Guidance Document

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Tax Status for Maine Income Tax of Interest Income from Government Obligations

Revised: 8/26/05

TAX STATUS FOR MAINE INCOME TAX OF INTEREST INCOME FROM GOVERNMENT OBLIGATIONS
Direct Obligation of U.S. Government Subject to Maine Income Tax
U.S. Savings Bonds all states No
U.S. Retirement Plan Bonds No
U.S. Treasury Bonds No
U.S. Treasury Bills No
U.S. Treasury Notes No
U.S. Depository Bonds No
U.S. Certificates of Indebtedness No
Obligations of Organizations
Created or Sponsored by U.S. Government
Student Loan Marketing Association, SLMA (Sallie Mae) No*
Government National Mortgage Association, GNMA (Ginnie Mae) Yes
Federal National Mortgage Association, FNMA (Fannie Mae) Yes
Federal Home Loan Mortgage Corp., FHLMC (Freddie Mac) Yes
Federal Home Loan Banks, FHLB No*
Federal Housing Administration, FHA:

Bonds

No*

Certificates of Claim

Yes
Federal Farm Credit System Banks, FCS

Land Banks for Cooperatives

No*

Federal Intermediate Credit Banks

No*

Federal Land Banks

No*
Farmers Home Administration, FMHA:

Bonds

Yes

Certificates of Beneficial Ownership

No*
Export Import Bank of the U.S. Yes
Obligations of other Governmental Entities and Organizations
State of Maine No
Maine Municipalities No
Maine Municipal Bond Bank No
Maine Turnpike Authority No
Housing Authority of Maine (HOME) No
Finance Authority of Maine (FAME) All Bonds No
Obligations of states, municipalities and Territories outside Maine, unless specific Exemption granted by U.S. Congress Yes
Puerto Rico government all bonds No*
Local housing authorities in District of Columbia, Guam and U.S, Virgin Islands If exempt from federal tax No*
Local housing authorities in states other than Maine Yes
Tennessee Valley Authority (TVA) all bonds No*
Foreign Government bonds Yes
International Bank for Reconstruction & Development Yes
Inter-American Development Bank Yes
*Exemption from all state and local income taxes granted by a specific federal law.
Money Market Funds:
A fund sold by a firm recognized as a regulated investment company by Internal Revenue Service may pass through to the shareholders tax exempt interest and dividends permitting the income to retain its original character. The statement received by shareholders notifies them whether the income is exempt from federal tax.
Under a repurchase agreement, Money Market or Mutual Fund income does not retain its original character. In this case, the court has ruled that the fund, not the taxpayer, owns the bonds.
Nuveen Bonds:
Nuveen Bonds are municipal bonds from all over. The taxpayer should receive a statement advising him what states are involved. If the bonds originate in Maine they are not taxable. If the bonds originate outside Maine they are taxable.

References:

  • Moody’s Municipal and Government Manual
  • Handbook of Securities of the United States Government and Federal Agencies.