Islamic Center of Nashville v. State of Tennessee, et al., No. 17-5045 (MOORE, Merritt, Rogers).
An Islamic Center filed suit in federal court, alleging constitutional, federal statutory, and state statutory claims that it alleged relieved it of its obligation to pay a property tax assessed against it during the time period the property was legally owned by a bank pursuant to an ijara agreement. In an ijaraagreement, a financial institution purchases an asset, retains title, and then leases it to the client, and entering into such an agreement allowed the Islamic Center to borrow money without running afoul of the Islamic prohibition on the payment of interest. During the period of the agreement, the Islamic Center alone used the property, and only for religious educational purposes. The district court dismissed the Center’s claim for lack of subject-matter jurisdiction because the Tennessee statute governing tax appeals names the appropriate state chancery court as the first step for obtaining judicial review after administrative adjudication. The Center appealed.
The Sixth Circuit affirmed the dismissal, holding that the Tax Injunction Act (TIA), 28 U.S.C. § 1341, applies to the Center’s claims and divests the district court of jurisdiction. The Court assumed that the Center was seeking only declaratory and injunctive relief, that being to declare Tennessee’s tax statute unconstitutional, but held that the TIA “prevents federal courts from awarding declaratory or injunctive relief to plaintiffs who challenge state tax laws.” The Court reasoned that, by seeking to declare a state tax statute unconstitutional, the Center “seeks, at bottom,” an order allowing it and others to avoid a future tax, like that arising from ijara agreements. Because Tennessee’s tax statute makes available “a plain, speedy and efficient remedy” in a state court, the Court held that the TIA applied and the district court lacked subject-matter jurisdiction over the Center’s claims.