If you believe the 1099R distribution reported as code 7D should not be subtracted from Illinois taxable income, you can find the "subtraction" section of your TurboTax state return for Illinois and delete the excluded amount or include an offsetting amount as a subtraction.
Code D is for "Annuity payments from nonqualified annuities and distributions from life insurance contracts" per page 17 of the IRS instructions for Form 1099 at this link.
See this Illinois Publication 120 Retirement Income, page 2 and 3 for a list of retirement income that is not and is taxable.
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