In Major League Soccer, an allocation represents an amount of money teams can use to sign players and/or allocate to their salaries to get under the salary cap. Allocations are given to teams for six reasons:
- Teams that have missed the playoffs the previous seasons
- Expansion teams in their first season
- Transferring a player to a foreign club for value
- Teams playing in the CONCACAF Champions League Group Stages or Knockout Round (with additional money being given for each of those a team is in for a given season)
- Teams can trade in 2 of their 10 "Off-Budget" (non-cap) roster spots for allocation money
- Teams that have yet to purchase a 3rd Designated Player Slot split the money paid by teams getting their 3rd slot as allocation money
Allocation Money can be used in several ways:
- Reduce the amount of money that a non-Designated Player Rule Player costs against the salary cap down to the league minimum salary ($46,500 in 2013).
- Reduce the amount of money that a Designated Player Rule Player costs against the salary cap down from $350,000 to a minimum of $175,000.
- Change a player whose salary would get a Designated Player Rule Slot back into a normal salary slot (by reducing the salary below $350,000).
- Acquire players outside the MLS (using Allocation Money for any part of the salary or trade cost)
- Trade it to another team for any value desired
Whether the allocation is given, and its size is determined by MLS; the details are not disclosed to the general public. Citing this, some in the MLS community have accused the league of favoring major market teams, particularly the Los Angeles Galaxy, in the use of allocations.
Allocation money is not to be confused with the MLS Allocation Order, which is a ranking used to determine which MLS club has first priority to acquire a U.S. National Team player who signs with MLS after playing abroad, or a former MLS player who returns to the league after having gone to a club abroad for a transfer fee. Along with Allocation Money, Allocation Order rankings can be traded, provided that part of the compensation received in return is another club’s Allocation ranking.
Twice in league history, an allocation received for a lost player was used on the same player upon his return to the league: by the Chicago Fire on Ante Razov and by the New England Revolution on Daniel Hernandez.