Protecting the C-Suite from the Tax Man

By The Lake Forest Group

G. Michael Verden is a former police officer, retired United States Secret Service agent, former Director of Security for the National Basketball Association, and current owner and CEO of The Lake Forest Group, a strategic security consulting firm.

As a protective security professional, you need to be up to date on the latest best practices to maximize security and minimize risk—in the most cost-effective and efficient way possible. Because executive protection is probably one of your primary security roles, an Independent Security Study can help select executives in your company avoid unnecessary tax liability, while assessing your company’s security environment and providing great value to you in your role as a corporate security professional.

Why Do You Need an Independent Security Study?

Your Executive Protection might include air travel, airport protection, ground transportation, and a travelling protective detail to ensure the safety of company executives, especially if they travel internationally. The IRS will tax the gross income of those executives for transportation security costs—unless you can show a bona fide business-oriented security concern for the protection provided.

An Independent Security Study Benefits You and Your Organization

An Independent Security Study meets the necessary requirements for the IRS to avoid this tax—and saves your C-Suite money. The scope of the study includes:

(1) On-site security surveys of private residences of select leadership;

(2) Assessments of executive offices, work environments, corporate aircraft, company-owned executive vehicles, and business travel;

(3) Examination of the risks, threats, and vulnerabilities potentially impacting the safety and security of leadership along with organization-wide operations;

(4) Development of countermeasures and strategies for risk transfer, avoidance, mitigation, or acceptance; and

(5) Detailed risk mitigation considerations in the operational areas evaluated, not just for the select executives, but for the organization as a whole.

In addition, your compliance with the IRS showing the security you provide your executives is part of an overall security program benefits you and your organization.

What Are the IRS and Tax Connections to the Study?

The Independent Security Study is tailored to fulfill IRS statutory requirements as they relate to validating employer-provided transportation for business-oriented security concerns and overall security programs. It documents employer-provided transportation for security concerns for corporations seeking to specifically exclude security-related cost and items from the executive’s gross income.

Employers must validate employer-provided transportation for security concerns, business-oriented security concerns, and overall security programs as stated in IRS Title 26. The Independent Security Study assists corporations in fulfilling the IRS’s statutory requirement as it applies to “working condition fringes for security” and shows the necessity to meet all IRS statutory requirements through an outsourced and independent security professional.

You Can’t Conduct the Study Yourself

An important part of the IRS compliance is that the study is done by an outsider, e.g., independent consultant. You can’t conduct your own assessment. The Independent Security Study is based on an objective assessment of all facts and circumstances and the employer applies the specific security recommendations contained in the security study to the employee on a consistent basis.

As a net result, an Independent Security Study conducted by an outsourced consultant provides an evaluation of your personnel, programs, policies, technologies, operations, and current security environment to identify areas of strength along with opportunities for improvement. In addition, by showing the security provided to the executives is part of an overall security program, it benefits your organization and complies with the IRS.