Should Surrogacy be Taxed?

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).

About CSP, Inc.
The Center for Surrogate Parenting, Inc. (CSP) is a world-renowned surrogate parenting program with offices in Encino, California, and Annap

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