The Internal Revenue Service has closed its audit of Rhode Island's $197 million tobacco settlement bonds, ruling that the bonds remained tax-exempt.

"We have made a determination that interest received by the beneficial owners of the bonds is excludable from gross income under Section 103 of the Internal Revenue Code," Allyson Belsome, an IRS manager of field operations for tax-exempt bonds, told state revenue director Rosemary Booth Gallogly.

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