WASHINGTON (AP) — 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, according to tax experts.

An Associated Press examination of Romney's financial records identified at least six funds set up in the Cayman Islands, a small Caribbean island chain that has long been used as a base for international investments because of low tax rates and financial secrecy. Romney has acknowledged that some of his investments are based in the Caymans, but he has not identified all of the specific accounts and the amounts based there. There is no indication Romney uses the accounts to dodge any U.S. tax obligations.

The Caymans have often been associated with individuals and corporations seeking to avoid paying U.S. taxes. However, it is legal for U.S. residents to own investment accounts that are set up there — if they file the proper forms with the Internal Revenue Service and pay the appropriate taxes.

"If you file the forms and report the income, you are 100 percent legal," said Kevin Packman, a Miami lawyer who chairs the offshore tax compliance team at the law firm of Holland & Knight.

Independent tax policy experts said Romney's use of the Cayman-based investments was legal, but some criticized the strategy as a province of wealthy investors allowed by a tax code studded with loopholes.

"The bottom line is, they're taking advantage of a system that's flawed," said Nicole Tichon, director of Tax Justice Network USA, part of a global network promoting tax transparency. "It may be legal, but these are loopholes that show problems in our tax code."

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.

In a financial report last August, Romney declared a family fortune worth as much as $250 million. The six Cayman funds are among dozens of investments the Romneys have owned since he left Bain in 1999 to organize the 2002 Olympic Games in Salt Lake City and then pursue a career in politics.

A Romney spokeswoman, Andrea Saul, said the Cayman funds "are taxed in the very same way they would be if those funds were established in the United States." She noted that because many of the funds are in a trust directed by a Boston lawyer, the Romneys played no role in deciding how the money was invested.

Saul said the decision to set up the funds in the Caymans was made by the funds' sponsors — in this case, senior partners at Bain Capital, not Romney. A Bain spokesman declined to comment on the funds' origins.

Tax experts and lawyers said 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.

"If you have a foreign investor who is making income largely abroad and doesn't want to be subject to U.S. regulations and reporting, it's a plus," said C. Eugene Steuerle, co-founder of the Urban-Brookings Tax Policy Center and former deputy assistant treasury secretary for tax analysis.

Under American law, U.S. investors must pay taxes on profits made from offshore investment funds. However, U.S. investors may be able to defer those taxes until later as they bring the profits into the U.S., depending on how the fund is structured, said Kevin Packman, chairman of his firm's offshore compliance team at Holland & Knight of Miami.

Some hedge fund and private equity managers route IRA retirement holdings through an offshore entity set up as a "blocker corporation," an affiliate of a private equity fund that acts as a way-station, storing the retirement funds while investing an identical amount in the actual fund. This complicated maneuver allows the investor to defer paying a 35 percent tax on earnings that the IRS considers "unrelated business income," said Michael J. Graetz, a Columbia University law professor and an authority on national and international tax law.

The 35 percent tax is aimed at pension funds, university endowments, hospitals and other nonprofit organizations when they invest in private equity funds that borrow large amounts of money to buy other companies. But nonprofits can use the offshore blocker funds to defer those tax payments, and similarly, IRA accounts can be routed through blocker accounts, depending on how tax plans are structured, Graetz said.

"One of the major functions of tax planning is to defer payments and deal with them down the road instead of today," Graetz said. "For an IRA account, it's not so much a tax rate game as it is a timing game."

Romney's other offshore-based investments would not benefit from that structure, Graetz said. But their earnings could be boosted by blocker corporations that promote investments by nonprofits, he said.

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

Congress has tried to make it harder for investors to defer tax payments by broadening requirements that U.S. investors in foreign-based funds pay taxes as they earn profits. But aggressive tax planners can still find ways to get around the rules, experts said.

"You have to look at each investment and its structure before you can pass judgment," Steuerle said.

Benefits to deferring tax payments include the ability to reinvest the deferred taxes, earning higher returns before bringing the money into the U.S. A wealthy investor who has no immediate need for the money would be able to keep the investment offshore indefinitely, never paying U.S. taxes on it.