I'm assuming this is a question about US taxation, from the context.
You'll need to check how your State handles this situation, it may differ from State to State. Here's a quote from the California FTB guidance (direct link to the PDF, see page 5):
California does not tax dividends paid by a fund attributable
to interest received from U.S. obligations or California state
or municipal obligations IF at least 50% of the fund’s assets
would be exempt from California tax when held by an individual.
California taxes dividends derived from mutual funds that are
paid from interest received from obligations (bonds) issued by
non-California states or municipalities in other states. The fund
will provide a statement regarding the dividends it pays.
So, if you're a California taxpayer, if your
x is <50% you'll pay the CA state income tax even if you'd be exempt had you held the T-Bills directly and not through the fund.