Fund Specific Information For Your Tax Returns

Percent of Income Attributable to Direct US Government Obligations for 2017

At least 1% of the 2017 income earned by the following funds was attributable to direct U.S. government obligations:

 

Information for those funds with less than 1% of their 2017 income attributable to direct US government obligations will be available by mid-February on the Search by Fund for Tax Information page of the Tax Center.

States generally grant tax-free status to interest income earned from direct obligations of the US government. This tax-free status may also apply to dividend distributions that mutual fund shareholders receive from a mutual fund’s investment in such obligations.

Direct obligations of the US government include US Treasury bonds, notes, bills and certificates, US savings bonds and many obligations issued by agencies of the US government (such as the Federal Home Loan Bank, the Federal Deposit Insurance Corporation [FDIC] and many other federal agencies).

The income on repurchase agreements and mortgage-backed securities, including Government National Mortgage Association (GNMA or Ginnie Mae) securities and Federal National Mortgage Association (FNMA or Fannie Mae) securities and Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac), does not qualify for tax-free treatment.

Depending upon your state’s laws, you may be entitled to declare a percentage of your income dividends as tax-exempt income on your 2017 state personal income tax return. However, the percentage of direct US government obligation interest available for tax-exempt treatment may be limited in states that require a fund to meet certain minimum investment thresholds. Please contact your tax advisor to determine the availability of tax-exempt treatment in your state. Also, corporate shareholders may be subject to different state income tax return requirements and should consult their tax advisors. You can determine the amount of your income derived from direct US government obligations by multiplying the percentage found here by the total ordinary dividends you received during the calendar year, as reported on your Form 1099-DIV, Box 1a.

 

The 2017 income dividends you received from your Franklin tax-free income fund(s) are fully exempt from regular federal income tax. Based on income the fund earned from state tax-exempt obligations, a portion of such dividends may also be exempt from your state’s personal income tax. For investors subject to the alternative minimum tax, a portion of fund dividends may be taxable. Distributions of capital gains and ordinary income, if any, are generally taxable.

You can determine the portion of income dividends that are attributable to bonds of a particular state and US territories by multiplying the percentage found here by the amount of tax-exempt income dividends for each fund as reported on Form 1099-DIV, Box 10.

Important Message for California Shareholders: Each fund is required to report to the Franchise Tax Board by May 31, 2018, your total 2017 payments of tax-exempt interest dividends (exempt from federal income tax), and the percentage of this total that is attributable to bonds of California and U.S. territories.

Important Message for Indiana and Utah Shareholders: If you are a resident of Indiana or Utah and own shares in Franklin tax-free income funds, a portion of your tax-exempt interest dividends may be subject to state income tax. See State Tax Information for additional information.

The following table lists the percentage of your 2017 income dividends that may qualify for exemption in your state. The percentage of income dividends by jurisdiction for each separate income distribution that Franklin tax-free income funds paid during 2017 is available by calling Shareholder Services at (800) 632-2301.

 

 

 

 

Click on the appropriate link below to display that state’s tax information for certain Franklin Templeton funds.