The kicker is the equivalent of a state tax refund. It is taxable in the next year only if you itemized deductions in the previous year. The rationale is that you got a tax benefit in the previous year for 100% of your state tax, so if you get a refund, you have to declare it as income the following year.
Later law changes have made this much more complicated because now state and law taxes (including the income tax) are now limited to $10,000.
So, before we go into that, did you itemize deductions on your federal return in 2019? If no, then the issue is simple: you don't need to report it.
See this old but still good column on the kicker by an IRS Senior Tax Consultant.
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