Bain Capital appears to have benefited from a provision in the U.S. tax code that grants companies tax breaks for costs associated with offshoring American jobs. Bain profited from the closure of a Denver factory in early 2001, when SEC filings list Romney as the sole shareholder and CEO of multiple Bain enterprises.
The tax perk available to Bain while under Romney's leadership conflicts with the Republican candidate's comments at the first presidential debate of 2012.
"You said you get a deduction for getting a plant overseas," Romney said, addressing Obama. "Look, I've been in business for 25 years. I have no idea what you're talking about. I maybe need to get a new accountant." A moment later, Romney added, "The idea that you get a break for shipping jobs overseas is simply not the case."
Bain purchased a major stake in the electronics manufacturer SMTC Corp. in 1998 and remained one of the company's largest shareholders through 2001. Bain had three seats on the company's board of directors -- more than any other shareholder, according to an April 2001 SMTC document filed with the Securities and Exchange Commission.
According to another SEC filing, SMTC laid off 429 workers at its Denver plant in 2001 when it shifted production to Chihuahua, Mexico, and other locations. The company said in May 2001 that it would record $22.7 million in upfront losses from the factory's closure, all of which would have been deductible from SMTC's U.S. federal income tax bill. The company's annual report for 2002 details a longer list of charges related to the closing of the Denver plant, including $25.4 million in direct costs and an additional $23.9 million in miscellaneous costs that derive in part from closing the Denver plant and costs from other locations.
Romney's remarks on the offshoring tax break during the debate appear to be true in a narrow, technical sense: There is no tax deduction expressly for shipping jobs overseas. But as HuffPost and Politifact have noted, companies can deduct costs associated with relocation whether they're moving down the street or halfway around the world: Section 162 of the Internal Revenue Code allows corporations to deduct any "ordinary and necessary" business expenses from their tax bill, including costs associated with offshoring jobs.
It is impossible to determine whether SMTC actually recognized the deduction without viewing their confidential IRS tax filing, but any competent accountant would have listed the offshoring charges as a deduction.
"The company deducted these costs at some point," said Rebecca Wilkins, senior counsel for federal tax policy at the nonprofit Citizens for Tax Justice. "Or they need a new accountant."
The Romney campaign has long disputed the candidate's precise departure date from Bain. "As we've said many times before, Mitt Romney left Bain Capital in 1999 to turn around the Salt Lake Olympics," Romney campaign spokesperson Michelle Davis told HuffPost. "He had no role in operational or investment decisions at Bain Capital after 1999."
A February 13, 2001 SEC filing from SMTC, however, asserts that "Mr. W. Mitt Romney is the sole shareholder, sole director, Chief Executive Officer and President of Bain Capital."
Other SEC documents list him as Bain Capital's CEO as late as 2002, The Boston Globe has reported.
The deduction likely pales in comparison to the savings that a multinational company might receive from actually storing profits overseas. But Scott Paul, director of the Alliance for American Manufacturing, said any rational business would consider the relocation tax break when weighing whether or not to move a plant to another country, particularly smaller and mid-size firms to whom the deduction might mean more.
"It's indisputable: that's a tax break for shipping jobs overseas and it definitely reduces the tax burden," Paul said. "This specific business deduction is something that has a bigger effect for mid-size manufacturers that may not be Fortune 500 companies but are the heart of manufacturing."
Several Democratic politicians have been trying to strip that benefit from companies that are moving jobs to other countries, most recently President Barack Obama and Sen. Debbie Stabenow (D-Mich.). Obama has discussed the issue regularly since his State of the Union address earlier this year, when he started pushing an economic plan heavy on manufacturing, and Stabenow has introduced a bill, the Bring Jobs Home Act, that would eliminate the deduction and award tax breaks to companies that "insource" jobs back to the U.S. It failed to overcome a GOP filibuster in July.
Bain Capital and SMTC Corp. declined to comment for this story.
Also on HuffPost:
SEC Filings List Romney As 'Chief Executive Officer'
According to the <em><a href="http://www.boston.com/news/politics/articles/2012/07/12/government_documents_indicate_mitt_romney_continued_at_bain_after_date_when_he_says_he_left/" target="_hplink"><em>Boston Globe</em></a></em>, Securites and Exchange Commission documents filed by Bain Capital after February 1999 list Romney as the private equity firm's "stole stockholder, chairman of the board, chief executive officer, and president."
$100,000+ Salary
The <em><a href="http://www.boston.com/news/politics/articles/2012/07/12/government_documents_indicate_mitt_romney_continued_at_bain_after_date_when_he_says_he_left/" target="_hplink">Globe</a></em> also found financial disclosure forms filed by Romney that indicate he still owned 100 percent of Bain in 2002, and earned at least $100,000 as an "executive" for the firm in 2001 and 2002.
2002 Testimony
As <a href="http://www.huffingtonpost.com/2012/07/12/mitt-romney-bain-departure_n_1669006.html?utm_hp_ref=politics" target="_hplink">The Huffington Post</a> reported, sworn testimony given by Romney in 2002 undermined his claims that he left Bain in 1999. In that testimony, given as part of a hearing to determine if he had sufficient Massachusetts residency to run for governor, Romney said that he "remained on the board" of the LifeLike Co., which Bain held a stake in at the time.
LifeLike's 2000 <a href="http://www.sos.state.co.us/biz/ViewImage.do?fileId=20001165127&masterFileId=19961077091" target="_hplink">corporate filing</a>, filed with the state of Colorado, lists Romney as a director.
More SEC Filings
HuffPost's Jason Cherkis and Ryan Grim identified at least <a href="http://www.huffingtonpost.com/2012/07/13/mitt-romney-bain-sec_n_1671819.html" target="_hplink">six documents</a> filed by Bain Capital with the SEC from 1999 to 2001 that were signed by Mitt Romney. Most of the documents refer to Romney as the "reporting person."
'Managing Member' In 2002
HuffPost <a href="http://www.huffingtonpost.com/2012/07/15/mitt-romney-bain-capital_n_1674209.html?utm_hp_ref=politics" target="_hplink">reported</a> on a 2002 corporate document filed with the state of Massachusetts that shows Romney listed as one of two managing members of Bain Capital Investors, an entity of the private equity firm.
Signed Documents After 1999
Romney signed an SEC filing in November 1999 pursuant to Bain's partial acquisition of medical-waste firm Stericycle, <em><a href="http://www.motherjones.com/politics/2012/07/mitt-romney-bain-financial-disclosure" target="_hplink">Mother Jones</a></em> reported. The filing noted that he was the "sole shareholder, Chairman, Chief Executive Officer and President" of the Bain entities involved in the $75 million deal.
2001 & 2002 SEC Filings
<a href="http://talkingpointsmemo.com/archives/2012/07/no_romney_didnt_leave_bain_in_1999.php" target="_hplink">Talking Points Memo</a> uncovered two SEC filings from July 2000 and February 2001. In both, Romney lists his "principal occupation" as "Managing Director of Bain Capital, Inc."
1999 News Reports
As Slate's <a href="http://www.slate.com/blogs/weigel/2012/07/13/did_the_romney_campaign_create_the_swift_yachting_story_.html" target="_hplink">Dave Weigel</a> pointed out, Romney's campaign has cited news reports from 1999 that clearly state that Romney left Bain in 1999. However, those same news reports state that Romney would still be involved with the company. "Romney said he will stay on as a part-timer with Bain, providing input on investment and key personnel decisions," read one such report from the <em>Boston Herald</em>
Former Partner Speaks Out
A former Bain Capital partner, Ed Conard, said during an appearance on MSNBC's "<a href="http://upwithchrishayes.msnbc.msn.com/_news/2012/07/15/12751962-former-bain-capital-partner-says-romney-was-legally-ceo-of-bain-capital-until-2002" target="_hplink">Up W/Chris Hayes</a>" that Romney was "legally" the CEO and sole owner of Bain Capital until 2002, as an ownership battle dragged on after Romney left to take over the Salt Lake City Olympics.
"We had a very complicated set of negotiations that took us about two years for us to unwind. During that time a management committee ran the firm, and we could hardly get Mitt to come back to negotiate the terms of his departure because he was working so hard on the Olympics," Conard said.
Relationships With Problematic Companies
HuffPost's Sam Stein <a href="http://www.huffingtonpost.com/2012/07/16/mitt-romney-bain-capital_n_1677133.html" target="_hplink">reported</a> that SEC filings link Romney to politically problematic companies after his alleged 1999 departure from Bain:
<blockquote>A Huffington Post review of SEC files unearthed six separate occasions in which Romney was listed as a member of "the Management Committee" of both Bain Capital Investment Partners and BCIP Trust, "deemed to share voting and dispositive power with respect to" shares held of DDi. In one of those filings, Romney is listed as president and managing director of Bain Capital, Inc.
The dates of those filings range from April 14, 2000 to May 10, 2001 -- all after Romney had left for Salt Lake City. In one March 2001 filing, Romney signed the document as the "reporting person."</blockquote>
'General Partner'
According at a <a href="http://www.huffingtonpost.com/2012/07/16/mitt-romney-bain_n_1677259.html" target="_hplink">document</a> filed with the California Secretary of State's office in July 1999, Romney was listed as a "general partner" at Bain Capital Partners. Romney's signature appears on the document.
Romney remained on record as a general partner until California was notified of his resignation in June 2003.
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