A bond issued by a non-state territory of the United States, such as Puerto Rico or Guam. Territory bonds are exempt from all federal, state, and local taxes. This gives a territory bond preferential treatment to a state or municipal bond, which is generally only exempt from state and local taxes in the state and locality in which it is issued.
A bond issued by a U.S. territory such as Guam, Puerto Rico, and the Virgin Islands. Interest from territory bonds is generally exempt from taxation by federal, state, and local authorities anywhere in the U.S.