A distribution code of 3 on your Form 1099-R represents disability income. This distributions isn't subject to an additional 10% tax as an early distribution, but it is still included in your taxable income.
According to Disability Pensions in the IRS's Publication 575,
If you retired on disability, you must generally include in income any disability pension you receive under a plan that is paid for by your employer. You must report your taxable disability payments as wages on Form 1040 or 1040-SR, line 1; or Form 1040- R, line 8, until you reach minimum retirement age. Minimum retirement age is generally the age at which you can first receive a pension or annuity if you aren't disabled.
It's possible that your state doesn't treat this as taxable income.
