Wednesday, May 26, 2010

New York Court Rules that FCUs Subject to Mortgage Recording Tax

The New York Supreme Court 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 argued by the state’s Department of Taxation and Finance. (see Aril 13 post) The Court found that the mortgage recording tax was properly assessed against federal credit unions, including Hudson Valley FCU, and granted the Department of Taxation and Finance motion to dismiss.

Hudson Valley FCU challenged the mortgage recording tax arguing that federal credit unions are exempt from virtually all state
and local taxation, including taxation on intangible property such as mortgages. The credit union was seeking a refund of almost $1.9 million.

But the New York Court of Appeals held that the mortgage recording tax is not a tax on property, and thus not an exempted tax for federal credit unions.


  1. Yes, NY calls it a "tax" not a fee, thereby making it a deductable occurance at tax filing time for banking institutions. Exempt organizations like CUs have to pay without the "wash" benefit. This way the tax-exempt organizatons get taxed, and the taxables do not. Beautiful.

  2. As a firm believer of the credit union movement and a former management level employee of one of the largest, I'm actually happy to hear about this decision. I have no sympathy for a $2.8 billion CU having to pay a tax or two. What led me to this opinion was working for a $5 billion CU that was the most profit motivated non-profit that I've ever seen!



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