Legal Alert
NEW YORK’S COURT OF APPEALS SAYS FEDERAL CREDIT UNIONS MUST PAY NEW YORK’S MORTGAGE RECORDING TAX
Media Contact: Michael L. Moskowitz 212.684.7800
Richard E. Weltman 212.684.7800 or 201.794.7500
E-mail: mlm@weltmosk.com or rew@weltmosk.com
For Immediate Release
NEW YORK, NY – On October 18, 2012, the New York Court of Appeals held that federal credit unions are subject to New York State’s Mortgage Recording Tax. The Mortgage Recording Tax requires a payment to New York State of one half of one percent (.5%) for the privilege of recording a mortgage.
The Court of Appeals in Hudson Valley Federal Credit Union v. New York State Dep’t of Taxation and Finance, …. N.Y.3d …., …. N.Y.S.2d …. 2012 WL 4932654 (Oct. 18, 2012; 5-1 decision), found that “[f]ederal credit unions are private associations chartered under federal law” and, although regulated by a federal agency, “they are wholly owned, funded and managed by their members.” The court thus refused to adopt credit union’s contention that a federal credit union is akin to a governmental agency providing immunity from state tax obligations.
The Hudson Valley Federal Credit Union (“HVFCU”) initially brought suit against the New York State Department of Taxation and Finance, asserting it was not required to pay the tax. Defendant’s motion to dismiss HVFCU’s lawsuit was granted in the trial court and affirmed by the Appellate Division, leading to the decision by New York State’s highest court on the matter.
HVFCU claimed the Federal Credit Union Act (FCUA) exempts federal credit unions and their property from all state taxation, and it claimed federal credit unions are instrumentalities of the United States and therefore immune from state taxation under the Supremacy Clause. The FCUA provides that “[t]he Federal credit unions organized hereunder, their property, their franchises, capital, reserves, surpluses, and other funds, and their income shall be exempt from all taxation now or hereafter imposed by the United States or by any State, Territorial, or local taxing authority….”
Despite language in the FCUA, the court held that “if federal credit union mortgages were intended to be excluded from state mortgage recoding taxes, such immunity would have been plainly stated in the FCUA.” The court further noted that, in past federal statutes, when Congress has decided to “immunize ‘mortgages’ of federally charted lending entities from state taxation, it has done so explicitly.” The court further rejected HVFCU’s argument that requiring payment of the mortgage recording tax will have serious financial ramifications for credit unions, even possibly putting them out of business.
For further information, please contact either Michael Moskowitz or Richard Weltman.
Richard E. Weltman and Michael L. Moskowitz are members of Weltman & Moskowitz, LLP, a business – oriented law firm having offices in New York and New Jersey. The firm focuses on bankruptcy and creditor’s rights, bankruptcy and business litigation, technology law, business divorce, commercial dispute resolution, and many types of business transactional matters, including entity formation, counseling and buy-sell agreements. They can be reached at 212.684.7800 or 201.794.7500 or by e-mail at mlm@weltmosk.com or rew@weltmosk.com.
