House Ways

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.