Appeals Court: FCUs Subject to NY Mortgage Recording Tax

The Appellate Division of the Supreme Court of New York upheld a lower court decision that Hudson Valley FCU and all other federal credit unions operating in New York are subject to the state's mortgage recording tax.

Hudson Valley sought a declaration that it and other federal credit unions are exempt from the New York State mortgage recording tax (MRT), in connection with mortgages made by them to their members, under the Federal Credit Union Act of 1934 (FCUA) and the Supremacy Clause of the US Constitution.

Contrary to Hudson Valley's contention, the Court found that the mortgage recording tax is a tax on the privilege of recording a mortgage, not a tax on property.

Additionally, the Court "rejected plaintiff’s contention that the FCUA should be interpreted so as to exempt federal credit unions’ mortgage loans, and the right to record them, from the MRT because the imposition of the tax undermines the statute’s main policy of making low-cost credit available to average Americans." The Court noted that at the time the FCUA was enacted, federal credit unions did not have the authority to make home loans. The Court further notes that Congress had amended the FCUA authorizing federal credit unions to make residential mortgage loans, Congress never amended the statute specifically to exempt federal credit unions’ mortgage loans from the mortgage recording tax. Therefore, the Court concluded that it does not have to consider whether federal credit unions have an implied exemption from the MRT under the Supremacy Clause.

To read the decision, click here and go to page 37.