Competitive Balance Tax

The Competitive Balance Tax (CBT) threshold will be $195M in 2017, $197M in 2018, $206M in 2019, $208M in 2020, and $210M in 2021. 

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. 
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) and 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) 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 CBT threshold will pay a 20% tax on the portion of the payroll that exceeded the CBT threshold, a club whose payroll from both the just-concluded MLB season as well as from the MLB season immediately prior to the just-concluded MLB season exceeded the CBT threshold will pay a 30% tax on the portion of the payroll from the just-concluded MLB season that exceeded the CBT threshold, and a club whose payroll from the just-concluded MLB season as well as from the two MLB seasons immediately prior to the just-concluded MLB season exceeded the CBT threshold will pay a 50% tax on the portion of the payroll from the just-concluded MLB season that exceeded the CBT threshold. 

A club whose payroll from the just-concluded MLB season exceeded the CBT threshold by more than $20M will pay an additional surcharge of 12% on the portion of the club's payroll in excess of $20M over the threshold, and a club whose payroll from the just-concluded MLB season exceeded the CBT threshold by more than $40M will pay an additional surcharge of 42% on the portion of the payroll in excess of $40M over the threshold.
NOTE: The surcharge for a club whose payroll from the just-concluded MLB season exceeded the CBT threshold by more than $40M will be 45% on the portion of the payroll in excess of $40M over the CBT threshold if the club paid a CBT tax in the both the just-concluded MLB season as well as in the MLB season immediately prior to the just-concluded MLB season.