26 U.S.C. § 103: Interest on State and local bonds

(a) ExclusionExcept as provided in subsection (b), gross income does not include interest on any State or local bond. (b) ExceptionsSubsection (a) shall not apply to—(1) Private activity bond which is not a qualified bondAny private activity bond which is not a qualified bond (within the meaning of section 141). (2) Arbitrage bondAny arbitrage bond (within the meaning of section 148). (3) Bond not in registered form, etc.Any bond unless such bond meets the applicable requirements of section 149. (c) DefinitionsFor purposes of this section and part IV—(1) State or local bondThe term “State or local bond” means an obligation of a State or political subdivision thereof. (2) StateThe term “State” includes the District of Columbia and any possession of the United States.