Here's his 2011 Tax Retuen. Look at the Foreign Tax Credit Forms he filled out
http://www.mittromney.com/learn/mitt/tax-return/2011/wmr-adr-return
http://www.nytimes.com/2012/08/25/business/in-romneys-tax-return-clues-in-foreign-taxes.html?pagewanted=all
Foreign tax credit means he paid taxes on the income to another government as it it is foreign money coming out of that foreign country.
From the IRS.
Topic 856 - Foreign Tax Credit
The foreign tax credit is intended to reduce the double tax burden that would otherwise arise when foreign source income is taxed by both the United States and the foreign country from which the income is derived.
Four tests must be met to qualify for the credit:
The tax must be imposed on you
You must have paid or accrued the tax
The tax must be a legal and actual foreign tax liability, and
The tax must be an income tax
Generally, only income taxes paid or accrued to a foreign country or a U.S. possession, or taxes paid or accrued to a foreign country or U.S. possession in lieu of an income tax, will qualify for the foreign tax credit. Qualified foreign taxes do not include taxes that are refundable to you, used to provide a subsidy to you or someone related to you, that are not compulsory because you could have avoided paying the taxes to the foreign country, or income taxes paid or accrued to any country if the income giving rise to the tax is for a period (the sanction period) during which:
The Secretary of State has designated the country as one that repeatedly provides support for acts of international terrorism,
The United States has severed or does not conduct diplomatic relations with the country, or
The United States does not recognize the country's government, unless that government is eligible to purchase defense articles or services under the Arms Export Control Act.
You can choose to take the amount of any qualified foreign income taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction. To choose the deduction, you must itemize deductions on Form 1040, Schedule A. To choose the foreign tax credit you generally must complete Form 1116 (PDF) and attach it to your Form 1040 (PDF), or Form 1040NR (PDF).
You can claim the credit for qualified foreign income taxes without filing Form 1116 if all of the following requirements are met:
All of your foreign source income is passive income, such as interest and dividends,
All of your foreign source income and the foreign income taxes are reported to you on a qualified payee statement, such as Form 1099-INT (PDF) or Form 1099-DIV (PDF), and
The total of your qualified foreign taxes is not more than the limit given in the Form 1040 Instructions for the filing status you are using, or in the Form 1040-NR Instructions (if you file Form 1040-NR).
If you claim the credit directly on Form 1040 or Form 1040-NR without filing Form 1116, you cannot carryback or carryover any unused foreign income tax to or from this year.
If you use Form 1116 to figure the credit, your foreign tax credit will be the smaller of the amount of foreign tax paid or accrued, or the amount of United States tax attributable to your foreign source income. This limit is currently computed separately for passive income, income resourced under a tax treaty, income derived from sanctioned countries, and all other income.
If you cannot claim a credit for the full amount of qualified foreign income taxes you paid or accrued in the year, you may be allowed a carryback and/or carryover of the unused foreign income tax. You can carryback for one year or carryover for 10 years the unused foreign tax. For more information on this topic (including taxes paid or accrued in years before 2005) see Publication 514, Foreign Tax Credit for Individuals.
You may not take either a credit or a deduction for taxes paid or accrued on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. There is no double taxation in this situation because the income is not subject to United States tax.
For more complete information on the foreign tax credit (including information on whether a particular tax is eligible for the credit), refer to the Form 1116 Instructions, or refer to Publication 514, Foreign Tax Credit for Individuals. If the information you need is not addressed in the instructions or in Publication 514, you may call the IRS International Tax Law hotline at 267-941-1000, Monday – Friday 6:00 a.m.–11: p.m. Eastern Time. This is not a toll-free number.
