This is from the CBA
38. When do free agents stop counting against team salary?
Free agents continue to be included in team salary until one of the following happens:
- The player signs a new contract with the same team. When this happens, the team salary reflects the player's new salary rather than his cap hold.
- The player signs with a different team. As soon as this happens, the player becomes his new team's problem, and his salary no longer counts against his old team.
- The team renounces the player. (See question number 39)
39. What does renouncing a player mean?
As detailed in question number
36, free agents continue to be included in team salary. By renouncing a player, a team gives up its right to use the Larry Bird, Early Bird, or Non-Bird exception (see question number
25) to re-sign that player. A renounced player no longer counts toward team salary, so teams use renouncement to gain additional cap room. Teams are still permitted to re-sign renounced players, but only with cap room or an exception other than the Bird exception1. The exception to this rule is that an Early Bird free agent, at the team's option, can be renounced to the Non-Bird level. A team might do this in order to sign the player to a one-year contract, instead of the minimum two years required by the Early Bird exception.
If the player does not sign with any team (his prior team or any other team) for the entire season, then his renouncement continues. In other words, the team is not permitted to renounce a player, let him sit idle for the year, and then re-sign him the following summer using Bird rights. However, if the player is renounced and then re-signs with his prior team, his renouncement is no longer in effect when his contract ends. For example, if a team renounces their Larry Bird rights to a player, then re-signs that player to a one-year contract using cap room, the player will be a Larry Bird free agent once again the following summer.
After renouncing a player, a team
can still sign the player to a Two-Way contract (see question number
82) or trade the player in a sign-and-trade agreement (see question number
92).
1 The team is bound to the restrictions on salary, contract length and raises associated with the means they use to sign the player -- for example, if a team renounces its Bird free agent and then re-signs him with the Non-Taxpayer Mid-Level exception, the contract must conform to the requirements of the Non-Taxpayer Mid-Level exception. However, if a team renounces its Bird free agent and later re-signs him using its cap room, the player can still receive the contract length and raises associated with the Bird exception. This is because the maximum contract length and raises in a cap room signing are determined by the player's original free agent status, and are not affected by renouncement.
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