CA starts with the Federal AGI, then makes adjustments from there, sometimes you see depreciations adjustments on the CA return.

Someone else dug this up, but this might help.   

Material Participation in Real Property Business – IRC Section 469(c)(7):

Beginning in 1994, and for federal purposes only, rental real estate activities of taxpayers engaged in real property business are not automatically treated as passive activities. California did not conform to this provision. 

P.S. Thanks for the email Marc!!

Thank you, my question is more related to the ProSeries Tax software, it there a special check place or mark in the 540 tax return to review non-passive to passive Federal Schedule E real estate transactions.