The NBA Finals are over, and the NBA offseason is upon us. If that’s a quick segue, well, that’s how quickly the league shifts from one mode to another. Free agency awaits.
This summer might be one of the most interesting in recent memory. Not just because of what will likely be another deluge of player movement and tantalizing storylines — the NBA now produces those like they come off a well-oiled factory line — but because of the new collective bargaining agreement hanging over everything. The NBA and the NBPA just agreed to it in April, giving teams and agents little time to read through the document. Actually, there is no document just yet — the league is still working off a term sheet, a copy of which was obtained by The Athletic, though the actual CBA is in the process of being written.
The new CBA will likely have some significant changes on how the NBA operates. One team executive called it a “soft hard cap” for how he expects it to change the behavior of the league’s highest-spending teams. But it was designed to pull up spending at the bottom too, perhaps erasing any team that wants to dive below the salary-cap floor and giving incentives to teams to inch near or even just above the luxury-tax line. Even though all of the new rules will not go into effect next season, they will still be top of mind for teams.
It will be interesting to see how the new second apron will impact spending and roster building over the life of this CBA. Over the last 10 years, there have been roughly six teams per season that go over the tax, and an average of three teams per season that spent enough to reach what will soon be the second apron level. But that swelled this past season to new highs. Nine teams went into the tax, and seven teams were above what would have been second apron level of spending. Will the new rules tamp down those numbers from their historical levels, or dwindle them even further? The Suns have already made their bet with a commitment to live above the second apron and accept the consequences. The Warriors may be looking to avoid it in future years, with too much salary committed to duck it this coming season.
The rate of growth for the salary cap will have something to do with all of this as well. The apron levels will increase proportionally with the cap. (While there will be a new media rights deal set to kick in with the 2025-26 season, the new CBA also has a built-in ceiling of no more than 10 percent cap growth each year.) That could shake loose more room to maneuver for teams after the slowed cap growth over the last three seasons; the 2022-23 salary cap was only 13.3 percent higher than the cap for the 2019-20 season. That’s at a lower seasonal rate of growth than the year-to-year raises built into max deals and other kinds of contracts (players who sign with Bird rights can include raises each season of up to eight percent of the first year’s salary, while players who sign without Bird rights can have raises up to five percent of the first year’s salary in their contracts).
While some of the new CBA rules have already been reported by The Athletic or elsewhere, the goal here is to produce a comprehensive guide to the new CBA that might be a useful reference as the offseason progresses and the transactions action get going.
(Analysis is based on the obtained term sheet referenced above.)
The first apron
The first apron is going to be set around $7 million above the luxury-tax level, according to the rules in the current CBA. Teams that go over it will be impacted by the rules currently in place for those above the tax apron, along with new ones written into the incoming CBA. These teams will now be unable to sign buyout players — defined as players who were waived during the regular season and who had a salary higher than the full non-taxpayer midlevel exception. Beginning on July 1 and through the end of the 2023-24 regular season, teams above the first apron can only match salaries up to 110 percent of the players in a trade. Starting with the first day after the end of the 2023-24 regular season, these teams above the first apron will have to match salaries like for like (i.e. 100 percent) in a trade. They will also see their traded player exceptions disappear.
The second apron
The creation of the so-called “second apron” is the headliner of the incoming CBA. The league pushed for an upper spending limit, but didn’t get one. Instead, there is a more semi-permeable layer for teams to tread. It will be set at $17.5 million above the luxury-tax level for the 2023-24 season and will increase at the same rate of growth as the cap in the ensuing seasons. In 2023-24, the cap is projected to come in at roughly $136 million and the luxury-tax level at $165 million.
Updated financial figures for the 2023-24 NBA season nears the 10 percent maximum increase, league informed teams today:
– $136 million salary cap, $2M higher than prior projection
– $165 million luxury tax level, $3M higher than prior https://t.co/udaRDUBXRK— Shams Charania (@ShamsCharania) June 21, 2023
The penalties for teams that step past the second apron can be severe. Teams will not be able to use their taxpayer midlevel salary exception. Starting with the first day after the end of the 2023-24 season, teams cannot aggregate player salaries together in a trade, will not be able to send out its own player in a sign-and-trade to acquire another team’s player and cannot send cash in a deal.
If a team is above the second apron as of the last day of the regular season, starting with the 2024-25 cap year (July 1, 2024), then its first-round pick seven years out cannot be traded. That’s called the frozen pick. If that team is also above the second apron in two of the ensuing four years, that frozen pick will also be moved to the end of the first round in that year. If more than one team has a frozen pick in a draft year, then they’ll draft in the reverse order of their finish in the standings in the season preceding that draft.
A team can unfreeze its pick if it is below or equal to the second-apron threshold in at least three of the next four years after it went over. It will then be allowed to be traded again, starting with the first day of the new salary-cap year after that third season not going over the second apron.
So if a team exceeds the second apron in the 2024-25 season, it means:
- Their 2032 first-round pick (at least temporarily) cannot be traded.
- It is unfrozen only if that team is at or under the second apron in at least three of the next four seasons. So the earliest they could trade their 2032 first-round pick is July 1, 2028. (They could also gain the ability to trade it on July 1, 2029).
- If they instead exceed the second apron in at least two of the ensuing four seasons, the 2032 pick moves to the bottom of the first round regardless of how they perform in the 2030-31 season, and it still cannot be traded.
If a team does any of those things, it will be hard-capped in the same way teams are under the current CBA, depending on which apron level they’ve yet to cross. If a team pulls off a trade between the end of the regular season and the start of the new cap year under the terms that are barred for teams above the first or second apron, it’ll also be hard-capped at the applicable apron level for the remainder of that salary-cap year and the one after that. For example, if the trade happens during the 2023-24 season, then the team will be impacted for the rest of that salary-cap year and for the one that encompasses the 2024-25 season.
The incoming CBA will give teams some measure of relief to acclimate to the rules after the end of the 2023-24 regular season. If a team will be hard-capped at a certain apron for the 2024-25 season because it pulled off one of the transactions above during the 2023-24 season, the team can still have its salary go above that level between the end of the 2023-24 regular season through June 30, 2024. That gives those teams some flexibility to make moves before the start of 2024 free agency.
The under-spenders
Just as there are restraints on the high side of the cap in the next CBA, there is scaffolding on the bottom. There will be strong incentives to make sure franchises reach the salary floor each year.
Under the current CBA, as long as teams reached the salary-cap floor by the last day of the regular season, they were considered to have spent enough. In the new CBA, they’ll need to hit that threshold by the first day of the regular season. Any team under the cap floor will have the difference between its team salary and the floor added to its payroll, so it can’t use that amount as available cap space anymore. It also won’t be allowed to perform any transactions after the first day of the regular season that would further decrease its team salary. The amount a team is under the floor will also be dispersed among all NBA players, not just the ones on the roster.
Next season, a team that doesn’t reach the floor will receive half of the money paid out to each non-taxpaying team. Beginning in 2024-25, teams that don’t hit the floor won’t receive any of the money paid out to non-taxpaying teams.
Taking exception
There will be a multitude of changes to the various exceptions NBA teams can avail themselves of each season.
- The value of the non-taxpayer midlevel exception will increase to 9.12 percent of the cap, a 7.5 percent increase from its value in the current CBA; that’s projected to be worth $12.4 million next season.
- The room midlevel will leap up 30 percent in value to 5.678 percent of the cap — it’s projected to be worth $7.7 million next season — and these contracts can now stretch up to three seasons, not just two.
- The taxpayer midlevel will be worth a projected $5 million next season — down from $6.479 million this season — and will increase proportionally with the cap; these contracts can only go a maximum of two seasons, down from three.
Beginning with the 2024-25 cap year, teams will be able to use the non-taxpayer midlevel, the room midlevel or the bi-annual exception to acquire a player or multiple players in a trade or on a waiver claim, as long as that player’s contract doesn’t exceed the maximum length allowed by that exception. The exceptions, however, can’t be aggregated.
A number of traded player exceptions also will change. Teams will now be able to use them for salary matching even if they are in the tax but under the first apron — previously only teams under the tax line could avail themselves of this. Teams under the first apron will be able to trade contracts worth up to $7.5 million and be able to take back up to 200 percent plus $250,000 in wiggle room; previously, that was 175 percent. For contracts worth more than $7.5 million and up to $30 million, they can take back the value of those salaries plus an extra $7.5 million — previously that was capped at $5 million — and this number will increase at the same rate of growth as the cap. For deals where teams receive more than $30 million in salary, they can take back up to 125 percent plus $250,000 in wiggle room. That will lead to more trade flexibility for teams that have eked over the tax line.
![Tamika Tremaglio, executive director of the NBPA](https://cdn.theathletic.com/app/uploads/2023/06/28102523/GettyImages-1247275471-scaled.jpg)
Tamika Tremaglio, executive director of the NBPA (Chris Gardner / Getty Images)
Second-round contracts
The incoming CBA will create a new second-round pick exception that can be used to sign players picked in the second round of the draft. The second-rounders can sign a three-year deal, in which the first season’s salary is worth up to the minimum annual salary for a player with one year of service, or a four-year deal, in which the first season’s salary is worth up to the minimum annual salary for a player with two years of service. Both can have a team option as the final year. If a player signs his second-round pick exception before July 31 that year, that salary wouldn’t count against the cap until July 31 of that year, but it does count under a team’s salary when it comes to checking if a team can make certain transactions for teams that are over the aprons.
The creation of the second-round pick exception could also lead to more spending power with the non-taxpayer midlevel exception. Since the 2017-18 season, an average of 10 teams per year have used a portion of their MLE to sign a second-round pick. It’s unclear whether teams can use the second-round pick exception multiple times in a year.
Contract extensions
The incoming CBA certainly creates wider boundaries for teams and players to come to an extension before the players’ current contract is up. Veteran extensions can now start at 140 percent of a player’s salary the prior season or of the estimated average player salary (whichever is greater), up from 120 percent. All rookie extensions can now go up to five seasons, not just the designated rookie-scale extension. There also will no longer be a limit on how many designated extension players a team may roster. Extend-and-trade contracts will be able to go up to a total of four years and 120 percent of the prior salary, beginning with the 2024-25 salary-cap year.
Additionally, under the new CBA, a team or player can decline to exercise an option for the following year and can then sign an extension in which the first season’s salary in the new contract is less than what the player would have made in that option season.
This will likely lead to more contract extensions. That’s what has happened under previous CBA changes to the value of an extension. The league saw two extensions per season, on average, during the 2011 CBA; there were nine extensions per season under the 2017 CBA, when players could sign for deals that began with 120 percent of that player’s salary in the first year.
Restricted free agency
Restricted free agency should potentially be a lot smoother starting with this offseason. The qualifying offer will go up by 10 percent for former first-round picks. The qualifying offer for any player who isn’t coming off a two-way deal or a first-round contract will be worth 135 percent of their prior year’s salary, up from 125 percent. This increased qualifying offer amount will kick in with the draft class of 2023.
It’ll happen a lot quicker now too. Starting July 1, if a team with a restricted free agent receives an offer sheet for that player before noon ET on a certain day, it’ll have until 11:59 p.m. ET the next day to match. If the offer sheet comes in on or after noon ET on a given day, then the team will have until 11:59 p.m. ET two days later to make a decision. And if an offer sheet is delivered at any point during the moratorium period, a team will have to give a response by 11:59 p.m. ET on the day after the end of the moratorium.
This could spur more competition in the restricted free-agent market. The number of offer sheets doled out each offseason has decreased with every new CBA.
Tax season
There are luxury-tax implications to all this too. The incoming CBA will try to lower the cost of business for teams that want to narrowly exceed the tax line and increase the cost of doing business for teams that go $10 million or more above it. It’s a common theme of the incoming rulebook: Make it less punitive to go just over the tax and very painful to go way over it.
NBA Luxury Tax Rates
Tax Bracket (Million) | Tax Rate Now | In 23/24 & 24/25 | 25/26 & Beyond |
---|---|---|---|
0 to $4,999,999 |
$1.50 |
$1.50 |
$1 |
$5 to $9,999,999 |
$1.75 |
$1.75 |
$1.25 |
$10 to $14,999,999 |
$2.50 |
$2.50 |
$3.50 |
$15 to $19,999,999 |
$3.25 |
$3.25 |
$4.75 |
$20 and over |
3.75* |
3.75* |
$5.25* |
*increases $0.50 |
*increases $0.50 |
*increases $0.50 |
|
with each |
with each |
with each |
|
$5 mil increment |
$5 mil increment |
$5 mil increment |
Over the past decade, on average, there have been 8.5 teams each season within five percent of the tax line. Will lighter tax burdens for teams that go just over that threshold smooth the way to more spending as more teams dip into the tax?
It’s no surprise, then, that the repeater taxes have been devised to make it more onerous for the teams that are in the tax year after year. Each level escalates the tax amount from the previous CBA, making it more expensive to repeatedly be in the tax each season no matter the amount a team goes over.
NBA Repeater Tax Rates
Tax Bracket | Repeater Tax Now | In 23/24 & 24/25 | 25/26 & Beyond |
---|---|---|---|
0 to $4,999,999 |
$2.50 |
$2.50 |
$3 |
$5 to $9,999,999 |
$2.75 |
$2.75 |
$3.25 |
$10 to $14,999,999 |
$3.50 |
$3.50 |
$5.50 |
$15 to $19,999,999 |
$4.25 |
$4.25 |
$6.75 |
$20 and over |
$4.75* |
$4.75* |
$7.25* |
*increases $0.50 |
*increases $0.50 |
*increases $0.50 |
|
with each |
with each |
with each |
|
$5mil increment |
$5mil increment |
$5mil increment |
There is one important note to all this. The tax brackets, just like the apron brackets, will be dynamic. They will increase from year to year at a rate equal to the salary cap itself. Unlike the current CBA, they will not be locked into those $5 million increments.
A few more tweaks
- The rule that gives a player who will get their Bird rights or early Bird rights at the end of their one-year contract the right to consent to a trade is changing. Under the new CBA, a team and player can agree at the time of the signing to waive the consent requirement.
- There will be a cap on how many minimum contracts can be thrown into a deal when that deal is done at any time except for Dec. 15 through the trade deadline. In deals outside that period, if a team is aggregating two or more salaries in a trade and getting at least one player back, and the number of contracts that team is sending out is more than the amount of players it is receiving in return, then that team cannot trade more than one minimum contract. But a team can aggregate two minimum deals if they are the only contracts the team is sending out.
- Total incentive compensation in a contract can’t exceed 20 percent of the players’ base salary (up from 15 percent). The bonus criteria has to stay the same from one season to another under the contract.
- Teams will now have to wait at least six months to be able to trade a player with whom they renegotiated a contract, and a player cannot renegotiate his contract for six months if he has been traded.
- The rules to stretch-waive a player have been relaxed. Teams can now decide to stretch-waive a contract by Aug. 31, instead of the three-day window they had before to make that decision after waiving a player (this applies to contracts waived after July 1). The remaining salary will be split over twice the number of seasons left plus another one. The $250,000 minimum threshold to stretch-waive a player’s deal is increased to $500,000 for all contracts signed as of July 1; this applies for cash purposes but is erased for salary cap.
- For those worried about tampering, there will be new rules in place to get ahead of that too. The incoming CBA stipulates that agents may now get fined up to $125,000 by the NBPA for violating the league’s tampering rules, going public with trade demands or the rules on when free-agency discussions can begin. Starting with the 2024 free-agency period, players and their agents will not be allowed to announce their new deals until the end of the moratorium period, unless that deal can legally be signed during it. The NBA will be able to fine teams or team personnel for violating the rules on premature free-agency talks. Those punishments include a fine up to $2 million, taking away draft picks and/or suspending people that work for that team.
- There will be some easing of the rules too. Teams will be able to start negotiating a contract with their own players beginning the day after the end of the NBA Finals.
- Players on Exhibit 10 contracts receive a raise too. The bonus for an Exhibit 10 will now be $75,000, up from $50,000, and will rise each season in proportion to the cap. Teams also have to disclose now if another G League team has that player’s returning rights.
- The new CBA will change the rules on how and when teams can roster fewer than 14 players. The new rules will allow teams to have fewer than 14 players on a standard NBA contract for no more than 28 total days during the regular season and never for more than 14 straight days.
- The new deadline to sign a player to a two-way contract is March 3, moved back from Jan. 15.
- If a team buys out an international player from his contract, then it won’t be able to sign him to a two-way deal or an Exhibit 10 for a year following that payment.
- Teams will now be able to play in a game on the same day as it traveled across two time zones. Previously, that was capped at one time zone for a game the same day.
(Top photo of Adam Silver: Sarah Stier / Getty Images)