California Mortgage Debt forgivnes act is only granted until the end of 2008. 

http://info.sen.ca.gov/cgi-bin/postquery?bill_number=sb_1055&sess=CUR&house=B&site=sen

If you have CCP 580b protections and you do a short sale, you may wish to make sure the short sale closes by the end of 2008.  If you close in 2009, you may have an issue with the Franchise tax board.  If someone with non recourse loans accepts a foreclosure then according to CCP 580b the lender may not be able to pursue the borrower for the deficiency and the borrower will not owe taxes to the IRS or CA for loan forgivness.  However, if the same borrower does a short sale, that borrower may be exposing themselves to taxes on the loan forgivness to the state of California - starting again in 2009.  (With respect to the IRS - the mortgage debt forgiveness act has been extended to 2012.

In short if you have non recourse loans - I suggest you make sure you are released from the potential defiiciencies in writing and you set the transaction up in a way to give you the best argument with the Califorina Franchise Tax board.  If a large tax bill to the State of CA is a concern - you should weigh the benefits of a short sale agianst the benefits of accepting a foreclosure.  (or perhaps a deed in lieu of foreclosure).