Exemption from Social Security

Ministers may be exempt only if they meet many requirements.

Church Law and Tax 1996-03-01

Social Security

Key point. Non—ministers having religious opposition to the acceptance of social security benefits are not eligible for exemption from social security, unless they satisfy a number of requirements, including membership in a sect that provides for the support of its dependent members.

A federal appeals court ruled that mandatory participation in the social security program by a non—minister taxpayer with religious—based opposition to social security did not violate his constitutional rights. The taxpayer refused to pay his self—employment (social security) taxes on the ground that he had religious objections to the social security system. He was not a member of a sect that was opposed to participation in the social security program. The IRS refused to recognize the taxpayer’s claim of exemption, and the taxpayer appealed. A federal appeals court agreed with the IRS that the taxpayer was not exempt from social security. It conceded that he had sincere religious opposition to the social security program, but it insisted that this was not a basis for exemption. Federal law permits self—employed members (whether ministers or lay persons) of certain religious sects to exempt themselves from social security if several conditions are satisfied. Among other things, the sect must be opposed to the acceptance of social security benefits on the basis of its established tenets or teachings, and must make provision for the financial support of its dependent members. These conditions were not met in this case. The taxpayer insisted that his constitutional right to freely exercise his religion would be violated if he were forced to pay social security taxes contrary to his religious beliefs. In rejecting this argument, the court pointed out that constitutional rights are not absolute. The government can limit a person’s constitutional right to the free exercise of religion so long as the limitation is supported by a compelling government interest. The court concluded that such an interest existed in this case—the government’s interest in a “fiscally sound social security system” that would be threatened by granting “myriad exceptions.” The court observed: “[P]ermitting him to opt out of the social security system would not only threaten the integrity of the system, but would threaten Congress’s goal of ensuring that persons who opt out are provided for (and will not burden the public welfare system).”

The taxpayer also pointed out that some persons are permitted to opt out of social security if they belong to a recognized sect having religious opposition to the social security program. By not the exemption to individuals not associated with such a sect the law impermissibly discriminated among categories of religious believers. Those who were members of certain sects were preferred over those who were not. The court disagreed. It insisted that the law did not show a preference for some religious believers over others. Rather, the law granting an exemption to members of religious sects under limited circumstances “does not discriminate among religions; it accommodates, consistent with the goals of the social security system, those who oppose social security on religious grounds. Put differently [the tax code] grants a religious exemption, provided that the individual belongs to an organization with its own welfare system. This is not a promotion of some religions over others. It is a religious exemption narrowly drawn to maintain a fiscally sound social security system and to ensure that all persons are provided for, either by the social security system or by their church.” Droz v. Commissioner, 48 F.3d 1120 (9th Cir. 1995). [ Exemption of Members of Certain Religious Faiths from Social Security Tax]

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