The Issue Defined
In our last post, we described how a taxpayer was not permitted to deduct his significant expenses for fertility treatments involving himself, three egg donors, three gestational surrogates, seven IVF procedures, and two fertility specialists. Here we are going to describe Joseph Morrissey’s main arguments for receiving the deduction and why the U.S. Court of Appeals for the 11th Circuit rejected them.
The tax argument
Morrissey argued that the $36,538 deduction for fertility treatments he incurred in 2011 constitute medical expenses paid “for the purpose of affecting any… function of the body” per 26 U.S. Code § 213(d). Since he and his male partner are physiologically incapable of reproducing together, Morrissey claimed that it was medically necessary to involve third parties in order for his own body to fulfill its reproductive function.
The court disagreed, holding that the costs of Morrissey’s “IVF-related procedures” (including his claimed expenses for identifying, retaining, compensating, and caring for the egg donors and surrogates) were not paid for the purpose of affecting Morrissey’s own reproductive function. It held that “the male body’s necessary function within the reproductive process” is to “produce and provide healthy sperm capable of fertilizing a female’s egg” and that since Morrissey was perfectly capable of producing healthy sperm with or without his female counterparts in the IVF process, the fertility treatments did not “affect” (meaning, “materially influence or alter”) any function of his body within the meaning of Section 213(d). Therefore, it held that those expenses did not qualify for the Section 213(a) medical care deduction.
Note that the court held that the $1,500 Morrissey spent on procedures performed directly on his own body, namely blood tests and sperm collection, could be itemized, but since they fell below the 7.5% threshold set forth under 26 U.S. Code § 213(f) they could not be deducted.
The equal protection argument
Morrissey also argued that the IRS’s disallowance of his deduction for fertility treatments violated his right to equal protection under the Fifth Amendment. He claimed that heterosexual couples are allowed to deduct their family planning expenses, including expenses for purely elective procedures, and that by denying him that same deduction, the IRS infringed on his fundamental right to reproduce and discriminated against him on the basis of his sexual orientation.
The court disagreed, stating that it saw no evidence of purposeful, intentional discrimination, and that the disallowance of the deduction in these circumstances was “consistent with longstanding IRS guidance and analogous Tax Court precedent.” It ruled that Morrissey failed to establish that he was treated differently from similarly situated people – among its many examples, it noted that (1) the IRS has refused deductions to heterosexual men for pregnancy-related care in surrogacy situations and in other situations where the female “partner” was not their spouse, and (2) the IRS has allowed deductions for IVF-related treatment to taxpayers in same-sex relationships, where the embryo is implanted into the taxpayer’s own body.
Furthermore, the court stated that IVF is a relatively new process and there exists no established “fundamental right” to procreate in this manner.
The Impact of Morrissey
While other recent cases have clearly supported same-sex married couples with their family planning, Morrissey makes matters more ambiguous. In light of the increasing use of IVF and numerous other fertility treatments, particularly among both married and unmarried same-sex couples, we expect to see more contested tax issues in this area. Stay tuned.