The answer is probably no.
Here's Vic Fleischer on a management fee conversion trick that Bain appears to have done, and that many reputable tax lawyers believe is bogus and could not withstand legal challenge.
And here's James Stewart in the New York Times (to appear in the Saturday print edition tomorrow), quoting me in re. why Romney's high foreign tax credit for 2008 - a sharp outlier relative to his credits in adjoining taxable years - raises strong suspicions that he did some sort of a tax shelter transaction in that year involving the effective purchase of credits with minimal economic substance.
My statement in the article that Romney's big foreign tax credit in 2008 "makes no sense to me at all" relates to the point that high foreign taxes are incredibly easy to avoid if you have passive income and/or access to Bain's extremely aggressive and complicated tax planning technologies. For example, all those Caymans entities create huge opportunities to avoid any significant foreign taxes, even with associated operations in countries that have income tax systems.
So I find it hard to believe that the Bain investors actually paid significant foreign income taxes in 2008 - and not just because this seems to have been a once-only extraordinary event. Rather, it appears far more plausible to me that they did one of those fake off-the-rack deals that the IRS generally challenges. Admittedly, taxpayers sometimes win these cases, requiring legislation to shut down foreign tax credit-generating tax shelters. But in general the government has done very well in anti-tax shelter litigation over the last five to ten years.
I am quoted in the article as saying that I consider the foreign tax credit hugely over-generous (which doesn't necessarily mean that tax burdens on U.S. companies' foreign source income should be higher - just that the statutory rate, rather than the credit, should be used to create the desired burden level). But it is true that, when you actually bear foreign income taxes that are creditable, you are not actually benefiting. Thus, suppose we conclude that the U.S. should not provide 100 percent reimbursement (via the credit) for income taxes that a U.S. company pays to Germany, because this eliminates the company's incentive to try to reduce German taxes (which from the U.S. national standpoint are purely a cost, as we don't get the money as we would from our own tax collections). Even though, in this setting, I would call the foreign tax credit over-generous, the taxpayer isn't getting away with anything, because paying a dollar of income tax to Germany costs you just as much as paying it to the U.S.
But if Bain, as I strongly suspect, acquired its 2008 foreign tax credits through some sort of super-aggressive tax shelter transaction, this scenario would not hold. The whole point of abusive tax shelters involving foreign tax credits is to get the credit without actually bearing the foreign tax cost.
Here is an example that would not actually work (or even come close) as a matter of U.S. income tax law, but that captures the economic heart of what these transactions do. Suppose that I were allowed unlimited foreign tax credits whenever I made any income tax payment to a foreign government, even if it wasn't actually my tax liability. Now suppose that J.K. Rowling came to me and said, "I owe the U.K. government $10 million of income taxes this year. But I will pay you $5 to pay this entire liability for me."
End result before U.S. tax: J.K. Rowling pays me $5, and I pay the U.K. government the $10 million that she would otherwise have paid. But if I can claim foreign tax credits for this full amount, the U.S. government gives me back the $10 million, and I end up ahead by $5 (minus the U.S. tax on that amount). So U.S individuals as a whole, via the effect on federal income tax receipts, lose $9,999,995.
Again, this transaction would not even come close to working under U.S. federal income tax law. But its bottom line is economically similar to the types of sham deals that I suspect Bain may have done in 2008. And if such deals could have been successfully challenged, then Romney may not have paid all the U.S. federal income taxes that he legally owed.
As usual, I feel half-apologetic about the degree of speculation that I am engaging in here. But it's Romney's unprecedented tax return secrecy, and the inferences reasonably derived from it, that makes such speculation necessary.