ExecutiveLoyalty.org

Tax: Executive Travel (employer-provided)

   >>> See SEC Disclosure re Executive Travel

Aircraft - Company provided
    Income Tax Regulations

• Personal vs Business Travel: see Treas. Reg. 1.61-21(g)
• Income Exclusion for Security-related Use: see Treas. Reg. §1.132-5(m)(4). 
  

    Articles: 

• For a discussion of IRS and SEC Rules, see McDermott Memo (5/9/2009). 
• For detailed discussion and examples, see Conklin Memo.

Automobile and/or Chauffeur

• Income Exclusion: see Treas. Reg. §1.132-5(m)(5).
• Value of Automobile and Chauffeur Services - see Treas. Reg. §1.61-21(b)(4) and (5).
  

Employee Deductions for Business Travel

• Personal Commuting vs Business-related (as the differentiator): see Bogue v. Commissioner, T.C. Memo 2011-164.
  

Security Programs Generally

• IRS Audit Rule.  See "Security-related Transportation" within IRS Audit Guidelines (02-2005). They begin with the following statement of the general tax rule: 
  
  • "Regulations § 1.132-5(m)(1) provides that if a bonafide business-oriented security concern exists, and an overall security program exists, then the employee may exclude the excess of the value of the transportation provided by the employer over the amount that the employee would have paid for the same mode of transportation absent the bona fide security concern."​
    
• Treas. Reg.  See Treas. Reg. §1.132(m) for general income exclusion rules for employer-provided transportation due to "bona fide business-oriented security concerns".  See Treas. Reg. 1.132-5(m)(2) for the need to demonstrate this through an overall security program established by the employer, and for a safe harbor that is available for independent studies meeting four regulatory requirements.​
  
  • If an overall security study documents the need for 24-hour security protection, the executive (and the spouse and family on the same flight or car) can travel in secure company owned vehicles and the cost of any extra security features (including the cost of a chauffeur, if it can be shown there would be no chauffeur but for security concerns) would not be included in income.
    
• NY Times Critique (4/10/2010): "For Some Corporate Chiefs, Private Security is a Tax Break".
  
• Securities Disclosure -- of Employer-provided Security Protection for Executives
  
  • Federal Express Proxy Statement (8/18/2014): "FedEx’s executive security procedures, which prescribe the level of personal security to be provided to the Chairman of the Board, President and Chief Executive Officer and other executive officers, are based on bona fide business-related security concerns and are an integral part of FedEx’s overall risk management and security program. These procedures have been assessed by an independent security consulting firm, and deemed necessary and appropriate for the protection of the officers and their families given the history of direct security threats against FedEx executives and the likelihood of additional threats against the officers. The security services and equipment provided to FedEx executive officers may be viewed as conveying personal benefits to the executives and, as a result, their values must be reported in the Summary Compensation Table. With respect to Mr. Smith, consistent with FedEx’s executive security procedures, the Board of Directors requires him to use FedEx corporate aircraft for all travel, including personal travel. In addition, FedEx provides certain physical and personal security services for Mr. Smith, including on-site residential security at his primary residence. The Board of Directors believes that Mr. Smith’s personal safety and security are of the utmost importance to FedEx and its shareowners and, therefore, the costs associated with such security are appropriate and necessary business expenses."
    
  • General Motors Form 10-K (3/5/2009): "As part of the comprehensive security study noted above, residential security systems and services are maintained for Messrs. Wagoner and Henderson and chauffeured vehicles are available for business-related functions. Chauffeuring costs associated with daily commuting are deemed personal benefits, and, as such, are imputed as income to the executives and are included in these security expenses. In 2008 they totaled $16,156 for Mr. Wagoner and $19,375 for Mr. Henderson. The associated cost of the residential systems includes the actual costs of installation and monitoring of security systems and allocation of staffing expenses for personal protection."
    
  • Macy's Proxy Statement (4/1/2009): "Car and Driver Program — Pursuant to an independent third-party security study Macy’s obtained in 2007, Macy’s is providing Mr. Lundgren with a car and driver for commuting in New York City, for certain business travel and for personal use. The driver is a trained security professional. This benefit is to ensure the personal safety of Mr. Lundgren, who maintains a significant public role as the leader of Macy’s. The benefit also allows Mr. Lundgren to work productively during his commute. For tax purposes, with respect to any commuting to and from work and any personal use of the car and driver by Mr. Lundgren, the costs relating to the service (other than the cost of executive protection services) are imputed as income. The cost of the executive protection services provided to Mr. Lundgren is considered to be a tax-free working condition fringe benefit in accordance with IRC Sec. 132(d) and Treasury Regulation 1.132-5(m)."