Hello, We reached out to our Extension Entomologist for help with this question. Here is the response:

Thank you for your message and for contacting Iowa State University. The larvae you found while smashing walnuts are called walnut husk maggots. There are at least two species of flies that develop in the seemingly inhospitable (oily and smelly) husks of walnuts; the walnut husk fly and the walnut husk maggot. The flies look very similar and have similar life cycles.

Walnut husk fly: Rhagoletis complete https://bugguide.net/node/view/92632

Walnut husk maggot: Rhagoletis suavis https://bugguide.net/node/view/15266

The walnut husk maggots live in the husks of black walnuts during the summer. The outer husk turns black and slimy as the maggots feed in the pulp of the husk. Deterioration of the husk can stain the nut shell. Discoloration of the black walnut nut shell is not an issue. The shell is already black and staining will go unnoticed. Control is not warranted.

Commercially, staining of light-colored shells like English walnuts reduces the value of nuts sold in the shell although the kernel is undamaged.

One management option is to immediately collect all dropped walnuts and discard (either far away or buried). This will destroy the maggots before they can burrow into the soil to spend the winter, and it might reduce future populations. Unless there are lots of black walnut trees in the area. Spraying walnut trees is done in California to protect English walnuts from walnut husk maggots, but spraying is not warranted in Iowa.

Our old article on black walnut harvest suggests removing husks as soon as possible. This removes the maggots and reduces chances of husk oils from contaminating the nut meat. https://hortnews.extension.iastate.edu/1994/9-16-1994/bnut.html