Competitive Balance Tax

Definition

Each season, teams that exceed a predetermined Team Value threshold are subject to a Competitive Balance Tax, commonly referred to as a “luxury tax.”    Those who carry Team Values above that threshold are taxed on each dollar above the threshold, with the tax rate increasing based on the number of consecutive seasons a team has exceeded the threshold.

 

  • Season 4: 2250
  • Season 5: 2150
  • Season 6: 2150
  • Season 7: 2150
  • Season 8: 2400
  • Season 9: 2400
  • Season 10: ????

 

A team exceeding the Competitive Balance Tax threshold for the first time must pay a 20% tax on all overages. A team exceeding the threshold for a second consecutive season will see that figure rise to 30%, and three or more straight seasons of exceeding the threshold comes with a 50% luxury tax.

 

If a team dips below the luxury tax threshold for a season, the penalty level is reset. So, a team that exceeds the threshold for two straight seasons but then drops below that level would be back at 20% the next time it exceeds the threshold.

 

The Competitive Balance Tax will be taken just before the season starts, once teams are completed, after everything else has been completed / paid for, but before tickets are issued. 

 

Teams that can not pay the Competitive Balance Tax will need to make the proper team adjustments to reduce their Team Value to a level that either lowers the tax to a rate they can afford or lowers the Team Value below the threshold.

 

If a team breaches the cap level during the season they WILL NOT be charged tax. This will apply whether they were over the cap at the start or not. 

Player Union Central
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