Should Surrogacy be Taxed?

By Holly Langdon

Nothing is certain but taxes and death.  So the old adage goes, and it holds true even today.  It begs the question, should surrogacy be taxed?  A recent journal article written by Bridget J. Crawford, Professor of Law at Pace University in New York, argues that surrogacy falls within the realm of taxable services.  She cites precedents that found selling bodily fluids to be taxable.  The first one, Green v Commission (1980) determined that a taxpayer who regularly sold her plasma, was in the “business” of doing that, and while she was entitled to take deductions off her taxes for the costs associated with the plasma deposits, such as mileage and groceries, she was still required to pay taxes on the money she earned from the deposits.    A second decision reached by the Department of the Treasury found that selling breast milk was also taxable, as the taxpayer selling her breast milk was selling “inventory” (Brown, 2010; Internal Revenue Service Gen. Couns. Mem., 1975). 

There is the belief that surrogacy should not be taxed because the surrogate must endure pain and suffering in order to go through a pregnancy on someone else’s behalf.  U.S. income tax law excludes from gross income any amounts received by a taxpayer on account of personal physical injury.  This means that the surrogate would not pay taxes on her fee because the pregnancy would be considered personal physical injury.   The argument against that, however, is that the surrogate pregnancy can not be considered personal physical injury when the surrogate mother contracted with the intended parents to undergo a pregnancy.  But what if complications arise from the pregnancy?  Complications such as the surrogate enduring a miscarriage, having to live through months on bed rest, or in the worst case, needing a hysterectomy and thus preventing her from carrying ever again, are all potential outcomes to a pregnancy.  When the surrogate signed the contract, these possible eventualities were probably touched on, but likely dismissed as being improbable.  It is therefore acceptable that the pregnancy be considered personal injury as the surrogate is accepting the fact that there could be extremely dire outcomes and is accepting of that possibility. 

Ms. Crawford’s argument goes on to discuss her belief that taxing surrogacy would legitimize the practice.  She asserts that the tax would enhance the well-being of women by making it part of the public dialogue.  “Bringing surrogacy out of the shadows and into the sunshine of law is a step toward recognizing the value of reproductive work…Tax law and the enforcement of tax laws relating to surrogacy is a part of the progress towards justice for women…” (Crawford, 2010).  In this statement it is apparent that Ms. Crawford believes her argument is helping surrogates, and women in general. 

Enforcing a tax on surrogacy would ultimately hurt all parties involved.  Surrogates may not want to undergo the process, for fear that they will not receive all the money they are paid because they will have to pay taxes on it.  Additionally, they could have ethical opinions that cause them to not want to pay the government for something they did with their body with altruistic intentions.  Intended Parents will have a hard time, too, because the surrogate’s fees will need to be increased to account for the amount she will need to spend on the tax.  This in turn could make it cost prohibitive for the Intended Parents.  Finally, it will hurt surrogacy agencies, because it could lead to fewer surrogates and fewer Intended Parents working with an agency, choosing instead to try to do everything “under the table” to avoid the tax.  Taxing surrogacy is not socially sound and should not be enforced. 

Crawford, B. (2009). Taxing surrogacy.

Comptroller General of United States, General Accounting Office Report (1975, 4

November).

Green v Commissioner, 74 T.C. 1229, 1234 (1980).

Surrogate Mother Insurance

When it comes to insurance, every surrogacy agency wants to scream out loud. Why does insurance have to be so difficult? It all seems so unfair, so discriminatory. Infertility is a disease not a choice. What does it really matter who carries the pregnancy? Either way insurance is supposed to pay for the pregnancy because the insured person paid her insurance premiums.

Whether it is the Intended Mother who pays her premiums or the surrogate mother who pays the premiums, why does it matter? Every other woman who has insurance pays her premiums and her pregnancy is covered. Why does it matter if she gives her baby up for adoption, or gives her baby to a family to raise, or to the dad to raise, or perhaps after a few months gives up her baby for adoption or returns the baby to the Intended Mother at birth? What right do the insurance companies have to ask what a woman’s intentions are with regards to her pregnancy and the child she is carrying?

The reality is that insurance companies have decided that they have a right to discriminate against woman and the pregnancy she carries.

Every surrogacy agency has to decide how they will handle insurance issues. There are very few risks to the surrogacy agency when it comes to insurance coverage, but huge risks to the Intended Parents and the Surrogate Mother. It is ultimately either the Intended Parents or the Surrogate Mother who will incur the costs if an insurance company denies payment. Below is an outline of options:

Surrogate mother uses Medicaid to cover her pregnancy. The first question a couple should ask themselves is why they are working with a candidate that qualifies for Medicaid? The next issue is that a surrogate is obligated by law to declare the money she receives from being a surrogate. There may be criminal penalties incurred by failure to report such income. It must be understood that the surrogate may have to deliver at a county hospital.

Surrogate uses her own insurance policy and simply does not inform the insurance company that she is a surrogate. This is perfectly legal – there is no legal obligation to inform an insurance company how a pregnancy was achieved. Two problems arise: first the insurance policy may require that they be notified if a surrogacy relationship is entered into and such a requirement is a term of coverage and therefore agreed to by the insurance holder. Second, it is difficult to keep a secret. It could be a nurse calling to ensure the surrogacy pregnancy is covered, or asking what code she needs to use for a surrogacy pregnancy, or a staff member who is not in favor of surrogacy could call to ask why the insurance company pays for surrogacy pregnancy or the insurance company requests a copy of the medical file and the doctor has handwritten “surrogacy” on the file,

Intended Parents own their own company and “employ” the surrogate and sign her up for their company insurance policy. This option is okay if she is really an employee. Faking employment to obtain insurance coverage is to commit a fraud on the insurance company. In addition the employer must ensure he is offering all benefits offered to other employees, including taxes and retirement contributions. Consideration also needs to be given to the risk factor of a breakdown in the surrogacy relationship and the employment situation.

Lloyds of London insurance policy. An excellent option for couples considering surrogacy. This is an expensive policy and they will not cover a twin or other multiple pregnancy.
Surrogate uses her own insurance policy or a policy she purchases specifically to cover the surrogacy pregnancy.

It is important that you discuss insurance with your chosen surrogacy agency. We highly recommend you take the time to understand your options, the risks and the work the agency is willing to put into insurance.

CSP has 30 years of experience in dealing with insurance issues. In that time we have learned lessons and implemented steps that offer protection to our couples. Our entire 30 years of experience is put into every surrogacy relationship. Not just 30 years selling widgets, but 30 years in the field of surrogacy. NO other agency can promise that.