In a recent review of our NOW accounts, I discovered a NOW account that we are holding for a single-member LLC. I know we can do this with sole-proprietorships and DBAs, but what about a single-member LLC? Any help is greatly appreciated!

Only if it's a non-profit organization. Otherwise an LLC (any LLC) cannot earn interest on a NOW account.

Is there regulatory evidence out there to back it up? I am sure that I will be asked to provide it.

You can't, an LLC is not a DBA/SP...it's a type of corporation. [more of clone between a partnership and a corporation...just because it's a single member LLC doesn't matter]

But, since you can have a transaction account that earns interest, why not simply re-classify it to a "business interest checking account"?

and this is the best you will get...I don't think LLC's even existed when the reg went into effect, but the specifics are 'specific' enough based on the legal organization of an LLC vs a sole prop/dba.

(b) Individuals. (1) Any individual may maintain a NOW account regardless of the purposes that the funds will serve. Thus, deposits of an individual used in his or her business including a sole proprietor or an individual doing business under a trade name is eligible to maintain a NOW account in the individual's name or in the ``DBA'' name. However, other entities organized or operated to make a profit such as corporations, partnerships, associations, business trusts, or other organizations may not maintain NOW accounts.

Thank you very much!

Only an echo... As noted, LLC's did not exist at the time that interpretation was offered, but they are still excluded by its language: "...other entities organized or operated to make a profit..."

A single member LLC is in no way the equivalent of a sole proprietorship.

OK, like every good compliance officer you want a definite answer citing chapter and verse.

Here's a 2006 letter from the Fed to the Tennessee Department of Financial Institutions that ought to fill that void for you.

http://www.federalreserve.gov/BoardDocs/LegalInt/FederalReserveAct/2006/20060823/20060823.pdf

Nothing has changed in the law since then. Of course, the LLC can have an interest-bearing demand deposit account if your bank is willing to provide it.