Blog Ipsa Loquitur

Jezebel has a cute video highlighting the crimes of Ferris Bueller. Really, I think this just proves that Principal Rooney was the real hero of the film. Damn that kid!

Save Ferris

The video shows Ferris committing:

  • Grand Theft Auto
  • Speeding in a School Zone
  • Littering
  • Speeding
  • Petty Theft
  • Computer Tampering/Fraud
  • Changing Public Records
  • Trespassing on Private Property
  • Reckless Driving
  • Identity Theft
  • Breaking and Entering
  • Inciting a Riot

But many of these aren’t actually crimes in Illinois (where the movie takes place). I’m not certain where some of the names of these crimes come from, but the law nerd in me cannot let this stand. Watch the video before you read on, unless you’ve memorized every second of the movie.

The Crimes

For starters, Grand Theft Auto doesn’t exist in Illinois, but they have a regular old Theft statute. Now, Wikipedia says the Ferrari 250 GT California model was worth $350,000, making this a Class 1 Felony Theft, which is punishable by up to 15 years in prison. Speeding in a School Zone is also not a thing, but the Illinois Vehicle Code does have a section titled “Special Speed Limit While Passing Schools,” the violation of which is punishable by a minimum fine of $150 for a first offense, slightly less than the $250 minimum for speeding in a construction zone.

Littering totally is a crime, though, and is prohibited in the Litter Control Act. It’s also punishable by six months in prison and a $1,500 fine. Speeding is another helpfully vague title; in Illinois, it’s covered in 625 ILCS §5/11-601. If Mr. Bueller was speeding really egregiously, he was guilty of the amusingly titled “Driving 31 Miles Per Hour or More in Excess of the Applicable Limit,” which is pretty much the opposite of vague. D31MPHOMIEOTAL is a Class A Misdemeanor, punishable by up to a year in prison and a $2,500 fine.

Also, Petty Theft isn’t a crime as such, but the regular crime of Theft is a petty offense if the stolen property was lost or waylaid. Petty offenses are not punishable by any jail time, but are punishable by a $1,000 fine and 6 months’ probation.

However, Computer Tampering is a crime in Illinois - it’s 720 ILCS §5/16D-3, and it describes pretty much exactly what Ferris did. In fact, it might even be Aggravated Computer Tampering, if he has disrupted or interfered with vital operations of his local government. Personally, I’d argue that education is the among the most vital operation a government can undertake, but I’d bet that the case law completely disagrees with me. Regardless, Computer Tampering is a Class 4 Felony, punishable by up to 4 years in prison.

The next one, Changing Public Records doesn’t seem to be a crime, at least in Illinois. I think the single most applicable crime to what is described here is Computer Tampering from the previous paragraph; if you wanted to go for a second crime, I’d try Interference with an Institution of Public Education. That one is a Class C Misdemeanor, punishable by up to 30 days in prison and a $1,500 fine. Tresspassing on Private Property **[sic] is properly called Criminal Trespass to Real Property in Illinois, a Class B Misdemeanor, good for 6 months in prison and a $1,500 fine. **Reckless Driving, however, is the correct name for what Ferris is doing. Covered by 625 ILCS §5/11-503, it’s a Class 4 Felony, which carries a maximum jail term of 3 years.

As far as Ferris and Identity Theft go, that one is a bit of a stretch. The law covers a lot of contingencies, and the only one that even arguably covers what Ferris & co. is the following; anyone who

uses any personal identification information … of another for the purpose of gaining access to any record of the actions taken, communications made or received, or other activities or transactions of that person, without the prior express permission of that person

is guilty of the crime of Identity Theft. Personal Identification Information is defined to include a person’s name, so maaaaaybe if Abe Froman’s reservation at the restaurant was an “activity or transaction,” that’s Identity Theft. It’s arguable, but I don’t think it passes the straight face test. (Again, I’m not going to cite case law here, I’m just interested in naming these crimes properly.) It’s a Class 2 Felony, which carries a maximum penalty of 7 years in jail. That makes me think the case law must have a “Sausage King exception” or something; poor Ferris shouldn’t miss prom, college, and grad school just for cutting in line to get some pancreas.

The Weird Crimes

The single most puzzling entry on this list is Breaking and Entering, which is an antiquated term for Burglary. Burglary is, of course, a crime in Illinois, but burglary is trespassing with the intent of committing a crime inside the premises you’re trespassing within. The Jezebel video makes it seem like simply trespassing into someone’s house is Breaking and Entering, but that’s simply not right. We’ve already covered Trespassing above.

The last one, Inciting a Riot, is almost as puzzling. That’s simply not a crime in Illinois. Disrupting a parade and causing a dance number to break out in the middle of the street could be creating a Public Nuisance, which is the criminal obstruction of public streets. Similarly, it might fit the catch-all Disorderly Conduct, which is an unreasonable act that alarms/disturbs another, and provokes a breach of the peace; this is a Class C Misdemeanor, punishable by up to 30 days in prison and a $1,500 fine. A Public Nuisance is a simple petty offense, punishable by a $100 fine.

In Conclusion

This is why we can’t have nice things. Jezebel posted a perfectly fine video, and I went and nerded all over it. But now you know what to expect when you re-enact Ferris’s crime spree across the fine state of Illinois.

Filed on under Legal Theory

My old law professor has a new blog post analyzing possible legal consequences for some of the shiny new features Apple announced last week. My favorite:

iTunes Match is great, I’m really happy for you, Imma let you finish, but think for a moment about the privacy implications of asking Apple to scan your entire music library and report back on it to the Apple mothership.

Right now, Genius scans your collection and reports back, but all that information is “stored anonymously.” Anonymity doesn’t work if the point is to push out actual music files to all of your devices. Similarly, this goes beyond other cloud services in that you’re not uploading specific chosen files; iTunes Match is designed to scan your entire music collection, no matter how gigantic.

Filed on under Legal Theory

M.G. Siegler On Grouponzi:

The fast rising consensus now in certain tech circles is that Groupon is essentially a Ponzi scheme (Grouponzi, FTW). The fact that their net income is well underwater (and going deeper) has everyone freaking out. As does the fact that some of the original investors (as well as founders) took hundreds of millions off the table in the last huge round.

But I’m more with Joe Stump on this. You cannot overlook the fact that they’re also making hundreds of millions of dollars each quarter now. The run-rate for this year could be over $3 billion.

Aside from the cute name, this is an informative read, especially if (like me), all you’ve heard about Groupon lately is how it’s an unsustainable scam.

Filed on under Irreverently Irrelevant

I heard about an interesting case on Clusterflock the other day. A tax dispute between the IRS and a documentary filmmaker has sparked some minor outrage. Based on what I’ve read, the case revolves around whether making documentaries is a profit-making enterprise; if it is not, then the filmmaker can’t deduct her expenses related to making her film. Or her previous films – she’d owe hundreds of thousands of dollars in back taxes and penalties.

The executive director of the International Documentary Association has released a statement strongly condemning an interesting misinterpretation of the issue in the case:

In a US Tax Court trial held in Arizona on March 9, Judge Diane Kroupa made a statement that, if memorialized in a ruling, will have a devastating impact on independent documentary filmmakers across the US. Judge Kroupa questioned whether a documentary could be “for profit,” since by its nature it is designed “to educate and expose,” and she invited the parties to present case law on the issue.

Judge Kroupa’s speculation came in a case in which the IRS argued that filmmaker Lee Storey could not deduct business expenses pertaining to her film Smile ’Til It Hurts: The Up with People Story because the primary purpose of her film (and by inference all documentary films) is to educate and expose, not to make profit, and that therefore documentary filmmaking is a not-for-profit activity.

The IRS believes that if the person has no intent to make a profit, then the activity is a “hobby.” Therefore, they claim that Storey owes hundreds of thousands of dollars in back taxes and penalties for the business deductions she took.

The potential affirmation of Judge Kroupa’s statement could have a serious impact on documentary filmmaking […], bringing about audits and demands for back taxes because of a characterization of documentary filmmaker as meriting nonprofit status. To support Storey, IDA has filed an amicus brief in the case, urging the US Tax Court to recognize that the production of a documentary film is, at its core, a “for profit” business such that business expenses are deductible for tax purposes.

(Emphasis added: this language is significant, but we’ll go into that later.)

Intro to Tax

I’ve read a lot of misplaced outrage, and it seems to be stemming from a lack of knowledge about tax law. Hobbies aren’t tax deductible? Come on, guys. Let’s back up a little bit and figure out where the IRS and Judge Kroupa are coming from. This is how I explain it to my tax students.

Income tax is calculated based on the amount of money you make in a year, except for money you spent on things that were really important. These things are so important that the IRS will just pretend you never had that money to begin with: like it was spoken for before you even got it.

For example, stuff like medical bills, college tuition, or money you donated to a charity are all exceptions to your income. People have to take care of their health, right? It’s not really an option. That $3,000 medical bill won’t count as income, so if you made $30,000 last year, the IRS will only tax you on $27,000 of it. This is how deductions work.

Sidebar: For the accountants and tax lawyers reading this, I’m aware that the $3,000 deduction will only be allowed to the extent that the $3,000 medical expense exceeds 7.5% of the taxpayer’s Adjusted Gross Income. I’m going to simplify all personal deductions in this article by ignoring the applicable floor.

The Wide World of Deductions

It’s not just medical bills, too. One of the big ones is the deduction for business expenses. If your printing company spends $5,000 on printing supplies, you can deduct that $5,000 from your income that year. Just like medical bills are really important and the IRS pretends you didn’t make that money, the IRS thinks it’s really important that you spend money on your business to make money.

To me, the most interesting thing about the tax code is seeing what sort of behaviors are incentivized by offering deductions. My father got a deduction a couple years ago for installing new insulation in his attic because Congress decided to incentivize making your house more energy efficient. As mentioned before, you get a deduction for donating to a charity, because we incentivize giving to really good causes.

Likewise, business expenses are designed to incentivize people to open businesses and inject money into the economy running the business. If your new bakery is going to fail, it’s going to be because of the global economic depression you failed, not because you couldn’t afford your taxes. That’s the idea, at least.

Operation: C.R.E.A.M.

So that’s a very basic primer on how deductions work and why they exist. Getting back to our documentary example: the IRS is arguing, and apparently Judge Kroupa agrees, that Ms. Storey’s filmmaking is not a business because there is no profit motive.

Now we know that business expenses are generally deductible; what if we don’t require that there be an actual business to be involved? It doesn’t take a lot of imagination to come up with ways to exploit this deduction.

So, that shiny new iPhone you bought can be an expense for your imaginary technology consulting business, which has no customers and for which you’ve made no money ever. Deduct the full cost of the iPhone. That giant new TV is part of your indie theater business, which never sells tickets and has never made a penny at all. Deduct the full cost of your whole home theater system while you’re at it.

To claim you’ve got business expenses, it’s not unreasonable to require the taxpayer to have a business. But a business is an entity that is engaged in making a profit; that’s just the nature of our system. Unfortunately, the IRS called Ms. Storey’s filmmaking a hobby in the part I bolded at the beginning of this article.

Plan B: The Hobby Loss

Your little garden that costs you $200 in soil, seeds and tools every year? Unless you’re selling the fruits (ha!) of your labor, you’re probably not going to get to count that as a business.

All is not lost, however. The tax code also offers a limited deduction for expenses incurred in decidedly non-profitable ventures, which we called “hobby losses” in my tax class. Under §183, titled “Activities not engaged in for profit,” a deduction is offered for your silly little garden; but only to the extent that you made a profit on the hobby.

This is still pretty handy. Sure, you won’t get to deduct all $200, but you also won’t have to pay tax on whatever little money you made from selling your vegetables (presumably to coworkers or lost little children).

Vive Le Différence!

There’s no such limitation on business expenses: if your business is crappy and you lose money, you can deduct as much as your spreadsheets can handle, even if it reduces the rest of your income to zero. If your hobby is crappy and you lose money, you can only only deduct the amount of money you made from your hobby.

You spent $400 making socks in your spare time, and sold $30 worth of them on the internet? If the IRS thinks it’s a business, you have a $400 deduction. If the IRS thinks it’s a hobby, you have a $30 deduction.

Bringing It Home

So what does this mean for Ms. Storey? Obviously, if the filmmaking was a business, she’d be in great shape: every penny she spent she could deduct. And really, movies are undeniably a product. Lots of folks are in the business of making movies.

But what if our filmmaker’s work is deemed a hobby? How could that even happen?

Well, the tax code has a specific deduction for hobby losses, so she’d still be allowed to deduct some expenses. Depending on how much income she has from selling her documentaries, she might even be able to deduct most of her expenses.

Unfortunately, if she’s been doing this filmmaking part-time (working a regular job otherwise), and trying to call her filmmaking a business which consistently loses thousands of dollars a year because she sells almost no films? Then yes, she’s going to have a really hard time convincing the IRS that it’s anything more than a hobby.

It’s not necessarily an easy sell for Ms. Storey, but it gets much worse if she’s been losing large amounts of money year after year in her (hypothetically hobby) filmmaking and working a full-time job; then it just looks like she’s using a hobby to deduct all her income, regardless of where it comes from. But again, you can’t deduct any of the income from your job, no matter how much money you lose in your hobbies.

(Spoiler alert: Ms. Storey is actually a lawyer by day, and makes films in her spare time. I leave it as an exercise to the reader to determine whether this resembles the hobby scenario or the business scenario I sketched out above.)

I look forward to reading the final ruling, because this case will turn on specific facts about how Ms. Storey conducted her filmmaking. Hobbies don’t generally have employees. Hobbies don’t generally have balance sheets. Businesses generally involve an effort to market and/or distribute your products. Businesses have plans and tax ID numbers.

So is this a hobby? Is this a business? I’ll get the popcorn.

Filed on under Legal Theory