TAX MATTER
CASE STUDY #192
A Restaurant Conglomerate Commissions an Assessment of its Executive Protection Program That Also Addresses IRS Requirements
Challenge
When a company establishes executive protection (EP) capabilities to help ensure the safety of one or several of its leaders, does the IRS allow these costs to be deducted from the company’s taxable income? Or does the federal government view EP costs as a taxable benefit for the executive receiving the protection? That depends, according to the IRS, on an independent expert’s evaluation of the risks confronting the executives in question.
The company's Global Head of Security authorized this assessment for several top executives with two objectives: (1) to gain expert, objective insights into the strengths and areas for improvement within the EP program and to develop effective solutions, and (2) to address IRS requirements.
Action
The Baghera Group (TBG) began by identifying and assessing the risks, threats and vulnerabilities confronting the executives as well as their immediate families. This evaluation encompassed their public profiles, history of security incidents, and known threat actors targeting them, their organization and industry. We reviewed organizational and departmental policies, procedures, and staffing, benchmarking our findings against other similar companies and their executive protection practices. We also conducted in-person physical security assessments of the company’s headquarters, corporate hangar, and the residences of each identified executive.
During the engagement, we collaborated intensively with the in-house team, interviewing multiple stakeholders, including key members of the company’s corporate security team, C-suite staff, residential staff and vendors, and representatives of local fire and police departments. Topics discussed and analyzed ranged from communication protocols and compliance requirements to corporate culture, team dynamics, and risk management practices. Following the completion of a comprehensive social media and digital investigation into the digital footprints of the executives and their immediate families, TBG compared the existing risk control measures against all the findings. The final reports included recommendations on how to fortify and optimize protective countermeasures, tactics, and teamwork.
Impact
As often occurs during these assessments, some of TBG’s findings required immediate action. In these cases, we notified management immediately, and provided independent and objective guidance on how to buy down the risks in a manner that would also support program maturity over time. Overall, TBG documented evidence of bona-fide risks for tax-related purposes and provided 60+ recommendations that have helped structure EP-related decisions and resource allocations since the report was delivered.