Hudson Valley Federal Credit Union, Albany, has appealed its challenge of the state's mortgage transfer tax - rejected by the lower court - arguing the federal credit union charter exempts it from all state taxes.
The case could have enormous ramifications for all federally chartered CUs and millions of their members.
The credit union's challenge was rejected in May by the lower court, which ruled that even though the Federal Credit Union Act defines federally chartered CUs as instrumentalities of the government and thus exempt from state taxes, the mortgage recordation tax is not a tax on CUs or a tax on borrowers, but on the "privilege of recording" a mortgage, as argued by New York's Department of Taxation and Finance.
But in its motion to the Court of Appeals, the $3 billion CU is arguing that the court's ruling was incorrect. A federal CU's immunity from taxation under the Supremacy Clause of the U.S. Constitution and the (Federal Credit Union) Act prohibits the state's imposition of mortgage recording taxes on loans granted to secure loans made by FCUs to their members, regardless of how the Court of Appeals has characterized the tax for other purposes and in other contexts, the credit union's attorneys said in their appeal.
Several credit union trade groups, including the Credit Union National Administration, as well as the U.S. Department of Justice, filed briefs supporting the credit union's challenge.
