Tax regulations

New luxury tax regulations are a relevant part of the revised NBA ABCs for the Sixers

The NBA’s salary cap and luxury tax levels remain unchanged at $ 109.140 million and $ 132.627 million, respectively, under the league’s amended collective agreement. While this is not surprising in light of the financial difficulties associated with COVID-19, there is a development in the luxury tax that is relevant to the Sixers.

Typically, the luxury tax threshold remaining the same would not be positive for a team like the Sixers willing to pay the tax. Sixers salaries from five on opening night last season total approximately $ 132.8 million for the 2020-21 season, and these players are obviously not the only ones with guaranteed contracts. However, there is a form of relief for taxpayer teams.

Team tax bills will be reduced in proportion to the amount of the decrease in NBA Basketball Related Income (BRI). While managing partner Josh Harris and the Sixers appear willing to pay whatever it takes to wrestle – substantial contracts for new president of basketball operations Daryl Morey and new head coach Doc Rivers are recent examples who suggest that a bigger tax bill wouldn’t deter the team from doing anything. meaningful actions – these revisions to the ABCs could impact their thinking. If the league had kept the tax level at the same level and ignored a cut in the BIS, it would make sense that the Sixers would be more reluctant to spend.

This is still a sub-optimal financial situation for many teams, although the cap is guaranteed to increase by a minimum of 3% and a maximum of 10% during the remainder of the ABC. The teams will likely have a bigger opening than usual this year to sell second-round picks, and the Sixers have four in next Wednesday’s draft (# 34, 36, 49, 58), in addition to the pick. n ° 21.

The luxury tax revisions were probably never likely to have a massive impact on the Sixers in free agency, which will kick off on November 20 at 6 p.m. ET. As a team of taxpayers, they will have minimum veteran contracts and the mid-level taxpayer exception, but do not have the ability to sign stars directly. Morey has done well on minimum contracts in the recent past, signing rotational players like Gerald Green, Jeff Green, Ben McLemore and Austin Rivers.

With the exchanges, however, the tax break tied to the BIS could sway the outlook for the Sixers. A business in which they take money should be a little more acceptable under these conditions than in a world with a flat tax threshold and no form of tax relief. We don’t officially know yet when the NBA transaction window will open, but ESPN’s Adrian Wojnarowski reports that the talks “are progressing towards confirming a date two or three days before” the November 18 plan.

Players will also be able to register and unsubscribe from contracts when the window opens, which should provide greater clarity on the state of the free agent market. In theory, players should be more inclined to sign up than usual, given the cap remains unchanged and uncertainty as to how teams will approach free agency. We’ll see if that’s the case.

Another factor to consider with options and free agency is player escrow. If pay cuts are needed due to a cut in the BIS, the league said those cuts “would be spread over this season and potentially over the next two seasons, subject to a maximum pay cut of 20%. for any season “. There’s a big difference between 10% and 20% of a player’s salary, of course, but the immediate conclusion is that the NBA doesn’t take a huge share of escrow upfront.

Like so much this year, the final numbers – and, really, whether the season is successful overall – will depend on how the league operates around COVID-19.

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