MANHATTAN, N.Y. (4/14/10)--The Credit Union National Association (CUNA) and the Credit Union Association of New York (CUANY) were present Tuesday for oral arguments in support of Hudson Valley FCU's challenge against a New York state assessment required on credit union mortgage loans. The 90-minute hearing was in the Supreme Court of New York County, a trial-level court located in Manhattan. At issue is whether a federal credit union (including its members) must pay a mortgage registration tax to New York to record its mortgages with the state. In Tuesday's proceeding, Judge Judith Gische accepted amicus curiae (friend of the court) briefs prepared in October in support of the credit union by CUNA, CUANY, the Department of Justice and the National Association of Federal Credit Unions. A fire drill interrupted the proceedings before oral arguments began. The Poughkeepsie-based credit union filed the suit on May 15, 2009, against the New York State Department of Taxation and Finance, Commissioner Robert L. Megna, and the State of New York. Hudson Valley says its mortgages are exempt from the state's mortgage recording tax, which is used by New York as a general revenue collecting mechanism for its general fund. This is different from most other states' fee charged to cover the cost of operating the recording office. Hudson Valley has paid nearly $3 million in the mortgage recording taxes on "no closing cost" loans made to its members (News Now Feb. 25). It also is seeking a refund of the tax in a separate administrative proceeding. The state claims federal credit unions must pay the recording tax by arguing that federal credit unions are not federal instrumentalities and that the tax is a "privilege tax" paid voluntarily for the so-called privilege of recording a mortgage. Tuesday's hearing centered on the credit union's opposition to a motion to dismiss the case by the New York Attorney General's office. Hudson Valley FCU has asked for a declaratory judgment to not pay the mortgage tax. CUNA General Counsel Eric Richard and Counsel for Special Projects Michael Edwards were among those attending Tuesday's hearing in Manhattan. CUANY Associate General Counsel Henry Meier presented arguments on behalf of CUANY and CUNA. Also, "it's very significant that the Department of Justice Tax Division sent an attorney to argue in support of the credit union position in the case," Richard told News Now.