State taxability of IRS interest on federal refunds?

It is definitely taxable interest income, and the IRS mails out the equivalent of a 1099INT,

I know it's definitely taxable on the federal return, but what about on the state return?

Yes, the interest paid by the federal government on a delayed federal tax refund is taxable by the states.

Rules may vary between states, but interest on federal tax refund is taxable in my state. From Alabama Form 40 instructions:

Income All income is subject to Alabama income tax unless specifically exempted by state law....

Examples of Income You MUST Report

Interest on: bank deposits, bonds, notes, Federal Income Tax Refunds,....

There doesn't appear to be any federal law that prohibits the states from taxing the interest on federal tax refunds.

Interest and dividend income from U.S. government obligations is subject to federal income tax but is exempt from state income tax by federal law. (for the same reason that interest on state/municipal obligations is exempt from federal income tax).

Actually, I believe it's exempt from state income tax by virtue of constitutional Supremacy Clause doctrine, not mere federal statute.

By contrast, that is done by federal statute.

Many states claim interest on federal tax refunds to be taxable. Best discussion I have found is here:

I never received a 1099-INT or equivalent from IRS for interest (about $40) received after filing an amended return. However, I still included it on Schedule B. As others noted, while federal interest on certain US Government obligations is exempt from state income tax, it's best to check one's state equivalent of Pub. 17 to see which ones are (e.g., Treasuries, Savings Bonds, TVA, FHLB) and are not (e.g., Fannie and Freddie).