Will Arizona’s political reporters ask about Mitt’s off-shore tax shelters?

Posted by AzBlueMeanie:

Last week the New York Times was hot on the trail of Willard "Mittens" Romney's off-shore tax shelters. Will Arizona's political reporters follow-up? Romney’s Returns Revive Scrutiny of Offshore Tax Shelters – NYTimes.com:

Mitt Romney's tax returns have drawn political scrutiny on multiple fronts, like his relatively low tax rates and the money parked in a Swiss bank account. But on Capitol Hill, his returns have caught the eyes of members of both parties for what appears to be his use of a type of complex shelter that has been debated for years in battles over evasion and fairness in the tax code.

The technique in question allows nonprofit institutions and large retirement funds to exploit the advantages of shell companies set up in tax havens like the Cayman Islands by investing money with private equity firms like Bain Capital, which Mr. Romney ran. Ordinarily, such private equity investments are frequently subject to something called the unrelated business income tax. But by going offshore, pension funds, universities, foundations and even large individual retirement accounts can structure those investments to avoid that heavy tax.

The technique has drawn bipartisan scrutiny from the Senate Finance Committee, complicating the confirmation of one of President Obama’s nominees, drawing negative attention to a Republican Treasury official and eliciting scathing criticism of a well-known charity, the Boys & Girls Club of America. The committee’s chairman, Senator Max Baucus, Democrat of Montana, and its former ranking Republican, Senator Charles E. Grassley of Iowa, have moved to make it illegal.

Tax experts and former Finance Committee staff members say that Mr. Romney’s I.R.A. appears to have used the technique, and that he may have benefited personally.

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In short, Mr. Romney . . . [would] have a difficult time making it through the Senate’s tax-sensitive confirmation process if he were merely a cabinet nominee.

“I pay all the taxes that are legally required and not a dollar more,” Mr. Romney said during a debate shortly after releasing his tax returns. “I don’t think you want someone as the candidate for president who pays more taxes than he owes.”

Say What? Is this an answer designed to appease Grover Norquist? Just what the hell is that supposed to mean, anyway?

The issue revolves around “blocker corporations,” set up in tax havens like the Caymans to help nonprofit giants avoid the unrelated business income tax, which was created to prevent nonprofits from straying into profit-making ventures that compete with taxpaying companies. Although not illegal, so-called UBIT blockers cost the United States Treasury nearly $1 billion a decade, according to Congress’s bipartisan Joint Committee on Taxation.

BCIP Trust Associates III, a Bain fund that holds $5 million to $25 million of Mr. Romney’s retirement savings, is a partnership, not a blocker entity. But the Caymans-based fund appears to be using blockers to shield retirement savings from some taxation. Nonprofit investors in Bain funds, and in funds managed by many other investment firms, use blocker corporations to retain their nontaxable status with respect to unrelated business income, according to experts familiar with the practices of the firm and the industry.

“It’s to the tax advantage of Bain’s investors: avoid UBIT issues as you diversify your portfolio,” said Dean Zerbe, a longtime Senate Finance Committee investigator now in the private sector.

The fund may also have helped Mr. Romney individually, tax experts say. Like nonprofits, individual retirement accounts are subject to the unrelated business income tax, said Anne Moran and Suzanne McDowell, offshore-tax experts at Steptoe & Johnson, a law firm in Washington.

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Mr. Romney’s I.R.A. holdings, in 25 funds, total from $21 million to $102 million, according to his financial disclosure forms. To reach those totals, he may have hit the investment jackpot, or, more likely, his contributions were laden with debt and valued very low, tax experts said. As that debt was retired, the value of those contributions exploded.

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In July [2010], Sen. Grassley tried to pass legislation that would prohibit any tax dollars from going to a nonprofit entity holding money in offshore accounts designed to avoid unrelated business income taxation.

At a town hall event in Maine on Friday, an antagonistic questioner asked Romney, “Do you think it’s patriotic of you to stash your money away in the Cayman Islands?” Tax Avoidance Questions Continue To Haunt Romney | TPMDC:

In response, Romney correctly noted that money U.S. taxpayers invest offshore is largely taxed just as it would be if they invested it in the states. But he once again denied avoiding any U.S. taxes by investing offshore — a claim tax experts openly doubt.

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As we’ve explained here repeatedly, Romney’s massive individual retirement account could very easily have avoided a significant (35 percent) tax called the unrelated business income tax (UBIT), if it is invested in any offshore entities that finance their own investments with debt. Tax exempt vehicles like the IRA are subject to the UBIT when they invest in companies that use leverage here in the U.S. But they can avoid the UBIT altogether by investing in companies that use leverage in other countries.

Romney’s camp has declined to address this question directly, despite growing attention from segments of the media — most recently the New York Times. If it turns out he has avoided this tax, it will puncture the central defense of his offshore investments.

Which should give an enterprising political reporter all the motivation he or she needs to be the first to pin down Willard "Mittens" Romney on this question he does not want to answer.