Update 3:30 p.m.: Officer Daniels was placed on administrative leave on Monday while the Chapel Hill Police Department starts an investigation.
"The pervasiveness of the concerns raised by many regarding his display of a tattoo that is associated with the "3 Percenters" has caused the Department to question his ability to function effectively as a police officer within this community," Town Manager Roger Stancil said in a statement.
Daniels will remain on leave for the duration of the investigation.
A Chapel Hill police officer was photographed by a demonstrator at the Silent Sam protest on Monday night with a tattoo of a symbol for an anti-government group.
The picture shows Officer Daniels with a Three Percenters tattoo on his arm.