New 'Saving Our MALLS Act' Offers Tax Break on Canceled Business Debt for Struggling Commercial Properties

The “Saving Our Mainstreet American Locations for Leisure and Shopping Act of 2025”—or the Saving Our MALLS Act, as its proponents call it—is looking to give a significant financial lifeline to commercial property owners. This bill focuses on changing how the IRS treats debt forgiveness for certain businesses, essentially making it a lot easier to restructure without getting hit with a massive tax bill.

The Tax Break That Isn't Taxable

When a bank forgives debt, the IRS typically views that canceled amount as income, which means you have to pay taxes on it. This bill carves out a new exception for what it calls “qualified commercial or retail indebtedness.” Think of a struggling shopping center owner who owes $10 million, and the bank agrees to forgive $3 million to keep the business afloat. Under current law, that $3 million is taxable income. Under this bill (SEC. 2.), that $3 million would be excluded from the owner’s taxable income, providing immediate, crucial relief.

Who Qualifies for the Lifeline?

This isn't a blanket forgiveness program; it's highly specific, reflecting the recent turmoil in the commercial real estate sector. To qualify, the debt must meet three key checkpoints. First, the debt must have been taken out before March 1, 2023. This is clearly aimed at covering debt incurred before the big interest rate hikes started hitting the market hard. Second, the debt must be officially discharged (forgiven) between December 31, 2023, and January 1, 2028. This sets a clear, time-limited window for businesses to restructure. Third, the debt must have been secured by real property used in the business—like a retail store, office building, or warehouse—both when it was taken out and right before it was forgiven.

The Fine Print: The Hidden Cost of the Exclusion

While this tax break sounds like pure financial sunshine, there’s a necessary trade-off built into the tax code that remains. When you use this exclusion to avoid paying taxes on canceled debt, you have to reduce certain “tax attributes.” This means you have to lower the tax basis of your property or reduce your net operating losses (NOLs) by the amount of the forgiven debt. For example, if the shopping center owner gets $3 million in debt forgiven, they must reduce the cost basis of the property by $3 million. While they avoid the immediate tax bill, they will pay for it later, either through higher taxes when they eventually sell the property (because the basis is lower) or by having fewer losses to offset future income. This makes the relief immediate but not entirely free, which is a key detail for business owners to understand when planning their finances.

Real-World Impact: Stabilizing Main Street

For the commercial real estate market, which has been under significant stress, this bill is a stabilization measure. Imagine a small-town theater owner who took out a loan in 2020 to renovate, but the pandemic and subsequent economic slowdown made the debt unmanageable. If the bank agrees to restructure and forgive a portion of that loan in 2024, this bill prevents that owner from being immediately crushed by a massive tax bill. The goal is to keep these commercial properties—the malls, the storefronts, the local business hubs—from collapsing into foreclosure, which helps stabilize local economies and employment. The downside, of course, is that the U.S. Treasury loses out on that tax revenue, meaning the cost of this stabilization ultimately falls on the broader taxpayer base.