Received a notice that I'm being audited by the State of Alabama for 2015 (partial LM return) and 2016 (full year LM return) "before refund can be issued". Any advice? I've never been audited before.

With my returns, I sent 2 copies of redeemed paychecks, a copy of 31 USC 3124 & a copy of 18 USC 8 (defining the obligation of USN). The audit is odd to me. Why not just deny it through sending me a letter? The audit makes me think they are fully aware of 31 USC 3124 and are looking for anyway way to keep my money.

I feel I have precedent. See James D. & Patricia M. Holland v. ALABAMA (Google "31 USC 3124 Alabama" and click on first link).

Should McCulloch v. Maryland not also be in my favor? "A tax on an instrument employed by the US govt is unconstitutional"