It's too late now to fix your problem for last years' taxes, but I just ran into the same problem this year, and I can tell you what's happening. If you have a 1099-INT with multiple line items, i.e. entries for both non-government and government interest, and then you add an adjustment, TurboTax doesn't ask you to identify which line item the adjustment applies to, it just pro-rates it across the multiple entries. I don't have a way to prove this theory, but in my case the numbers passed to my state return match this.
Did anyone figure out how to get TurboTax to pass "Accrued Market Discount" to the state return properly as US Government interest? I've called TurboTax support 3 times but have had no success in getting an answer.
