Amnesty Clause FAQ
You've heard about the NBA's new "amnesty" clause.
Now you want to know how it works.
Herewith, then, is an FAQ to explain every aspect of the rule.
Q: What is the amnesty clause?
A: This new provision grants teams a one-time exception to waive a player without paying any further luxury tax on the player's contract, regardless of how long or how rich the contract is.
Q: What is the deadline for capitalizing on this provision?
A: The window for releasing an amnesty player opened when the new labor agreement took effect Aug. 2 and ends Monday at midnight. At the urging of the union and various teams, the deadline was brought forward to Aug. 15 from Oct. 1 so amnesty players aren't shut out of the free-agent market all summer and left scrambling for a new team two days before training camps start.
Q: Can teams save this one-time exception for later in the season or future seasons?
A: No. NBA front-office sources told ESPN.com that multiple teams have pushed for the rule to be tweaked to allow teams to be able to save the one-time provision for use during any of the six seasons in the new labor agreement. The league, however, refused to budge.
Q: Do teams have to waive a player?
A: No. The league-wide consensus actually suggests that fewer than half of the NBA's 30 teams will make use of the amnesty provision.
Q: Does the contract of an amnesty player drop off a team's payroll?
A: No. And the provision provides only luxury-tax relief, with no salary-cap relief. So a team can't release a player to gain cap space.
Q: But any player on a team's roster can be released?
A: Yes. Any player who appears on a team's 2005-06 payroll list is eligible -- except those acquired after June 21.
That includes players who are no longer with a team but whose salary still appears on the payroll. One prominent example is Alonzo Mourning, whose contract was bought out by Toronto for an estimated $11 million in March. Mourning has since signed with the Miami Heat, but the Raptors can still make Mourning their amnesty player to avoid paying the luxury tax on what they still owe him.
Boston (with Vin Baker) and Phoenix (Howard Eisley) are also expected to use the amnesty clause in this manner.
Q: Can a team re-sign its own amnesty player at a later date?
A: No. Amnesty players are strictly prohibited from re-signing with the team that released them for the life of the terminated contract.
The league also snuffed out the possibility that teams might try to trade around this stipulation by including the June 21 deadline for players to be eligible to be released via the amnesty clause.
Let's say Dallas wanted to trade Michael Finley to Toronto in exchange for Jalen Rose, with the Mavericks and Raptors agreeing to use their amnesty slot to release each player so both could sign back with their original teams at a reduced price. Because such a trade couldn't be completed before June 21, neither player could be released with amnesty, meaning that the Mavericks and Raptors would get no tax break from such an arrangement.
Q: Can one team sign multiple amnesty players?
A: Yes. Let's say, hypothetically, that Derek Anderson and Brian Grant both wanted to sign with Detroit. Both would become unrestricted free agents after being released by the Blazers and Lakers, so the Pistons would indeed have the right to sign both.
Q: Who does this rule benefit the most?
A: Teams with extremely high payrolls. New York and Dallas can save roughly $40 million and $50 million, respectively, in luxury-tax payments by releasing Allan Houston and Finley if they wish. But it's not bad for those players, either. Finley, for example, would be guaranteed every penny of the $52 million left on his Mavericks contract -- albeit spread out in annual installments of less than $5 million -- while also becoming an unrestricted free agent who can sign a separate long-term contract.
Q: Is there a reduction in a team's financial obligation to an amnesty player once he signs a new contract with another team? Or can a player double-dip?
A: The union fought to make double-dipping permissable, but the league held firm and won the right in the end to apply the usual set-off provision for players released with money owed to any amnesty player's new contract. That means a percentage of the player's new salary will go back to the team that released him.
Q: Can a team that doesn't have a payroll exceeding the luxury-tax threshold exercise the amnesty option?
A: Yes. Even if a team isn't on course to pay luxury tax after the 2005-06 season, it can elect to make an amnesty waiver if it anticipates a tax-paying situation down the road. A team could determine that a amnesty move now would save money later, but the decision has to be made this month with the amnesty option only available through Aug. 15.
Q: Why was this rule adopted and what are teams really gaining if releasing an amnesty player results in no cap relief and doesn't stop the player from collecting all of his checks?
A: Taxpaying teams have long complained that the NBA's financial system offers no mechanism for teams to undo or recover from a contract mistake. This is a one-time chance for teams to at least free themselves of the tax consequences of what is deemed a bad contract.
Sources indicate that some of the league's smaller-market (and more fiscally responsible) teams fought the implementation of the amnesty clause, arguing that the league's big spenders already have big advantages when it comes to player acquisition. Those appeals were denied.
Q: New York's Allan Houston has been mentioned so frequently as an amnesty candidate since June that some refer to this clause as the "Allan Houston Rule." Why have the Knicks reportedly decided not to waive Houston?
A: Houston has a close relationship with Knicks owner James Dolan and, according to NBA front-office sources, has convinced Dolan that he plans to retire if his arthritic knees prove unstable in training camp this October. Should Houston retire, New York wouldn't need to waive him now to come away with some substantial savings. Releasing Houston on Monday would spare the Knicks nearly $40 million in future luxury-tax payments, but if Houston is forced to retire because of health reasons, insurance would pay the bulk his remaining salary. Dolan would prefer not to release Houston if he doesn't have to and the fact New York has other amnesty options -- such as forward Jerome Williams (due $21.3 million over three seasons) and the leftover $18 million still owed to the bought-out Shandon Anderson -- helps Houston's cause.