Jerome James and the luxury tax

Ahhhhh...retirement. (via 1.bp.blogspot.com)

Intrepid poster 'Tommy Udo 6' on the RealGM board managed to get an answer from NBA cap guru Larry Coon regarding Jerome James' (he of the likely medical retirement and insurance paying 80% of his salary next season) cap impact on the Bulls.

The salary counts [towards the salary cap]. It doesn't matter whether insurance is paying it...The Board of Governors can exclude the salary of disabled players from the luxury tax, and typically does so.

In the dregs of pre-draft-and-free-agency Bulls news, what followed is what one could consider 'spreading like wildfire' in the Bulls Blogosphere (there sort of is one now!). The story was linked by both Bulls Confidential and DaBullz.com under the headlines of "Jerome James may not count towards the luxury tax" and "Jerome James Could Be Excluded From Bulls’ Luxury Tax Calculation":

But I'm not sure that's what  Larry Coon is actually saying:

the Board of Governors can exclude the salary of disabled players from the luxury tax, and typically does so.

It could just be miscommunication since Tommy did specifically ask about the luxury tax calculation. But Larry Coon's answer says to me that the salary is still counted in the luxury tax calculation, but the Bulls would not have to actually pay a luxury tax on James’ salary. Meaning that even though there’s a scenario where the Bulls wouldn’t pay any tax on James, they would still be considered a ‘tax paying team’ due to their cap number being over the tax threshold, and therefore miss out on the few million that gets doles out from the tax-paying teams to the rest of the league.

That scenario (contingent, by the way, on James retiring, and the sticky fact that the Bulls knew he was injured when trading for him) is still a savings over the alternative (the dollar-for-dollar payment on whatever James made that put the Bulls over that threshhold), but it still wouldn't rectify the fundamental truth that the Bulls would lose financially if over that tax threshold. And as the (by far) most profitable team in the league, we've been told that fact matters.

But if it is true that this effectively gives the Bulls an extra $6m under the tax threshold (though wouldn't we not know until the end of next season?)...it would be a neat wrinkle in the Bulls plans, and yet another reason why that Larry Hughes deadline deal was fairly tremendous.

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