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The NBA salary cap is the limit to the total amount of money that National Basketball Association teams are allowed to pay their players. Like many professional sports leagues, the NBA has a salary cap to control costs, defined by the league's collective bargaining agreement CBA. This limit is subject to a complex system of rules and exceptions and as such is considered a soft cap and is calculated as a percentage of the league's revenue from the previous season.
Under the CBA ratified in December , the cap will continue to vary in future seasons based on league revenues. The NBA had a salary cap in the mids, but it was abolished after only one season. The league continued to operate without such a cap until —85 season , when one was instituted in an attempt to level the playing field among all of the NBA's teams and ensure competitive balance for the League in the future.
To ensure the players get their share of the BRI, teams are required to spend 90 percent of the salary cap each year, the salary floor for the —17 season will be In December , the league and the players' union reached a tentative agreement on a new CBA, with both sides ratifying it by the end of that month.
Unlike the NFL and NHL , the NBA features a so-called soft cap, meaning that there are several significant exceptions that allow teams to exceed the salary cap to sign players. This is done to allow teams to keep their own players, which, in theory, fosters fan support in each individual city.
By contrast, the NFL and NHL caps are considered hard, meaning that they offer relatively few if any circumstances under which teams can exceed the salary cap.
MLB does allow teams to spend as much as they want on salary, but it penalizes them a percentage of the amount by which they exceed the soft cap. The percentage increases as the number of consecutive years a team exceeds the cap grows, resetting only when a team falls under the cap. The maximum amount of money a player can sign for is based on the number of years that player has played and the total of the salary cap. The CBA made a subtle change to the determination of maximum salaries. Under the CBA, the salary cap was based on players receiving This difference was eliminated in the CBA, with the same A Designated Player is eligible for a 5-year contract extension, instead of being held to the standard 4-year restriction.
All teams were limited to having a maximum of two Designated Players contracted on their roster at any time one which they had created from one of their own rookie contracts, and one acquired from another team.
Under the CBA, the "Designated Player" limit remains at two, but in a new feature, teams are now able to create Designated Player contracts from their own veteran contracts.
In addition, teams may now use their Designated Player slots on any combination of their own rookie contracts, their own veteran contracts, or players acquired in trades.
James Harden of the Houston Rockets and Anthony Davis of the New Orleans Pelicans had such a clause in their contract extensions, but both failed to meet the criteria. Players who come off rookie contracts at the end of the —18 season, or later, must meet any of the following criteria to qualify: These criteria are identical to those for the veteran player extensions introduced in the CBA. Kevin Love was eligible for a designated player contract, but the Minnesota Timberwolves opted  for a 4-year contract with a player option year included, potentially allowing him to become an unrestricted free agent instead.
His contract was initially drawn up before the lockout—during which the Derrick Rose Rule was implemented—but was officially approved under the provisions of the CBA  by the NBA after the lockout. This led some people  to question whether the Thunder had with NBA approval effectively signed two players as their Designated Player, as both were contracted for 5 years.
The provision in the CBA that allows teams to create Designated Player contracts for their own veteran players, officially known as the "Designated Veteran Player Extension" DVPE ,  came to be called the "Kevin Durant Rule" because it was seen as a reaction to a wave of veteran superstars leaving their teams in free agency, capped off by Durant's departure from the Thunder to the Golden State Warriors in the offseason. For a veteran player to qualify for such an extension, he must be entering his eighth or ninth season in the NBA, and have either:.
Additionally, the team offering the extension must have originally drafted the player, or obtained him in a trade while he was on his rookie contract. The extension cannot last more than five years after the expiration of the player's current contract or five years for a player who is a free agent when signed , but can be negotiated and signed one year before the current contract expires. The extension can be offered to a team's own free agent as well as a player with time left on his contract.
All four were named to one of the three All-NBA teams for that season; two were already eligible under the new criteria. Harden and Westbrook would not have qualified under the standard DVPE criteria because both signed extensions to their contracts in the offseason, Harden for two years and Westbrook for one.
The players' union and owners negotiated a special dispensation allowing them to sign DVPE contracts should they otherwise qualify. Curry signed the contract once the NBA's free agency moratorium ended on July 6, Because the NBA's salary cap is a soft one, the CBA allows for several important scenarios in which a team can sign players even if their payroll exceeds the cap.
The exceptions are as follows:. Once a year, teams can use a mid-level exception MLE to sign a player to a contract for a specified maximum amount. The amount of the MLE and its duration depend on the team's cap status. Teams can use this exception to offer contracts of up to four years.
In subsequent seasons, all MLE amounts will be determined by applying the percentage change of the salary cap to the previous exception amount. In a new feature, the apron will change from season to season, with the percentage change up or down set at half of the rate of change of the cap for that season. An example of the bi-annual exception was the Los Angeles Lakers ' signing of Karl Malone to a contract before the —04 season. The exception was eliminated for teams above the tax apron following the NBA lockout as many high spending teams were using this as a tool to gain top paid players.
A team cannot use this exception in consecutive years; a team that used it in —17 under the CBA cannot use it in —18 under the CBA. It also cannot be used by a team that has already used an MLE in the same season. Additionally, once a team uses the bi-annual exception, the tax apron becomes a hard salary cap for the remainder of that season. The NBA allows teams to sign their first-round draft choices to rookie "scale" contracts even if their payroll exceeds the cap.
Before the CBA, all D-League players were contracted directly with the league, and all D-League players could be called up by any NBA team, regardless of whether they were affiliated with the player's D-League team. Now, each NBA team can sign two players to contracts that allow them to assign the players to the G League without risk of being "poached" by another NBA team.
The players signed to such deals benefit by receiving a considerably higher salary than other G League players while in that league, as well as earning a prorated share of the NBA minimum rookie salary for each day they are with their contracted NBA team.
Salaries of two-way players are not included in salary cap calculations. Perhaps the most well-known of the NBA's salary cap exceptions is the Larry Bird exception, so named because the Boston Celtics were the first team permitted to exceed the salary cap to re-sign one of their own players in that case, Larry Bird.
Free agents who qualify for this exception are called "qualifying veteran free agents" or "Bird Free Agents" in the CBA, and this exception falls under the terms of the Veteran Free Agent exception. In essence, the Larry Bird exception allows teams to exceed the salary cap to re-sign their own free agents, at an amount up to the maximum salary.
To qualify as a Bird free agent, a player must have played three seasons without being waived or changing teams as a free agent. Players claimed after being amnestied have their Bird rights transferred to their new team. Other players claimed off waivers are not eligible for the full Bird exception, but may qualify for the early Bird exception. Prior to an arbitrator ruling in June , all players that were waived and changed teams lost their Bird rights. It also means that when a player is traded, his Bird rights are traded with him, and his new team can use the Bird exception to re-sign him.
The lesser form of the Larry Bird exception is the "early Bird" exception. Free agents who qualify for this exception are called "early qualifying veteran free agents", and qualify after playing two seasons with the same team.
Players that are traded or claimed off waivers have their Bird rights transferred to their new team. Early Bird contracts must be for at least two seasons, but can last no longer than four seasons. If a team agrees to a trade that would make a player lose his Early Bird Rights, he has the power to veto the trade.
A much-publicized example for this was Devean George , who vetoed his inclusion into a larger trade during the —08 season that would have sent him from the Dallas Mavericks to the New Jersey Nets. Contracts signed under the Non-Bird exception can last up to four years down from six under the CBA.
Teams can sign players for the NBA's minimum salary even if they are over the cap, for up to two years in length. In the case of two-year contracts, the second-season salary is the minimum salary for that season. The contract may not contain a signing bonus. This exception also allows minimum-salary players to be acquired via trade.
There is no limit to the number of players that can be signed or acquired using this exception. If a team trades away a player with a higher salary than the player they acquire in return the deal hereafter referred to as "Trade 1" , they receive a Traded Player Exception, also known as a "Trade Exception.
This exception is particularly useful when teams trade draft picks directly for a player; since draft picks have no salary value, often the only way to get salaries to match is to use a trade exception, which allows trades to be made despite unbalanced salaries.
It is also useful to compensate teams for losing free agents, as they can do a sign and trade of that free agent to acquire a trade exception that can be used later. Note this exception is for single player trades only, though additional cash and draft picks can be part of the trade.
This exception requires an NBA-designated doctor to verify the extent of the injury. Under the CBA, a team could sign a player under this exception for five years; since the CBA, it has been allowed only for one year.
Note that while teams can often use one exception to sign multiple players, they cannot use a combination of exceptions to sign a single player. A player banned from the league for a drug-related offense who is reinstated may be re-signed by his prior team for up to his previous salary. A restricted free agent is subject to his current team's Right of First Refusal, meaning that the player can be signed to an offer sheet by another team, but his current club reserves the right to match the offer and keep the player.
An offer sheet is a contract offer of at least two years made by another team to a restricted free agent. For first-round draft picks, restricted free agency is only allowed after a team exercises its option for a fourth year, and the team makes a Qualifying Offer at the Rookie-scale amount after the fourth year is completed.
Teams are limited in what they can offer an unrestricted free agent with two years or less experience. The maximum first-year salary in an offer sheet is the mid-level exception.
The second-year salary can be raised a maximum of 4. The third year salary is limited to the maximum a team has available in their salary cap. The salary in the fourth season may increase or decrease by up to 4. The offer sheet can only increase in the third season if it provides the highest salary allowed in the first two seasons, the contract is fully guaranteed, and it contains no bonuses. If the raise in the third season is greater than 4. Through the —17 season, the accounting was different for the player's original team, where the player's salary for a given year—not the contract's average—was counted against the cap.
This could discourage them from matching the offer sheet. The CBA changed the accounting rules for the player's original team in this scenario.
If the original team matches, and has enough cap space to absorb the average annual salary of the offer, it can choose to take cap hits of either the actual contract payouts or the average of the contract in each season.
Before the CBA, the original team could only use an exception to re-sign a player who had been drafted in the first round. The CBA allowed teams to use exceptions on non-first-round picks, with the extension named the "Gilbert Arenas Rule". Players on a team's season-ending roster remain under contract with their respective team until the start of free agency on July 1. The salary cap for the upcoming year is not set until the league's audit is completed by the end of the period.