This is what you posted above because this is the 50% tax exempt rule in California.
Your mutual fund tax-exempt income is not taxable in California if at least one of the following are true:
- 50% or more of the fund's assets are invested in U.S. obligations
- 50% or more of the fund's assets are invested in California tax-exempt obligations
- 50% or more of the fund's assets are invested in combination of U.S. and California tax-exempt obligations
So yes, if the assets in the funds do not meet the criteria listed above, your interest income is taxable in California whether you are a non-resident or not. To correctly determine if your taxable interest is taxable in California or not, you would need to examine the portfolios of each fund to determine the makeup of the fund assets. Since the portfolio's might change, you need to examine each year's fund portfolios to determine the asset makeup. My suggestion is to prepare a California non-resident return this year and report the interest earned from the mutual fund earned in California. If it doesn't produce a taxable event, then don't finish filing the return.
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