Untangling the SAMRT

October 25, 2012 at 7:06 am Leave a comment

Since Tuesday morning, New York State’s credit union industry has been in a justifiable frenzy after some title insurance companies instructed closing agents to immediately begin collecting the special additional mortgage recording tax (SAMRT) on credit union mortgages. The title insurers were concerned that the Court of Appeals’ recent decision in Hudson Valley Federal Credit Union v. New York State Department of Taxation and Finance meant that federal credit unions were no longer exempt from the SAMRT.

In case you missed it, Credit Union Association of New York Chief Executive Officer and President William Mellin sent an email yesterday evening informing credit unions that the Department of Taxation and Finance has indicated that federal credit unions remain exempt from the SAMRT.  In talking to credit unions and lawyers over the last couple of days, it is clear there is a lot of confusion about the tax and the lawsuit, so here are some of the facts:

  • Section 253 of New York State tax law imposes a mortgage recording tax  (MRT) and a special additional mortgage recording tax (SAMRT).  Since at least 1986, New York State’s Department of Taxation and Finance has opined that federally chartered credit unions are exempt from paying the SAMRT.  State chartered credit unions are exempt by statute.
  • Notwithstanding the action of some title insurance companies, the Department has confirmed that the 1986 opinion remains in effect.
  • Hudson Valley Federal Credit Union’s lawsuit claimed that the MRT was illegal, irrespective of whether it is paid by the credit union or the member.  The case had nothing to do with the special additional mortgage recording tax.
  • The SAMRT and the MRT are  really different taxes authorized by the same statute.  The state takes the position, as it did in Hudson Valley’s lawsuit, that the MRT is not a tax on property, but a tax on the privilege of recording a mortgage in New York State.  In contrast, the SAMRT is a tax that must be paid by the lender.  In other words, the SAMRT tax is indisputably a tax on the credit union, while the state has argued that the mortgage recording tax is not.
  • Bottom line, some title insurers were a little too quick on the trigger on this one and could have saved us all from a first class case of agita.  Neither the decision or anything the state has said or done since the decision necessitate credit unions paying the special additional mortgage recording tax.

Entry filed under: Legal Watch, New York State, Regulatory. Tags: , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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