My vote is a running play. I agree that any foul that occurs *during* an illegal kick behind the NZ is part of the loose-ball play, but that's not the case here. If you go down the list of loose-ball play action in 10-3-1 with the word "during" in mind, nothing fits in this case.
10-3-1-a: Did the foul occur during free kick or scrimmage kick action? no
10-3-1-b: Did the foul occur during a legal forward pass? no
10-3-1-c: Did the foul occur during a backward pass (including the snap)? no, because the snap by definition (2-39-3) ended as soon as it was touched and the backward pass ended as soon as it was caught (2-30-6).
Did it occur during an illegal kick or fumble by team A behind the NZ before a COP? no, because the ball was in player possession (2-33-1) when the foul occurred.
Therefore because we don't meet any of the requirements of 10-3-1, it must be a running play per 10-3-2.
Now one thing that is worth looking at is the "Note" statement of 10-3-1 which states: "The run(s) which precedes such legal or illegal kick, legal forward pass, backward pass or fumble is (are) considered part of the action during loose-ball play."
The key here is back in 10-3-1-c with the statement "...made by A...:
Therefore, even though we have a "run" (and by 'run' I mean the player possession consisting of holding the ball on the ground on a tee), it is only if A commits the illegal kick that this "run" gets rolled up into a one and only loose-ball play. Because B was the one who kicked it, we still don't meet the requirements of loose-ball play in 10-3-1-c and therefore we have a running play.
Another way to look at this is that Team A is responsible for the ball being back 7 yards by virtue of the snap. Team B did not cause the ball to be back there in the first place. This is similar to a QB who scrambles and is tackled for a 7-yard loss and B is called for a 5-yard facemask. We're going to tack the 5-yards onto the end of the run. Even though Team A repeats the down, it's still a 2-yard net loss.
Now I understand that in this situation, the run in this example is not followed by a loose ball, but that's covered by the language explained above. In fact, in this case Team A would be wise to fumble the ball in that they would change the BS to the PS by doing so. (NCAA has this covered without having to do something like that as all runs that end behind the NZ have a BS of the PS under the 3-and-1)
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