I see my broker send me 1099 form. BAB dividend is set as ordinary dividend tax as regular rate. I understand that BAB invest in municipal and state bond. That should be interest exempt for the federal. But this form indicate I have to pay the div tax. Did Invesco make a mistake?
Municipal bonds can be taxable. BAB or Build America Bonds are federally taxable but have a higher coupon interest rate to make up for it. This can be a good choice for an IRA or somebody in a low tax bracket.