Allan Houston - "Allan Houston Rule"

"Allan Houston Rule"

In 2005, the NBA agreed on a new collective bargaining agreement (CBA). The most striking innovation granted NBA teams a one-time option to release a player without his contract counting against the luxury tax threshold regardless of how long or how rich the contract was. The provision did not negate the player's contract, a team's obligation to pay the player, or the impact on the salary cap; it merely removed the player's salary when computing the luxury tax. This rule benefited teams that were in danger of facing the "luxury tax" penalty, a tax paid on salaries spent above a certain threshold of total team salary. The correct term is "amnesty clause," but because the team with the worst problems was the Knicks, and their worst financial liability was Houston, it was quickly dubbed the "Allan Houston Rule." Ironically, the Knicks chose not to use the exception for Houston, but for forward Jerome Williams instead, since the Knicks correctly predicted Houston would retire due to lingering injuries over his last two seasons. As a result, Houston's contract counted a total of $40 million against the salary cap, but did not count towards the luxury tax due to his medical retirement, and insurance covered most of the team's payments to him.