Double Exemption

Securities that are exempt from state as well as federal income taxes are said to have ?double exemption.? In states where this exemption occurs, the exemption is usually only for bonds issued by the state or its local governments. An exception to this rule is the bond debt of U.S. territories such as Guam. Debt of Puerto Rico is also double exempt.

Remarks: Bond funds including mutual funds (open-end and closed-end, actively managed and indexed), exchange-traded funds and unit investment trusts offer a convenient and affordable way to invest in a diversified portfolio of bonds, but a bond fund investment can differ from a bond investment in ways that are important to understand.