193 – Understanding the Business Case for Secure Transportation

In this week’s episode, the topic is An Answer to Question – Why do I need secure transportation? – A Marketing Tool from the IRS.

On-Page 136 of Joe Autera’s book “The Professional Guide to Planning, Managing, and Providing Secure Transportation is written as one of the better answers to the question – Why do I need secure transportation?

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A quote from the book

“It has been said, time and time again, that there are only two things in life that are a certainty, death, and taxes. While no one enjoys paying taxes, virtually everyone would rather pay them than be confronted by the other. If the right conditions are met, the Security Driver is one of the few people on the face of the earth that can reduce the Principal’s risk of both! Naturally, this brings us to the other elements of the business case for having a Security Driver or Solo Practitioner supporting the Principal. Understanding the business case for Secure Transportation starts with  gaining an understanding of  IRS Regulation Part 132(5), which dictates the conditions under which corporations and/or their executives may be eligible for tax deductions when secure ground transportation is provided.”

An introduction 

Every two years since 2013, the ISDA produces the Executive Vehicle Survey. One of the survey questions asked is, “Do you know of the IRS regulations concerning Secure Transportation?” And surprisingly every year, a large number of practitioners say that they don’t know or understand the IRS Code and Regulation. In fact, the Regulation is called Secure Transportation, and it can and should be used as a marketing tool.

An Explanation of the IRS Code

When a driver and vehicle are provided for an Executive, there are IRS guidelines they must follow if the executive and the company want to deduct the cost of the driver and vehicle. The IRS covers these guidelines under the Executive Compensation Fringe Benefits: Audit Techniques and Guide. 

As individual marketing and/or supplying “Security Drivers” or if you are a “Secure Transportation provider,” you need to ensure your marketing material mentions that you are in compliance with the IRS regulations regarding Security Related Transportation.

The IRS Code requires that the overall security program consistently apply appropriate protective measures in areas such as work location, residence, traveling to/from the work location, and potentially traveling for business or personal reasons. 

A Brief Explanation

If the Secure Transportation supplied does not meet the IRS Code, the transportation cost is considered a perk to the Executive. As a perk, the Executive will be required to pay tax on the amount of the service. If the Executive or their company believes that the service provided is Secure Transportation but does not meet the IRS Code, specifically the code that defines a Security Driver then the Executive unknowingly is personally responsible for the taxes on the amount of that service. If this scenario continues over a period, the Executive is personally responsible for the tax on the service, the interest, and penalties, which can be a considerably large sum of money, not to mention one pissed-off Executive. I suggest reading Joe Autera’s article “Perk or Prerequisite: the Security Driver from a Business Perspective” to find more info about the IRS code. 

Also, another question from Joe’s book is –  So exactly how is it that someone goes about making sure their executives are eligible for this tax deduction? The first step in the process is the most critical, demonstrating the existence of an “overall security program” that provides the employee 24-hour protection. The IRS defines a program that provides 24-hour protection as one in which the employee in question is protected while: 

  • at their residence
  • commuting to and from the workplace
  • at the workplace
  • traveling for business or personal purposes

Of particular importance is the fact that to be considered an overall security program, the security measures must include a bodyguard/chauffeur trained in evasive driving techniques, and the employer must provide an automobile specifically equipped for security. While that particular paragraph in the tax code goes on to mention other measures such as guards, metal detectors, alarms, or similar methods of controlling access to the workplace and residence, it is important to note that the only security measure the program must have is a bodyguard/chauffeur trained in evasive driving techniques.

It may come as a surprise to some (or to no one at all) that the IRS is not just going to take the employer’s word that they met the standards for an overall security program.  To claim that the conditions described above have been satisfied, the employer must commission an independent security study to assess whether the circumstances that create a need for the fringe benefits in question exists and, if so, that an overall security program also exists. Furthermore, the employer must implement all the recommendations contained in the study, not just those which they feel are the most important, most beneficial…or least expensive.

The IRS Code requires that the overall security program consistently apply appropriate protective measures in areas such as work location, residence, traveling to/from the work location, and potentially traveling for business or personal reasons. 

If properly implemented and based on the assessment of the independent third party, the cost of an executive protection program (EP agents, Security Drivers, residential alarms, etc.) may be excluded from a Principal’s personal income tax regarding fringe benefits and reduce corporate tax liabilities.

A Guide to Kidnap & Ransom Insurance Coverage

The decision to use or hire Executive Protection Specialists, Security Drivers or Secure Transportation providers is often based on the terms of the client’s Kidnap and Ransom (K&R) insurance policy. In the Corporate and High-Net-Worth (HNW) community, K&R Insurance is the catalyst for the use of Secure Transportation and Executive Protection.  

For additional information, we suggest the K&R content found in the ISDA Business Center


Not all protection markets need IRS Regulation Part 132(5) compliance. In our honest opinion, Part 132 is what separates the full-time market from the part-time market.

Also, not all protection markets may be affected by the IRS code. We (ISDA) are not tax accountants and/or lawyers. If you offer Secure Transportation services, we would strongly suggest you have someone with knowledge of the tax codes give you an opinion concerning your compliance with the tax code.

As was mentioned, to receive the tax benefit, IRS Part 1.132-5 also requires the employer to provide an automobile specially equipped for security. But they do not go into an explanation of precisely what they consider a security vehicle.

An armored vehicle would obviously be considered a security vehicle. As we have mentioned many times in our podcasts, our executive vehicle surveys indicate a growing number of companies and secure transportation providers moving towards armored vehicles. But there are more straightforward solutions that have met with the approval of the IRS.

Some Considerations

Install Run Flats. Years back, installing run-flats was a complicated process. However, in today’s market, run-flats are easier to install and do not have an adverse effect on the vehicle’s ride characteristics. We suggest taking a look at ISDA Member Gerardo Corona’s articles concerning run-flats.

The Wildcard of Security Driving: Run-Flat Inserts – Part 1

In an upcoming podcast, we will be covering information and data we discovered conducting backing-up maneuvers with deflated tires and run-flats. All we can say now is that it was a unique experience. 

Shatter Proof Glass. Just keep in mind that shatterproof is not ballistic glass, and is usually used on the side windows only. Also, there have been scenarios where the shatterproof glass separates from the vehicle window, so choose the installer wisely if you decide to use shatterproof glass.

Communications. Just a side note for those young practitioners, there was security driving and executive protection before there were cell phones – honest –  there were companies that supplied communication and tracking for executive vehicles. Such a company sponsored the old Scotti School. Back then, GPS was in its infancy, but today’s GPS systems are small and sophisticated.

In summary, given how vague the IRS language is, this is a topic that should be discussed with your tax attorney to ensure that the measures being implemented will comply with the IRS regulations. 

We suggest you learn about Personal Security Assessments and the companies that conduct them. They are familiar with the IRS code and many times make recommendations based on their audits. If you google “ Personal Security Assessment or Personal Security or Personal Security Audit, you will find an abundance of information. We have a link in the show notes from a security company that supplies the service.

Personal Security Assessment from FocusPoint Risk Advisory Services

Driver Training

Although this podcast is about marketing and the IRS, we would be neglectful if we did not discuss the IRS and part 132 without mentioning protective driver training. The practitioners looking for driver training need to ask if the training meets the IRS part 132 requirements and do not accept the simple answer yes. Ask them to explain what part 132 is and its implications on secure transportation.

A while back, when we asked that question of a security driver training provider, we were told, “yes, we are approved by the IRS.” As you might imagine, the IRS does not approve driver training. Those third parties who conduct the personal security audit and the K&R companies do have preferred trainers and recommend them to their clients, but the IRS is not involved in the process.

As we mentioned, the security program must-have not should have, a bodyguard/ chauffeur trained in evasive driving. The question then becomes what type of evasive driving will they accept.

Additional reading material

An explanation of the IRS Code from Cornell University


Tax Code Creates Lethal Vulnerability for Corporate Leaders by Dave Johnson


Daschle Pays 3 Years of Tax on Use of Car


Tax benefits for the Executive when considering executive protection


26 CFR § 1.132-5 – Working condition fringes.


Read more on this subject at https://www.law.cornell.edu/cfr/text/26/1.132-5 or consult a tax professional.

If interested in discussing an independent Third-Party Security Study, please do not hesitate to contact me at [email protected]

Some additional information from member Jerry Jacobs

IRS Publication


Personal Security Assessment from FocusPoint Risk Advisory Services


Scott Pruitt’s Security Detail–A Tax Problem?

the administrator of the Environmental Protection Agency


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