Thank you for the response, and it makes sense--pension benefits 50% allocated under community property laws to a nonresident should not be taxed in CA under 4 USC Section 114. Example 3, however, involves two nonresidents in a community property state, so after the 50-50 allocation, both would be sourced to a non-CA jurisdiction and CA could not tax either because of 4 USC Section 114. In my example, W is a CA resident and the recipient of the pension payment (though subject to community property 50-50 allocation - 1/2 to NV). If the payment to W was wages for working in CA, there would be no question, it would be 100% taxed in CA: 50% to W (taxed as a resident) and 50% to H (taxed as a non-resident because the income is sourced to CA - like rental income from CA). I cannot find any examples or authority supporting how CA would tax H on his 50% community property share of W's pension payment --i.e., does CA take the position that H's 50% pension share is (i) CA sourced like wages and is taxable in CA and hence not subject to 4 USC Section 114, or (ii) is not CA sourced (like stock sales or income from personal property) and hence is subject to 4 USC Section 114 and not taxable in CA. California Office of Tax Appeals nonprecedential opinion 2019-OTA-171 foot notes 2 and 3 suggest that 50% of non-resident W's pension payment should be allocated and taxed to resident H's CA taxable income under community property laws--and this too makes sense. Unfortunately, I cannot find authority for the opposite--pension received by CA resident with 50% allocated under community property laws to non-resident spouse.
