I agree. This is a Turbotax bug. The program knows enough not to tax a Roth distribution on the Federal but erroneously taxes it on the state, if there is a code T in box 7. Such distributions are not taxable at the state level if you are over 59 and the account has been open at least 5 years. Code T just means the custodian is doesn't know if you meet those criteria. Code T does not mean you fail those criteria. So, Turbotax should ask additional questions to determine if you do meet those criteria and, not tax you at both state and Federal levels if you meet them.
I have brought this to the attention of Intuit and am waiting for a response. Until they fix the program, it seems like the choices are to either (a) change that code manually to Q after filing your Federal and before filing your state or (b) do some kind of manual override on Sch X of the state.
