If single member disregarded entity LLC receives income from Community Care Licensing Division, California department of social services, for the placement of children with developmental disabilities in a long-term residential care facility; Is the income taxable for the LLC? If it is not taxable, does the owner have to pay self-employment tax when the income passes through? Is this considered a difficulty of care payments paid through a Medicaid waiver program? 

More information: the owner lives with the children full-time in the home. The owner is paid an administrative fee for managing the home and is also paid as caregiver. The LLC does have employees that also rotate in and out to help care for the children.