Yes, you are correct that MSRRA does not apply.
Her income was not earned in California. It was earned in Pennsylvania.
File a California non-resident return and state that zero percent of the income was earned in California. Then all of that money will be refunded.
File a Pennsylvania return that shows the income was earned in Pennsylvania and pay the Pennsylvania state taxes. There is a supreme court ruling that two states cannot tax on the same income. State income taxes are paid to the state where you reside.
Your wife can complete and submit the California Exempt from Withholding form so that California Taxes will not be withheld in 2021 and you will not need to file a California return next year.
