Saving Our MALLS Act

The Saving Our MALLS Act is a tax bill that would create a new, temporary exclusion from income for certain debt discharged on commercial or retail real estate. Specifically, it adds a new category called “qualified commercial or retail indebtedness” to the existing discharge-of-ind indebtedness rules. For debt to qualify, it must have been incurred before March 1, 2023; be discharged between December 31, 2023 and January 1, 2028; and be secured at all times by “specified real property” used in the taxpayer’s trade or business (and not described in certain depreciation or other property categories). If these conditions are met, the canceled debt would be excluded from income for tax purposes, reducing the tax burden when a property owner restructures or negotiates a workout of commercial/retail debt. The bill also broadens coordination with existing exclusions, and requires that the same type of tax-attribute reductions that apply to other discharge exclusions apply to this category. The effective date attaches to discharges occurring on or after December 31, 2023. In short, the bill would ease taxes for certain debt forgiveness on shopping centers and other commercial/retail real property, but only for a defined window and under specific property- and debt-history conditions.