WASHINGTON, Jan. 25 (UPI) -- Republican presidential hopeful Mitt Romney's holdings in the Cayman Islands may have muddied the debate on his tax returns, lawyers said.
Romney's tax returns, released this week, showed huge international financial interests, including one of his biggest foreign investments sheltered from U.S. taxation partly because it's based in the Cayman Islands, long considered a safe harbor tax shelter, The Washington Post reported Tuesday.
"This is a classic example of how good tax planning avoids taxes until you want to pay taxes on the money," Martin Lobel, a Washington lawyer and chairman at Tax Analysts, which provides information for tax specialists, told the Post.
An August 2011 financial disclosure indicated Romney's individual retirement account included a stake valued between $5 million to $25 million in BCIP Trust Associates III, a partnership that regulatory filings indicate was related to Romney's work at Bain Capital and registered in the Cayman Islands.
Experts told the Post hedge funds and private equity firms can establish corporate shells, known as blockers, in places such as the Cayman Islands to help clients lower their tax exposure.
David Miller, a lawyer who works with private equity firms and hedge funds, said Bain might have formed such an entity in the Cayman Islands for investors such as foundations and endowments that are tax-exempt and trying to avoid any tax on unrelated business income.
In a statement Tuesday, the Romney campaign said his IRA "uses investment structures just as those commonly used by charities and pension funds, including union pension funds, to maintain their tax exempt or tax deferred status."
"The Romneys' investments in funds established in the Cayman Islands are taxed in the very same way they would be if the Romneys held their shares of the fund investments directly in the U.S. rather than through a Cayman fund," the statement said.