Competitive Balance Tax

The Competitive Balance Tax (CBT) threshold will be $230M in 2022, $233M in 2023, $237M in 2024, $241M in 2025, and $244M in 2026. 

CALCULATING A CLUB'S COMPETITIVE BALANCE TAX (CBT) LIABILITY: 

For the purpose of calculating a club's CBT liability, a club's MLB payroll consists of the Average Annual Value (AAV) of player salaries  and bonuses earned by players on the club's MLB Reserve List (40-man roster) and MLB 60-day Injured List. 
NOTE: Beginning in 2022, if a club acquires a player signed to a multi-year contract via trade or waiver claim and the player's salary varies from year-to-year (the contract is either "front-loaded" or "back-loaded"), the AAV liability for the acquiring club is whatever salary is left to be paid at the time of the trade or waiver claim. 
CoViD-19 EXCEPTION: A club's 2020 MLB payroll is the value of the aggregate contracts prior to salaries being pro-rated due to the truncated season.  

In addition, MLB Player Benefit Costs (PBC), the AAV of "legacy salaries" paid to players who are no longer on the club's MLB 40-man roster (such as a player who has been released or outrighted to the minors, or who is being paid a deferred salary after becoming a free-agent), and money contributed to the Pre-Arbitration Bonus Pool are considered to be part of the club's payroll when calculating the CBT.   

FINANCIAL PENALTIES FOR EXCEEDING COMPETITIVE BALANCE TAX: 

A club whose payroll from the just-concluded MLB season exceeded the Competitive Balance Tax (CBT) threshold by any amount up to $20M will pay a 20% tax on the portion of the payroll that exceeded the CBT threshold, or a 30% tax on the portion of the payroll from the just concluded MLB season in excess of the threshold up to $20M for any club that also exceeded the threshold the season prior to the just concluded season, or a 50% tax on the portion of the payroll from the just-concluded MLB season in excess of the threshold up to $20M for any club that also exceeded the threshold in the two seasons prior to the just completed season.
 
A club whose payroll from the just-concluded MLB season exceeded the CBT threshold by more than $20M up to $40M will pay an additional surcharge of 32% on the portion of the club's payroll from the just concluded MLB season in excess of $20M up to $40M over the threshold, or an additional surcharge of 42% on the portion of the club's payroll from the just concluded MLB season in excess of $20M up to $40M for any club that was also over the threshold in the season prior to the just concluded season, or an additional surcharge of 62% on the portion of the club's payroll from the just concluded MLB reason in excess of $20M up to $40M  for any club that was also over the threshold for two seasons prior to the just concluded season. 

A club whose payroll from the just-concluded MLB season exceeded the CBT threshold by more than $40M up to $60M will pay an additional surcharge of 62.5% on the portion of the club's payroll from the previous season in excess of $40M up to $60M, or an additional surcharge of 75% on the portion of the club's payroll from the previous season in excess of $40M up to $60M for a club that was also over the threshold in the season prior to the just concluded season, or an additional surcharge of 95% on the portion of the club's payroll from the previous season in excess of $40M up to $60M for a club that was also over the threshold for two seasons prior to the just completed season.  

A club whose payroll from the just concluded MLB season exceeded the CBT threshold by more than $60M will pay an additional surcharge of 80% for the portion of the payroll in excess of $60M over the CBT threshold, or an additional surcharge of 90% for the portion of the payroll in excess of $60M over the CBT threshold if the club that was also more than $60M over the threshold in the  season prior to the just completed season, or an additional surcharge of 110% for the portion of the payroll in excess of $60M if the club was also more than $60M over the threshold in the two seasons prior to the just completed season.