if you leave the money in there will be no Federal tax or penalty unless there is a contribution excess not withdrawn - see below. you will still pay California taxes on any income earned in the HSA. if you take it out for nonmedical expenses you will pay a Federal income tax and penalty. Your California tax liability will not change except that a withdrawal would likely reduce the income you earned for the year.
Now if you are removing an excess 2021 (you have until 10/15/20222) /2022 contribution in 2022 that you made personally (not through payroll) there is no Federal tax or penalty on the excess withdrawn. There is a federal tax on income that must be included in the withdrawal. don't try to do this without going through the plan administrator. if the excess contrbutions were done through payroll deductions box 1 on your w-2 was likely reduced for your portion of the contributions. in this case, the withdrawal, including any portion that is an employer matching contribution, is subject to Federal income taxes
