There is no reason why you should be taxed for your paid family leave in California. It may have been the manner in which you answered the questions when you entered your 1099G in the federal interview.
At this point you may wish to contact a specialist that can work through that section of the return with you. The specialists can look at your return on their screen to find out exactly what is causing this issue and suggest how you can take corrective action if needed. It is impossible for me to identify the issue and how to correct it. I did enter a sample 1099G in my test program and I was able to get the exclusion.
One last thing, make sure you entered this under federal>wages and income>all income>unemployment>Unemployment and paid family leave. There are other 1099G sections so make sure you are on the right menu path.
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