Thanks! Yes, that all seems correct. My mutual fund company sends such an insert (or the data is searchable online, though you have to poke about a bit, sometimes). TT does not seem to query very far when you review a downloaded 1099-B or 1099-INT. The presence of potentially tax-exempt income is given from the entry on the 1099, but the state details are indeed something each user has to enter for themselves. I'm not sure if I overlooked the state percentage entry when reviewing 1099s, but I really think TT (Federal) didn't ask.
The tricky part is in the CA interview: that's where numbers appear in the summation of tax-exempt income reported in the Federal return, and not always in a clearly-labeled way, nor can it be easily traced back to the Federal form, which makes it difficult to know what's going on when several funds with different characteristics are involved. Since TT asks about what seems like a million contingencies that don't apply to me (even when I use "you choose", not "ask everything"), I do with they'd go over how they handle tax-exempt income (not just for CA, where the 50% rule adds an extra wrinkle, to be sure), and make it more transparent and obvious to us users, that's all.
