IS California state disability Insurance income taxable?

Several years ago, my wife and I got fined for not reporting other SDI income. This year we tried to obtain the 1099 to do it properly and CA is saying it is not taxable and there is no form. IRS office says it is taxable and must be reported (not surprised) so what gives? Who is correct?
    One of the only ways Calif disability payments are taxable is if they take the place of unemployment insurance. Calif would issue a 1099-G for such payments in that case.

    If that's not the case then those payments are not taxable on your federal return.

    Here's an authoritative article about it

    • Thank you Terry, very informative. CA will not issue 1099-G but IRS agent told me that it is taxable, after he told me that it was not. Should I file a review of the penalties I paid back in 2007? Identical situation, IRS said the income was taxable state said it was not, though I do not know how they found out since no 1099 form was issued.
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