Does Lower BRI Ease Luxury Tax Impact of Contracts?

[old skool]

If Basketball Related Income drops notably, players will not get the full amount of their "guaranteed" contracts. Part or all of the salary that is held in escrow for each player would be returned to the team employing the player.

The reduced BRI will result in a lower luxury tax limit for 2009-10. What amount counts against the luxury tax limit? Is it the full amount of the guaranteed contract, or is it the final net amount of salary paid after contracts are adjusted for the actual BRI?

I could not find a definitive answer to this question in the CBA FAQ. It seems to be an important point, with so many teams looking to shed salary and so many fans here calculating how much a given team needs to shed to stay under the tax limit.

Any help (or corrections to any factual misstatements) is appreciated.

oLd sKool

[FGump]

The tax/escrow rules are here if you want to do the research and share the answers.

http://www.nbpa.com/cba_articles/article-VII_12.php

I haven't researched the topic to a great degree but I'll share what little I think I understand and then let someone else clean it up if need be.

It looks to me like any adjustments to salary are limited to the escrow money that is set aside each year. And escrow is definitely part of the ongoing landscape regardless of whether revnues are rising or falling. The CBA says,

(5) In the event that the Overage for any Salary Cap Year exceeds the Aggregate Salaries and Benefits Adjustment Amount for such Salary Cap Year, the NBA shall not be entitled to reduce player Compensation in such Salary Cap Year or any subsequent Salary Cap Year so as to recover any amounts in excess of the Aggregate Compensation Adjustment Amount.

As I read it, players always get their salary less the escrow. Later, they also will get between 0 and 100% of that escrow depending on spending-vs-revenues calculations. That would mean that in general the contractual salaries themselves don't change if the tax and cap are lowered other than those which specify payment of a future "maximum" salary which had yet to be determined when it was signed.

[coyotes_geek]

Since there's no mention on FAQ#16 about any kind of adjustment for escrow when figuring team salaries for purposes of calculating luxury tax I would assume that it's the amount on the players contracts that get used.

[LarryCoon]

The tax and escrow calculations are separate and distinct. For the tax they use the Team Salary (as of the last day of the regular season), without taking into account any effect from the escrow system.

[old skool]

Thanks LC.

Also thanks for the Salary Cap FAQ.

oLd sKool