Steve916,
The same thing happened to me. I am not positive, but I assumed that my state tax refund last year was not added to my income this year because the refund was less than the amount of state and local taxes that I was not able to deduct last year. For instance, if your total state and local taxes last year was 12,500, and you were only able to deduct 10,000, you were not able to deduct the 2,500. Since last years state tax refund was less than the 2,500, you don't have to count it this year. It would only be counted this year is you were able to deduct it last year--and you weren't able to do that.
