@jdnaylor I have the same issue on my NC software for my TVA bonds.
I suspect that those $$ are not included in box 3 of the 1099-INT because the various states may not exclude $$ from the exact same set of agencies. IF the income-taxing states could agree on exactly which of the various "Agency" bonds generate interest that they considered state exempt, they might be able to talk the IRS into enacting rules which directed the financial providers/brokerages to report those $$ in box 3 instead of box 1.
But how does one start such a conversation among all the state's income tax departments.
Certainly, TTX should be including a way to exclude those $$ in the tax software....perhaps an additional question on the follow-up page after the main 1099-INT form, asking "A Portion of this box 1 interest is from US-backed Agency bonds"...........similar to what they do for US Treasury interest included in box 1a on 1099-DiV forms. (Though, many folks might get that confused with what $$ are already showing in box 3 for US Treasury bonds)
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
