Weekly SSRN Tax Article Review And Roundup: Layser Reviews Crawford's Tax Talk And Reproductive Technology

This week, Michelle Layser (Illinois) reviews Bridget Crawford (Pace), Tax Talk and Reproductive Technology, 100 B.U. L. Rev. ___ (2019).

As the U.S. fertility industry explodes, there is plenty of talk about surrogate miscarriages, freezer failures, unwieldy donor family trees, problems with privacy and anonymity, and the physical and emotional tolls of egg and sperm donation. What’s missing from the conversation? According to Professor Bridget Crawford, the answer is “tax talk.” Crawford’s article, which focuses on how egg donors talk about taxes with each other and their fertility clinics, is an empirically grounded exploration into the ways that talking about tax (or failing to do so) reflects and reinforces cultural norms.

The article begins by recounting the facts of a 2015 tax court case called Perez v. Commissioner. In that case, the taxpayer Nichelle Perez had received fees for her “time, effort, inconvenience, pain, and suffering in donating her eggs.” Perez earned her fees. She underwent a series of painful hormone injections that resulted in pain, bruising and burning. She submitted to general anesthesia and an invasive egg removal procedure that left her cramped, bloated, nauseous, fatigued and moody.

To add insult to injury, at the end of the year Perez received a Form 1099 MISC showing $20,000 of income arising from the donor fees. Like many women Crawford describes in the article, Perez was not happy to receive the tax form. She turned to internet forums, where other egg donors reassured her that her donor fees were not taxable. She declined to report the $20,000 on her tax return, and when the IRS tried to collect on the sum, she defended that the fees were excludable as compensation for her pain and suffering. The tax court rejected her argument. The law was clear: donor fees are taxable income.

Yet, as Crawford’s research shows, many egg donors don’t see it that way. Crawford argues that the misunderstanding stems from a failure among fertility clinics to talk about the tax consequences of egg donation. She performed a content analysis of 25 fertility clinic websites, a key source of information for women who are in the early stages of deciding whether to donate eggs. Only three included information about taxation. 

Facing this void of information, some women turn to online forums for advice. But Crawford’s content analysis of discussion threads found the conversations to be confusing at best and misleading at worst. Some information was accurate—or at least partially so—but much was not. Crawford argues that this confused information environment helps the fertility industry thrive at the expense of donors (when they pay unexpected taxes) and the Treasury (when they don’t).

Crawford posits that if egg donors don’t know that fees are taxable, then they will accept lower fees. If the word gets out that fees are taxable, however, egg donors may require “gross ups” to cover the cost of taxes. As donor fees climb, fewer infertile couples will be willing and able to pay. Not only would this reduce access to fertility treatment for some families, but it would also harm fertility clinics’ bottom line. Unmoved by these concerns, Crawford argues that fertility clinics should be required to talk taxes with potential donors. This would help increase tax compliance and enable donors to charge appropriate fees.

But this practical recommendation can only be fully understood in light of the much more nuanced contribution this article makes to the tax and culture literature. Crawford’s research shows that tax talk—not just tax laws and policies—creates and reflects cultural attitudes about social behaviors and choices. 

Building on insights from critical race theory and other feminist scholarship (think: Nancy Staudt’s Taxing Housework), Crawford contends that taxing income arising from the work of women—including fertility work—has a legitimating function. Yet the existing tax on donor fees has not empowered women or pulled egg donor transactions into the commercial mainstream. Crawford’s research strongly suggests that tax talk is a key to realizing such benefits.   

Indeed, Crawford’s view of taxation as fundamentally empowering would surprise many of the egg donors in the internet forums. As her own research shows, many egg donors perceive themselves as altruistic actors and believe that tax law will (or should) recognize their gratuitous acts through a tax exclusion. (Fertility clinics even foster this self-perception by avoiding tax talk, which would make the commercial nature of egg donation transactions more salient.) This kind of rhetoric quickly gives way to viewing taxes on donor fees as unwarranted sin taxes, which are anything but empowering. 

If the taxation of egg donation fees is to lift up women, then tax talk must mean more than simply giving egg donors a heads up about an impending Form 1099 MISC. Tax talk also means explaining to donors that they are not taxed despite rendering valuable services (or, worse, because lawmakers have judged the activity as undesirable). Rather, they are taxed because egg donation is a valuable service. So valuable, in fact, that it should be taxed the same as any other value-adding market transaction. Crawford concludes that this kind of tax talk “has the potential to bring reproductive work into the realm of recognized and respected labor.”

This article contains insights relevant to any tax scholar interested in female autonomy, gender equality, reproductive rights, compliance, social media technology, or the language and culture of law. 

Here’s the rest of this week’s SSRN Tax Roundup:

• Andrew B. Ainsworth (Sydney), Kingsley Y.L. Fong (South Wales), David R. Gallagher (Univ. of Queensland Bus. Schl.) & Graham Partington (Sydney), Taxes, Order Imbalance and Abnormal Returns Around the Ex‐Dividend Day, 18 International Review of Finance 379 (2018)
• Marcin Bielecki (Univ. of Warsaw) and Nikolai Stahler (Deutsche Bundesbank), Labor Tax Reductions in Europe: The Role of Property Taxation, Deutsche Bundesbank Discussion Paper No. 30/2018
• Katharine D. Drake (Arizona), Nathan Goldman (Univ. Texas at Dallas) & Frank Murphy (Connecticut), Foreign Employment, Income Shifting, and Tax Uncertainty, University of Connecticut School of Business Research Paper No. 18-23
• Benedict S. Jimenez (Northeastern), Fiscal Institutional Externalities: The Negative Effects of Local Tax and Expenditure Limits on Municipal Budgetary Solvency, 38 Public Budgeting & Finance 3 (2018)
• Bret Wells (Houston), Reform of §355, American Univ. L. Rev. (forthcoming 2018)