Since you appear to have entered this income correctly in TurboTax, the exclusion of this income is almost surely reflected on your return -- you may just be looking in the wrong place.
The income portion of Montana's Form 2 starts with your federal adjusted gross income (AGI) from your federal return, and includes your U.S Savings Bonds interest. See lines 1 through 11 of Form 2.
However, state subtractions from your federal AGI are claimed on the Montana Subtractions Schedule on page 5 of Form 2, and are then transferred to line 13 of Form 2.
So, while your interest is included early in the math part of the Montana return, it's subtracted out later in the return.
