As far as I've ever seen....for any state with an income tax, that state exempts US territory bond interest.
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Ooops, a "however" for some other states, (but not applicable to MA).
1) IL doesn't allow any exemptions for any tax-exempt interest from Mutual funds....i.e. box 11 on a 1099-DIV. But do allow it for UL bonds and US Territories if you hold specific individual Bonds (box 8 on a 1099-INT).
2) CA and MN have certain % minimums in order to allow the deductions when issued from a Mutual fund....essentially you need to buy a State Specific bond fund for those two states. Of course, if one holds individual state or US Territory bonds, those $$ are still exempt.
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
