New York assesses two mortgage recording taxes -- a regular mortgage recording tax that is paid by the borrower and a "special additional mortgage recording tax" that is paid by the lending institution
According to the New York Times, Hudson Valley Federal Credit Union, in Poughkeepsie, N.Y., is suing the state of New York. The credit union contends that New York State forced the credit union to collect the recording tax, despite its tax-exempt status. Hudson Valley Federal Credit Union is seeking a refund of all of the special additional mortgage recording taxes paid prior to the Tax Department's ruling that the credit union is exempt from the tax.
The complaint states that Hudson Valley FCU and other federal credit unions, as instrumentalities of the United States government, are afforded immunity from taxation under the Supremacy Clause of the United States Constitution in that a state cannot tax an instrumentality of the United States government without the express authorization of Congress. The U.S. Justice Department filed a brief supporting the federal credit union.
However, the New York Times wrote that:
The state maintains that it has not violated the tenets of the Federal Credit Union Act of 1934, which stipulates that credit unions “shall be exempt from all taxation,” except on real and tangible personal property. The tax, the state says, is not on the credit union or on mortgages but for the privilege of recording a mortgage.
A decision is expected in about 6 weeks.
If the credit union wins the case, the state of New York could lose millions of dollars of revenue.