Some tax software is doing this. I suspect TT is taking the conservative approach given there seems to be some debate about whether the FTB considers AMD taxable or not. If you take the stand that that since the 1f amount ends up as interest on Schedule B due to a Code D conversion of cap gains to interest, then no state may tax this interest since it was classified as interest by the IRS and derives from federal obligations.
A few users in community forums have pasted written FTB responses that would seem to indicate the FTB does consider this taxable. These response were written by a human without quoting a CA tax code specifically. My guess is that if it were to be spelled out in writing, then it would force an explicit fed/state conflict.
By leaving it ambiguous, many CA tax payers will end up paying taxes on the full AMD reported in 1f vs having this formally resolved which would mean no taxpayers ever overpay as TT would also fix this in software like some other tax programs already have. This isn't a dis on TT. I totally get why they would take this route but it does require that you understand the tax nuances of investing in Treasuries (especially Notes and Bonds).
What I find more interesting is that the stated reason (by some) for AMD is that the amount under OID is an additional discount that you wouldn't have received if you bought the note/bond from the federal government directly yet 1f includes 100% of the face value minus the paid value, NOT OID minus the paid value, so that reasoning is completely invalid given what actually ends up in 1f.
You could have bought a bunch of notes/bills on the secondary market above OID but under face value and you'd still end up with face value minus price paid in 1f.
