U.S. Tax Court registers pro-trans decision

glad_logoA ruling this week by the U.S. Tax Court held that a Massachusetts woman should be permitted to deduct the medical costs associated with her transition (male to female) for the purposes of filing federal income tax returns—a ruling that could have significant implications for transgender people.

Rhiannon O’Donnabhain, 65, sued the Internal Revenue Service (IRS) when the federal tax agency denied a deduction of $5,000 for approximately $25,000 in medical expenses, including hormone therapy, sex reassignment surgery (SRS), and breast augmentation.

The IRS contended that that the treatments were “cosmetic” and not necessary medical care for Gender Identity Disorder (GID), a diagnosis required before therapy and surgery.

But, in an 11 to 5 decision, the tax court disagreed.

In its February 2 ruling in O’Donnabhain v. Commissioner of Internal Revenue, the tax court ruled that GID is a “disease” within the meaning of the tax code. The court said the IRS’s claim that all the treatments were “cosmetic” was “at best a superficial characterization of the circumstances that is thoroughly rebutted by medical evidence.” The court said that the IRS must consider sex reassignment surgery in the same manner, for example, as an appendectomy or even heart surgery.

But the court did agree with the IRS that breast enhancement could be considered “cosmetic” and thereby “excluded from the deduction of medical care” under federal tax code because she achieved augmentation through hormone treatments.

The U.S. Tax Court is a federal court with national jurisdiction that hears cases on a wide range of income tax claims.

Attorneys for the Boston-based legal organization Gay & Lesbian Advocates & Defenders (GLAD), the lead counsel for the petitioner, said the decision could affect thousands of people a year who undergo similar medical procedures.

The American Gay and Lesbian Medical Association estimated that between 1,600 to 2,000 people undergo SRS in the United States each year.

During a telephone press conference this week, Karen Loewy, a GLAD senior staff attorney, said the court’s decision established “narrowly” an “important legal principle” that “under the tax code, expenses incurred for the course of care for GID are deductible. She said “more broadly, the decision recognizes that there is a legitimacy for this medical condition that cannot be dismissed out of hand.”

“It’s incredibly big to have a statewide court setting a national precedent. This is the first time a court that has jurisdiction nationally has reached this conclusion.”

Born a biological male, O’Donnabhain provided highly personal testimony during her trial in Boston in July 2007, detailing an experience of dissonance between her biological sex and gender identity, starting as early as age 8. O’Donnabhain said she felt like “a female trapped in a male body.”

After decades of suffering and struggling with GID, O’Donnabhain sought medical help, undertaking a course of professionally prescribed treatment that included an SRS in 2001. O’Donnabhain’s health care providers testified that the treatment was critical to her mental health and ability to function more fully in society.

“The evidence amply supports the conclusions that petitioner suffered from severe GID, that GID is a well-recognized and serious medical disorder, and that hormone therapy and sex reassignment surgery are considered appropriate and effective treatments for GID by psychiatrists and other mental health professionals who are knowledgeable concerning the condition,” stated the court ruling.

Reacting to the decision, O’Donnabhain said, “I am overjoyed, not only for me, but also for other transgender people. We deserve respect, equal treatment for our medical care, and treatment by our government.”

Transgender-rights advocates voiced praise for the court’s ruling, too.

“This is a significant ruling,” said Meghan Stabler of Houston, Texas, who serves on the board of directors for the Human Rights Campaign, “not so much for the medical diagnosis but certainly from the coverage perspective.” Stabler said managers of private “health care plans and insurers always pointed to [treatment procedures] as elective and cosmetic. Now at least we have a point of reference to show where the federal government says these are necessary items, covered and deductible to a point.”

Transgender advocate and educator Joanne Herman of Boston said she hopes the decision will “bring us closer to having health plans provide coverage.”

“In the near term, the decision will help only a few trans people because most are under- or unemployed and do not have the money to pay for surgery in the first place,” said Herman. For them, she added, “whether it is deductible or not is fairly moot. The big help for trans people will come when it is covered by insurance. Therefore, the main importance of this decision is that IRS acceptance of surgery as medically necessary makes it harder for insurance companies to not cover it.”

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