Family Law

Is New Tax Bill The Key To Affordable And Equitable Fertility Treatment?

Tax policy can be a little dry, but with rising rates of infertility and concerns of substantial population shrinkage, it's a topic that we need to tackle sooner rather than later.

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Earlier this month, California Representatives Adam Schiff and Judy Chu introduced the Equal Access to Reproductive Care Act, a federal bill aimed to make the taxation of fertility treatments fairer, especially when it comes to surrogacy.

What Does It Do?

The bill is short — not even a full three pages — but if it passed, it would be big news for those unable to carry a pregnancy for themselves. The bill expands the definition of a current “medical care” tax deduction to explicitly include assisted reproduction. “Assisted reproduction” is broadly defined to include “any methods, treatments, procedures, and services for the purpose of effectuating a pregnancy and carrying it to term, including gamete and embryo donation, intrauterine insemination, in vitro fertilization, intracervical insemination, traditional reproductive surrogacy and gestational reproductive surrogacy.”

The bill also provides that “assisted reproduction shall be treated as medical care of the taxpayer or taxpayer’s spouse or dependent to the extent that the taxpayer or the taxpayer’s spouse or dependent, respectively, intends to take legal custody or responsibility for any children born as a result of such assisted reproduction.”  In other words, the tax deduction can be attributed to the person paying the expenses for their own fertility treatment, even when the expenses relate to a third person like a donor or surrogate.

So if you put those definitions together, in short, assisted reproduction expenses, including, specifically, surrogacy expenses, can be included in qualifying medical expense deductions. That seems fair and reasonable. What’s the problem with the current tax code?

The Current Situation: No Medical Care Tax Deduction For Surrogacy

Under Section 213 of the Tax Code, the IRS permits individual taxpayers to deduct their qualified unreimbursed medical care expenses that exceed 7.5% of their adjusted gross income. Wisely, the term “qualified” unreimbursed medical care expenses was interpreted broadly in the context of assisted reproduction in a 2003 private letter ruling. There, the IRS found that egg donation expenses — including the donor’s fees, agency fees, and, most importantly, attorney’s fees — were all reasonable qualified medical care expenses for the taxpayer-recipient, and therefore entitled to be used as a qualifying tax deduction.

Sponsored

However, similar requests for tax deduction of expenses relating to surrogacy — and egg donation paired with surrogacy — have been denied on multiple occasions, including in the Morrissey case, because they weren’t for the “purpose of affecting any structure or function of the body of the taxpayer, their spouse, or their dependent.” Instead, the medical care expenses were considered the expenses of a third party because it was the surrogate who was considered to be receiving the medical care. Put simply, the IRS has said yes to the deduction of third-party expenses if a taxpayer (or taxpayer spouse or dependent) is the one carrying the pregnancy, but no to the deduction of those third-party expenses if the pregnancy is carried by a surrogate.

Single men, as well as same-sex male couples wishing to have children genetically related to one or both of them, are often without options for family-building besides surrogacy. The inability to deduct high costs relating to surrogacy means a major increase in the overall financial burden for these individuals. Of course, the bill makes no mention of the marital status, gender, or sexual orientation of a taxpayer, as the broadened tax deduction would apply equally to any hopeful parent needing to turn to surrogacy.

An Impressive Coalition

The Schiff-Chu bill is supported by not just one or two organizations, but by an impressive list of collaborators including: Men Having Babies, RESOLVE: The National Infertility Association, Family Equality, NCLR (National Center for Lesbian Rights), GLAD (GLBTQ Legal Advocates and Defenders), and COLAGE (Children of Lesbians and Gays Everywhere). Many of these groups take special interest in ensuring that LGBTQ+ hopeful parents are able to achieve those dreams without facing structural legal barriers, like tax burdens. Ron Poole-Dayan, the executive director of Men Having Babies, explained that this bill is part of a larger overall initiative for Fertility Equality, aimed at reducing financial barriers to parenthood.

I spoke with Barbara Collura, president of RESOLVE, about the impetus for this bill. She explained that the proposed law was inspired by a constituent bringing the outdated tax code and its negative and discriminatory effects to the attention of legislative representatives, highlighting the importance of individual stories being shared with legislators. Collura also described her pleasure working with the broad coalition of organizations, effectively collaborating to achieve their common goal of improving the tax code to acknowledge and support modern routes for family formation.

Sponsored

Tax policy can be a little dry, but with rising rates of infertility and concerns of substantial population shrinkage, it’s a topic that we need to tackle sooner rather than later. And it seems more than reasonable to give a tax break — applied in a nondiscriminatory fashion — to those already spending an arm and a leg just to become parents. Plus, they are going to need that tax refund to pay for diapers.

Ellen TrachmanEllen Trachman is the Managing Attorney of Trachman Law Center, LLC, a Denver-based law firm specializing in assisted reproductive technology law, and co-host of the podcast I Want To Put A Baby In You. You can reach her at [email protected].

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