The income for the trust is taxable to the state where the income is produced. If the income for the trust is located in California then Yes if your distribute income to your nephew in Oklahoma he would need to file a California return and pay the California tax on the income.
The same thing is true for individuals, even though they reside for example in Nevada, but they work in California they have to file and pay state tax to California for all work performed in California.
@Jeff_txx
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