WASHINGTON–The U.S. Supreme Court has declined to review a decade-old New York court ruling that upheld a rule requiring federal credit unions in the state to impose the state’s mortgage recording tax.
Challengers to the law had argued the Federal Credit Union Act exempts federally chartered CUs from “all taxation,” other than taxes on real property and tangible personal property.
As CUToday.info reported earlier, home builder O’Donnell & Sons Inc. had argued in a petition filed in March that FCUs were exempt from the tax. O’Donnell & Sons had also filed a putative class action after Hudson Valley FCU, its lender, had passed the mortgage recording tax onto the company.
On Oct. 18, 2012, the New York Court of Appeals had held that federal credit unions are subject to New York State’s Mortgage Recording Tax, which requires a payment to New York State of one half of one percent (.5%) for the privilege of recording a mortgage.
In that case, the Court of Appeals in Hudson Valley Federal Credit Union v. New York State Dep’t of Taxation and Finance 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 rejected HVFCU’s argument that a federal credit union is akin to a governmental agency providing immunity from state tax obligations, as well as other arguments made by the credit union.
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