Sponsors (4)
The bill provides temporary, targeted tax relief and clearer rules for owners of qualifying secured commercial or retail loans to aid recovery, but does so at the cost of reduced federal revenue, added compliance complexity, and uneven coverage that leaves many businesses without relief.
Small-business owners and other taxpayers with qualifying commercial or retail loans can exclude discharged secured debt from taxable income for discharges occurring between Dec 31, 2023 and Jan 1, 2028, directly reducing their tax bills.
Small-business owners with qualifying secured commercial debt gain improved cash flow and greater ability to recover or restructure their operations because debt relief won't trigger immediate taxable income.
Taxpayers and financial institutions face clearer rules about how the exclusion interacts with bankruptcy, insolvency exceptions, and tax-attribute reductions, reducing legal uncertainty and (potentially) fewer unexpected tax outcomes.
All taxpayers could be indirectly affected because excluding discharged commercial debt from gross income will reduce federal tax receipts, which could lower government revenues and pressure services or increase deficits.
Taxpayers and financial institutions may face higher compliance costs and more disputes with the IRS due to complex eligibility rules and the need to coordinate this exclusion with bankruptcy/insolvency and tax-attribute reduction provisions.
Businesses and creditors without qualifying secured property (for example unsecured creditors or businesses with excluded asset types) receive no relief, creating uneven treatment across similarly situated firms.
Based on analysis of 2 sections of legislative text.
Excludes certain pre-3/1/2023 commercial or retail debt forgiven between 12/31/2023 and 1/1/2028 from gross income and adjusts §108 coordination and attribute-reduction rules.
Official title: To amend the Internal Revenue Code of 1986 to exclude certain discharges of indebtedness secured by real property from income.
Introduced June 24, 2025 by Claudia Tenney · Last progress June 24, 2025
Creates a temporary tax exclusion that prevents certain commercial or retail borrowers from recognizing cancellation-of-debt (COD) income when qualifying debt secured by business real property is forgiven. The exclusion applies to debt incurred before March 1, 2023 and discharged between December 31, 2023 and January 1, 2028, and modifies the existing tax-attribute reduction and insolvency coordination rules to account for the new exclusion. The change primarily affects owners and operators of commercial real estate (for example, shopping malls and retail property), lenders, and the taxpayers who held qualifying debt, by reducing the taxable income that would otherwise arise from debt relief during the covered period.