Legal Question in Business Law in California

I would think so, because although the rate is dictated by law, the payor is a private party (usually, at least) so it should be treated as interest income from a private source, just the same as a corporate bond.

Of course it is. The only question is when. If you are a cash basis taxpayer, it is taxable when you receive it. Accrual basis taxpayers have more complex evaluations. If you are an individual you are most likely a cash basis taxpayer.