IRS Section 132 Independent Security Study

When a corporation provides executive protection to its executives, the value of that protection is generally taxable income to the executive — unless an Independent Security Study under IRS Treasury Regulation §1.132-5(m) establishes a bona-fide business-oriented security concern.

ParaMil conducts the Independent Security Study itself: a written, defensible analysis of the threats to the executive, the protective program required to mitigate them, and the resulting structure that supports working-condition fringe benefit treatment. The study is prepared independently of the corporation and the executive, as required.

When This Service Is Needed

Public companies, family-office structures, and pre-IPO companies that provide (or plan to provide) executive protection benefits routinely engage an independent security firm to perform a Section 132 study. The study supports proxy-statement disclosure of security benefits and the tax treatment of those benefits under §132 and §274.

What the Study Includes

• Independent threat assessment for the named executive
• Documented bona-fide business-oriented security concern
• Overall security program description & protection level
• 24-hour protection rationale (if applicable)
• Family-member protection rationale (if applicable)
• Aircraft, residence, and ground-transport components
• Written report formatted for tax-counsel review

Independence Standard

Treasury Regulation §1.132-5(m) requires the study be conducted by an objective, qualified independent security consultant. ParaMil’s engagement structure, scope of work, and reporting are designed to satisfy that independence requirement and produce a study that withstands audit scrutiny.

Coordination with Tax & Legal Counsel

ParaMil routinely coordinates with the corporation’s outside tax counsel, general counsel, and audit firm. Our methodology and report format integrate cleanly into proxy-disclosure workflows and audit defense files.

Periodic Updates

Section 132 studies are typically refreshed every 1–2 years or upon material change in the executive’s threat environment, role, or compensation structure. ParaMil maintains the working file and produces update studies on a defined cadence.