SSR 83-2a: SECTION 202(v) (42 U.S.C. 402(v)) EXCLUSIONS FROM SELF-EMPLOYMENT -- SERVICES EXEMPTED ON RELIGIOUS GROUNDS -- WAIVER OF BENEFITS
20 CFR 404.305(a) and 404.1075
- The claimant was granted an exemption from the payment of Social Security self-employment taxes under the provisions in section 1402(g) of the Internal Revenue Code of 1954 (IRC). He subsequently applied for old-age insurance benefits (OAIB), but the payment of those benefits was precluded under section 202(v) of the Social Security Act (the Act). When the Social Security Administration (SSA) denied the claimant's application, he appealed, contending that he had not been informed that the granting of the exemption would preclude the payment of Social Security Benefits. The Appeals Council found that the application the claimant signed when he applied for the tax exemption clearly explained the effects the granting of such an exemption would have on his future rights to Social Security benefits and thus fully complied with the provisions in section 202(v) of the Act and section 1402(g) of the IRC. Accordingly, the Appeals Council held that the claimant was not entitled to OAIB.
The general issue in this case is whether the claimant is entitled to OAIB. The specific issue is whether he has waived his rights to such benefits under section 202(v) of the Act.
The Internal Revenue Service (IRS) granted the claimant, who is a member of the Old Order Amish Church, an exemption from the payment of Social Security self-employment taxes under the provisions in section 1402(g) of the IRC. The claimant subsequently applied for OAIB, but the payment of those benefits was denied, under section 202(v) of the Act, because the tax exemption granted to him was still in effect. When SSA denied the claimant's application, he appealed, contending that he had not been informed that the granting of the exemption would preclude the payment of Social Security benefits.
- Section 202(v) of the Act provides that --
- "Notwithstanding any other provisions of this title, in the case of any individual who files a waiver pursuant to section 1402(g) of the Internal Revenue Code of 1954 and is granted a tax exemption thereunder, no benefits or other payments shall be payable under this title to him, no payments shall be made on his behalf under part A of title XVIII, and no benefits or other payments under this title shall be payable on the basis of his wages and self-employment income to any other person, after the filing of such waiver; except that, if thereafter such individual's tax exemption under such section 1402(g) ceases to be effective, such waiver shall cease to be applicable in the case of benefits and other payments under this title and part A of title XVIII to the extent based on his self-employment income for and after the first taxable year in which such tax exemption ceases to be effective and on his wages for and after the calendar year (if any) which begins in or with the beginning of such taxable year."
Section 1402(g)(1) of the IRC provides, in part, that --
- "Any individual may file an application . . . for an exemption from the tax imposed by this chapter if he is a member of a recognized religious sect . . . and is an adherent of established tenets or teachings of such sect . . . by reason of which he is conscientiously opposed to acceptance of the benefits of any private or public insurance which makes payments in the event of death, disability, old-age, or retirement or makes payments toward the cost of, or provides services for, medical care (including the benefits of any insurance system established by the Social Security Act). Such exemption may be granted only if the application contains or is accompanied by . . .
- (B) his waiver of all benefits and other payments under titles II and XVIII of the Social Security Act on the basis on his wages and self-employment income. . . ."
Section 1402(g)(3)(B) of the IRC provides that the tax exemption on religious grounds shall end after the time the individual ceases to be a member of a properly recognized tax exempt religious sect, or when he ceases to be an adherent of established tenets or teachings of such sect, or at the time the Secretary of Health and Human Services (HHS) finds that the sect of which the individual is a member ceases to meet the requirements of section 1402(g)(1)(C) or section 1402(g)(1)(D).
Section 1402(g)(1)(C) of the IRC provides that the Secretary of HHS determines whether such sect has the established teachings referred to in the first sentence of section 1402(g)(1).
Section 1402(g)(1)(D) of the IRC provides that the Secretary of HHS determines whether it is the practice of the sect for members to make provision for their dependent members which in his judgment is reasonable in view of their general level of living.
The claimant acknowledged signing Form 4029 (Application for Exemption from Self-Employment Tax, Claim for Refund and Waiver of Benefits). The form, which is in total compliance with section 202(v) of the Act and section 1402(g) (formerly 1402(h)) of the IRC, clearly sets forth the requirements for eligibility for the tax exemption and includes the following provisions:
- "I hereby waive any and all rights to any type of social security payment or benefit under Titles II and XVIII of the Social Security Act and understand and agree that no benefits or other payments of any kind under Titles II and XVIII of the Social Security Act shall be payable on the basis of my wages or self-employment income, or both, to any other person.
- Furthermore, I understand that if any tax exemption pursuant to section 1402(h) of the Internal Revenue Code ceases to be effective such waiver shall also cease to be effective, but only on the basis of my self-employment income for and after the first taxable year in which the exemption ceases to be effective, and my wages for and after the calendar year beginning in or with the beginning of such taxable year.
- I agree to notify the District Director of Internal Revenue promptly (within 60 days) of the occurrence of any act or event the results of which I no longer am a member of the religious group described above, or that I no longer adhere to the established tenets or teachings of such group."
Immediately above the claimant's signature is the declaration, "Under penalties of perjury, I declare that this application, claim, and waiver has been examined by me and to the best of my knowledge and belief it is true and correct."
The evidence shows that the claimant has acknowledged that he freely signed, in the presence of his wife and attorney, without peer pressure, Form 4029 as prepared by the attorney, whom he had retained for income tax purposes, and that the claimant has never taken any formal action to terminate the agreement made with the IRS. There has been no contention that the claimant was incapable of reading and understanding Form 4029 when he signed it; and presumably, he has been provided with an approved copy of that form. The claimant's position, that he was never informed that the granting of the exemption would preclude the payment of Social Security benefits, is contradicted by the express wording of Form 4029 which he signed, under penalty of perjury, as being correct.
While the Act and the IRC are interwoven on the issue of tax exemption and waiver of benefits, the separate laws and regulations do set limits on the actions of SSA and the IRS.
Thus, the IRS had the sole power to grant or terminate individual applications, and SSA was limited to making determinations as to whether specific religious sects originally met or continued to meet requirements for exemption under the IRC. There is no provision for SSA to approve a termination of the waiver by an individual under the Act. However, the IRS does provide a specific means for termination under which the individual simply is required to notify the IRS if he has disassociated himself from the Church, or if he no longer adheres to its established tenets.
Inasmuch as SSA has no authority to terminate the tax exemption and the claimant has admittedly not taken the action permitted by the IRS to terminate his exemption, the Appeals Council concludes that the waiver continues to be in effect. Since only earnings reported after a formal termination of the tax exemption may be used to establish quarters of coverage for entitlement to Social Security benefits, the claimant presently has no quarters of coverage and thus is not entitled to OAIB.