Does taking levels in a prestige class cause XP Penalty?

Question

In D&D 3.5, does taking levels in a prestige class cause the XP penalty like multiclassing does? Please provide the source of the answer so I can show it to my players.

Answer 1

According to the srd, no, taking a prestige class does not cause an XP penalty. To grab the quote:

Taking a prestige class does not incur the experience point penalties normally associated with multiclassing.

Answer 2

Very few tables use the multiclass XP penalty.

No table ever should use the multiclass XP penalty.

In hypothetical discussions around the multiclass XP penalty and favored classes, in my experience, the unanimous consensus is that prestige classes don’t count towards the XP penalty.

As IgneusJotunn’s answer shows, the SRD indicates that prestige classes do not count towards the XP penalty. And I have confirmed that this line appears in Wizards of the Coast’s original publication of the SRD section on prestige classes. The 2012 premium edition of Dungeon Master’s Guide also includes this line, apparently a bit of stealth erratum.

But I can find no discussion of this in any of the books themselves prior to that 2012 edition of Dungeon Master’s Guide. I specifically checked Player’s Handbook, Dungeon Master’s Guide (and its errata), and Rules Compendium:

• Player’s Handbook only mentions prestige classes a couple of times as a thing you can find in Dungeon Master’s Guide,

• neither Dungeon Master’s Guide nor its errata make any reference to the multiclass XP penalty—the line in the SRD is not found at all, and in its place is an example rogue becoming an assassin—, and

• Rules Compendium doesn’t even use the phrase “favored class,” much less discuss the multiclass XP penalty.

I have no idea where the SRD got the line from—it seems to have originated in the SRD itself. Rules-as-written, that’s kind of dicey—the primary source on prestige classes is Dungeon Master’s Guide, not the SRD, which means the errata would have us rule this “conflict” in favor of the book. The 2012 edition reprinting would be valid, so with that we have solid ground to stand on, but the issue certainly existed prior to 2012. So if we ignore that line and use just the books, that leaves us with a synthesis of disparate rules that may or may not have been intended to be used together:

XP for Multiclass Characters

[...]

Uneven Levels: If any two of your multiclass character’s classes are two or more levels apart, the strain of developing and maintaining different skills at different levels takes its toll. Your multiclass character suffers a −20% penalty to XP for each class that is not within one level of his or her highest-level class.

^{(Player’s Handbook, pg. 60)}

Prestige Classes

Prestige classes offer a new form of multiclassing. Unlike the basic classes found in the Player’s Handbook, characters must meet requirements before they can take their first level of a prestige class. The rules for level advancement (see page 58 of the Player’s Handbook) apply to this system,

^{(Dungeon Master’s Guide, pg. 176)}

Now, the “rules for level advancement [on] page 58 of the Player’s Handbook” presumably refers to the section entitled Experience and Levels that begins on page 58—and ends on page 59, when the Multiclass Characters section begins (that is, Multiclass Characters is a new section, not a subsection of Experience and Levels, at least going by the heading style). So Dungeon Master’s Guide page 176 is not explicitly directing us to use the rules for multiclass characters, including the XP for Multiclass Characters section on page 60. But it does refer to prestige classes as a “form of multiclassing,” and prestige classes are certainly “classes.” Rules-as-written, barring the line that seems to have originated in the SRD (which is, again, dubious from a RAW primacy perspective), there seems to be little ground to stand on for freeing prestige classes from multiclass XP penalties.

Of course, as poorly-designed as the multiclass XP penalties are in general (Seriously, why is this so taxing? Even just reading the quoted description in Player’s Handbook makes no sense to me), applying them to prestige classes is even worse—no race in the game has a prestige class as a favored class, and you can’t enter a prestige class without multiple levels in something. Unless you play a character has no more than 2 levels in any one class, the XP penalty is inevitable—which seems like the sort of thing that should be mentioned as a major drawback if it was intended. That lack of mention (seriously, nowhere in the book are multiclass XP penalties mentioned) stands out to me as a strong, albeit circumstantial, case for claiming that the authors intended prestige classes to be exempt from multiclass XP penalties. And the line that showed up in the SRD goes a long way towards confirming that.

Of course, these are the same authors who, presumably, intended the multiclass XP penalty to be applied at all, so, ya know, grain of salt and everything. Their opinion on this subject should be ignored anyway.