Executive Protection, Business Risk, and IRS Code §132

Why Title Matters Less Than Exposure — and Where Companies Get It Wrong

Executive protection has changed.

What was once associated with Fortune 100 CEOs and high-profile public figures is now increasingly relevant across industries like healthcare, energy, finance, and technology. Rising public hostility, social media amplification, litigation exposure, and politically charged decisions have expanded the threat landscape well beyond the corner office.

At the same time, organizations face a separate — and often misunderstood — question:

When are executive security expenses considered a legitimate business expense, rather than a taxable personal benefit?

That question is governed by IRS Code §132, and the answer is far more nuanced than many companies realize.

A Brief Primer on Executive Protection

Executive protection (EP) is not about luxury, prestige, or comfort. At its core, EP exists to protect the continuity of business operations by mitigating credible threats to individuals whose roles expose them to risk because of their employer’s activities.

Modern EP commonly focuses on:

• Primary residences

• Work environments

• Predictable transportation routes

• Physical and electronic security controls

What it does not inherently include are lifestyle services, personal convenience, or family-focused protection unless a clear business nexus exists.

That distinction matters — especially when tax treatment is involved.

What IRS Code §132 Actually Does

Under Internal Revenue Service Code §132, certain employer-provided benefits may be excluded from an employee’s taxable income if they qualify as working condition fringe benefits.

In plain terms, this means:

If an employee would have been able to deduct the expense as an ordinary and necessary business expense had they paid for it themselves, the employer may be able to provide that benefit without it being treated as taxable income.

For executive protection, this hinges on one core requirement:

There must be a bona fide, business-related security concern

Security expenses qualify only to the extent they mitigate risks that arise because of the executive’s role in the business — not because of personal wealth, lifestyle, or generalized fear.

What §132 Is Not

This is where misunderstandings begin.

IRS Code §132:

• Is not limited to CEOs

• Is not based on job title

• Is not a “key man” exception

• Does not automatically cover all security provided to important executives

Instead, §132 is risk-based and activity-based, not status-based.

Executives qualify because of what they do, not how senior they are.

Why CEOs Are Common — But Not Special

CEOs appear most often in §132 discussions because their roles typically involve:

• Public visibility

• Controversial decision-making

• Symbolic association with corporate actions

These factors make it easier to document business-related risk. But the law itself does not give CEOs any special standing.

A Chief Medical Officer, General Counsel, CFO, or operations executive can qualify just as readily — if their role creates documented exposure.

What Is Acceptable Under §132

✅ Example 1: Primary Residence Security

A healthcare executive involved in hospital closures or policy changes receives credible threats tied to their professional role.

A security assessment recommends:

• Exterior lighting

• Controlled access

• Alarm monitoring

• Perimeter cameras

Why it qualifies:
The security mitigates a business-driven threat at a location the executive must occupy to perform their job.

✅ Example 2: Non-CEO Executive With Public Exposure

A senior clinical executive becomes publicly associated with controversial medical decisions and is named in hostile communications.

Security measures are implemented at:

• The workplace

• Routine commuting routes

• The primary residence

Why it qualifies:
Title is irrelevant; the exposure exists because of business activity.

✅ Example 3: Routine Business Transportation

An executive’s predictable commute creates exposure due to visibility and prior incidents.

A study supports limited transportation-related security measures focused on risk reduction.

Why it qualifies:
The protection follows business activity, not personal convenience.

What Isn’t Acceptable Under §132 (Even If It Feels Reasonable)

❌ Example 4: Vacation or Recreational Property

An executive owns a vacation home or recreational property, and the company installs standing security to “protect them wherever they go.”

Why it doesn’t qualify:
Security at a personal vacation or recreational property is typically considered a personal living expense, not an ordinary and necessary business expense — unless the location is being used for documented business purposes.  Unless the executive has a designated office/workspace and uses this location for business purposes while at this location, it would not qualify.

This isn’t a judgment about security logic; it’s how tax law draws the line.

❌ Example 5: Family-Focused Protection

Security measures primarily intended to protect spouses or children without a clear business nexus.

Why it doesn’t qualify:
§132 protects the business, not the executive’s household or family activities.

❌ Example 6: Chauffeurs or Convenience Services

A driver or vehicle is provided without a documented security threat, primarily for comfort or efficiency.

Why it doesn’t qualify:
Convenience transportation is not protective security under §132.

❌ Example 7: “Key Executive” Justification

The argument that an executive is so important that protecting them everywhere is automatically a business expense.

Why it doesn’t qualify:
There is no “key man” doctrine in §132. Business nexus — not importance — is the test.

The Rule That Always Holds Up

A simple way to understand IRS Code §132 is this:

Security follows business activity, not the individual.

• Primary residence → potentially qualifying

• Workplace → qualifying

• Routine business transportation → potentially qualifying

• Lifestyle or recreational locations → generally not qualifying without a documented business purpose

This distinction may feel artificial to security professionals, but it is central to tax compliance.

Why This Matters

Organizations that overreach on executive protection risk:

• Tax exposure for the executive

• Audit findings for the employer

• Credibility issues for consultants and advisors

Well-prepared, conservative security studies do the opposite:

• They document real threats

• Tie recommendations directly to business exposure

• Avoid lifestyle framing

• Protect everyone involved

Final Thought

IRS Code §132 does not limit executive protection — it defines its boundaries.

When security is grounded in documented business risk and scoped appropriately, it can be both effective and compliant. When it drifts into personal convenience or lifestyle protection, it stops being a business expense — no matter how reasonable it may feel.

Understanding that distinction is the difference between defensible executive protection and an expensive misunderstanding.