The interest on bonds issued by U.S. territories is exempt from which types of taxes?

The interest on bonds issued by U.S. territories is exempt from all types of taxes, which includes local, state, and federal taxes. This characteristic arises from the federal tax code, which provides tax benefits to encourage investment in bonds issued by these territories. These tax exemptions make such bonds attractive to investors, as they can yield income that is not subject to taxation at any level. Therefore, investors can seek tax-efficient investment options through these bonds, which can result in a lower overall tax burden. This unique treatment reflects the federal government's stance on supporting U.S. territories, allowing them to raise funds for local projects while providing significant financial advantages to their bondholders.