Are Marshawn Lynch’s Fines Tax Deductible?

Seattle Seahawks running back Marshawn Lynch has gained notoriety over the last two seasons for his continual avoidance of the media and the resulting fines. By making himself unavailable to the media after games, Lynch is no stranger to league penalties. In fact, no NFL player was fined more in 2014 than Lynch, who racked up $131,050 in fines, mostly for not speaking with reporters.***

While Lynch violated the NFL’s media policy, could his fines actually generate tax savings?

Whether the fines are deductible depends on the general rule that an expense is deductible if it is ordinary and necessary in the taxpayer’s trade or business. Ordinary expenses are common and accepted in the trade or business. Necessary expenses are helpful and appropriate in the trade or business. These are different for every taxpayer – what’s ordinary and necessary for an NFL player is not the same as what is common, accepted, helpful and appropriate for a public accountant.

Getting fined this much money for not speaking with the media is uncommon. Otherwise, his press conference shenanigans would be much ado about nothing. It’s also hard to make a case that his actions generating the fines were either helpful or appropriate; not speaking with the media didn’t impact the Seahawks weekly game strategy. Under this guise, his fines do not seem deductible.

However, a case could be made that it isn’t his actions that should be scrutinized under the ordinary and necessary rule, but rather the fines themselves. If Lynch did not pay his fines, the NFL would not allow him to play, necessitating payment in order to continue working. Using that as the basis, paying his fines is both accepted and appropriate. Additionally, NFL fines are common for a number of reasons to the point that the leagues’ 2014 infraction schedule listed 18 finable offenses of varying assessments. All of this suggests that his fines are ordinary and necessary expenses.

Also interesting is the timing of his fines. Most individuals are cash-basis taxpayers, meaning they report income when it is received and expenses when they are paid. Lynch’s most infamous fine in 2014 was for $100,000 for skipping a post-game press conference. However, that fine was structured in two parts: $50,000 for the instance itself and $50,000 from a reinstated 2013 fine.

In 2013, the NFL fined Lynch $50,000 for a similar offense, but suspended the fine with the caveat that it would be reinstated if he violated the same policy in the future. He wouldn’t have reported that fine on his 2013 tax return because it wasn’t paid. If his 2014 fines are deducted then he may actually benefit more from the bunched nature of the expense. Because fines are typically reported as itemized deductions subject to the 2% floor of adjusted gross income, a higher total in 2014 may afford Lynch with a greater deductible amount than if he reported $50,000 each year.

Getting fined $131,050 certainly hurt Lynch’s wallet, but if he is a glass-half-full kind of guy, he can take solace in potentially getting some relief in his 2014 tax bill.

*** Note: Ray Rice lost a significant amount of his salary due to his suspension, but that figure is considered lost wages and not a league fine. Rice was fined $58,823 during the season, less than half of Marshawn Lynch’s total.

To read the original article published on CPA Now by PICPA, click here.