Thursday, October 18, 2012

FCUs Are Subject to New York's Mortgage Recording Tax

The Court of Appeals for the State of New York ruled that Hudson Valley FCU is subject to the mortgage recording tax.

Hudson Valley asserted that it was not required to pay the mortgage recording tax (MRT) on mortgage obligations issued to members because (1) the Federal Credit Union Act (FCUA) exempts federal credit unions and their property from state taxation and (2) as instrumentalities of the United States, federal credit unions are immune from state taxation under the Supremacy Clause.

However, the Court wrote "if federal credit union mortgages were intended to be excluded from state MRTs, such immunity would have been plainly stated in the FCUA. Instead, although the FCUA contains an extensive list of exemptions relevant to federal credit unions, it makes no mention of mortgages or loans of any kind."

The Court disagreed with Hudson Valley that the mortgage recording tax "is tantamount to an illegal direct tax on the credit unions themselves."

The Court also concluded that the credit union's assertion that the mortgage recording tax would thwart the efforts of credit unions to serve people of modest means and would have serious financial ramifications for federal credit unions to be unfounded.

The Court opined "contrary to its assertions, there appears little danger that the MRT will drive federal credit unions out of business."

The Court further rejected the federal instrumentality argument.

Read the Decision

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