Saving Our MALLS Act

Summary

Creates a temporary tax exclusion that lets certain commercial and retail borrowers avoid reporting cancelled debt as taxable income when that debt is tied to business real estate. The exclusion applies only to debt taken on before March 1, 2023 and cancelled in a limited window from late 2023 through the end of 2027, and it adjusts related insolvency and tax-attribute reduction rules so the exclusion works with existing tax law.

• Creates a new exclusion under IRC §108 for 'qualified commercial or retail indebtedness' so some cancelled commercial debt is not taxable income.
• Applies only to debt incurred or assumed before March 1, 2023 and discharged in the limited window ending January 1, 2028.
• Requires the cancelled debt to have been secured (directly or indirectly) by specified business real property at all times between incurrence and discharge.
• Defines 'specified real property' by reference to existing tax-code categories and excludes certain property types identified in §168(b)(3)(B) and §144(c)(6)(B).
• Modifies coordination, insolvency/priority, and tax-attribute reduction rules so the new exclusion interacts with existing §108(a)(2) and §108(b)(1) mechanisms.
• Effective for discharges on or after December 31, 2023; taxpayers must track timing carefully to qualify.
• Primarily affects commercial property owners, retail borrowers, and lenders by changing tax consequences of debt restructuring or forgiveness.
• May reduce taxable income reported by borrowers and thus lower federal tax receipts for qualifying discharges.
• Creates documentation and compliance responsibilities for taxpayers and the IRS to establish eligibility and apply revised attribute reductions.