Hoops Rumors Glossary: Mid-Level Exception

The mid-level exception is the most common way for NBA teams that are over the salary cap to sign free agents from other clubs for more than the minimum salary. It’s not nearly as valuable as it used to be as the salary cap rises drastically, since the mid-level amounts were set when the league and the players negotiated the last collective bargaining agreement in 2011. The cap fluctuates based on revenue, but the mid-level doesn’t, moving up only in small, predetermined increments each year, so it’s becoming progressively more of “low-level” exception, as I examined in-depth.

Still, it has utility for teams as they build out their rotations. Different forms of the mid-level apply based on a team’s proximity to the cap. The most lucrative kind of mid-level exception is available to teams that are over the cap but less than $4MM above the tax threshold. Still, clubs deep into the tax, and even those under the cap, have access to lesser versions of the mid-level. Here’s a glance at how all three forms of the exception are structured:

For over-the-cap teams:

  • Commonly called either the full mid-level exception, the nontaxpayer’s mid-level exception or simply the mid-level exception
  • Contract can cover up to four seasons
  • First-year salary is worth $5.628MM for 2016/17
  • Once used, the team cannot surpass the “tax apron” ($4MM above tax line) for the remainder of the season.

For teams above the cap and the tax apron:

  • Commonly called the taxpayer’s mid-level exception
  • Contract can cover up to three seasons
  • First-year salary is worth $3.477MM for 2016/17

For teams with cap room:

  • Commonly called the room exception
  • Contract can cover no more than two seasons
  • First-year salary is worth $2.898MM for 2015/16

Each form of the mid-level allows for annual raises of up to 4.5% of the value of the first season’s salary. So, here are the maximum amounts a free agent could receive this summer under each of the three forms of the mid-level exception:

Full Mid-Level Exception

  • 2016/17: $5,628,000
  • 2017/18: $5,881,260
  • 2018/19: $6,134,520
  • 2019/20: $6,387,780
  • Total: $24,031,560

Taxpayer’s Mid-Level Exception:

  • 2016/17: $3,477,000
  • 2017/18: $3,633,465
  • 2018/19: $3,789,930
  • Total: $10,900,395

Room Exception

  • 2016/17: $2,898,000
  • 2017/18: $3,028,410
  • Total: $5,926,410

Teams can split the mid-level among multiple players, and that’s a common course of action. Few teams used the mid-level to give out contracts for as much as they could and for as many years as they could to any single player in 2015/16. The Pelicans used parts of their mid-level to sign Dante Cunningham, Alonzo Gee and Bryce Dejean-Jones in the summer of 2015, leaving a chunk still unused as training camp began. They waived Dejean-Jones in the preseason but signed him again in February, using yet another portion of the mid-level to do so.

Players drafted near the top of the second round often sign contracts for part of the mid-level because it allows teams to give them contracts worth more than the minimum salary, if only slightly so, that cover more than the two years the minimum salary exception provides. The Heat gave 2015 No. 40 pick Josh Richardson only the minimum salary, but they used the taxpayer’s mid-level to sign him for three years, so they’ll have full Bird rights instead of only Early Bird rights with him when his contract ends.

Some front offices prefer to leave all or part of their mid-level exception unused so they can lock up intriguing developmental players to long-term contracts toward the end of the season. Sean Kilpatrick impressed the Nets on a pair of 10-day contracts, prompting Brooklyn to use a leftover part of its taxpayer’s mid-level exception to re-sign him to a three-year contract in March. Had the Nets already used their entire mid-level, they wouldn’t have been able to sign him to a contract longer than two years.

The Kilpatrick signing also illustrates another aspect of the mid-level exception. The Nets weren’t a taxpaying team when they signed Kilpatrick, but because they’d already used parts of the taxpayer’s mid-level on Shane Larkin and Wayne Ellington, they couldn’t upgrade to the more valuable nontaxpayer’s mid-level. However, Brooklyn could have used the nontaxpayer’s mid-level on Kilpatrick if it hadn’t signed anyone using the taxpayer’s mid-level while it was over the tax apron.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA’s Collective Bargaining Agreement. Larry Coon’s Salary Cap FAQ and the Basketball Insiders salary pages were used in the creation of this post.

Earlier versions of this post appeared in 2012, 2013, 2014 and 2015.

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