Box 12 represents tax-exempt interest. You have to enter the amount in box 12, but on the next screen, put a checkmark in the first box - A portion of these dividends is US Gov. interest. Then on the next screen, you enter the amount that is US Gov interest. And on the next screen, you will enter CA. TurboTax automatically transfer that info to your CA state return. Leave Boxes 14-16 blank, those box do not apply if they are empty (those are for state withholding).
The U.S. government taxes income you receive on its own bonds. Your state does NOT tax income from U.S. government bonds, but each state defines government bonds differently. You should check to see if any part of these dividends is taxable in your state. This information is usually included with the 1099 you received from your broker. You may also be able to get this information from your mutual fund company's website.
Certain mutual funds pay “exempt-interest dividends.” If the mutual fund has at least 50 percent of its assets invested in tax-exempt U.S. obligations and/or in California or its municipal obligations, that amount of dividend is exempt from California tax. The proportion of dividends that are tax-exempt will be shown on your annual statement or statement issued with federal Form 1099-DIV, Dividends and Distributions. For more information, Linked Ref: CA FTB
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