Signing Jeremy Lin to a big contract after just 26 productive NBA games represents a significant risk to the Knicks. Depending on New York's total payroll in 2014-2015, Lin could cost the Knicks about $15 million in salary, plus an additional $47.5 million in luxury tax that year alone.
But CBA expert and ESPN Insider Larry Coon notes that, while the risk is significant, the "stretch provision" can give the Knicks real protection against Lin being a bust:
If worse comes to worst, another new rule can help the team out. The "stretch provision" allows a team to waive a player and extend his salary payments over twice the number of remaining seasons, plus one. So if Lin is waived with one season remaining on his contract, he would be paid his salary over three years.
Here's the important part -- teams also may elect to stretch a waived player's salary cap hit over the same number of years. So if Lin proves to be a disaster over the next two seasons, the Knicks can waive him, stretch the payment of his $14.8 million salary over three years, and reduce his salary cap amount to about $4.9 million in each season. This would reduce the team's tax bill significantly. If they are right at the tax line, a $4.9 million salary would translate to a $7.35 million tax bill. This is much more palatable.