NO. if a portion is US government interest then at least that portion of the dividend is taxable for federal income tax purposes. the US interest portion would be entered just below the total ordinary dividend box 1a
your 1099-div should indicate what lines the dividends should be entered. if 100% of the dividend was municipal interest then none could be US government interest. the US Gov does not issue "municipal bonds"
you may be confusing a mutual bond fund that invests in taxable bonds with a mutual bond fund that invests in municipal bonds. some municipal bond funds have a provision allowing them to invest in taxable bonds. that portion would be taxable for federal purposes.
if some of the dividends are in fact municipal interest only the fund can provide a breakdown by state.
