I believe I have found the answer to the question I posed and have concluded that the software is correctly calculating the state tax. It turns out that TurboTax is reducing the non MI tax exempt income by the percentage that bond amortization premium represents of total tax exempt interest income. Intuitively this makes sense but there was no way to understand or track this calculation on any of the supporting forms. It would help if I could click on the resulting reported income in the box to understand how it is calculated.
