Hudson Valley FCU Appeals Ruling On State Mortgage Tax

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ALBANY, N.Y. – Hudson Valley FCU has appealed its challenge of the state’s mortgage transfer tax to the state’s Court of Appeals, arguing the federal credit union charter exempts it from all state taxes.

The case could have enormous ramifications for both federally chartered New York credit unions and millions of their members.

The credit union’s challenge was rejected in May by a lower court, which ruled that even though the Federal CU Act defines federally chartered credit unions as instrumentalities of the federal government and thus exempt from state taxes, the mortgage recording tax is not a tax on credit unions or a tax on borrowers, but on the “privilege of recording” a mortgage, as was argued by the state’s Department of Taxation and Finance.

But in its appeal, the $3 billion credit union argued the court’s ruling was incorrect. "An FCU’s immunity from taxation under the Supremacy Clause of the United States Constitution and the (Federal Credit Union) act prohibits the state's imposition of mortgage recording taxes on mortgages granted to secure loans made by FCUs to their members, regardless of how the Court of Appeals has characterized the tax for other purposes and in other contexts," the credit union’s attorneys said in their note of appeal, filed last week.

Several credit union groups including CUNA and NAFCU, as well as the U.S. Department of Justice, filed briefs supporting the credit union’s challenge.

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