31 U.S.C. § 3124 : US Code - Section 3124: Exemption from taxation

      (a) Stocks and obligations of the United States Government are
    exempt from taxation by a State or political subdivision of a
    State. The exemption applies to each form of taxation that would
    require the obligation, the interest on the obligation, or both, to
    be considered in computing a tax, except - 
        (1) a nondiscriminatory franchise tax or another nonproperty
      tax instead of a franchise tax, imposed on a corporation; and
        (2) an estate or inheritance tax.

      (b) The tax status of interest on obligations and dividends,
    earnings, or other income from evidences of ownership issued by the
    Government or an agency and the tax treatment of gain and loss from
    the disposition of those obligations and evidences of ownership is
    decided under the Internal Revenue Code of 1986 (26 U.S.C. 1 et
    seq.). An obligation that the Federal Housing Administration had
    agreed, under a contract made before March 1, 1941, to issue at a
    future date, has the tax exemption privileges provided by the
    authorizing law at the time of the contract. This subsection does
    not apply to obligations and evidences of ownership issued by the
    District of Columbia, a territory or possession of the United
    States, or a department, agency, instrumentality, or political
    subdivision of the District, territory, or possession.