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May 1, 2024
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During the NBA offseason, what is the purpose of the CBA’s second apron and how does it restrict teams with a high spending budget?

What is the purpose of the second apron? Starting with the 2011 collective bargaining agreement, the league designated a single tax apron, which set a limit on how much teams could exceed the salary cap and luxury tax line before facing additional penalties. The second apron is a recently introduced threshold, estimated at approximately million (totaling 0 million), which will further restrict team executives’ decision-making abilities in 2024-25.

The difficult aspect is that if a team stays in the second tier for two out of the next four seasons, their first-round draft pick seven years later will not only be frozen, but also moved to the end of the first round (30th pick).

As the season winds down, the NBA is preparing for the upcoming offseason, where teams will have to navigate a highly competitive marketplace and strict rules surrounding roster changes. The recently implemented collective bargaining agreement will add further challenges, particularly with the introduction of the “second apron,” a salary threshold that teams must now consider before making expensive signings. This change comes with potential penalties for teams that choose to exceed the threshold. Some notable teams, such as the Phoenix Suns, have already been eliminated from the playoffs.

The Phoenix Suns and Kevin Durant are expected to be a runner-up team.

The upcoming team penalties in the second apron of the league have intrigued executives, as they are curious to see the impact on the summer’s activities and how it will affect roster building in the coming seasons. Under these new rules, teams in the second apron will not be allowed to trade their first-round draft pick up to seven years in advance. This means that if a team is still in the second apron by the end of the 2024-25 season, their first-round pick for 2032 will be frozen and cannot be traded. While this may seem like a distant draft asset, it holds value for teams in contention who have already used up many of their valuable resources. An example of this is the Bucks, who gave up their 2030 first-round pick to the Trail Blazers in their major trade for Damian Lillard.This seems in part why we saw Milwaukee and Boston take huge swings last summer — Lillard for the Bucks, Jrue Holiday and Kristaps Porziņģis for the Celtics — before this new tax landscape sweeps across the league. Boston will almost certainly be a second apron team for 2024-25, after inking Holiday to a four-year, 5 million extension, which has left rival executives more than curious what Boston’s appetite will be in paying to retain versatile guard Derrick White once the final year of his deal concludes after ’24-25.

Previously, being subject to tax implications meant that teams were charged an additional dollar for every dollar over the salary limit. This applied proportionally to subsequent tax brackets and resulted in teams losing access to the full mid-level exception, a valuable contract tool for signing quality rotation players. However, under the new collective bargaining agreement (CBA), teams above a certain threshold will now also face limitations when it comes to matching salaries during trades. Non-taxpayer teams can exceed this threshold by up to 125%, while teams within the threshold are restricted to matching salaries up to 100% of their outgoing money. In simpler terms, teams cannot bring in more money than they are sending out. Additionally, first-apron teams are not permitted to sign players who have been waived during the regular season if their salary exceeds the mid-level exception for that year. This change had a major impact on several teams for the current season, including the Boston Celtics, Denver Nuggets, Golden State Warriors, Miami Heat, Milwaukee Bucks, Phoenix Suns, and LA Clippers.

The Warriors must carefully consider their financial situation this summer and determine how much they are willing to pay in taxes and what consequences they are willing to face for their expensive and aging team that did not make it to the playoffs this year. Other teams expect the Warriors to try to improve their roster without exceeding the apron limit for the 2024-25 season. The Nuggets’ potential to exceed the apron and become a tax-paying team has sparked interest from other front-office personnel to see if they will keep Kentavious Caldwell-Pope, a valuable player with a million player option for 2024-25 that he is likely to exceed on the open market.

Minnesota seems to have a strategic plan in place as they recently signed a two-year extension with Mike Conley Jr., ensuring his presence as the point guard for the Timberwolves until the 2025-26 season. This move aligns with their goal of creating a competitive team led by rising star Anthony Edwards. It is worth noting that this would be the second year in a row that Minnesota will exceed the second apron, with the intention of investing in a contender. Additionally, 2025-26 marks the final year of Rudy Gobert’s significant contract, should he choose to exercise his player option. Naz Reid, the Sixth Man of the Year, also has a player option for that season. Aside from promising players Edwards, Karl-Anthony Towns, and Jaden McDaniels, the Timberwolves have the flexibility to avoid the penalties of the second apron in the future.

There is a growing agreement among team strategists that top teams looking to win championships will be open to entering the second apron for two out of the five years in their championship window. This would include the first year in the second apron and the following four years with a cap. Owners with significant resources will likely be willing to cover the tax costs if their team is competing for championships and generating profits. Front offices will also be willing to give up future draft picks in order to support their team. However, there is a belief circulating in the league that teams may only have a limited time frame of two years during a five year period to fully invest before dropping below the second apron, particularly if the team falls short of their high expectations.

The consequences of being a second-apron team will become more serious in 2024-25, as teams above the threshold will lose their mid-level exception. They will not only be restricted to 100% salary matching in trades, but they will also be unable to combine multiple players’ salaries in trades. For instance, Phoenix would not be allowed to trade both Jusuf Nurkić and Nassir Little for a player making .8 million. Additionally, second-apron teams cannot use trade exemptions from previous years or offer cash to facilitate deals.

Sources say that Philadelphia personnel view the Sixers’ million cap space this summer as an advantageous asset. Unlike other contenders with hopes of winning a championship who must carefully manage their cap space, Philadelphia only has to account for Joel Embiid’s guaranteed salary for the foreseeable future.

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