@BobKamman No, I don't condone omitting income items just because they fall beneath the threshold for 1099 reporting.  But in this case we don't know if the MCTR IS an income item.  So that leaves everyone to choose the path they feel is correct for their practice. 

CA has probably taken the prudent path in issuing the 1099s in the absence of guidance.  That doesn't mean they are correct.  Generally when a client receives a 1099 in error, rather than trying to get the issuer to amend it, we will enter it on the return along with an offsetting entry explaining the error.  In the case of the MCTR, if you're taking the position that it qualifies for the general welfare exclusion, I would treat all of them in the same manner, regardless of amount, mostly as a CYA.  However, I can see how some preparers may take the position that the MCTR is not taxable to the fed, the 1099 reporting is wrong and in that case don't report it on the return unless you have to deal with a 1099.  

In my previous reply I was replying more to your assertion that discussing it with the client was something other than informing them so they can decide if they want to take a more conservative approach or opt to wait for guidance.  I don't think we've got too many folks on here who let their clients tell them to do the wrong thing.  I'm sure many of us have told a few of our clients what they could do though.