California is holding my refunds because at the end of 1999 my mother passes away and I received some inheritance from her estate, but it falls well below the 1.5m, so I was under the impression I wasn't going to be taxed, this is also the only income I made that year. Can they do that?

Some states require that an estate tax form be filed even if there is no tax due - could that be the case here? Or could it be that the executor failed to file income tax forms for the estate while it was being probated (i.e. before the assets were distributed to you)? The executor of the estate should be able to tell you whether these forms were filed properly.

Strangely enough, after notifying the CA state franchise tax board again that the money I received was an inheritance, they informed me that there is no tax due and that the matter is resolved, a check with my state refund was being issued and on its way.

Glad to hear it! Thanks for letting us know how it turned out.