By Carolina Mandl and Bo Erickson

NEW YORK/WASHINGTON (Reuters) -Industry groups representing sectors including real estate, finance and multinational companies are pushing for the reduction or exclusion of a retaliatory tax targeting foreign investors in the U.S. in the Republican tax bill, as they see it as a threat to their businesses and to the broader markets and economy.

The proposed tax, known as Section 899, applies a progressive tax burden of up to 20% on foreign investors' U.S. income as pushback against countries that impose taxes the U.S. considers unfair, such as digital service taxes. It could raise $116 billion in taxes over 10 years.

Some individual companies are also pushing for action, according to two lawyers familiar with their clients' plans, who did not name specific companies due to client confidentiality.

“Lobbying surrounding Section 899 is at peak levels,” said Jeff Paravano, a former Treasury Department official who is now chair of law firm BakerHostetler’s tax group.

The move comes as Senate Finance Committee Chairman Mike Crapo, the Republican in charge of the chamber's tax writing provisions, and other Republicans are in close coordination with President Donald Trump on the tax bill, having met on Wednesday.

The White House declined to comment. Crapo said he would not comment on ongoing discussions about the bill.

Global investors hold almost $40 trillion in U.S. assets, such as securities, loans and deposits, according to the U.S. Treasury International Capital Reporting System. This raises concerns about the ripple impact of the bill.

"It has the potential to be a very negative impact on the free flow of capital from the U.S. and through businesses that are multinational," said Gabriel Grossman, a U.S. tax partner at Linklaters, adding he has seen some clients put planned investments in the U.S. on pause until they have more clarity on the new levies.

The broader bill itself is also creating much debate as it is forecast to add about $2.4 trillion to the U.S. debt and has sparked an explosive feud between Trump and his erstwhile key ally Elon Musk, the billionaire CEO of Tesla.

COLLATERAL DAMAGE

Industries across different sectors are on high alert.

The new levy could increase taxes from rents and real estate investment trusts, gains from property sales and securitized products.

"There is a legitimate fear among investors that, if this goes through, it could impact investments, and that it would create higher costs for real estate in terms of getting financing," said David McCarthy, managing director at the CRE Finance Council, a nonpartisan trade group. "It could depress the value of real estate if you don't have as much money to finance property purchases."