WASHINGTON -- Mitt Romney sought and received $787,455 in foreign tax credits from the U.S. Treasury to cover his tax payments to other nations in 2008.
While there is no evidence that his actions violated the law, abuse of the foreign tax credit has been a problem for the Internal Revenue Service. The agency has prosecuted a number of international fraud cases in the last few years involving such credits. And the size of Romney's claim in 2008 raises questions about the sources of his foreign income.
"This could definitely be a contributing reason for Romney's unwillingness to disclose prior years' returns," said New York University School of Law professor Daniel Shaviro, a tax expert.
The U.S. government provides tax credits to Americans who also pay taxes abroad, so that foreign income is not taxed twice by different governments. While these credits do not save U.S. residents from paying taxes -- they still have to pay the foreign governments -- they do put a dent in the U.S. Treasury's collections.
"In the plain-vanilla case, the taxpayer is hurting the U.S. Treasury to the benefit of the foreign treasury, but isn't benefiting himself," Shaviro said.
The Huffington Post had previously reported that Romney received more than $25 million in foreign income between 2005 and 2010. At the time, he was governor of Massachusetts. His 2010 return also lists foreign tax payments that Romney made dating back to 2000. Through 2004, the payments were tiny -- for Romney -- averaging $37,000 a year. In 2005, however, his foreign tax bill shot up to $333,149 and stayed high for the next three years, prior to the Great Recession.
"Romney had a significant amount of foreign income," observed Rebecca J. Wilkins, senior counsel for federal tax policy with the nonpartisan Citizens for Tax Justice. "We don't know what the source of his foreign income is."
The Romney campaign declined to comment for this article, and there is no way to determine where Romney's foreign income came from without additional disclosures. HuffPost recently pointed out the circumstantial evidence showing that he may have used offshore corporations to avoid paying taxes.
The total $787,455 credit covers both "passive income" -- dividends and investment gains -- and "general income" -- foreign wages and business revenue. Some money from Romney's Bermuda-based corporation, Sankaty High Yield Asset Investors Ltd., could qualify as general income.
While there is no evidence that Romney broke the law, American taxpayers have set up illegal sham transactions involving foreign taxes in recent years to dupe the IRS. Such transactions can involve multiple taxpayers claiming the credit for the same foreign income or one taxpayer claiming multiple tax credits for the same foreign income. Individual taxpayers have also claimed credits for foreign taxes that they never actually paid.
Much of Romney's foreign banking activity is also shrouded in secrecy. He has not released a 2010 tax form that details his foreign bank account holdings. He has, however, disclosed the existence of a Swiss bank account. Such accounts are prized by global elites for Swiss banks' extreme levels of secrecy, which has allowed thousands of American taxpayers to shield offshore income from the IRS by stashing it in Swiss accounts. There is no evidence that Romney broke the law with his Swiss account.
But Romney's large foreign tax credit in 2008 was unusual. Many wealthy individuals who engage in aggressive tax planning choose to park foreign income in tax-free jurisdictions. Romney and Bain Capital, for instance, made extensive use of Cayman Island accounts. The U.S. Treasury, moreover, caps the foreign tax credit at whatever the U.S. tax rate would be on the income in question. Any additional foreign taxes can be "carried forward" and receive a tax credit in future years. Because Romney exceeded the foreign tax credit limit in 2008, he received additional credits based on his 2008 income in 2009 and 2010.
"What does he have that's generating all that foreign income?" Wilkins asked.
Also on HuffPost:
"Politically, I think that would help him," Paul said in a interview with <a href="http://www.politico.com/news/stories/0712/78599.html#ixzz20w7ycTBE" target="_hplink">Politico</a>. "In the scheme of things politically, you know, it looks like releasing tax returns is what the people want."
"I have no idea on why he has restricted the number to this point," <a href="http://www.cbsnews.com/8301-18563_162-57474352/pressure-mounts-on-mitt-romney-to-release-more-tax-returns/?tag=socsh" target="_hplink">Lugar said</a>.
"I don't know why... he didn't get all of this out and tidy up some of his offshore accounts and all the rest," Will said on ABC's "<a href="http://www.huffingtonpost.com/2012/07/15/george-will-mitt-romney-bain_n_1674513.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+HP%2FPolitics+(Politics+on+The+Huffington+Post)" target="_hplink">This Week</a>." "He's done nothing illegal, nothing unseemly, nothing improper, but lots that's impolitic."
"He should release the tax returns tomorrow. It's crazy," Kristol said on "<a href="http://www.huffingtonpost.com/2012/07/15/mitt-romney-tax-returns_n_1674325.html" target="_hplink">Fox News Sunday</a>." "You gotta release six, eight, 10 years of back tax returns. Take the hit for a day or two."
"I just believe in total transparency," Bentley told <a href="http://abcnews.go.com/blogs/politics/2012/07/gop-governor-calls-on-mitt-romney-to-release-additional-tax-returns-and-show-he-has-nothing-to-hide/" target="_hplink">ABC News</a>. "In fact, I was asked today that question -- do you think that Governor Romney should release his tax returns? And I said I do. I said, I release my tax returns. I may be the only public official in Alabama that does, but I release mine every year and I just believe that people should release their tax returns. And if you get them out and just get past that, it just makes it so much easier."
When asked on "<a href="http://www.nationaljournal.com/2012-presidential-campaign/barbour-romney-should-release-more-tax-returns-20120710" target="_hplink">The Situation Room</a>" if Romney should release more returns, Barbour said, "I would. But should it be an issue in the campaign? I don't think it amounts to diddly."
"If there's nothing there, there's no 'there' there, don't create a there,'" Steele said on MSNBC.
"Tax returns the next problem. Releasing returns under pressure: more weakness, more pain," Frum <a href="https://twitter.com/davidfrum/status/224509505973661696" target="_hplink">tweeted</a>.