NBA CBA: Hard Caps

The NBA’s financial system is commonly referred to as a “soft cap” because, while there is a salary cap, it is one that teams can exceed. To go beyond the cap teams must use “cap exceptions,” of which there are quite a few, and deal with roster building restrictions.

However, if teams take certain actions they invoke a “hard cap” which sets a total salary that the team cannot exceed for any reason during the league year in which the hard cap is triggered.

These hard cap triggers are a mirror image of the restrictions placed on teams with total salaries above a certain limit. In the current CBA there were three hard cap triggers. A team that crossed the “Apron,” a line currently $6,716,000 above the luxury tax threshold, at any time loses the ability to acquire a player via sign-and-trade, cannot use the Bi-Annual Exception, and is limited to the Taxpayer Mid-level Exception.

To keep teams from operating below the Apron, using these tools, and then crossing the Apron later on the CBA dictates that once a team uses any of those three tools they are then hard capped at the Apron. It’s a reflective model where the Apron sets the restrictions and the restrictions trigger the Apron, unlike the salary cap where a team can go back-and-forth across the line.

The new CBA adds a “Second Apron” with new restrictions and expands the limitation that teams above the First Apron must deal with. This also means that there is a longer list of actions that trigger a hard cap.

To current knowledge, here is a list of all the actions that will trigger a hard cap at either the First or Second Apron:

First Apron

In the 2023–24 season the First Apron is projected to be $6,997,000 above the luxury tax line, or ~126% of the Salary Cap. In subsequent years it will grow at the same rate as the Salary Cap, staying at that 126% amount.

1. A team acquires a player via an inbound sign-and-trade
2. A team uses the Non-taxpayer MLE to sign a free agent
3. A team uses the Bi-annual Exception to sign a free agent
4. A team acquires a player via trade or waiver claim using a Mid-level or the Bi-annual Exception — The new CBA allows teams to acquire player(s) via trade or waivers using the Non-taxpayer MLE but not the Taxpayer version so acquiring a player via this mechanism, even if their salary is below the Taxpayer MLE, will define the used MLE as the Non-taxpayer one and trigger the hard cap at the First Apron, not the Second
5. While over the cap, a team takes in salaries greater than what they send out in a trade — for 2023–24 the line is 110% of outgoing salaries and drops to 100% for all season after that
6. During the playing season, a team signs a player that was waived in-season off a contract that paid more than the Non-taxpayer MLE
7. A team uses a TPE generated before the end of the previous regular season *
8. A team acquires a player via traded player exception, either in a simultaneous or non-simultaneous trade, whose current contract was previously moved via a sign-and-trade

Second Apron

In the 2023–24 season the Second Apron is to be $17,500,000 above the luxury tax line, or ~134% of the Salary Cap. In subsequent years it will grow at the same rate as the Salary Cap, staying at that 134% amount.

1. A team uses the Taxpayer MLE to sign a free agent
2. A team aggregates two or more outgoing players to create a salary match in a trade*
3. A team sends cash in a trade*
4. A team creates a trade exception from an outbound sign-and-trade, in either a simultaneous (taking a player back via salary matching) or non-simultaneous (creating a TPE for later use) fashion*
5. A team trades their first round pick, regardless of protections, associated with the season seven years in the future**

• * Rule takes effect at the end of the 2023–24 Regular Season
• ** Rule takes effect at the beginning of the 2024–25 League Year

The challenge that teams will face is that it’s easy to know what you cannot do once you’ve crossed an Apron. It’s not as easy to project out your team’s complete season of transactions and know if it’s safe to make a move that triggers a hard cap early in the offseason. For this reason, we’ve seen teams in the past avoid using the Non-taxpayer MLE so as not to invoke the hard cap even if they end up not threatening the Apron once their roster is fully built.

In the new rule set, teams will likely behave the same way. Early in an offseason where they could conceivably want to pass an Apron they might pass up opportunities that would trigger a hard cap.