Tax Apron and 10 Day Contracts

[Smitty731]

Thought about this when updating some 10 Day Contract and things:

Towards the Tax Apron, undrafted players being paid less than the two year minimum count as the two year minimum for the Apron calculation.

Does this count for 10 Day Contracts? Obviously the pro-rated amount. Or are 10 Day contract excluded? I'm having trouble finding a clear answer anywhere.

[DBoys]

Afaik there is no reimbursement on 10-day contracts, as the amount paid on such a contract wouldn't ever exceed the 2-year minimum.

[gom]

Thought about this when updating some 10 Day Contract and things:

Towards the Tax Apron, undrafted players being paid less than the two year minimum count as the two year minimum for the Apron calculation.

Does this count for 10 Day Contracts? Obviously the pro-rated amount. Or are 10 Day contract excluded? I'm having trouble finding a clear answer anywhere.

Hi Smitty! I had a similar question. Let's help each other.

To me, the language in the CBAFAQ seems pretty clear that all completed contracts are part of "salary" (so 10 day contracts are) and that also in terms of the tax apron, all prorated contracts (such as a 1 year player like Tyler Johnson) are taken at the 2 year contract cost. Here are the relevant passages:

http://www.cbafaq.com/salarycap.htm#Q14

The following are included in team salary:

...
...
...

Salaries for completed contracts (such as 10-day contracts) are included in team salaries for the remainder of that salary cap year (through June 30).

and

They use a slightly different calculation for determining the team salary in relation to the apron -- the point $4 million over the tax line. This applies to the Bi-Annual, Non-Taxpayer Mid-Level, and Taxpayer Mid-Level exceptions (see question number 25), and for Sign-and-Trade transactions (see question number 91). For these purposes they use the team salary as defined above, with the following modifications:

All unlikely bonuses are included for contracts and extensions signed under the current CBA.
Amounts that could be included in team salary as the result of certain grievances are included.
For rookies and players with one year of experience who were signed as free agents (not as draft picks) and whose salary is less than the two-year minimum salary, the two-year minimum salary is used in place of their actual salary.

So, it looks like for calculation of the tax apron (the point $4 million over the tax line) a 1 year or rookie player would be charged as a two year player (at $947,276 prorated at $5572 per day rather than at $525,093 (rookie), $3,089 per day, or $845,059, at $4971 per day.

Now, here's my question. The above calculation (using a 2 year vet min rate rather than a rookie or 1 year rate) appears to be specific to the calculation of the tax apron and not whether the tax itself is crossed. This seems clear to me but I'm confused.

Here's why:

On Spotrac (http://www.spotrac.com/nba/miami-heat/cap/), for the team's salaries of $84,424,244, you just add the players' salaries and that's it. Easy. We have had no 10 day contracts so no variables. Spotrac shows we are $275,756 under cap which is the difference betwen $84,700,000 and $84,424,244. I love it when numbers make sense, but this article raises a question:

http://heathoops.com/2016/02/miami-heat-drop-below-the-luxury-tax-with-two-trades/#more-27333

Albert has calculated a $218,000 difference for the tax line because he takes into account Whiteside's 1 day suspension (which should only be a tax apron factor as far as I know) and the fact that Tyler Johnson (a 1 year player) is counted as a two year player $947,276 with respect to tax calculation.

Now, this doesn't make sense with what I read in the cba FAQ. I think it's only an apron calculation.

The reason I'm asking is that my interpretation is that rookie's would be discounted as 0 year players and first year players as 1 year players in salaries for purposes of determining if the cap is exceeded. I know this is a small detail, but I wish to understand.

I found this too:

http://www.hoopsrumors.com/ten-day-contracts

However, teams gain no financial advantage if they eschew 10-day contracts with more experienced players to sign rookies or one-year veterans to 10-day deals in an effort to avoid the tax, as those deals count the same as the ones for two-year veterans when the league calculates a team’s salary for tax purposes.

This also seems to mix the salary calculation with the tax apron calculation. Odd.

I've tweeted the question to the author, so I may get an answer eventually, but I was wondering if you just knew.

Thanks for any help!

-----

Found it:

http://www.cbafaq.com/salarycap.htm#Q21

When determining the amount of tax a team owes, the league uses its team salary (see question number 14) on the date of its last regular season game (i.e., if a player is traded away before the end of the season, then none of his salary is taxed), with the following adjustments:

Cap holds and exceptions are ignored.
Any "unlikely bonuses" (see question number 74) that were actually earned are added to the team salary.
Any "likely bonuses" (see question number 74) that were not earned are subtracted from the team salary.
Any trade bonuses (see question number 98) for players received in trade after the last regular season game are added to the team salary. This amount may be pro-rated -- see question number 99 for details.
Any amounts from settlements of grievances are added to the team salary.
For players who signed as free agents (i.e., not draft picks) under the current CBA, and make less than the two-year minimum salary, the minimum salary for a two-year veteran is used in place of their actual salary.2
For minimum salary players whose salary is partially paid by the league (see question number 16) only the amount paid by the team (the two-year minimum salary) is taxed.
The salaries of players waived via the Amnesty provision (see question number 69) are exempt from the luxury tax.

So there is no advantage in signing rookies or 1 year players as far as tax calculation is concerned.

[Smitty731]

Snip

So, I tweeted Eric Pincus about it and he is under the impression that anyone who would count towards the Tax Apron at the 2 year Min amount on a "regular" deal would also count as the prorated 2 Year Min amount for a 10 Day. So, anyone who wasn't drafted and signed to a 10 Day Contract counts towards the Tax Apron at $55,722.00 (this year's figure), same as a veteran with 2 or more years experience.

Keep in mind this is only towards the Tax Apron and not the Tax itself. That is a pretty important distinction. And that is one I missed on for quite a while before getting some help with it.

Oh, and I tend to trust most anything Pincus says. He's usually spot on. And if he's off, he's quick to correct.

[Smitty731]

Oh, one other thing. The money loss due to suspension does come off the Tax as far as I understand it. The challenge is sometimes tracking down if it is was a suspension without pay or not. Those things aren't always reported really accurately.

Part of the reason I am fairly certain it comes off the Tax and not just off the Tax Apron is that Bobby Marks was tweeting about how Houston may end up under the Tax when suspensions are factored in.

[gom]

Oh, one other thing. The money loss due to suspension does come off the Tax as far as I understand it. The challenge is sometimes tracking down if it is was a suspension without pay or not. Those things aren't always reported really accurately.

Part of the reason I am fairly certain it comes off the Tax and not just off the Tax Apron is that Bobby Marks was tweeting about how Houston may end up under the Tax when suspensions are factored in.

Hey! Thanks, Smitty! One of these days I'm sure everything will make sense (and then a new CBA will be negotiated! LOL). Take it easy!