From the SF Chronicle:

The decision to issue 1099s surprised some tax professionals, because the state did not send those forms for the Golden State Stimulus payments it issued to low- and middle-income residents (up to $75,000 in annual income) in 2020 and 2021 for coronavirus relief.

The state did not issue a 1099 for those payments because it believed they qualified for a federal tax exemption under Section 139 of the Internal Revenue Code for disaster relief funds, Spidell Publishing, a provider of tax information for professionals, said in a note to clients and in a podcast.

“We believe those Golden State Stimulus payments qualified for a federal gross income exclusion under either IRC Section 139 or the general welfare exemption under federal law,” Spidell said.

It’s not clear whether the new payments would qualify for either of those exemptions.

On its website, the state tax board advises recipients to “consult the IRS or your tax professional regarding the federal tax treatment of these payments.”

The IRS could not provide a clear answer. “I can tell you, we are aware of it. California is not the only state doing this,” IRS spokesman Raphael Tulino said.

The only answer Tulino provided was this excerpt from IRS Publication 525. “In most cases, an amount included in your income is taxable unless it is specifically exempted by law. Income that is taxable must be reported on your return and is subject to tax. Income that is nontaxable may have to be shown on your tax return but isn’t taxable.”

https://www.sfchronicle.com/california/article/inflation-relief-payment-federal-tax-17625427.php