Pro Football Rumors
Earlier this week, Mike Florio of Pro Football Talk took a stab at working out just how much the Browns had redeemed in tax credits from the insurance on quarterback Deshaun Watson‘s five-year, $230MM fully guaranteed contract. Since then, Jason Fitzgerald of OvertheCap.com has weighed in to try and clear up some of the confusion on one of the league’s less reported salary cap features.
Per Fitzgerald, when the money coming back to a team from its insurance policy is tied to a prorated bonus, like a signing bonus, the league is required to go back and reevaluate the value of the bonus based on the player’s activity (or lack thereof) over the course of that season. After the revaluation, the NFL takes the value that is theoretically returned and prorates it again over the remaining years of the bonus.
Fitzgerald provided the example of a $10MM bonus prorated evenly across five years in $2MM-increments. If the league were to say that the full $2MM is due back after the first year, they would’ve just credit the team $2MM of cap space. Instead, they would choose to look at it now as an $8MM bonus prorated over five years in $1.6MM-increments. Crediting the team $400K of cap space from the first year, and lowering the future impact of the prorated bonus by the same amount.
Florio’s initial confusion came from seeing the revalued bonus amounts as full refunds to the Browns, but OvertheCap.com clarified that the actual amount the Browns had gotten back was the difference between the original prorated values of the bonus and the adjusted values. From 2024 through 2029, they estimate the total value to eventually be redeemed from Watson’s prorated bonuses to be about $9.83MM, with other savings coming from insurance on the base salary.
The base salary calculations appear to be a bit more straight forward. The amount depends on the terms of how the team insures the base salary, but whatever is calculated to be due back to the team, that amount is given as a cap credit. Fitzgerald explains that if a player had a $10MM base salary insured up to $7MM and, based on the games missed, the team is due back $4.5MM, the league would view that as the team having paid the player $5.5MM and would credit the $4.5MM directly back to their cap space.
After seeing Fitzgerald’s response, Florio teamed up with another alleged salary cap expert and tried again. This time, Florio estimated that the Browns have recouped around $25.82MM to date on Watson’s contract, with a good amount more expected over the next few prorated years. It’s an interesting look under the hood at one of the more under-the-radar aspects of the game.
