Maryland Subtraction of Income from U.S. Govt. Obligations

[richard's_tax]

My Vanguard brokerage provides information on income from US Govt. Obligations.  I provided this on the interview for my 1099 and it subtracted it from my MD state return. Seams straight forward enough, but Maryland Administrative Release #13  (AR13) discusses taxation of US Govt. Obligations. and provides a list of items that may look like they shouldn't be taxed in MD, but they are.  For example, Freddie Mac, Fannie Mae and Ginnie Mae are not US Govt. Obligations.  The Vanguard statement  specifically excludes GNMA, but I'm left wondering if the % of income that Vanguard identifies as coming from US Govt. Obligations meets the requirements of Maryland's AR13? 

[jtax]

It probably does meet those requirements. You might be able to track it down, but I'm not sure how and it would be a lot of effort. Typically the amount excluded is relatively small and the risk of it being wrong very small. I wouldn't worry about it. But of course you could try to contact vanguard and ask. 

What fund(s) are involved?

(What's going on here is that things like GNMA, etc. are *backed* by the feds, but are not federal debts. So the states can tax those.)

[richard's_tax]

Thank you for your response.

The fund in question is the Cash Reserves Federal Money Market Fund (formerly Prime Money Market Fund).  Vanguard says it derived 31% of income from US Govt. Obligations and that they make up 79% of its assets. 

[jtax]

As you know the Vanguard 2020 supplemental tax info doc says

Investments in U.S. government obligations may include the following: Banks for Cooperatives, the Commodity Credit Corporation, the Federal Deposit Insurance Corporation, Federal Farm Credit Banks, the Federal Financing Bank, Federal Home Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks and the Federal Land Bank Association, the Federal Savings and Loan Insurance Corporation, the General Insurance Fund, the Government Services Administration (GSA Public Building Trust Participation Certificates), the Production Credit Association, the Student Loan Marketing Association, the Tennessee Valley Authority, the U.S. Postal Service, and the U.S. Treasury Department (bonds, notes, bills, certificates, and savings bonds). GNMA securities aren’t U.S. government obligations.

I think that shows they have a good handle on it. Can't be 100% certain that they agree with MD law, but I'd say your risk is small.