This week, Kenneth Kies, the Treasury Department's Assistant Secretary for Tax Policy, told a tax conference hosted by BakerHostetler that Treasury is "taking a close look at" the §1202 planning technique known as stacking. His remarks suggest Treasury is considering guidance in this area, though the timing and scope remain open questions.
If you are a founder, early employee, or investor who has executed — or is considering — a multi-trust QSBS plan, this is the moment to take a hard look at your structure.
What Stacking Is, in One Paragraph
The §1202 gain exclusion is calculated per taxpayer, per issuer. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, raised the cap to the greater of $15 million or 10x adjusted basis (the basis at original issuance (at least the FMV of any property contributed, per §1202(i)(1))) for QSBS issued after that date (with tiered 50/75/100 percent exclusion at 3/4/5 years of holding). Because each non-grantor trust is treated as a separate taxpayer for federal income tax purposes, a founder can — in principle — gift QSBS into several irrevocable non-grantor trusts benefiting different family members, with each trust claiming its own exclusion. Five trusts, five exclusions. That's stacking.
Example: A founder with $50M of QSBS gain who holds the stock personally can exclude only $15M, leaving $35M taxable. Gifted across five separate non-grantor trusts — each with its own $15M exclusion, for $75M of aggregate capacity, comfortably more than the $50M of gain — potentially all $50M is excluded. Stacking therefore shelters an extra $35M of gain. Gain above the per-issuer cap is long-term capital gain taxed at up to 20% plus the 3.8% net investment income tax (23.8%), so the federal tax saved here is on the order of $8M, before any state tax. That's what Treasury is looking at.
What Treasury Actually Said
Reporting in the Bloomberg Daily Tax Report (May 21, 2026) says Kies told the BakerHostetler audience that investors are "going beyond" the one-trust-per-family-member scenario, and that Treasury is taking a close look at more aggressive structures. The OBBBA expanded the §1202 exclusion but did not statutorily address stacking. Kies's remarks suggest Treasury may pursue administratively what Congress did not address legislatively — though Treasury's options, scope, and timing all remain to be seen. Kies's exact words were not publicly released; Bloomberg reported his remarks secondhand from the conference.
A note on what this is and isn't: as of this writing, Treasury has not issued any QSBS-specific guidance, notice, or proposed regulation on stacking. The signal so far rests on a single secondhand account of Kies's remarks. The §643(f) authority and §199A precedent discussed below are real and on point — but the QSBS-specific campaign is, for now, a signal and not a rule.
The Existing Legal Landscape
Three pieces of background worth knowing:
1. §643(f) is already on the books. That provision empowers Treasury to treat two or more trusts as a single trust if (i) the trusts have substantially the same grantor and substantially the same primary beneficiary, and (ii) a principal purpose of the arrangement is the avoidance of federal income tax. The statutory hook for an anti-stacking rule has existed for decades.
2. Treasury tried this once before. In 2018, proposed regulations under §643(f) included a presumption that separate trusts had a tax-avoidance purpose if they produced a significant income tax benefit that could not have been achieved without the separate trusts. That presumption was dropped from the final regulations. Whatever Treasury does next, expect the 2018 proposal to be the starting point. Notably, Treasury invoked §643(f) in those same §199A regulations to address taxpayers dividing assets among multiple non-grantor trusts to multiply the §199A threshold amount. If you want a template for what a QSBS anti-stacking rule might look like, this is the closest one on the books.
The operative terms are not crisply defined. “Principal purpose” and “substantially the same” grantors and beneficiaries leave real room, and reasonable structures can fall well on the right side of them. The government’s concern has consistently been tax-motivated fragmentation of what is substantively one economic arrangement — not the mere existence of multiple trusts.
What's Likely — and What Isn't
Treasury can issue regulations or sub-regulatory guidance interpreting §643(f) and the broader anti-abuse doctrines. Treasury likely cannot, however, simply rewrite §1202's statutory per-taxpayer framework by regulation alone.
Treasury's most likely move is a proposed regulation or notice articulating factors that cause multiple trusts to be aggregated for §1202 purposes — targeting structures with overlapping beneficiaries, common trustees acting in concert, or other "single economic unit" features. Any such guidance would most likely apply prospectively or include transition protection, though retroactivity is never fully off the table, particularly where anti-abuse doctrines, sham-trust theories, the step transaction doctrine, or §7805(b) effective-date authority are in play.
The bottom line: completed transactions likely carry materially lower regulatory risk than future planning structures, but facts, structure, and timing matter in every case. And one reason not to overreact: the operative tests under §643(f) are fact-intensive and not precisely bounded, so a structure built around genuinely distinct beneficiaries and real economic separation sits on the comfortable side of that line.
What to Do This Quarter
If you have an existing stacked structure:
- Document the non-tax purposes. Estate planning, creditor protection, generational wealth transfer, governance considerations — these are real, articulable reasons for separate trusts. Get them in the file now, not in response to a future audit notice.
- Confirm true separateness. The features that distinguish genuine separateness from tax-motivated fragmentation are the ones to focus on: distinct beneficiaries, independent trustees, no de facto common control, and separate administration. The government's concern is not "many trusts" — it's legal fragmentation that doesn't track economic substance.
- Do not add new trusts to an existing stack without fresh analysis.
If you are considering stacking:
- Move thoughtfully, but do not panic. Anti-abuse guidance, when it comes, would most likely apply prospectively or provide transition relief, even if retroactivity can't be ruled out entirely.
- Get the planning right the first time. A poorly documented stack is far more vulnerable if the IRS ever looks at it.
- Coordinate trust counsel, tax counsel, and corporate counsel. §1202 turns on facts at the corporate level (qualified trade or business, the $75M gross asset ceiling, original issuance) and at the holder level (separate-taxpayer status). All three pieces have to line up.
The Bigger Picture
The OBBBA expansion made QSBS a much larger prize, which is exactly why Treasury is paying attention. The stakes also differ depending on when the QSBS was issued: structures built around the old $10M cap carry a different risk profile than new planning designed around the $15M OBBBA cap, and Treasury is most likely focused on the latter. Expect Treasury activity across §1202 generally over the next 12–18 months — not just stacking, but SAFE/convertible note holding periods, carried-interest interactions, and the qualified-trade-or-business test. The planning environment is more uncertain than it was a year ago.
Related reading: QSBS Trust Stacking: What Actually Works (and What Doesn't) · QSBS Attestation: What Your Letter Needs to Say · QSBS & Section 1202: The Complete Founder's Guide
If you've gifted QSBS into more than one trust — or are considering it — it's worth reviewing your structure with counsel before year-end. I work with founders, early employees, and investors nationwide on §1202 planning, attestation, and structuring. Book a 20-minute call to discuss your situation.
Joe Wallin is a startup and tax attorney at Carney Badley Spellman in Seattle. He chairs the Angel Capital Association's Legal Advisory Committee and co-authored Angel Investing: Start to Finish (Holloway).
This post is for educational purposes only and is not legal or tax advice. Consult a qualified attorney about your specific situation.
