Final answer:
Interest received on U.S. Treasury Obligations is generally exempt from state and local taxes due to tax advantages provided by the federal government.
Step-by-step explanation:
Interest received on U.S. Treasury Obligations is generally exempt from state and local taxes. The interest earned from these obligations is subject to federal income tax, but it is usually excluded from state and local income tax calculations. This is because the federal government encourages investment in Treasury bonds by providing tax advantages, and one of these advantages is the exemption from state and local taxes.