The purpose is to allow teams to exceed the salary cap in order to re-sign their own free agents, up to the player’s maximum salary. This was a loophole introduced essentially to allow players to be retained more easily by their current teams.

This exception allows a team to exceed the salary cap to re-sign their own free agents, provided they own that player’s Bird rights. In order for a team to own a player’s Bird rights, that player must play three seasons for them without clearing waivers or changing clubs as a free agent.

The Bird exception, named after Larry Bird, is a rule included in the NBA’s Collective Bargaining Agreement that allows teams to go over the salary cap to re-sign their own players. A player who qualifies for the Bird exception, formally referred to as a Qualifying Veteran Free Agent, is said to have “Bird rights.”

Contrary to the MLB which has a no salary cap and the NFL 's hard salary cap, the NBA has a soft salary cap — meaning there are exceptions for teams to exceed the cap threshold without facing the penalty of the luxury tax. One of them is the Qualifying Veteran Free Agent Exception, more commonly known as the Larry Bird exception.