Yes, PA will be handled separately and you did the right thing marking the amount received and used so that you are not paying tax on that amount since there are no credits as on federal. It looks like you made it through!
PA DOR states: Distributions from an IRC Section 529 College Career and Savings Program Account not used for qualified educational expenses are taxable and reportable as interest income on PA Schedule A and Line 2 of form PA-40. The cost recovery method must be used to determine the taxable amount for contributions made in tax years 2005 and earlier. The total amount of distributions that were claimed as deductions for tax years 2006 and later is taxable.
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