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NBA offseason: What is the CBA’s second apron? And how does it limit big-spending teams?

With several expensive rosters on the line, the NBA’s new business season is here. Each offseason, which includes the annual rookie draft and free agency, sees front offices compete against each other in a competitive market with restrictive rules on how teams do business. This transaction cycle and difficulty in assembling rosters will only intensify when the league’s new collective bargaining agreement goes into full effect. Most notably, the NBA’s new “second apron” will become an actual salary threshold that front offices will have to really consider, with varying penalty limitations for teams that decide to shell out that maximum amount.

What exactly is the second apron? Starting with the 2011 CBA, the league had only a single tax apron, a limit on how much teams could spend above the salary cap and luxury tax threshold without paying additional penalties that also imposed other restrictions. The second apron is a new, additional threshold set to be about $11 million ($190 million total) above the first apron for 2024-25, which will hamper teams’ decision-makers more than ever.

Previously, being a tax team meant that for every dollar above the limit, clubs were charged an additional dollar, proportional to subsequent tax brackets, and they then had to forgo access to the full mid-level exception – a valuable contract mechanism that allows teams without a salary cap to sign rotation-quality players. Under the new CBA, teams above the first apron are now also only allowed to match salaries in trades to 100% of their expenses, while teams that don’t pay taxes can do the math to 125%. In short, teams cannot take in more money than they spend. First-apron clubs are also prohibited from signing a player released during the regular season if his salary exceeds that year’s mid-level exception. This year, for example, that affected the Boston Celtics, Denver Nuggets, Golden State Warriors, Miami Heat, Milwaukee Bucks, Phoenix Suns and the LA Clippers.

Phoenix Suns forward Kevin Durant pauses on the court during the first half of Game 4 of a first-round NBA playoff series against the Minnesota Timberwolves, Sunday, April 28, 2024, in Phoenix. The Timberwolves won 122-116 to take the series 4-0. (AP Photo/Ross D. Franklin)Phoenix Suns forward Kevin Durant pauses on the court during the first half of Game 4 of a first-round NBA playoff series against the Minnesota Timberwolves, Sunday, April 28, 2024, in Phoenix. The Timberwolves won 122-116 to take the series 4-0. (AP Photo/Ross D. Franklin)
Kevin Durant and the Phoenix Suns are expected to be a second-protection team. (AP Photo/Ross D. Franklin)

The impact of the second apron will begin in earnest once the league calendar flips to 2024-25, with teams above that threshold now losing all mid-level exceptions entirely. Not only are they limited to 100 percent salary matching on trades, but second apron teams will also be prohibited from combining the salaries of multiple players in trades. Phoenix, to give a specific example, would not be able to trade both Jusuf Nurkić and Nassir Little for a player making $24.8 million. Second apron teams also cannot use trade exceptions from previous years or send money to get deals across the finish line.

How severe that final element of second-round penalties will be is what league officials are most interested in about this summer’s activities — and how roster construction plays out over the next few seasons. Second-round teams can’t trade their first-round pick for seven years, so if you’re in the second round by the end of the 2024-25 season, your 2032 first-round pick will automatically be frozen and untradeable. That may seem like a far-fetched draft advantage, but those picks are valuable to contending teams that have already mostly emptied their war chests. The Bucks, for example, sent their 2030 first-round pick to the Portland Trail Blazers as part of their September 2023 blockbuster deal to sign Damian Lillard.

And here lies the difficult part: If a team then stays in the second round in two of the following four seasons, its first-round pick seven years later will not only be frozen, but will automatically be moved to the end of that first round – or to the 30th pick.

So far, there seems to be a growing consensus among team strategists that teams competing for championships are willing to go to the second tier for two years of that entire five-year window — the first season in the second tier and then the next four years after that. Competing for championships and generating the revenue that comes with it will likely make deep-pocketed owners willing to pay the tax increases, and front offices willing to sacrifice their future draft capital to do so. But a school of thought is emerging around the league that says teams may have just two years over a half-decade to give it their all before jumping back below the second tier, especially if the team hasn’t lived up to its lofty expectations.

It seems no coincidence that Minnesota signed Mike Conley Jr. to a two-year contract extension this spring, keeping the Timberwolves point guard through the 2025-26 season. This could well be the second year in a row that Minnesota goes beyond the second round to fund a competitive team behind emerging superstar Anthony Edwards — and 2025-26 is also the final year of Rudy Gobert’s massive contract if the three-time Defensive Player of the Year exercises his player option. Sixth Man of the Year Naz Reid also has a player option for this season. Only Edwards, Karl-Anthony Towns and Jaden McDaniels have guaranteed money on the books for the Wolves beyond the 2025-26 season, giving Minnesota some flexibility to avoid second-round penalties should it so choose.

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This seems to be partly why we saw big moves between Milwaukee and Boston last summer — Lillard to the Bucks and Jrue Holiday and Kristaps Porziņģis to the Celtics — before this new tax landscape sweeps the league. Boston will almost certainly be a second apron team for 2024-25 after Holiday signed a four-year, $135 million contract extension, which has made opposing executives more than curious about how much Boston will be willing to pay to retain versatile guard Derrick White when the final year of his contract expires after 2024-25.

The Warriors will have to seriously consider this summer how much of a tax burden they will have and how much of a disadvantage their front office will take in building a team for an aging, expensive roster that didn’t make the playoffs this year. Because of this, opposing managers expect the Warriors to try to improve their team while avoiding the second round for 2024-25. Denver’s projection of becoming a second-round team also makes opposing front offices curious about whether the Nuggets are willing to keep two-way veteran Kentavious Caldwell-Pope, who opted out of his contract and is now a free agent.

That’s an added advantage the Sixers have, according to Philadelphia officials, as they have over $60 million in salary cap space this summer, sources said. While many contenders with championship aspirations have to account for every penny on their payroll, Philadelphia only has Joel Embiid’s guaranteed salary for ’24-25 and beyond on the books.

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