NEW YORK (Reuters) -Six investment groups representing sectors including fund managers, venture capital and real estate in a letter to two Senate Republicans over the tax and spending bill now under debate asked that passive investments be exempt from a provision of the bill that targets foreign investors.

The proposal would allow the imposition of new taxes on residents, businesses and other entities from countries that are found to impose "unfair foreign taxes." It targets, for instance, income from investments, rents and dividends.

The investment groups said the levy, which includes the possibility of imposing a progressive tax burden of up to 20% on foreign investors' passive income, could spook investments in the U.S.

The new tax "would significantly disrupt U.S. public and private debt and equity markets," the associations said in the letter, which was sent to Senate Majority Leader John Thune and Senate Finance Committee Chairman Mike Crapo on Monday evening.

The groups said there would be the risk of investors selling portfolios in advance of the new levy. "This unnecessary sell-off will cause U.S. asset values to fall," they said in the letter.

Although Senate Republicans proposed changes to the tax and spending bill that the House of Representatives passed last month, the Senate kept the provision of a tax targeting foreign investors. Under the Senate version, however, the tax would take effect in 2027, one year after the House version.

The letter was jointly submitted by the Managed Funds Association, American Investment Council, Investment Company Institute, Loan Syndications and Trading Association, National Venture Capital Association and the Real Estate Roundtable.

In notes to clients, many Wall Street analysts have cautioned that the levy could end up weighing on demand for U.S. assets. Multinational companies have said they could shut down operations in the U.S.