Cal. Public Resources Code § 32206

The exercise of the powers granted by this division shall be in all respects for the benefit of the people of this state, for their health and welfare, and protection of the state’s environment. Any bonds, notes, or other obligations issued under this division, their transfer and the income therefrom, shall at all times be free from taxation of every kind by the state and by municipalities and other political subdivisions of the state. However, the preceding sentence shall not apply with respect to any bonds, notes, or other obligations, or the income therefrom, for any period during which the bonds, notes, or other obligations are held by (1) Any normally taxable participating party, (2) persons, organizations, trades, or business, whether incorporated, organized in this state, or affiliated with a participating party, owned or controlled, directly or indirectly, by the participating party, or (3) persons, organizations, trades, or businesses, whether incorporated, organized in this state, or affiliated with the participating party, which own or control, directly or indirectly, the participating party.