A bipartisan bill that would alter a tax law to allow retail REITs to invest more in their tenants was introduced in Congress as the retail sector continues to be impacted by the ripple effects of the pandemic.

The Retail Revitalization Act would increase the share of equity investments a real estate income trust is allowed to make from 10% to 50% in distressed tenants and 10% to 30% for tenants that aren't distressed, Commercial Observer reported. Other changes include how much space a REIT can rent to its subsidiaries.

The bill was reintroduced to the House Ways and Means Committee by Reps. Darin LaHood and Brad Schneider, a Republican and Democrat, respectively, who represent districts in Illinois. The bill was introduced two other times, in 2021 and 2022, but fell flat under the Democrat-led chamber.

Real estate, retail and labor industry groups have shown strong support for the bill. The Real Estate Roundtable CEO Jeffrey DeBoer said that the bill could save jobs and increase local tax revenue.

“The Retail Revitalization Act would reform an outdated section of our tax code that currently prevents the commercial real estate industry from stepping forward and deploying its own capital to solve significant economic challenges,” DeBoer said in a statement, according to Commercial Observer.

Those pushing back on the bill say it would create a tax loophole for these major REITs and weaken workers' rights.

“This bill would create a large and ill-defined loophole in our corporate tax code that would likely benefit some of our country’s largest and most profitable companies at the expense of smaller main street competitors and the public,” AFL-CIO Director of Government Affairs William Samuel said in a December letter to congressional leadership.

The bill comes amid bankruptcy filings by several major retail chains.

Christmas Tree Shops last month filed for Chapter 11 bankruptcy and promptly announced plans to close 10 stores. In April, Bed Bath & Beyond made plans to close 480 stores by the end of June after filing for bankruptcy.

As some retail chains have been feeling the pain, retail REITs have performed well under pressure. By the end of 2022, some REITs saw a boost in occupancy, including New York-based Kimco Realty leasing 2.5M SF in the fourth quarter.