Taxes, Charter Challenges, and Surrogacy Arrangements Collide In Foley v. The Queen, 2021 TCC 92, Hogan J. of the Tax Court of Canada (the “TCC”) heard an appeal from the CRA’s decision to disallow the claimant’s claim for a tax credit under section 118.01 of the Income Tax Act (the “ITA”), for expenses incurred with respect to a gestational surrogacy arrangement.The claimant and his wife had a child using an embryo created from the claimant’s sperm and his wife’s egg which was implanted into a gestational surrogate. This surrogacy arrangement, including referral fees to a surrogacy organization and legal fees, cost the claimant approximately $10,000. The claimant claimed these expenses under the Adoption Tax Credit (the “AETC”) in section 118.01 of the ITA. The claim was denied because the expenses were not related to an adoption (paras 5-7.). Parties’ Arguments The claimant appealed to the TCC and challenged the denial of the claim on Charter grounds. The appellant argued that parents by surrogacy is an analogous ground to the enumerated grounds protected against discrimination under section 15 of the Charter. His position was that exclusion of surrogacy-related expenses, as compared to adoption expenses, perpetuates or exacerbates disadvantages suffered by parents by surrogacy (paras 8-9).The Crown argued that the status of a parent by surrogacy is not an analogous ground under section 15 of the Charter. The Crown noted that the objective of the AETC is to encourage the domestic and international adoption of children who are deprived of stable parental relationships. However, the inclusion of surrogacy expenses would be inconsistent with the objective of this tax incentive. Finally, the Crown argued that the AETC is an ameliorative program designed to improve the situation of disadvantaged groups, (in this case, children without stable parental relationships,) and is therefore protected by s. 15(2) of the Charter (paras 11-15). Court’s Decision Hogan J. noted that, in order to succeed in its Charter challenge, the claimant must first demonstrate that the AETC creates a distinction based on a ground that is analogous to the grounds enumerated under subsection 15(1). Second, the claimant must show that the exclusion of surrogacy-related expenses from the AETC perpetuates or exacerbates the disadvantages that surrogate parents suffer under the law (para 20).The Court noted that the claimant did not demonstrate that his claim was justified based on analogous grounds for the purpose of subsection 15(1) of the Charter (para 21).Further, the Court noted that the ITA provides for numerous tax incentives that are meant to encourage actions or activities that Parliament wishes to encourage because such actions or activities are perceived to be of social good or beneficial to society as a whole (para 29). The AETC is designed to promote adoption in the interest of vulnerable children who do not have proper parental care and who face many disadvantages as a result. Hogan J. noted that surrogacy is inconsistent with the goal of the AETC, which is designed to promote adoptions (paras 29-30). Hogan J. went on to explain that the fact that the AETC is available to parents by surrogacy does not perpetuate the view that parents by surrogacy are less worthy of recognition or value as a member of Canadian society. Rather, the AETC encourages domestic and international adoptions in the interest of vulnerable children. Surrogacy does not lead to that outcome, and therefore, the AETC tax credit is not available to parents by surrogacy (para 32).