Mutual exclusion doctrine

Mutual exclusion doctrine

The doctrine that ruled that municipal bond interest is federal tax-free. In return for this federal tax exemption, states and localities cannot tax interest generated by federal government securities.

Mutual Exclusion Doctrine

The principle that the U.S. federal government does not tax the interest one earns on municipal bonds and debts issued by state and local governments; likewise, the state and local governments do not tax the interest on federal debts, such as Treasury securities and others. The mutual exclusion doctrine was established very early in the history of American tax law. See also: McCulloch v. Maryland.
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