The New York State Court of Appeals late Wednesday agreed to hear an appeal from Hudson Valley Federal Credit Union, which claims its status as a federally chartered credit union should exempt it from the state's recordation transfer tax on all real estate transactions.
The state appeals court also agreed to allow the U.S. Department of Justice to argue on behalf of the credit union that the Federal Credit Union Act exempts all federal CUs from state taxes like the New York levy.
The stakes in the case are huge: federally chartered credit unions such as Hudson Valley pay tens of millions of dollars in mortgage recordation taxes each year.
“We've been dismissed at the two lower court levels, so this is a very big thing for us,” said Dale Lois, a Fishkill, N.Y., representing the $3.2 billion Poughkeepsie-based credit union.
Hudson Valley, a one-time IBM employees credit union, had sued the New York State Department of Taxation and Finance, claiming that it is shielded by the Federal CU Act from paying the state tax.
Under the Federal CU Act, federally chartered credit unions are considered federal instrumentalities and thus, are exempt from both federal and state taxes. But the lower courts dismissed this argument and asserted that the state's mortgage recordation tax is a levy on the privilege of a mortgagee to record their deed and not a tax on the credit union.
