This site uses cookies to provide you with a more responsive and personalized service. By using this site you agree to our use of cookies. You can learn more about our use of cookies and similar technologies and your choices by reviewing our Privacy Policy. By clicking “I agree” you agree to our use of cookies and similar technologies.
Turning Growing Risk into Fringe Benefits: How IRS 132 Security Assessments May Reduce the Cost of Protecting Your Executives
Most organizations recognize their executives’ lives are under a level of public scrutiny and exposure that is ever increasing. This is especially concerning for tech startups, since founders are the cornerstone of the business, not only in their product, but also their brand reputation. High visibility comes with high risk, and potential bad actors know that startups may spend little to no resources on security to pour more energy and attention into growing their market share. That risk increasingly demands a thoughtful and well documented security program.
The sticking point for many companies is not whether to protect their executives, but how to justify the investment. Understandably, leadership teams, investors, strategic advisors, general partners of venture capital or private equity funds, and boards of directors are right to seek clarity about what is truly required. Unless you’re knee-deep in tax code knowledge, you might not know that there are provisions that offer a path toward offsetting the financial impact of security investments. IRS Code Section 132 and regulations promulgated thereunder expressly provide for a company to engage a qualified security expert to conduct an Independent Security Study on a tax advantaged basis. When an executive faces a bona-fide risk due to the nature of their position, organizations are permitted to treat certain protective measures as a nontaxable benefit. As always, all tax strategies should be reviewed by a company’s legal and accounting tax professionals.
A proper Independent Security Study (IRS Code 132 assessment) is much more than a formality. It is an independent evaluation of the specific risks associated with the executive, the nature of the business environment, the executive’s visibility, and the realistic potential for targeted harm. When conducted by a qualified and independent third party, the assessment creates a credible foundation for determining what level of protection is required. It also provides the documentation necessary for the organization to apply favorable tax treatment to those measures. In other words, it brings financial and operational discipline to a topic that is often handled too informally.
As I discussed in an earlier blog post, security does not necessarily mean a 24/7 armed executive protection team. Few executives want or need such a robust security program. Rather, reasonable security measures may include upgrades to the executive’s home security system, digitally scrubbing their online presence, or even exclusive travel by private aircraft.
Although many executives do not want or require a full-time protective detail, it is important to understand how the tax code approaches the question of eligibility. IRS guidance makes clear that a 24/7 executive protection (“EP”) security program automatically qualifies for favorable treatment, but the code does not limit tax benefits exclusively to that level of protection. But for clients where a 24/7 EP program does not make sense, several options remain. For example, organizations may still realize the same advantages when a qualified independent third-party subject matter expert, like Guidepost, conducts an objective Independent Security Study. The results may identify specific physical (such as an inadequate home security system), digital (exposure and ease of access for personally identifiable information), or reputational (subscriptions or participation in certain adult-only platforms, such as OnlyFans) threats facing the executive. In such instances, reasonable security measures that reduce or eliminate those risks may benefit from the same tax-favorable treatment as a 24/7 EP program. The key is consistency. Once the recommended measures are established, they must be applied reliably to maintain the defensibility of the tax position.
This is where many companies unintentionally create exposure. An organization cannot selectively decide when to employ executive protection resources and still expect those costs to qualify. Consider a situation where an executive is faced with a pattern of credible threats. A properly conducted assessment would surface those issues and translate them into actionable guidance, such as deploying a two-person protection detail for all pre-announced public appearances. If the organization follows those recommendations consistently, the costs associated with that protection can qualify under the code, even without a full-time program. What falls outside the rules is an ad hoc approach where protection is provided for some events and not others without a risk-based rationale.
It is also worth noting that when the IRS first developed its framework for security-related tax treatment, the focus was primarily on traditional protective measures such as drivers, close protection personnel, and secure travel for executives and their families. As the threat landscape has evolved, so too has the interpretation of what constitutes legitimate, security-driven expense. Today, risk-based measures such as online personal-data opt-outs, digital threat monitoring, and enhanced residential security may also qualify, provided they are tied to the executive’s documented risk profile and implemented in a consistent manner. This evolution reflects the broader reality that modern threats extend beyond physical environments and demand a more comprehensive approach.
As the IRS 132 assessment becomes more broadly known, many new companies are emerging and soliciting clients to perform an Independent Security Study, often at greatly discounted rate. Local companies which previously exclusively did private investigator work or guard force staffing have marketed themselves as IRS Code 132 experts overnight. Be cautious when considering low-cost providers claiming expertise in IRS 132 assessments, as many deliver superficial, template-based reports that fail to reflect the unique risks faced by senior leaders. These firms often lack access to credible threat-intelligence sources and do not understand how to properly justify executive-level risk in a way that can withstand legal, finance, or IRS scrutiny. Their documentation frequently lacks the rigor needed for audit defensibility, with missing rationale, poor source attribution, and inadequate linkage to corporate governance requirements.
It is essential to evaluate not just an organization’s overall credentials but also the expertise of the professionals who will conduct the Independent Security Study. Our teams are comprised of seasoned practitioners with backgrounds in federal investigative and intelligence agencies (including the IRS, CIA, DEA, and FBI), bringing deep experience in threat analysis, regulatory expectations, and defensible documentation standards. This level of professionalism ensures that the assessment is both accurate and resilient if later reviewed by internal auditors or the IRS. Ultimately, organizations benefit from working with practitioners who have the stability, judgment, and technical grounding to support their findings long after the report is delivered.
The true return on investment becomes clear over time. A well-documented and properly justified protection program reduces uncertainty, strengthens internal alignment, supports a consistent budgeting process, and can provide significant tax advantages. It also minimizes the chance that an incident will disrupt operations or force an unplanned expansion of security in response to a crisis. Companies that adopt this disciplined approach often discover that the assessment pays for itself through improved clarity, fewer surprises, and a better understanding of what is necessary and why.
The conclusion is straightforward. Protecting executives is a business responsibility, not a personal perk, and the tax code recognizes that reality. An IRS 132 security assessment is the tool that brings structure and legitimacy to the process. If your organization has not undertaken one, it is likely leaving both compliance and cost advantages on the table.
MSU Institutional Assessment + RAMAGELLAN MonitorshipEmpire/Liberty Review