I am surrounded by Carolina Panthers fans. It can’t be helped. I was born and raised in North Carolina. I grew up in the Panthers franchise era. I remember the hopefulness, the whispers, that someday we might get a National Football League team. That day came on July 29, 1995, when the Panthers played their inaugural game (they won, besting the Jacksonville Jaguars with a score of 20-14).
I don’t live in North Carolina anymore. That doesn’t mean that I still don’t feel the love. Every year during football season, my Facebook feed is filled with Panthers game pictures and memes. I can’t scroll down without being reminded to #keeppounding at least a few times every Sunday. Especially this year.
This year, with the Panthers going to the Super Bowl, the excitement is at all time high. And if my feed is to be believed, there is practically no one I know that doesn’t think that quarterback Cam Newton walks on water. This is a big deal in an area where football and faith go hand in hand.
Leading the top of the list of “Things that Cam Newton does that makes him amazing” is a claim, widely circulated on Facebook, that Newton has been fined more than $250,000 for giving away footballs to kids in the stands. The meme suggests that Newton is fined $5,512 every time he hands a ball to a young fan in the stand but he does it anyway because he’s reminded that he should “never take nothing for granted.” It’s a wonderful story. Only it isn’t true. Newton actually does not get fined by the NFL for handing out those footballs.
It’s easy to see how the rumor got started. It’s true that players can be penalized for hiding the ball or engaging in behavior that would delay the game. Prolonged or excessive celebrations are also prohibited per NFL rules. And, for safety reasons, a player is not allowed to throw or kick a football into the stands during a game.
(You can read the entire NFL Rulebook here.)
Simply handing the ball to a fan? The NFL doesn’t impose a penalty for that behavior.
But what if they did?
The meme that was circulating suggested that Cam’s behavior was somehow charitable. Maybe in spirit. But not for income tax purposes.
If Newton really had been fined for handing those game balls out – and paying the resulting fine – it would not have resulted in a charitable contribution for him no matter how deserving the child might be. It’s no secret that Newton singles out kids with special stories. He’s handed out a game ball to Colin Toler, who attended a game just weeks after his father died, and Braylon Beam, who’s fighting cancer, just to name a couple.
That is, however, not enough for the Internal Revenue Service (IRS). Charitable donations to individuals do not qualify for a charitable deduction. So, there’s no charitable deduction for handing out a football, no matter how deserving the child nor how valuable the ball. And, of course, paying a fine to a third party for doing something charitable doesn’t count either.
So, how about a business deduction? If Newton had really been fined, could he have deducted those fines on his taxes as a business expense? It’s a fascinating question – and here’s why.
I’ve noted before that there’s no specific “football” section of the Tax Code. The same rules apply to playing football as apply to, say, being a tax attorney (except that one of those makes a lot less money). The question isn’t whether the specific behavior happened at the office (or on the field) but whether the expenses related to the behavior are considered in the course of business. With tax attorneys or sales clerks or architects, that’s not a terribly fuzzy line: we’re ordinary people and our business and personal lives are generally quite separate. When you’re a celebrity the line is a bit more blurred. When you are your brand, it’s not quite as simple to separate your business and personal behaviors into neat compartments.
Penalty and fines, however, are treated differently. A fine or penalty is deductible as a business expense if it is considered an “ordinary and necessary” expense in the taxpayer’s trade or business.
I think on its face, Newton’s behavior would fail that test. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is “one that is helpful and appropriate for your trade or business.” Unlike the Belichick cheating scandal where the underlying behavior – while perhaps morally despicable (sorry, I’m an Eagles fan) – produced a favorable result for Belichick, the fine for the behavior could have been considered helpful and appropriate. If the goal was to win, then cheating would do it. Was that the only way to accomplish that goal? It doesn’t matter. The IRS has clarified that an expense does not have to be indispensable to be considered necessary.
In this case, Newton’s behavior – the handing over of the ball to a fan – doesn’t help him win. It doesn’t make him a better player (a better person, maybe). It isn’t necessary to accomplish his goal.
That, of course, assumes his goal is to win. But what about the business of being Cam Newton? Does his behavior add to his brand? Does it make him a more valuable commodity? Maybe. When you go back and answer the question of whether the fines would be ordinary and necessary for the business of being Cam Newton, you might get a different answer than before. Remember, again, that a necessary expense is one that is “helpful and appropriate for your trade or business.” On some level, of course, the expenses were necessary: he has to pay those fines in order to keep playing in the NFL. But are those fines helpful and appropriate for Cam Newton’s trade or business? I think that might depend on what business you’re describing. Image does count in the NFL.
(For now, I’m putting aside the bigger argument that paying the fine for breaking the rules is completely necessary for an NFL to continue to work: you can read more on that here.)
So, to recap, the NFL isn’t fining for Cam Newton for handing over the game balls to his fans. But if the NFL were issuing a fine, while paying the fine wouldn’t be a charitable donation for Newton, there’s an argument to be made that it could be a business expense, depending on which business you’re focusing on.
Does any of this make Newton’s actions less special? Of course not. Handing over that game ball means something: to Newton, to the kids who get those balls and to the fans. In a year that’s filled with lots of news about what’s wrong with the NFL, I think we can all agree that this is an example of getting it right.
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