As far as refunds being counted as taxable income I believe that has long been the case.  I think the idea behind it is that since the money is returned to us we must act as though it was always a part of that taxable years income.

I mostly want to address the Arizona issue though - there does appear to be a problem with how the Turbo tax forms are being filled in for those who make donations for the AZ dollar for dollar tax credit.  Please see a fellow AZ post entitled

Turbo-tax can't handle SALT Safe Harbor + Arizona tax credits. Please fix for next year.

:

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/turbotax-can-t-handle-salt-safe-...