A bill to amend section 265 of the Internal Revenue Code of 1954 with respect to the deduction, by certain financial institutions, of interest paid on deposits of public funds where those deposits are secured by tax-exempt obligations.

Amends the Internal Revenue Code to exempt interest paid on deposits by State and local governments of public funds, which are secured by tax-exempt securities, from provisions of the Internal Revenue Code which disallow income tax deductions for interest paid with respect to tax-exempt financing.