Client’s Challenge: Are Executive Protection Costs Deductible from Gross Income?
The objectives of this internationally branded company’s corporate tax counsel were strategic, compelling and clear. The first was to address the serious risk of harm to the company’s leadership team and its members’ immediate families – particularly given that more than 40 individuals had either made direct threats or exhibited unusual interest in various members of this high-profile group since the inception of the company’s executive protection program. The second goal was to demonstrate to the IRS that a Title 26, CFR-compliant “bona fide business-oriented security concern” existed and, because of this technical fact, that the costs associated with the company’s executive protection program represented legitimately deductible expenses from gross income for tax reporting purposes.
Our Solution: A Comprehensive Assessment Aligned with IRS Requirements
Hillard Heintze conducted a comprehensive, highly intensive and best-practice- based assessment of all facts and circumstances relating to the safety and security of the company’s CEO and Executive Vice Presidents, as well as their respective families.
Impact on the Client: Documentation that Defends the Company’s Tax-Related Strategy
As a direct result of this assessment, the company’s executives-at-risk found comfort in the assurance that all threats and methods of compromise that are known, anticipatable, preventable and directed at other highrisk individuals in similar positions of risk and exposure are competently being addressed by the company’s executive protection program. At the same time, the company’s board members realized comparable levels of assurance that they were undertaking the appropriate risk-based actions to protect the company’s senior executives and their families. And the Fortune 100 company’s accountants, tax advisors, and both internal and external auditors gained the documentation they needed to defend and explain the company’s tax-related strategies and deductions.
Unplugged: The Project Manager's Post-Engagement Perspective
“We tend to push beyond the boundaries of a traditional security engagement. ‘Bolt-on’ solutions are not the best way to create value. So we spend a lot of time ‘getting smart’ about precisely where and how security supports individual organization’s objectives.
We delve into the critical hooks that a top-notch security program needs to have with other decision hubs in the organization. Like HR. Operations. Finance. Legal. Tax. Definitely Tax.
Take this project. You could have a great executive protection program, but not be compliant with the tax regulations regarding security programs – neither the CFO nor general counsel understands the technical security intricacies. When’s the last time you saw a CSO hired for tax and accounting expertise?”