Municipal Bonds Tax Exempt

Why do you need to report the interest if it is exempt from tax? (Well, you still need to report, but it is not taxable for regular tax purposes, but may be subject to the AMT)

Zero Coupon Muni bonds are exempt from federal income tax (at least for the regular income tax, may or may not be exempt from the AMT, you must check with the sender about it), and in many cases, exempt from state and local taxes too.