I figured it out in the end, after inserting a day to let my frustration to subside. I deleted both state returns and started from scratch. I started with VT return first then moved on to PA. I found some exclude from PA options that I missed the first time. It seems it is not programmed that well to take into account non resident returns. I had to individually edit each line in the investment income to state PA tax exempt. It would be easier if I could have selected all at once.
