I also was not referring to the foreign earned income exclusion in particular. With that exclusion, you have to report the amounts being excluded on a certain form as part of your federal return. Since California requires you to submit your federal return, you couldn't hide that without falsifying the documents you send them. However, there are other situations were income is not taxed federally and does not show up anywhere on the federal return at all (most notably, income from "without the US" (actual statutory language) earned while you were a nonresident alien). If you have income like that, you are in the position of having to voluntarily disclose information that California would not otherwise know about, and the effect of doing so is to increase your tax liability.
Now, I personally did declare that foreign income that California would not otherwise know about, but I know or strongly suspect that none of my coworkers did (I work for a company with many people moving from foreign countries to California to work here). That is why I felt like a sucker and posted the thread.
As for this, I completely ignored the obviously large case where US filers weren't US citizens. US citizens would be required to report all income earned worldwide regardless of source. This makes more sense now, thanks!
Note that US citizens and
resident aliens are treated identically for almost all tax purposes. (The main exception is that residents are only subject to expatriation tax if they are "long-term residents" when they conclude their residency; whereas US citizens are subject to expatriation tax regardless of how long they were citizens if they give up citizenship.)
Once you become a resident alien, you have to pay tax on worldwide income to the USA just like citizens. The different tax regime is only for nonresident aliens or people who were a nonresident alien for part of the year (referred to by the IRS as "dual status aliens").
As for carryover items, the other obvious one is net passive losses. In my personal case, though, that complexity was from net capital losses and I can give a brief explanation of why.
In the USA and in most or all states, capital losses are allowed in the amount of capital gains plus $3,000. In Canada, however, net capital losses are not allowed at all. So basically, if you were living in the USA your whole life, your carryover capital loss would just be your net capital loss remaining on your previous return after claiming the $3,000 -- but that is not the case with your Canadian return. Instead, you actually have to break out your past records and calculate it.
The second reason for the complexity was that a few years ago, before I knew what I was doing, I took a speculative position inside a Canadian tax shelter and lost some money. Since California doesn't recognise that shelter, that loss is deductible, but I have to calculate all the returns between then and now to figure out how much of it can actually be carried forward based on California's rules for carrying over losses. Part of the reason this was obnoxious is that the Canadian broker did not issue me any tax statements in respect of that account because it was a tax shelter so the assumption was you don't need the statements. Thus, I had to figure it out from even more basic records.
Finally, the other obnoxious thing to throw into the mix is having to convert the amounts between CAD and USD. The exchange rate varied wildly over the relevant period and it was in my interest to use the actual exchange rate on the date of each transaction, which as you can imagine added a lot of work to the exercise.