In The Curious Case of Tax Deductions for Fertility Treatment Costs, Katie Pratt elaborates the patchwork and unsatisfying treatment of assisted reproductive technologies (ARTs) under the current law governing deductions for medical expenses under § 213. Specifically, Pratt details recent court decisions in Magdalin, Longino, and Morrissey that severely circumscribe the scope of “medical care”—and thus the deductibility of related expenses—in the ART context. To some extent, Pratt’s argument illustrates the complications that flow from enacting a C- statute, then subjecting it to a variety of D+ interpretations. Hard facts may make bad law, but, at least in Magdalin and Morrissey, the facts aren’t the primary problem. Pratt appropriately concludes by proposing reasonable amendments to the statutory definition of “medical care” that would recognize the current landscape with regard to ARTs.
Pratt’s article focuses on the tax deductibility of collaborative ARTs, in which a prospective parent uses someone other than a spouse as a source of human gametes or as a gestational surrogate. Under current law, these questions seem to turn on family structure as well as medical status. Costs paid in pursuit of the same end result—the production of a child—may have different consequences depending on whether a taxpayer is male or female, married or unmarried, in a same-sex or different-sex relationship, and fertile or infertile. The specifics of each procedure performed play into this analysis, as does the limited precedential weight of many legal authorities in this area. There is a lot of texture and nuance, and readers might appreciate a handy chart to keep everything in order.
One question raised by Pratt’s excellent exegesis is the precise scope of “the body” in the context of reproduction. This term is important because, for taxpayers without a medical diagnosis of infertility, collaborative ART costs generally are deductible under § 213 only if they are paid “for the purpose of affecting the structure or function of the body.” For the courts in Magdalin and Morrissey, this language meant that male taxpayers could not deduct the costs of in vitro fertilization (IVF) and surrogacy but could deduct costs incurred to collect the taxpayers’ sperm (this allowance is implicit in Magdalin). Pratt reads these cases as anti-aggregation: the female bodies of egg donors and surrogates are not treated as adjunct to the taxpayers’ male bodies. But another perspective could track the “body”-ness of the sperm as it’s used in the reproductive process (rather than, say, stored for future use). This approach could draw from, or map onto, the somewhat convoluted questions about the ownership and control of gametes outside of tax law. Why draw the line after the sperm’s collection? One could argue that the sperm persists as an aspect of the male body during intracytoplasmic sperm injection (ISCI), or as part of IVF, or (less credibly and much more problematically) after implantation of a fertilized egg in a surrogate.
Another element of Pratt’s trilogy of cases involves the potential for tax gaming. The volume and diversity of controversies involving “medical care” shows that Congress and Treasury might have a legitimate point in tightly policing the scope of § 213. For example, the taxpayer in Longino is pretty clearly a bad actor more generally; he lost soundly on all eight substantive issues before the Tax Court, including phantom charitable contributions to a “nonprofit” he controlled and a bevy of sketchy business expenses. Allowing Longino to deduct his fiancé’s IVF expenses would mar this otherwise perfect tableau. Similarly jaundiced is practitioner talk about a “double-dip” that leverages § 213 and adoption credits. In this harebrained scheme, a lower-AGI female taxpayer pays for IVF to have a child, has her higher-AGI partner adopt the child to claim tax credits, then marries her partner. And these tales don’t even touch the many cases that directly engage the personal-medical boundary. The correct response to this propensity for tax gaming, however, may not be to litigate into submission (or amend) the definition of “medical care.” A tiered AGI threshold, a higher-income phase-out, or similar structural responses might curtail the more overt abuse of § 213, and Pratt might consider such adjustments as part of her proposed statutory amendments.
Finally, for me, Pratt’s discussion of collaborative ARTs reinforces the critical role that medical expertise plays in classifying these types of costs. In each of the cases highlighted by Pratt, the taxpayers had no diagnosis of infertility. While such a diagnosis might not have permitted deductions for, say, surrogacy, it likely would have shifted the debate in the taxpayers’ favor. Indeed, well-traveled cases such as O’Donnabhain can be read as extending substantial deference to medical professionals’ determinations about the appropriateness or necessity of a given procedure. A doctor’s note isn’t conclusive, but it’s persuasive. If Congress can’t summon the will to modify § 213, then perhaps medical associations will take a more holistic view of reproduction as a fundamental aspect of human existence—and as something that, for many couples, requires medical intervention to achieve.
Overall, Pratt’s engaging article provides a detailed and compelling analysis of the tax law regarding collaborative ARTs. Policymakers and medical professionals, among others, should find Pratt’s arguments compelling and insightful.