WASHINGTON, DC-There are whispers and faint signs that a legislative proposal to change the tax characterization of carried interest may not come to pass--the latest being feedback that International Council of Shopping Centers president Michael P. Kercheval has received about a grassroots campaign the association launched, coordinated with BOMA International.

That effort entailed beseeching member companies of both groups to contact their Congresspeople to warn them of the adverse affects such a change will have on the commercial real estate industry. "The word our members and lobbyists are getting is to ‘call off the dogs,' " Kercheval tells Globest.com. "To me that is a very good sign." He adds that the campaign was done is a positive spirit. "I think there are many people on the Hill that don’t realize the severe unintended consequences if this were to pass. What we are doing is trying to educate them."

Most industry associations have launched campaigns against the proposal either at the grassroots or lobbying level, he notes. Most recently, the Conference of Mayors urged the Senate to leave carried interest as it is, citing the need for developers to be able to take risks in rehabbing brownfield sites and developing urban locations.

The Hill newspaper also reported that there is talk the tax increase on carried interest might be substituted with a tax increase on foreign insurers. It is not for certain, the paper said, citing an unnamed source, but apparently legislators are getting pushback against the change.

Senators are increasingly becoming aware that this bill is not what it seemed to be at first--that is, an increased tax on hedge funds that only modestly hits real estate, Jeff DeBoer, chairman of the Real Estate Roundtable, tells GlobeSt.com. “They are beginning to realize that what it really is is a huge real estate tax increase that will only modestly affect hedge funds.”

The issue could still go either way, DeBoer adds, which is why he says it is important for people to keep up their contacts with the Hill. “This process is not being given a public hearing--in fact the last time there was a public hearing on carried interest was close to three years ago. So it is important for people in the real estate industry to continue to offer their viewpoint to Congress at every opportunity.”