Romney's Returns Revive Scrutiny of Offshore Tax Shelters WASHINGTON - 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 in recent years 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 Clubs 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 Senate 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. The attention suggests that Mr. Romney's personal finances could remain an issue in the presidential campaign. And it highlights how, under the tax code, legality and fairness are not necessarily the same thing. In short, Mr. Romney, a former Massachusetts governor, may well become his party's nominee, and could be elected the 45th president of the United States, but if history is a guide, he might have a difficult time making it through the Senate's tax-sensitive confirmation process if he were merely a nominee to some other president's cabinet. Romney campaign officials did not return requests for comment. "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. Nonetheless, Mr. Baucus said, "from what I have read about Governor Romney's tax returns, I think it raises very serious questions." 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 tax-paying 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. If an I.R.A. invests in a partnership like Bain that has "debt-financed" investments, Bain's specialty, income from those investments is subject to unrelated business taxes. For instance, an investor could put $1 in an I.R.A. and purchase a partnership interest of Bain Capital in the Cayman Islands, which, in turn, borrows $1,000 to buy 1,001 shares of a company near bankruptcy that Bain has just purchased. When the shares go to $100, the investor then has $99,100 after he pays off the $1,000 loan. Such a transaction would be walloped by the unrelated business tax if done on shore. To reap the advantages of a partnership, the I.R.A. investment manager buys shares in a blocker corporation. The corporation then invests in the partnership, and investment gains are paid out as dividends, not subject to the tax, Ms. McDowell said. Adding to the appearance that Mr. Romney has used such leveraged investments in his I.R.A. is its sheer size. Even if someone had contributed the maximum amount to an I.R.A. since 1975, when Congress created such tax-favored accounts, contributions would total roughly $100,000. And even if someone had contributed the maximum amount to an employer-provided retirement plan, then rolled that into an I.R.A., the total would be about $1.5 million, said experts in the field.