Yes, distributions with code D7 are taxable income in PA and are reported as interest income on PA Schedule A. Please review your selection on the “What kind of retirement income do you have from Pennsylvania?” screen during the state interview.
"For tax years beginning on or after January 1, 2005, any amounts reported in gross income for Federal Income Tax purposes for a retirement annuity that is not an employer sponsored retirement annuity (reported as Codes 1D, 2D, 3D, 4D or 7D in Box 7 beginning with 2013 Forms 1099-R) are reported as interest income on PA Schedule A regardless of whether the annuity payments began before January 1, 2005, or on or after January 1, 2005." (PA DOR)
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