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WASHINGTON, DC-At least 14 associations that represent the interests of the housing and real estate communities have sent an open letter to Congress urging it to oppose a proposal to tax carried interests in partnerships as ordinary income. The lobbying efforts against the proposal has taken on an added urgency now that the House Ways and Means Committee has introduced a comprehensive tax plan that would among other measures more than double to 35% the tax rate on carried interest.

While the proposal had been floating around Capitol Hill for a while, industry advocates had been relatively sanguine about its chances of passage–until that is, the proposal got linked to abolition of the AMT. The real estate associations acknowledge that tax relief from the AMT–which snares a growing number of middle class families every year–is an important goal. However, the associations maintain, AMT relief should be decoupled from this proposal, which could have devastating consequences to the economy.

“We support the extension of the AMT relief and other important expiring tax provisions–particularly those affecting real estate,” the letter said. “We also appreciate the goal of improving fairness in the Tax Code and reducing the income disparity in our country. However, we don’t believe offsetting the cost of this relief with the carried interest tax is the right solution.”

Many in the industry–including this group–are likening the consequences of the proposal to the 1986 Tax Reform Act, whose attempt to eliminate passive income had the unintended affect of massive real estate loan defaults and foreclosures.

Not that is a done deal by any stretch. Senate Majority Leader Harry Reid has promised to keep a similar bill off of the Senate floor, at least for this session. “We don’t know what, if anything, will emerge from Congress,” Scott Arnold, leader the firm’s Real Estate Practice Group of King & Spalding LLP, tells GlobeSt.com. A proposal from a joint committee–should the Senate even introduce a bill–could contain carve outs for the real estate industry, he speculated. “The impact on the real estate industry would be huge–I think Congress will recognize that in the end.”

Signatories to the letter included the Real Estate Roundtable, National Association of Home Builders, National Association of Industrial and Office Properties, Manufactured Housing Institute, International Council of Shopping Centers, Building Owners and Managers Association International, Appraisal Institute, American Resort Development Association, American Land Title Association, American Hotel & Lodging Association, The Mortgage Bankers Association, American Senior Housing Association,Public Storage Association, and the Commercial Mortgage Securities Association.

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