Does Canada's tax law discriminate against gay men who want children?

A court is deciding whether denying a gay man the medical expense tax credit for surrogacy-related medical expenses violates the Canadian Charter of Rights and Freedoms.

Last week, I spent two days in the Tax Court of Canada. Who knew it could be so riveting?

I was there to listen to the closing arguments in a case I first reported on back in 2021.

In a nutshell, a Canadian single gay man wanted to be a parent. He tried surrogacy in Canada and did not succeed. In 2015, he sought surrogacy outside the country, in Nepal, and came home with a son. On his 2015 income tax return, he claimed some of the medical expenses related to his child's creation. He was denied. He filed an objection and was denied again.

Now, almost nine years on, it is before the court. And this is not just a tax case, but a human rights case as well.

I always feel a little unwell in courtrooms, and I think I've finally figured out why: I'm not allowed to talk. I can't interrupt and say, "Yeah, sure, but what about —?" I can't guffaw and mutter, "Oh come on!" I can't even clarify things with a, "Sorry, are you saying that —?" Instead I have to hold it all in.

I will start this week's item with a brief summary of the arguments made both on behalf of the man claiming he should get the tax credit and the government saying it should be denied.

I will follow that with some of the thoughts I've had trouble containing.

11 minute read

A brief summary of the two sides

At the centre of this case is whether a gay man, who used surrogacy in 2015 to have his son, was eligible for a medical expense tax credit. Canada's Income Tax Act says that he has to be a "patient" for that to be the case. Is he a patient?

Here is the wording:

"...a medical expense of an individual is an amount paid... to a medical practitioner... in respect of medical... services provided to a person (in this subsection referred to as "the patient") who is the individual, the individual's spouse or common-law partner or a dependent of the individual..."

The man, Ken McNeilly, argues that he was the patient and should have been regarded as the patient under the law. He wants the tax credit.

Interestingly, the Income Tax Act was amended in 2017 to include "Fertility expenses." These could be applied retroactively. The additional wording said:

"An amount is deemed to be a medical expense of an individual for the purposes of this section if the amount

(a) is paid for the purpose of a patient... conceiving a child; and

(b) would be a medical expense of the individual... if the patient were incapable of conceiving a child because of a medical condition."

The government says he's not a patient because he doesn't have a medical condition or illness. (While medical illness is not mentioned in the law itself, I gather that there is guidance where the requirement of a medical illness is mentioned.) In addition, he can't claim the expenses because the treatments were not performed on him, his partner or a dependent.

There was another amendment, in 2022, called "Surrogacy expenses," that explicitly allowed for surrogacy and donor expenses to be eligible. It was not retroactive. It does not allow out-of-country expenditures and still depends on the individual claiming the expenditure (or their partner or dependent) being a "patient."

Here it is:

"An amount is deemed to be a medical expense of an individual for the purposes of this section if the amount

(a) is paid by the individual or the individual's spouse or common-law partner;

(b) is

(i) an expenditure described under any of sections 2 to 4 of the Reimbursement Related to Assisted Human Reproduction Regulations, or

(ii) paid in respect of a surrogate mother or donor and would be an expenditure described in subparagraph (i) if it was paid to the surrogate mother or donor;

(c) would be a medical expense of the individual... if the amount was paid in respect of a good or service provided to the individual or the individual's spouse or common-law partner;

(d) is an expense incurred in Canada;

(e) is paid for the purpose of the individual becoming a parent."

The government spent a fair amount of time arguing that, although the 2022 amendment was not retroactive, it signalled disapproval of transnational surrogacy. The government seemed to be arguing that, even if McNeilly were deemed a "patient" under the Income Tax Act, he should be denied the tax credit for almost all his expenses because they were incurred outside the country, in a way that was "unethical."

Importantly, this case is also a charter challenge, meaning that McNeilly and his lawyers are arguing that the government's interpretation of the Income Tax Act contravenes the Canadian Charter of Rights and Freedoms. They argue (among other things) that McNeilly was discriminated against on the basis of sexual orientation.

Quick note here: I was not allowed to tape the proceedings and had no access to the thousands of pages of documents that the parties referred to under tab-this and paragraph-that. All I could do was listen and scribble intently.

In short, the government says that since no one in 2015 got to claim surrogacy expenses on the medical expense tax credit, McNeilly was not denied anything. The government conceded that there may have been an adverse effect (legal term) on gay men, but it did not perpetuate, exacerbate or reinforce any disadvantage or perpetuate a harm or stereotype (legal terms). McNeilly, they argued, made a decision to use surrogacy. Turning to surrogacy was discretionary, and only non-discretionary expenditures are allowed under the medical expense tax credit.

McNeilly's lawyers argue that the government is in fact perpetuating a pernicious stereotype — that gay men are not natural parents. McNeilly made a decision to have a child through a surrogate, according to the government, while straight people who use surrogates have no choice but to do so. McNeilly could have chosen to not have a biological child. But, say his lawyers, so could a straight couple with a medical condition. Why is it non-discretionary for the straight couple, but discretionary for a gay man, when the alternatives are the same? The answer is the stereotype that gay men aren't natural parents. And the denial of the medical expense tax credit, they argue, perpetuates it.

A brief summary of what I refrained from blurting out from my seat in the public gallery

As I sat there quietly listening to the proceedings, I had thoughts.

Reproduction always takes more than one person.

Human reproduction is not like most other bodily processes: it takes at least two people. Some people may look like they're doing it solo, but they're not. There is always a sperm from one person, an egg from another person, and a person with a uterus.

People turn to assisted reproduction when one of those elements is missing or not working. To be clear, it is possible, even common, to "suffer from infertility" even if you are completely healthy. That's because it always involves more than one person. If the person you want to reproduce with is infertile, or is the same sex as you, or, as in McNeilly's case, is not in your life, then you, a healthy person, have a reproductive challenge. Nobody does this alone.

Also, and importantly: it is not always the person with the medical issue who undergoes the treatment.

I present to you a hetero man with sperm that doesn't move. In 1992, a technique — intracytoplasmic sperm injection (ICSI) — became available to help with this problem. With ICSI, a sperm could be injected directly into an egg.

Here's the thing, though. Although the man has the medical issue, the woman undergoes almost all of the treatment. In the example I am presenting to you, the woman is completely healthy — good eggs, good uterus. Nonetheless, in order to have a biological child with her husband, she will take fertility drugs, undergo retrieval, rely on ICSI to fertilize her eggs, then have the embryo transferred into her body by a doctor. All the man with the medical issue has to do is get the sperm out of his body.

The woman has no medical issues. Should her treatment be eligible for the medical expense tax credit? I would argue that, yes, this treatment should be eligible, because reproductive health issues are not down to a single individual. They always involve more than one person.

In this case, I would argue, the man is the patient, but his wife is undergoing the expensive part of the treatment. She is also "a" patient, but she is not "the" patient.

My guess is that the Canada Revenue Agency (CRA) probably allowed hetero couples like this one to claim the medical expense tax credit. Because the woman was the man's spouse, and because the tax authorities did not understand or inquire about the nuances of assisted reproduction.

I suspect they've also allowed plenty of hetero couples with perfectly good sperm to claim the costs of ICSI, even though they did not need it. They didn't need to inject sperm, they could have just used routine in vitro fertilization. But I doubt the CRA knew about that.

In any case, the 2017 amendment appears to take care of all this. It says you can claim the credit if it would have been an expense if you had been incapable, medically, of conceiving a child.

I could be wrong, but I sensed the judge was shaking his head a bit at this one, wondering why in the world that had been written into the law.

Which leads me to my next point.

Most of human reproduction depends on the woman.

I present to you a single woman. She is 39. She is undergoing a fertility treatment with sperm from a person who won't be a parent. Because of how human reproduction works, it's not that hard for her to get the sperm that she needs. Maybe she gets it from a sperm bank or maybe a friend provides his. In any case, despite the fact that, like McNeilly, she is single and is missing the opposite-sex gamete that is essential for human reproduction to take place, it's not a huge problem for her. And let's not forget, she has a uterus.

She does intrauterine insemination (IUI). Does she qualify for the medical expense tax credit?

According to the government line, if it works, maybe she shouldn't? Because, I mean, she doesn't have a medical condition, right?

I'm just guessing, but I think single and lesbian women might be part of why we have that 2017 amendment. A lot of women undergo fertility treatments not so much because they have a "medical condition" but because a component needed for human reproduction is missing.

Okay, let's make this woman older. Now she's 49. Not only does she need sperm, but she needs eggs. Is age-related infertility a medical issue? Why is waiting until you are 49 — past the age when a woman can reasonably expect to get pregnant using her own eggs — not considered "discretionary"? She's not sick, she's just old.

But hold on. (Head exploding here.) If eyeglasses and walkers are eligible for the medical expense tax credit, why not treatments that reverse age-related fertility loss? Otherwise, why don't we just ask all people to get their reading done before age 40 and their walking before age 85?

And of course there's the question of the age under which not having good eggs can be considered a medical condition. Is it 30? 38? 39? 42?

What about a lesbian woman? She herself is perfectly healthy, but she is missing an opposite-sex gamete and a gamete-delivery device.

What about a woman who freezes her eggs? She is healthy and young, but the whole purpose of elective egg freezing is to make it possible for her to wait until she is too old.

Again, it looks like the 2017 amendment might solve these problems — that is, for women and people who are, for tax purposes, attached to women. That's because women have all the tricky and expensive parts needed for reproduction. The parts they don't have — sperm, sperm-delivery organs — have easy workarounds.

But the organs McNeilly was missing and in need of can't be replaced with a syringe or a bit of plastic tubing. Which brings me to another thought.

Artificial wombs.

They are not quite here yet, but they are on the horizon. Thought experiment: If McNeilly had used an artificial womb to gestate his child rather than a surrogate, would that have altered the picture? Would he then be a "patient"? If so, what changed? He would still have had his sperm tested, he would still have had to procure some eggs, he would still have had to have a doctor fertilize those eggs in a lab. But now technology, not a person, would bring the fetus to term.

He would be a patient, right?

Because if he's not, then why should a woman in the analogous situation be considered one? A single female using medical technology to do the missing male bit — preparing the sperm and putting it into her body — is eligible. Why wouldn't a single male using medical technology be one too?

But why would technology transform him into a patient?

The spirit of the law.

The government spent a fair amount of time arguing that the spirit of the Assisted Human Reproduction Act opposed commercialization and exploitation and, therefore, McNeilly's transnational surrogacy expenses should all be excluded on those grounds alone, even if he were to be deemed a patient. There's a lot I could say on this — could the government be more hypocritical?? — but I have decided to spare you.

If we're going to invoke the spirits of laws, surely the one we should be looking at is the Income Tax Act. What is the purpose of the medical expense tax credit? It is to provide tax relief for above-average medical expenses.

No one disputes that infertility expenses are extraordinarily high.

The only real dispute is whether McNeilly, a gay man, can be considered a patient under the law.

I've argued this before and I will argue it again: there would have been no medical treatment had it not been for McNeilly's reproductive challenges. As a single male, he was missing key components — eggs and a uterus. No one would have undergone treatment if not for him. The egg donor was healthy and didn't need eggs extracted; she did it because of him. The surrogate was healthy and didn't need to gestate a fetus; she did it for him. He was "the" patient.

It seems to me not in the spirit of the law to deny him this tax relief.

Alison Motluk. "The cost of building a family." Xtra. 09 Jun 2021.