Embryo Exchanges and the Adoption Tax Credit
posted by Sarah Lawsky
So, where are we? We know what an embryo exchange is. We know that Georgia has enacted a law (signed by Governor Perdue last week, effective July 1), the Option of Adoption Act, that permits, but does not require, the intended parents in an embryo exchange to obtain an order of parentage or adoption. And we know that some people have claimed that, given the Georgia law, a federal adoption tax credit is available for expenses incurred in embryo exchanges. But this claim is incorrect. No federal adoption tax credit is available for such expenses.
First, some information about the federal adoption tax credit: To encourage adoption, the Code provides for a tax credit (essentially dollar-for-dollar reimbursement) for qualified adoption expenses up to $12,150 (for 2009) for each eligible child adopted. Only expenses incurred for a legal adoption are creditable.
The claim that a federal adoption tax credit is available for embryo exchanges fails for two reasons: an embryo is not an eligible child, and an embryo exchange is not a legal adoption. First, as explained in an earlier post, an embryo is not an “individual” for income tax purposes, and thus is not an eligible child for purposes of the adoption tax credit. So even if the taxpayers choose to get an order of parentage or an order of adoption for the embryo pre-birth (which they are permitted, but not required, to do under Georgia law), they have not adopted an eligible child.
Second, the procedures described by the Georgia law do not constitute a legal adoption, because under Georgia law, the birth parents are already the child’s legal parents. The “adoption” has no effect. (It’s also pretty striking to compare the optional embryo “adoption” procedures with the rigid requirements for adoption of a child.)
Steve Wynn: "I'm smiling like this because I make so much more money than you!"
So, who cares? Why does this matter? Why five blog posts? Well, it’s not the money. Say every single person in the entire United States who participated in an embryo exchange claimed the full amount of the credit, and say that 5000 people a year participate in embryo exchanges in the U.S. These are ridiculous assumptions. First, nobody’s claiming that this credit is available outside of states with embryo “adoption” laws, which at this point is Georgia and nowhere else. Second, the credit phases out for incomes above a certain amount. Third, we don’t know how many people participate in embryo exchanges, but it’s many fewer than 5000 a year. But if we make these ridiculous assumptions and max this thing out, we’re looking at a roughly $60 million hit on the fisc. $60 million! This is nothing. The federal budget is about $3 trillion. $60 million is to $3 trillion as my seven-year-old’s annual allowance is to Steve Wynn’s annual compensation.
Naomi discussed some of the reasons we might care about these claims in an earlier post–reasons related to how we think about abortion, egg and sperm donation, and assisted reproductive technology. But, as I will discuss in a later post, this sort of thing matters for tax-specific reasons too.
(An extended version of this discussion is available here.)
Image: Wikimedia Commons
May 13, 2009 at 10:46 am
Posted in: Tax
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