# Understanding the Retail Revitalization Act of 2023

This bill makes changes to how real estate investment trusts (REITs) can do business with struggling retail tenants. REITs are companies that own and lease commercial properties like shopping centers and office buildings. The main goal is to make it easier for REITs to help retail businesses that are in financial trouble, particularly those dealing with bankruptcy or cash flow problems.

The bill creates a special break for REITs that acquire struggling retail tenants. Normally, federal tax law limits how much rent a REIT can collect from a company it owns a significant stake in—the idea is to prevent REITs from just shuffling money between related entities to avoid taxes. But under this new rule, if a REIT takes over a struggling tenant's business during a bankruptcy or when the tenant can't pay its bills, the REIT gets more flexibility for seven years. Specifically, the REIT can now collect rent from that tenant even if it owns up to 50 percent of the tenant's business, whereas the old rule would have kicked in at just 10 percent ownership. This gives REITs more incentive to rescue failing retail businesses by taking them over and keeping them operating.

The bill also raises the general ownership threshold from 10 percent to 30 percent across the board for all REITs and tenants. This means a REIT can own a bigger stake in a tenant company before the tax restrictions apply. Additionally, the bill limits how tax rules about "constructive ownership" (essentially, ownership through indirect connections) can be stacked together, which simplifies the calculations REITs need to make. For everyday people, these changes could mean more retail stores stay open because REITs have better financial incentives to keep struggling tenants afloat rather than letting them close.

Retail Revitalization Act of 2023

LaHood, Darin

Retail Revitalization Act of 2023 This bill amends tax rules for real estate investment trusts (REITs). It increases (1) the share of equity investments a distressed retail tenant may receive from a REIT from 10% to 50%, and (2) the equity share for regular tenants from 10% to 30%. The bill also allows taxable REIT subsidiaries to accept equity in a retail tenant's businesses as a form of rent, subject to certain restrictions.