No, the Middle Class Tax Refund from California is not taxable to CA, and you do not need to claim it as income on your California tax return. Please see the link from the Franchise Tax Board Help With The Middle Class Tax Refund.
However, the Middle Class Tax Refund may be taxable on your federal tax return which is why CA will be mailing 1099-MISC for MCTR payments of $600 or more. The IRS has not provided a clear answer on this issue but IRS Pub502 states “an amount included in your income is taxable unless it is specifically exempted by law” which this type of payment is not. Income that is taxable must be reported on your return and is subject to tax. See the link for more information IRS Pub 525 Taxable and Non-Taxable Income.
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