With economic uncertainty plaguing markets, more investors are turning to physical precious metals as a hedge. But few realize storing precious metals in Texas depositories can exempt certain metals from burdensome property taxes.
In 2019, Texas voters approved Proposition 9, relating to the exemption from ad valorem taxation of precious metals held in a depository in Texas. This enacted House Bill 2859 (HB 2859), defining precious metals as gold, silver, platinum, palladium, and others that “bear a high value-to-weight ratio.”
HB 2859 also established criteria for qualifying “precious metals depositories” eligible for the tax exemption. These facilities must primarily provide metal storage services to the general public and carry insurance for deposited assets.
Proposition 9 and HB 2859 incentivize investors to store their qualifying precious metal investments in secured, specialized Texas depositories, like IDS of Texas.
This article will explore this tax exemption, revealing how investors keeping physical precious metals in select Texas precious metals depositories can now avoid property taxes entirely legally.
Under The State of Texas Proposition 9, What is Considered a Precious Metal?
Texas legislation broadly defines precious metals as any metal that “bears a high value-to-weight ratio” and “customarily is formed into bullion or specie.” This encompasses most investment-grade commodity metals.
Specifically, the following are considered precious metals exempt from property taxes when stored in a qualifying depository:
- Gold
- Silver
- Platinum
- Palladium
- Rhodium
Bullion and specie coins minted from these metals, like the American Gold Eagle, would also qualify. However, collector coins made predominantly of copper, nickel, or other base metals would likely not qualify.
The critical requirement lies more in the intrinsic value density of the invested metal and less in specific items or formats. Virtually all common forms of investment bullion and coins containing high ratios of gold, silver, platinum, or palladium metals would qualify based on the legislation’s broad criteria.
What Qualifies as a Precious Metals Depository?
Only some facilities storing precious metals qualify for the property tax exemption. The precious metals depository must meet two primary criteria defined in HB 2859:
- Primarily provides metal storage to the public
- Maintains insurance for deposited metals
First, the facility’s core business must provide precious metal storage to the public. The depository cannot be an adjacent service of a separate primary business, like a bank safe deposit box.
The legislation seeks to incentivize specialized, dedicated precious metal depositories equipped to secure physical bullion and silver, platinum, palladium, rhodium or gold coins.
Second, the depository must carry adequate insurance to cover the value of precious metals customers store. This ensures the facility sufficiently protects investor assets against physical risks like theft, damage, or loss.
Requiring primary dedication to metal storage and robust asset insurance establishes a high professional standard for precious metal depositories. In essence, the legislation vets top-tier facilities so individuals can confidently entrust the facility with their physical metal investments.
IDS of Texas offers 100% insurance protection underwritten by Lloyd’s of London, the world’s leading provider of specialized asset insurance for the past 300 years.
All precious metals deposits at any of the three International Depository Services Group secure storage facilities (IDS of Delaware, IDS of Texas, and IDS of Canada) are insured through an all-risk policy. This caliber of coverage is only available at select precious metal depositories.
By restricting the tax exemption solely to metals in specialized, insured depositories, Proposition 9 promotes a network of trusted, purpose-built facilities across the state, fostering the metals investing industry.
Prop 9 exempts precious metals from taxes
Proposition 9 and HB 2859 established a comprehensive property tax exemption for precious metals in qualifying Texas depositories. Here are the key details:
Exemption from Ad Valorem Taxation:
The amendment authorizes the legislature to exempt precious metals from all ad valorem taxation. Like standard property taxes, ad valorem taxes are levied based on an asset’s value.
By prohibiting ad valorem taxation of precious metals, the exemption prevents local jurisdiction from taxing metals held in a depository regardless of their quantity or value.
No Limits on Quantity or Value:
Critically, the exemption places no restrictions on the number of precious metals that can be exempted from property taxes. Whether an investor stores a single gold coin or hundreds of ounces of silver bullion, the entire holding remains tax-exempt.
Similarly, the total value of stored precious metals does not affect exemption eligibility. From modest collections to sizable seven-figure holdings, all precious metals avoid taxation equally under the legislation.
Applies to All Eligible Precious Metal:
As covered previously, all precious metals as defined by the law – including gold, silver, palladium, platinum, rhodium and others – qualify for the exemption—the specific form, whether bars, rounds, coins or otherwise, does not impact eligibility.
Only Requires Qualified Depository Storage Facility:
Precious metals must be held in a qualifying Texas depository to be tax-exempt. Holding metals personally or in a non-qualified facility remains taxable.
However, no further requirements beyond storage in an eligible depository are imposed. The precious metals owner need not be a Texas resident or meet other criteria.
Storing Precious Metals in an IDS Group Depository
For investors seeking a Texas-based depository to secure their precious metals tax-free, the International Depository Services (IDS) Group is an exceptional choice. The IDS Group has served the metals industry for decades.
State-of-the-Art Security:
IDS Group’s facilities feature cutting-edge security measures explicitly designed for precious metals. Highlights include:
- Uncompromising, round-the-clock security under constant surveillance with multi-redundant security systems
- Reinforced class III UL-rated vaults
- Restricted access
- Monitoring by on-site trained security professionals
- Does not utilize contract workers or temporary staffing
- Strictly enforced operating protocols
- Stringent inventory control measures, including stringent “dual control” and “separation of duties” methodologies
- 24/7/365 Online account access
IDS Group’s comprehensive security measures, exceeding industry standards, provide unmatched protection for client assets. Clients enjoy peace of mind knowing their metals are secured by an impeccably credentialed leader in bullion storage.
Tailor-Made Storage Options:
IDS Group pioneered specialty segregated storage offerings tailored to precious metals investors’ unique needs.
Exceptional Service at Competitive Rates:
IDS Group couples its robust infrastructure with highly attentive client service backed by decades of experience. Clients benefit from a dedicated point of contact and 24/7/365 online client portal account access.
Despite its premium offerings, IDS Group maintains highly competitive all-inclusive rates. Precious metals storage starts at 0.5% of holdings annually – a compelling value given the comprehensive security, insurance, and service provided.
Knowledgeable, transparent, and efficient, IDS Group is the superior choice for astute precious metals investors. With IDS Group, clients gain not only the full tax benefits of Prop 9 but also the confidence of storing their metals with an industry pioneer renowned for integrity and innovation.
To learn more about how IDS Group can help you protect your investments and maximize your after-tax returns, visit internationaldepositoryservices.com or call 888-322-6150 today.
Why is Prop. 9 Good for Texas Investors?
Proposition 9 and the enabling legislation, HB 2859, offer several compelling benefits to precious metals investors in Texas:
Eliminates Property Tax Liability:
Most profoundly, the exemption eliminates potential tax liability for Texas precious metals investors. While historically rarely assessed, local jurisdictions retained the authority to levy property taxes on precious metals holdings before Prop 9.
By proactively prohibiting this ad valorem taxation, the amendment ensures precious metals investors won’t face an unexpected tax bill, even if their local property tax rates increase. This predictability enhances the overall stability and attractiveness of metals as an investment.
Protects Privacy and Confidentiality:
Taxation inherently requires some disclosure of an asset’s existence and value for assessment. Prop 9 ensures that precious metals investors do not need to register their holdings by constitutionally eliminating the possibility of taxation and promoting privacy.
This confidentiality is particularly relevant given Texas’ long tradition of attracting self-reliant, independence-minded investors. The amendment resonates with the state’s spirit of financial freedom and suspicion of government overreach.
Incentivizes In-State Depository Storage:
The amendment rewards investors for storing precious metals in Texas depositories by restricting the exemption to in-state facilities. This makes the largest precious metals depository in the state, IDS of Texas, especially attractive.
As more investors store metals in-state, these depositories can achieve economies of scale to improve services and lower costs. The centralizing effect also facilitates a more robust metals marketplace within the state, enhancing liquidity.
Attracts Out-of-State Investors:
Prop 9 makes Texas a uniquely appealing environment for precious metals investors nationwide. Texas’ pro-investor policies, now featuring tax-free precious metals storage, stand out prominently from other states.
Ultimately, Texas precious metals investors should view Prop 9 as a distinctly favorable policy that elevates metals as an accessible, advantaged asset class in the state. The amendment marks a strong affirmation by Texas voters and legislators of the validity of metals as an essential component of an investment portfolio worthy of special protections.
Benefits of Using a Depository Like International Depository Services Group
While Prop 9’s tax benefits are compelling on their own, investors who store their precious metals in a qualified Texas depository like IDS of Texas gain additional advantages:
Avoid Taxes with Specialized Storage:
Most prominently, using a depository is the key to exempting precious metals holdings from property taxes under Prop 9. Investors cannot claim the exemption if they store metals personally or in an unqualified facility.
Additional Security:
Qualified precious metals depositories, like IDS of Texas, offer tremendously more security than most personal storage options. With purpose-built infrastructure and extensive physical security measures, depositories are exceptionally difficult targets for theft.
Features like 24/7 monitoring, reinforced vaults, and strict access controls provide investors with robust protection that is difficult to replicate personally. A depository becomes increasingly essential for asset safety for any investor storing a substantial amount of precious metals.
Comprehensive Insurance Coverage:
Reputable depositories carry extensive insurance policies on the precious metals they store. Prop 9 codifies this requirement for tax-exempt metals.
Depository insurance provides far more comprehensive coverage than standard homeowner’s or renter’s insurance (if homeowners’ policies will even cover precious metals investments). Considering metals’ high value-to-weight ratio, insurance is imperative to protect against unlikely but costly complete loss scenarios.
Enables Geographic Diversification:
Utilizing a Texas depository gives investors the ability to strategically store their precious metals in a geographically advantageous jurisdiction.
Storing precious metals in a Texas depository is a prudent choice independent of Prop 9’s tax benefits. From enhanced security to insurance coverage, the advantages of specialized storage are substantial for any wise investor. Given this tax exemption, a depository is now the optimal way to hold precious metals in Texas.
If you’re a precious metals investor who wants to take full advantage of this exemption, consider IDS of Texas as your storage solution. With its deep expertise, commitment to client service, and uncompromising security, it’s no wonder more investors choose IDS of Texas than any other Texas-based depository.
To learn more about how IDS of Texas can help you unlock the benefits of the Texas tax exemption, visit https://internationaldepositoryservices.com/ids-group-locations/texas/ or call them today at 888-322-6150. Your future self – and your portfolio – will thank you.