Eloise Drane
Hey there! Welcome back to Fertility Cafe. I’m your host Eloise Drane. Welcome to Episode 77 of Fertility Cafe. In the egg donor and surrogacy communities, it’s known that financial compensation is often a strong motivator. But there have been many developments in recent years that impact donor and surrogate compensation. In this episode, we’re diving into the nitty gritty perhaps the uncomfortable side of egg donation and surrogacy compensation. We’ll cover changes to tax law, appeals, and how compensation affects the already delicate relationship. Let’s get started. Often, egg donors and surrogate compensation is fixed depending on the egg bank, clinic or agency they’re working with. Let’s start by talking about recent developments in egg donation compensation. Since donation comes first in the process, and where things have landed today. In 1993, an article came out that led the American Society for Reproductive Medicine or ASRM to set standards for donor compensation. According to the article, the recommendation was based on a formula that set compensation for egg donors by using a formula that multiplied payment for sperm donation by the amount of time women spent donating eggs as compared to men donating sperm. As a result, the ASRM set standards that would cap donor compensation at $10,000 for a single cycle. The exact verbiage of the ASRM guidelines state that “Total payments to donors in excess of 5000 required justification in sums above 10,000 are not appropriate.” The ASRM guideline further noted that high levels of reimbursement could entice women in financial need to subject themselves to the risks and discomfort of egg donation simply because the payout was too alluring. The ASRM argued that compensation at a relatively low level will keep the danger of unduly enticing low income women in check. Naturally, egg donors argued that this was a superficial justification for not paying women their due compensation, and in response to the formula that initially set the compensation gaps, they argued that being an egg donor is not comparable to being a sperm donor. And there are far more factors involved than just time. There’s the pain and discomfort of the injections in your growing ovaries. There’s a vast unknown health risks of what these medications and the combination of meds donors are required to take due to a woman’s health over time. In 2011, a class action lawsuit was filed by a group of egg donors against the ASRM challenging guidelines that recommended limiting reimbursement for egg donation to up to $10,000. The New York Times reported on the case and added to the argument that such limitations go against a free market system. The plaintiffs in the lawsuit refer to this as the Sherman Act Challenge. The Sherman Act is an 1890 Anti-trust law that says that price fixing is illegal and limits a free and unfettered market. This sparked a lot of discussion and controversy because egg donors are not compensated for the sale of their eggs, but rather for their pain suffering in time. During the lawsuit, another argument was brought up, the ASRM argued that fertility treatments are already incredibly expensive, and couples in need shouldn’t have to pay more for donor eggs in order to build their families. In return, the class action group of egg donors have responded by asking why should egg donors pay the price for more affordable assisted reproduction? The question of how we make assisted reproduction more accessible to families without being unfair or limiting compensation for donors is one that still exists today. Which is why you’ll find a lot of different theories on compensation among egg donation agencies and banks, as well as among donors themselves. Ultimately, after four years of litigation, the lawsuit of Kamakahi versus American Society for Reproductive Medicine ended in a settlement, the ASRM agreed to remove the language in their guidelines, capping egg donor compensation at 5000 for first time donors, and 10,000 for repeat donors. They also agreed to not impose any dollar amount compensation recommendations in the future. The ASRM remove the compensation recommendations from their guidelines in 2015. It is still common practice however today in the industry to have preset donor compensation rates for first time donors. For example, many banks and agencies will set first time donor compensation rates at seven to $10,000 and then increase for subsequent cycles. Many donors think of their compensation in terms of what they’re going to pay for with their compensation money, such as student loans, rent or mortgage payments, a down payment on a new home or car, savings accounts, etc. In 2021, an article came out on salon claiming that egg donation is becoming an increasingly common way for women to pay for their student loan debt. The article states that “The cost of college tuition in the US across all sectors has more than tripled in the past 20 years, well beyond the cost of inflation, making education out of reach for many, the rapidly rising cost of education has led to a rise in student loan debt as parents and students borrow to help ensure their dream of future success.” The author of the article interviewed more than 600 egg donors and found that over 60% of them said that their financial need was a strong influence in their decision to donate, and 45% of them had between 10,000 and up to 100,000 in student loan debt. The author said “I’ve learned through my interviews and surveys with more than 600 egg donors that student debt burdens lead some Americans to make medical decisions they may not otherwise make.” If financial compensation is part of your motivation to donate, that’s okay. And it’s normal. There’s nothing wrong with that. Just make sure you are making a decision that isn’t based in fear or financial desperation. Keep in mind that the long term ramifications of egg donation are still unknown. And there may be children born from your donation many many years down the line long after your compensation money has been put to use. I say all of this to get you thinking about whether donating is really right for you long term. And if you decide that it is, what rate of compensation feels right for you. For egg donors, it’s also important to know that your compensation is taxable. Here is where we currently stand on tax laws relating to egg donor compensation. In 2015, and the case of Perez versus Commissioner, it was determined that the IRS is able to tax egg donor compensation. There are no thresholds either, so whether you receive 5000 or 50,000, you will still need to pay taxes. Understandably, donors argue that compensation is considered income for pain and suffering, which wouldn’t be non taxable. However, during the case, the comparison was made to a professional boxer who gets paid for taking punches during a match and who experiences pain and suffering because they are voluntarily subjecting themselves to it for financial compensation, it’s taxable. As a result, the IRS determined that donors are not in fact compensated for pain and suffering. Rather, they determined that egg donation is considered a service that donors are providing and therefore the compensation is taxable. So what about appeals to this tax law? In recent years, donors have been more vocal about appealing the compensation taxes. In fact, there have been donors who have received tax bills appeal them in one and others who have done the same and lost their appeals. There are a considerable number of appeals going on and they are still waiting to hear about the results of their appeal. Now let’s look at surrogacy compensation. Surrogacy compensation is quite different from egg donor compensation in that there are state by state laws on surrogacy and compensation. Throughout the United States, surrogacy laws vary greatly. For example, in 2007, Washington State initiated legislation that stated gestational surrogacy and contracts for surrogacy arrangements are legal, but contracts for compensation beyond reasonable expenses are illegal. According to the state law, compensation is defined as any payment beyond actual medical costs, other expenses related to pregnancy and legal fees related to drafting of the contract. Luckily, in 2019, new legislation decriminalized compensated surrogacy was enacted. Also in 2007, Virginia passed similar legislation disallowing compensation for anything other than expenses directly related to the pregnancy. Oddly, Kentucky legislation prohibits compensation for facilitating a surrogacy contract, which applies to legal professionals and agencies, but doesn’t specify anything relating to gestational surrogacy or compensation for gestational surrogates. And then compensated surrogacy is flat out illegal in Louisiana and Michigan, and unenforceable in Nebraska and Arizona. While many states have laws saying whether surrogacy is legal or illegal, and whether surrogacy can be compensated, no state specifies how much or how little a surrogate can be compensated. When it comes to taxable income for surrogates, the situation is similar. Because it is illegal to consider compensation for surrogates as compensation for the child she’s carrying, the compensation is considered to apply to the service she is providing. However, many advocates of third party reproduction suggest loopholes to mitigate taxation on surrogacy compensation, in particular. First, if you receive a 1099 miscellaneous from your intended parents, surrogacy agency or escrow service, then you will definitely need to claim your compensation as income. A 1099 means that your compensation has been classified as income. And once that is done, it’s very hard to argue. However, if you don’t receive a 1099 I’ve heard of several options. And just to add my own piece of information here, these are just options I have heard. Please check with your tax professional to determine which option is best for you, if anything at all. First option is to classify the surrogacy compensation as pre birth child support. This argument can fall through if your gestational surrogacy agreement isn’t worded properly. So some attorneys will deliberately list compensation terms as pre birth child support, which is not taxable under the law. However, there haven’t been any major cases involving this strategy to be able to say it will hold up. Another option is to claim the compensation as a gift. Some surrogates have done this successfully, but it’s a fine line between gift and compensation for a so called service like surrogacy. In this scenario, the language in Section 104 of the Internal Revenue Code was argued, the tax code states that compensation received for pain and suffering on account of personal physical injuries or physical sickness is not taxable. Some surrogates have had success claiming that pregnancy itself or the symptoms of pregnancy add up to personal physical injuries or physical sickness. Finally, claiming your compensation as being for pain and suffering is another option, but also the one that the IRS is most used to responding to and denying. Keep in mind, none of these strategies are guaranteed. So even if you try to claim your surrogacy compensation as pre birth child support, a gift or compensation for pain and suffering, the IRS or your state tax office could come back and say that they don’t agree and you need to pay taxes. Be sure to discuss your options with a qualified tax professional and choose the option that is best for you. As for surrogates appealing there are no public cases of surrogates appealing their tax bills, so we have no information on the success rates of their appeals. The fact of the matter is that the tax law surrounding egg donation and surrogacy is currently under ongoing discussion and might change in the future. But for now, donors and surrogates should expect to pay taxes on their compensation, especially if they receive a 1099. It’s also important to keep in mind that you should plan to pay taxes on your compensation, even if you don’t receive a 1099 for your compensation. Some egg banks, clinics and agencies have not yet gotten into the habit of collecting W9s and issuing 1090 nines for their donors, which means not all donors have documentation of their donation compensation. But this doesn’t mean that you can’t exclude your donor or surrogacy compensation on your tax returns. If that agency does retroactive reporting in the future, the IRS may learn of your donation compensation and contact you if you didn’t report it. So what can you do about it? If you feel strongly about your compensation not being taxed, you can appeal your tax bill for the donor or surrogacy compensation reported on your 1099. There’s no guarantee that you will win of course, but more and more donors are doing this and with the amounting numbers, it’s possible that the IRS will reconsider I’m sure surrpgates will follow suite and similarly argue that their compensation is not taxable. Another thing you can do to keep more of your compensation is to deduct expenses related to going through the process. For example, mileage, meals and travel expenses and maternity clothes may be deducted. Those expenses may reduce the amount of tax you must pay. And always be sure to work with a tax professional or CPA to make sure your taxes are properly filed. I have heard there have been a number of problems with donors and surrogates using TurboTax to do their own taxes and find that their egg donation and surrogacy compensation and expenses are incorrectly classified, so they end up owing more. So to bring this full circle, I want to leave you with this parting thought, as an egg donor or a surrogate, you need to think about the deeper reasons for why you’re doing this. Yes, it’s a beautiful, generous thing you’re doing. Yes, the financial compensation is a great perk. And at the same time, what the industry needs is women who want to help others have the families they’ve always dreamed of. It’s about helping those who need something that you are blessed to be able to do. You can certainly and should ask for the compensation that feels right to you. But also remember that if your compensation is so high that only the elite can afford it, are you really helping? Many families that seek out third party reproduction assistance are scraping together money to pay for the services. It’s important that everyone involved who was in a position to help finds a balance between compensation that feels fair and equitable to them. And that is accessible so that we can truly make a difference. Thank you so much for listening. If you found this episode helpful, please rate Fertility Cafe on your favorite listening platform and share this episode with anyone you think could benefit from hearing it. Thank you so much for joining me today. Until next time, remember, love has no limits, neither should parenthood.
Hey there! Welcome back to Fertility Cafe. I’m your host Eloise Drane. Welcome to Episode 77 of Fertility Cafe. In the egg donor and surrogacy communities, it’s known that financial compensation is often a strong motivator. But there have been many developments in recent years that impact donor and surrogate compensation. In this episode, we’re diving into the nitty gritty perhaps the uncomfortable side of egg donation and surrogacy compensation. We’ll cover changes to tax law, appeals, and how compensation affects the already delicate relationship. Let’s get started. Often, egg donors and surrogate compensation is fixed depending on the egg bank, clinic or agency they’re working with. Let’s start by talking about recent developments in egg donation compensation. Since donation comes first in the process, and where things have landed today. In 1993, an article came out that led the American Society for Reproductive Medicine or ASRM to set standards for donor compensation. According to the article, the recommendation was based on a formula that set compensation for egg donors by using a formula that multiplied payment for sperm donation by the amount of time women spent donating eggs as compared to men donating sperm. As a result, the ASRM set standards that would cap donor compensation at $10,000 for a single cycle. The exact verbiage of the ASRM guidelines state that “Total payments to donors in excess of 5000 required justification in sums above 10,000 are not appropriate.” The ASRM guideline further noted that high levels of reimbursement could entice women in financial need to subject themselves to the risks and discomfort of egg donation simply because the payout was too alluring. The ASRM argued that compensation at a relatively low level will keep the danger of unduly enticing low income women in check. Naturally, egg donors argued that this was a superficial justification for not paying women their due compensation, and in response to the formula that initially set the compensation gaps, they argued that being an egg donor is not comparable to being a sperm donor. And there are far more factors involved than just time. There’s the pain and discomfort of the injections in your growing ovaries. There’s a vast unknown health risks of what these medications and the combination of meds donors are required to take due to a woman’s health over time. In 2011, a class action lawsuit was filed by a group of egg donors against the ASRM challenging guidelines that recommended limiting reimbursement for egg donation to up to $10,000. The New York Times reported on the case and added to the argument that such limitations go against a free market system. The plaintiffs in the lawsuit refer to this as the Sherman Act Challenge. The Sherman Act is an 1890 Anti-trust law that says that price fixing is illegal and limits a free and unfettered market. This sparked a lot of discussion and controversy because egg donors are not compensated for the sale of their eggs, but rather for their pain suffering in time. During the lawsuit, another argument was brought up, the ASRM argued that fertility treatments are already incredibly expensive, and couples in need shouldn’t have to pay more for donor eggs in order to build their families. In return, the class action group of egg donors have responded by asking why should egg donors pay the price for more affordable assisted reproduction? The question of how we make assisted reproduction more accessible to families without being unfair or limiting compensation for donors is one that still exists today. Which is why you’ll find a lot of different theories on compensation among egg donation agencies and banks, as well as among donors themselves. Ultimately, after four years of litigation, the lawsuit of Kamakahi versus American Society for Reproductive Medicine ended in a settlement, the ASRM agreed to remove the language in their guidelines, capping egg donor compensation at 5000 for first time donors, and 10,000 for repeat donors. They also agreed to not impose any dollar amount compensation recommendations in the future. The ASRM remove the compensation recommendations from their guidelines in 2015. It is still common practice however today in the industry to have preset donor compensation rates for first time donors. For example, many banks and agencies will set first time donor compensation rates at seven to $10,000 and then increase for subsequent cycles. Many donors think of their compensation in terms of what they’re going to pay for with their compensation money, such as student loans, rent or mortgage payments, a down payment on a new home or car, savings accounts, etc. In 2021, an article came out on salon claiming that egg donation is becoming an increasingly common way for women to pay for their student loan debt. The article states that “The cost of college tuition in the US across all sectors has more than tripled in the past 20 years, well beyond the cost of inflation, making education out of reach for many, the rapidly rising cost of education has led to a rise in student loan debt as parents and students borrow to help ensure their dream of future success.” The author of the article interviewed more than 600 egg donors and found that over 60% of them said that their financial need was a strong influence in their decision to donate, and 45% of them had between 10,000 and up to 100,000 in student loan debt. The author said “I’ve learned through my interviews and surveys with more than 600 egg donors that student debt burdens lead some Americans to make medical decisions they may not otherwise make.” If financial compensation is part of your motivation to donate, that’s okay. And it’s normal. There’s nothing wrong with that. Just make sure you are making a decision that isn’t based in fear or financial desperation. Keep in mind that the long term ramifications of egg donation are still unknown. And there may be children born from your donation many many years down the line long after your compensation money has been put to use. I say all of this to get you thinking about whether donating is really right for you long term. And if you decide that it is, what rate of compensation feels right for you. For egg donors, it’s also important to know that your compensation is taxable. Here is where we currently stand on tax laws relating to egg donor compensation. In 2015, and the case of Perez versus Commissioner, it was determined that the IRS is able to tax egg donor compensation. There are no thresholds either, so whether you receive 5000 or 50,000, you will still need to pay taxes. Understandably, donors argue that compensation is considered income for pain and suffering, which wouldn’t be non taxable. However, during the case, the comparison was made to a professional boxer who gets paid for taking punches during a match and who experiences pain and suffering because they are voluntarily subjecting themselves to it for financial compensation, it’s taxable. As a result, the IRS determined that donors are not in fact compensated for pain and suffering. Rather, they determined that egg donation is considered a service that donors are providing and therefore the compensation is taxable. So what about appeals to this tax law? In recent years, donors have been more vocal about appealing the compensation taxes. In fact, there have been donors who have received tax bills appeal them in one and others who have done the same and lost their appeals. There are a considerable number of appeals going on and they are still waiting to hear about the results of their appeal. Now let’s look at surrogacy compensation. Surrogacy compensation is quite different from egg donor compensation in that there are state by state laws on surrogacy and compensation. Throughout the United States, surrogacy laws vary greatly. For example, in 2007, Washington State initiated legislation that stated gestational surrogacy and contracts for surrogacy arrangements are legal, but contracts for compensation beyond reasonable expenses are illegal. According to the state law, compensation is defined as any payment beyond actual medical costs, other expenses related to pregnancy and legal fees related to drafting of the contract. Luckily, in 2019, new legislation decriminalized compensated surrogacy was enacted. Also in 2007, Virginia passed similar legislation disallowing compensation for anything other than expenses directly related to the pregnancy. Oddly, Kentucky legislation prohibits compensation for facilitating a surrogacy contract, which applies to legal professionals and agencies, but doesn’t specify anything relating to gestational surrogacy or compensation for gestational surrogates. And then compensated surrogacy is flat out illegal in Louisiana and Michigan, and unenforceable in Nebraska and Arizona. While many states have laws saying whether surrogacy is legal or illegal, and whether surrogacy can be compensated, no state specifies how much or how little a surrogate can be compensated. When it comes to taxable income for surrogates, the situation is similar. Because it is illegal to consider compensation for surrogates as compensation for the child she’s carrying, the compensation is considered to apply to the service she is providing. However, many advocates of third party reproduction suggest loopholes to mitigate taxation on surrogacy compensation, in particular. First, if you receive a 1099 miscellaneous from your intended parents, surrogacy agency or escrow service, then you will definitely need to claim your compensation as income. A 1099 means that your compensation has been classified as income. And once that is done, it’s very hard to argue. However, if you don’t receive a 1099 I’ve heard of several options. And just to add my own piece of information here, these are just options I have heard. Please check with your tax professional to determine which option is best for you, if anything at all. First option is to classify the surrogacy compensation as pre birth child support. This argument can fall through if your gestational surrogacy agreement isn’t worded properly. So some attorneys will deliberately list compensation terms as pre birth child support, which is not taxable under the law. However, there haven’t been any major cases involving this strategy to be able to say it will hold up. Another option is to claim the compensation as a gift. Some surrogates have done this successfully, but it’s a fine line between gift and compensation for a so called service like surrogacy. In this scenario, the language in Section 104 of the Internal Revenue Code was argued, the tax code states that compensation received for pain and suffering on account of personal physical injuries or physical sickness is not taxable. Some surrogates have had success claiming that pregnancy itself or the symptoms of pregnancy add up to personal physical injuries or physical sickness. Finally, claiming your compensation as being for pain and suffering is another option, but also the one that the IRS is most used to responding to and denying. Keep in mind, none of these strategies are guaranteed. So even if you try to claim your surrogacy compensation as pre birth child support, a gift or compensation for pain and suffering, the IRS or your state tax office could come back and say that they don’t agree and you need to pay taxes. Be sure to discuss your options with a qualified tax professional and choose the option that is best for you. As for surrogates appealing there are no public cases of surrogates appealing their tax bills, so we have no information on the success rates of their appeals. The fact of the matter is that the tax law surrounding egg donation and surrogacy is currently under ongoing discussion and might change in the future. But for now, donors and surrogates should expect to pay taxes on their compensation, especially if they receive a 1099. It’s also important to keep in mind that you should plan to pay taxes on your compensation, even if you don’t receive a 1099 for your compensation. Some egg banks, clinics and agencies have not yet gotten into the habit of collecting W9s and issuing 1090 nines for their donors, which means not all donors have documentation of their donation compensation. But this doesn’t mean that you can’t exclude your donor or surrogacy compensation on your tax returns. If that agency does retroactive reporting in the future, the IRS may learn of your donation compensation and contact you if you didn’t report it. So what can you do about it? If you feel strongly about your compensation not being taxed, you can appeal your tax bill for the donor or surrogacy compensation reported on your 1099. There’s no guarantee that you will win of course, but more and more donors are doing this and with the amounting numbers, it’s possible that the IRS will reconsider I’m sure surrpgates will follow suite and similarly argue that their compensation is not taxable. Another thing you can do to keep more of your compensation is to deduct expenses related to going through the process. For example, mileage, meals and travel expenses and maternity clothes may be deducted. Those expenses may reduce the amount of tax you must pay. And always be sure to work with a tax professional or CPA to make sure your taxes are properly filed. I have heard there have been a number of problems with donors and surrogates using TurboTax to do their own taxes and find that their egg donation and surrogacy compensation and expenses are incorrectly classified, so they end up owing more. So to bring this full circle, I want to leave you with this parting thought, as an egg donor or a surrogate, you need to think about the deeper reasons for why you’re doing this. Yes, it’s a beautiful, generous thing you’re doing. Yes, the financial compensation is a great perk. And at the same time, what the industry needs is women who want to help others have the families they’ve always dreamed of. It’s about helping those who need something that you are blessed to be able to do. You can certainly and should ask for the compensation that feels right to you. But also remember that if your compensation is so high that only the elite can afford it, are you really helping? Many families that seek out third party reproduction assistance are scraping together money to pay for the services. It’s important that everyone involved who was in a position to help finds a balance between compensation that feels fair and equitable to them. And that is accessible so that we can truly make a difference. Thank you so much for listening. If you found this episode helpful, please rate Fertility Cafe on your favorite listening platform and share this episode with anyone you think could benefit from hearing it. Thank you so much for joining me today. Until next time, remember, love has no limits, neither should parenthood.
