A mutual fund that limits its investments to tax-free bonds of issuers from a single state. Thus, a double-exempt fund pays investors residing in the same state as the issuers of the bonds with income free of federal and state income taxes. Double-exempt funds have been particularly popular in the populous, high-tax states of California and New York. If an investor lives in a city with an income tax, these funds are exempt from three taxes. Also called single state municipal bond fund. See also triple tax exempt.