Usually, the interest included is not state tax exempt. if you are sure then it will need manual adjustment on the CA return
as to box 3 The following are not considered U.S. obligations for California purposes: Federal National Mortgage Association (Fannie Mae); Government National Mortgage Association (Ginnie Mae); or Federal Home Loan Mortgage Corporation (Freddie Mac).
as to line 8 Turbotax should ask about the state and amount so if you enter CA and the amount it should be excluded on CA and 1040
