Thanks. However, one point of confusion with your reference is that it is in respect to interest, not dividends. The ETF pays out dividends that were reported on 1099-DIV, and the FTB Publication 1001 makes no reference to dividends being exempt from California state income tax. So even though the dividends were derived 100% from the interest of "federal bonds", they are were paid to me as dividends, not as interest. Do they still qualify?
UPDATE: Never mind, I found the answer. The last part of the Taxable Interest Income section covers Exempt interest dividends (Mutual Funds), and says:
"California does not tax dividends paid by a fund attributable
to interest received from U.S. obligations or California state
or municipal obligations if at least 50% of the fund’s assets
would be exempt from California tax when held by an individual."
Although ETFs and not mutual funds, but it seems they would still be covered by this section.
