California does not tax Social Security benefits or Tier 1 Railroad retirement benefits which are treated the same as Social Security benefits.

The California BOE has a long-held position that U.S. treaties with foreign countries do not apply to California tax. So California does not conform to the Internal Revenue Code as it relates to treaties that exempt certain income from federal taxation. The result is that, although foreign pensions and social security may be exempt from federal taxation under U.S. treaties, the income is subject to California tax.

In the Appeal of George S. Gilmour, November 28, 2000, Case No. 34337 the taxpayer argued that a treaty between the U.S. and Great Britain exempts Social Security from taxation and Social Security is exempt from taxation by statute. The BOE position has been that tax treaties between the U.S. and other countries do not prevent California from taxing persons otherwise covered by such treaties (Appeal of M.T. de Mey van Streefkerk, Cal. St. Bd. Of Equal., Nov. 6, 1985). In support of this position, the U.S. Supreme Court has ruled that tax treaties the U.S. enters into generally do not prohibit the taxing activities of sub-national governments.

Only U.S. Social Security Benefits Exempt from CA Taxation - R&TC Sec. 17087(a) exempts only U.S. Social Security and there is no provision under either the California statute or the Internal Revenue Code to specifically exempt foreign social security from taxation by California residents.