How treasury AMD is treated by states varies by states. Some states exempt it, some don't. For example, a poster on bogleheads.org reports a written response from California that it is exempt and posters in this report it is exempt in their states after talking to the state, while North Carolina has a court decision that it is not exempt.
TurboTax should allow filers to choose whether or not to enter treasury AMD on the relevant interest on treasuries line of their state return, rather than not allowing them to e-file if they put it on the treasury interest line by overriding, as TT does for NY. TT does allow treasury AMD to be reported on a general subtractions line in NY, but that does not appear to be the correct line according to many. Not everyone agrees how to treat it in NY, so TT should not take a position that may be incorrect and less favorable to the taxpayer.
EDIT: In NY:
You're required to electronically file your return if you meet all three of the following conditions:
A poster on another forum reports that Lacerte, Intuit's professional tax software, treats treasury AMD as exempt from state tax, at least in California. TurboTax should not take an inconsistent position.
