The U.S. Justice Department has sided in favor of a credit union locked in a legal battle against its state.
The $2.7 billion Hudson Valley Federal Credit Union has taken the State of New York to court over a tax that the state applies to recording mortgages. The credit union contends that as a federal credit union, it should not have to pay the state tax and the Justice Department agreed in its filing with the court.
Federally chartered credit unions are "instrumentalities of the United States and may not be taxed absent a specific waver," the Justice Department argued in its filing. "Therefore, unless the State of New York can demonstrate that Congress has specifically waived immunity for the mortgage tax at issue, the tax is barred by the doctrine of sovereign immunity," the Justice Department added.
CUNA and NAFCU have weighed in on the issue in favor of the CU as well. The court has said it will hear oral arguments on the case on April 13.