Sept. 4, 2012 – NAFCU will be on hand as oral arguments take place today in Hudson Valley FCU’s challenge to the state of New York’s levy of mortgage recording fees on the credit union, a suit that the association supports in line with its goal of preserving credit unions’ tax-exempt status.
Originally, the Poughkeepsie, N.Y.-based credit union filed suit in 2009 challenging the state’s imposition of a mortgage recording tax on mortgages given to secure loans made by federal credit unions. NAFCU has filed amici briefs at various stages supporting the credit union.
The credit union has filed repeated appeals over the tax, but the state continues to argue that the credit union’s request has no statutory or constitutional basis.
In a brief filed March 19, the state of New York said the Federal Credit Union Act does not bar collection of recording taxes on mortgages securing federal credit union loans because the tax “is not a property tax.”
Hudson Valley, however, says the state’s judgment was erroneous and should be reversed. Its reasoning: Hudson Valley and other federal credit unions are federal instrumentalities, and the Federal Credit Union Act exempts such entities, their assets and operations from all federal, state and local taxation not expressly and specifically permitted by Congress.
Hudson Valley points out that Congress has not waived this broad immunity with respect to state mortgage recording taxes. It argues that federal law, therefore, prohibits these taxes from being imposed on federal credit unions such as Hudson Valley.