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Islamic Center of Nashville v. State

United States District Court, M.D. Tennessee, Nashville Division

December 14, 2016




         Pending before the court is a Motion to Dismiss (Docket No. 12), filed by Defendants State of Tennessee and the Tennessee State Board of Equalization. For the reasons stated herein, Defendants' Motion is GRANTED, and this action is DISMISSED.


         Plaintiff Islamic Center of Nashville (“ICN”) filed this action against the State of Tennessee, the Tennessee State Board of Equalization, and Charlie Caldwell, alleged to be the Metropolitan Trustee in Nashville, Tennessee.[1] Plaintiff alleges that it has, since 1995, run a religious school in Nashville, called the Nashville International Academy (“NIA”), on property owned by ICN and leased by NIA. Plaintiff's Complaint avers that both ICN and NIA are independently operating, yet overlapping, 501(c)(3) organizations.

         Plaintiff asserts that the Tennessee State Board of Equalization (“TSBE”) granted limited land use property tax exemptions to ICN as a religious entity in 1996, pursuant to Tenn. Code Ann. § 67-5-212(a), which provides an exemption from property taxation for real property owned by any religious or nonprofit educational institution that is occupied and actually used by the institution (or another exempt institution) purely and exclusively for an exempt purpose.

         In 2008, ICN borrowed money to fund construction of a new building for educational purposes on the subject property. Because the Islamic faith prohibits the payment of interest, Plaintiff used a vehicle called an Ijara Agreement to borrow this money from a subsidiary of Devon Bank. Under the Ijara Agreement, an entity controlled by Devon Bank received legal transfer of title of the property until the payments were complete.

         Plaintiff states that payments under the Ijara Agreement were complete in October 2013, and ICN regained the unencumbered title to the property at issue. Plaintiff applied for a property tax exemption regarding the new building in February of 2014 and sought retroactive application of the exemption for the time period during which title was held by Devon Bank.[2] Plaintiff was denied retroactive application of the exemption but granted the exemption going forward from October of 2013. Plaintiff appealed that decision to an Administrative Law Judge, who upheld denial of the retroactive application. Plaintiff again appealed, this time to the Tennessee Assessment Appeals Commission, which held that it was unable to ignore the legal transfer of title and found against ICN.

         Here, Plaintiff seeks redress for the alleged disparate impact of the application of the tax laws that caused Plaintiff to suffer harm as a result of compliance with its sincerely held religious beliefs concerning payment of interest. Plaintiff alleges causes of action under (1) the Religious Freedom and Restoration Act (“RFRA”) and its Tennessee counterpart; (2) the Religious Land Use and Institutionalized Persons Act (“RLUIPA”); (3) the Elementary and Secondary Education Act of 1965 (“ESEA”); and (4) the Establishment Clause of the First Amendment. Plaintiff seeks money damages, and injunctive and declaratory relief. Defendants State of Tennessee and TSBE have moved to dismiss Plaintiff's Complaint on several grounds.


         For purposes of a motion to dismiss, the court must take all of the factual allegations in the complaint as true. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Id. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Id. at 1950. A legal conclusion couched as a factual allegation need not be accepted as true on a motion to dismiss, nor are recitations of the elements of a cause of action sufficient. Fritz v. Charter Township of Comstock, 592 F.3d 718, 722 (6th Cir. 2010).


         Defendants first argue that this action is barred by the Tax Injunction Act, which provides: “The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.” 28 U.S.C. § 1341. Because this is a threshold issue concerning the court's jurisdiction, the court addresses it first.

         The Tax Injunction Act has its roots in equity practice, in principles of federalism, and in recognition of the imperative need of a State to administer its own fiscal operations. Colonial Pipeline Co. v. Morgan, 474 F.3d 211, 217-18 (6th Cir. 2007). A federal district court is under an equitable duty to refrain from interfering with a State's collection of its revenue except in cases where an asserted federal right might otherwise be lost. Id. at 218. Because the Tax Injunction Act drastically limits federal district court jurisdiction to interfere with so important a local concern as the collection of taxes, a district court does not have jurisdiction over state and local tax matters where a plain, speedy and efficient remedy is available in state court.[3] Id. The Supreme Court has interpreted and applied the Tax Injunction Act only in cases in which state taxpayers seek federal court orders enabling them to avoid paying state taxes. Hibbs v. Winn, 542 U.S. 88, 107 (2004).[4]

         Plaintiff here seeks to avoid paying state taxes for the time period during which title to this property was held by Devon Bank. Plaintiff challenges the Defendants' determination ...

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