Tax Facts

7670 / If the interest on an obligation issued by a state or local government is not tax-exempt, how is it taxed?

Updated: January 02, 2025 at 02:54 AM
Short-term obligations issued on a discount basis and payable without interest at a fixed maturity date of one year or less are treated like U.S. Treasury bills (see Q 7624 to Q 7626).1 Other bonds are treated like U.S. Treasury notes and bonds (see Q 7630 to Q 7633).2




1.   IRC § 1271(a)(3); IRC § 454(b).

2.   IRC §§ 1271 and 1272.


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