((a)) ** Exclusion** Except as provided in subsection (b), gross income does not include interest on any State or local bond.

((b)) ** Exceptions** Subsection (a) shall not apply to—

((1)) ** Private activity bond which is not a qualified bond** Any private activity bond which is not a qualified bond (within the meaning of section 141).

((2)) ** Arbitrage bond** Any arbitrage bond (within the meaning of section 148).

((3)) ** Bond not in registered form, etc.** Any bond unless such bond meets the applicable requirements of section 149.

((c)) ** Definitions** For purposes of this section and part IV—

((1)) ** State or local bond** The term “State or local bond” means an obligation of a State or political subdivision thereof.

((2)) ** State** The term “State” includes the District of Columbia and any possession of the United States.