Monday, January 23, 2012

Romney offshore accounts contain up to $32 million.

The Miami Hearld reports that Republican presidential candidate Mitt Romney owns investments worth between $7 million and $32 million in offshore-based holdings, which are often used legitimately by private equity firms to attract foreign investors. Such offshore accounts also can enable wealthy investors to defer paying U.S. taxes on some assets.

The six Romney offshore holdings are in investment funds run by Bain Capital, the private equity powerhouse he led in the 1980s and 1990s. The six funds are listed only by name and a range of amounts in Romney's financial records, but the Cayman addresses are in other corporate documents filed with the U.S. Securities and Exchange Commission and in foreign investment portfolios.
Five of the Cayman-based funds are included within a blind trust for Romney's wife, Ann, and worth between $2.8 million and $7.6 million.

A sixth fund, called Bain Capital Investment Partners Trust Associates lll, is part of Romney's IRA retirement account and worth between $5 million and $25 million.

Using offshore funds to attract foreign investors is a legitimate and standard business practice. Increased foreign investment in a U.S. fund based abroad could increase financial returns for American investors. Offshore funds offer advantages for U.S. investors looking to diversify their portfolios and for foreign investors seeking to avoid U.S. reporting and tax-withholding requirements.

Romney's taxpaying strategy may become clearer when he makes his 2012 tax returns available in April as he has promised.

Posting Supplied by Kevin E. Packman, Partner at Holland & Knight.

1 comment:

  1. Unlike Americans who rely on a paycheck, Romney earns most of his income from investment profits, dividends and interest. The returns for 2010 and estimates for 2011 showed that he will pay a total of $6.2 million in taxes on income of $42.5 million.

    Romney and his wife Ann paid an effective tax rate of 13.9 percent in 2010 and expect to pay a 15.4 percent effective tax rate when they file their returns for 2011.

    Those rates are far below the top income tax rate on wages, which is 35 percent, because the U.S. tax code in recent years has favored investment income over wage income.

    Romney got about $13 million in income over the past two years from "carried interest," a form of earnings that is available to private equity partners and taxed at the 15 percent investment income tax rate, not the higher wage income rate.

    The carried interest provision of the U.S. tax code has repeatedly been targeted for elimination by Democrats who say it is unfair, while the private equity industry defends it. A campaign spokesman said Romney "has not addressed carried interest specifically in this campaign."

    For more on this story go to Reuters