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 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 Barack 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, Sen. Max Baucus, D-Mont., and its former ranking Republican, Sen. Charles E. Grassley of Iowa, have moved to make it illegal.

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

The attention suggests that 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, 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," 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, 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. Though not illegal, so-called UBIT blockers cost the United States Treasury nearly $1 billion a decade, according to Congress’ bipartisan Joint Committee on Taxation.

BCIP Trust Associates III, a Bain fund that holds $5 million to $25 million of 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 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 IRA 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 IRA 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 IRA 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, McDowell said.

Adding to the appearance that Romney has used such leveraged investments in his IRA is its sheer size.

Even if someone had contributed the maximum amount to an IRA 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 IRA, the total would be about $1.5 million.

Romney’s IRA 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.

The Romney campaign has not said whether the candidate’s IRA investments are in a blocker entity, but they have come close. A campaign statement said Romney’s IRA "uses investment structures just as those commonly used by charities and pension funds, including union pension funds, to maintain their tax-exempt or tax-deferred status."

But it has been the behavior of charities and pension funds that has angered the Senate.

In 2010, Grassley joined Sens. Tom Coburn of Oklahoma, Jon Kyl of Arizona and John Cornyn of Texas, all Republicans, in going after the Boys & Girls Clubs for putting $54 million in six offshore accounts, much of that through blocker corporations. In July, 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.

"Individuals have also been caught in the net. In 2009, a private equity executive, Jeffrey Goldstein, went before the Senate Finance Committee for a hearing on his nomination to be the president’s under secretary of the Treasury for domestic finance. He got grilled over his firm’s involvement in blocker entities.

"The only real difference that I hear between investing in the Cayman Islands and investing in the United States, or the only way that the Cayman Islands investments are superior, is the possibility of avoiding U.S. tax," Grassley lectured.

On March 27, 2010, eight months after he was nominated and almost six months after he delivered his tax documents to the Finance Committee, Goldstein was installed as a recess appointment. Grassley accused the president of cutting short the vetting process. Goldstein, who returned to his private equity firm last year, declined to comment.

In 2007, Grassley brought Robert Steel, President George W. Bush’s under secretary of the Treasury for domestic finance, to Capitol Hill to question him about his position on the Duke University board of trustees after Grassley learned of the university’s ample use of offshore blocker corporations.

A blocker user "is clearly abusing its status," said Sen. Benjamin L. Cardin, D-Md., who has pressed for enforcement of unrelated business income tax rules. "When you cross the line and are in competition with the private sector, you should pay the tax," he said.

Finance Committee leaders in 2007 wanted to close the loophole, to bring investments back to the United States and to raise revenue.

House Democratic tax writers took another tack. The Ways and Means Committee chairman at the time, Rep. Charles B. Rangel of New York, and the current ranking Democrat on the committee, Rep. Sander M. Levin of Michigan, pressed for legislation that would allow nonprofits to shield investments from unrelated business taxes outright. The move would have kept money out of tax havens like the Caymans but would have cost the Treasury an estimated $1.34 billion over 10 years.

"The intent of my legislation was to help organizations such as universities and pension funds to eliminate unnecessary administrative costs when making investments, not to help an individual who is in the unusual position of accumulating tens of millions of dollars in an IRA that invests through a Cayman Islands account," Levin said Thursday regarding Romney’s IRA investments in the Caymans.

Because the two chambers differed so much on the proposals, neither one advanced.