Q. That's because the amount is actually the portion of interest from Treasury obligations that is included in mutual fund dividends. And, yes, it's legitimately deductible in DC.
A. In that case, the entering technique is a little different. It's still entered in the federal section of the program. After entering the 1099-DIV, a later screen will ask "Tell us if any of these uncommon situations apply to you". Check the box "A portion of these dividends are U.S. government interest". The next screen will give you a box to enter the amount. That will automatically transfer to the state return as a deduction.
