Why is TurboTax counting my exercise of ISO shares without selling (i.e., exercise and hold) as a tax event beyond affecting the AMT calculation?

It could be that you are subject to the Alternative Minimum Tax.  The AMT amount, however, becomes a potential tax credit that you can subtract from a future tax bill. If in a subsequent year your regular tax exceeds your AMT, then you can apply the credit against the difference. 

@bryanyc2001