IRS Changes Preserve Social Security Conscience Exemption For LLCs

Yesterday the Internal Revenue Service published T.D. 9554 in the Federal Register. As explained by the Journal of Accountancy, the release amends federal tax regulations under Sec. 3127 of the Internal Revenue Code. That section provides an exemption from Social Security taxes where both the employer and employee are members of a religious sect that opposes participation in Social Security. However, changes in regulations in 2009 created a problem where the employer was not an individual, but instead a so-called "disregarded entity"-- primarily a limited liability company (LLC) wholly owned by one individual. The 2009 changes treated the LLC as the employer-- and the LLC as an artificial business entity, of course, has no religious beliefs. The changes made yesterday assure that the exemption will continue to be available where the sole owner of the LLC is an individual whose religious faith opposes participation in Social Security.