Is Federal interest payment taxable at state level?

The IRS paid me $700 in interest and sent a 1099-INT to me. Is this interest taxable at the state level (Alabama)?

Yes, this is taxable income in Alabama.

According to the Alabama revenue site:

All income is subject to Alabama income tax unless specifically exempted by state law. The term “income” includes, but is not limited to:

Wages including salaries, fringe benefits, bonuses, commissions, fees, and tips.
Dividends.
Interest on: bank deposits, bonds, notes, Federal Income Tax Refunds, mortgages on which you receive payments, accounts with savings and loan associations, mutual savings banks, credit unions, etc.
Original Issue Discount.
Distributions from an Individual Retirement Arrangement (IRA) including SEPs and DECs, if you excluded these amounts in a prior year.
Bartering income (fair market value of goods or services you received in return for your services).

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