By Alla Raykin and Charlie Kearns 

The US Court of Appeals for the Sixth Circuit held that the Tax Injunction Act (TIA) barred a religious nonprofit from bringing a federal suit over Tennessee’s denial of a retroactive property tax exemption. In Islamic Ctr. of Nashville v. Tennessee, the Islamic Center of Nashville sought a refund for property tax paid while its property was held by the bank under the terms of an ijara. Because Islamic doctrine prohibits interest, an ijara is a financial vehicle used to avoid interest. Here, the Islamic Center of Nashville transferred title of the property to the bank and paid the bank lease payments. Once title was transferred back to the Center, the Center sought a property tax refund for the years it paid tax while title was held by the bank. The Sixth Circuit upheld the District Court’s dismissal, because an action in a federal court seeking a refund of tax paid contravened TIA’s purpose of preventing the use of federal courts to avoid a state tax assessment. The Sixth Circuit distinguished the present case from US Supreme Court precedent in Hibbs v. Winn, 542 U.S. 88 (2004), where the plaintiffs sought to strike down a tax credit statute as unconstitutional, rather than to absolve the plaintiffs of tax. Here, the court reasoned, the Center sought a finding that the denial of the tax exemption was invalid. Therefore, the court concluded that the TIA prevented the federal court from interpreting state tax provisions when a sufficient state remedy existed. (– F. 3d –, 2017 WL 4159484 (6th Cir. Sep. 20, 2017).