Deductions & credits

Yes, that’s correct, you need to include this as income on your state return. 

California law doesn’t conform to the federal exclusion, and the amount excluded from your federal return must be included on line 8z, column C of your 2021 Schedule CA (540) California Adjustments - Residents

According to Frequently Asked Questions - COBRA/Cal-COBRA Premium Assistance:

To receive the subsidy, you must let your employer, plan administrator, or health plan know that you want to elect to receive the subsidy. 

You will not receive a direct payment for the premium assistance. Instead, if you are eligible for premium assistance, the premium assistance will be provided to your employer or health plan to pay the premiums during coverage period (during the period you are eligible between April 1, 2021 and September 30, 2021).

So, although you didn’t receive a direct payment for the assistance, you are treated as receiving the subsidy, which isn’t excluded from your California income.

Please see COBRA premium assistance in the 2021 Instructions for Schedule CA (540)California Adjustments for more information.

@ExcessTurbo