Koneo,
While you probably have filed already, you can relax. That worksheet is saying that because you used the standard deduction in 2018 (or whatever year you got the refund for), your refund is not included in income for 2019.
The reason for this check is that if you had itemized your deductions in 2018, you would have subtracted all the state and local taxes you had paid from your federal income. When it turned out that a portion of what you subtracted was refunded back to you, the amount that was subtracted proved to be more than what was actually paid. To correct for this, the IRS has you add that excess prior year deduction back onto this year's income. The worksheet does go a bit further to make sure that what is added back is only that amount that portion of the refund that wouldn't have caused the total itemized deductions to fall below the standard deduction.
Whew!
