New Bill Could Let Your Mutual Fund Hold More Gold: Precious Metals Parity Act Proposed

Alright, let's talk about a small change to the tax code that could ripple into your investment options. Congress is looking at the "Precious Metals Parity Act," which tweaks the rules for certain types of investment funds.

What's Changing for Investment Funds?

This bill focuses on something called a "Regulated Investment Company," or RIC. Think of your typical mutual fund or ETF – many of them are structured as RICs. To get favorable tax treatment, these funds have strict rules about where their income comes from. At least 90% of their earnings generally need to be from specific sources like stock dividends or interest, known as "qualifying income."

Currently, income directly from holding precious metals like gold or silver doesn't usually count towards that 90%. This bill changes that. It specifically amends the Internal Revenue Code (Section 851(b)(2)(A), if you're keeping score) to add income derived from precious metals to the list of "qualifying income."

So, What Does This Mean for You?

Why care about this tax code tweak? It could make it easier for mutual funds and ETFs to invest directly in physical precious metals or assets closely tied to them, without risking their special tax status. If a fund manager wants to add gold or silver to diversify a portfolio, this change removes a potential tax hurdle.

For you, the investor, this might mean seeing more funds offering exposure to precious metals down the line. It essentially puts income from precious metals on the same footing as income from stocks and bonds for these specific types of funds. The change would kick in for tax years starting after the bill is enacted.