Understanding Brookfield Infrastructure Partners: Your Tax Questions Answered

Brookfield Infrastructure Partners L.P. (BIP) is a publicly traded limited partnership that owns and operates critical and diverse infrastructure networks globally. For investors, especially those in Canada and the U.S., understanding the tax implications of investing in BIP is crucial. This article addresses common tax-related questions unitholders may have, providing clarity on BIP’s structure, income nature, tax forms, and other essential tax considerations.

Brookfield Infrastructure Partners: Partnership, Not Corporation or Trust

It’s essential to clarify the structure of Brookfield Infrastructure Partners right from the start. Brookfield Infrastructure Partners is a Bermuda-based limited partnership. This is a key point for tax purposes, particularly for Canadian investors, as it’s treated as a partnership under Canadian tax law.

Crucially, Brookfield Infrastructure Partners is not a corporation or a trust. This distinction influences how the income is taxed and reported to unitholders. Understanding this fundamental aspect is the first step in navigating the tax landscape associated with BIP investments.

Decoding the Income Nature of Brookfield Infrastructure Partners

Brookfield Infrastructure Partners operates by owning subsidiary corporations across various jurisdictions. These subsidiaries generate income from diverse infrastructure operations. However, BIP itself, as a partnership, does not earn active business income directly.

Instead, BIP receives investment income from these subsidiaries in the form of:

Interest: Earnings from lending capital to its subsidiaries or other entities.
Dividends: Distributions of profits from subsidiary corporations.
Return of Capital: A return of the investor’s original investment, which is not immediately taxable but reduces the adjusted cost base of the investment.

The specific mix of these income types allocated to unitholders can fluctuate based on the performance and financial structure of BIP’s various business units. Furthermore, the source of these funds directly impacts potential withholding taxes on distributions.

Tax-Advantaged Investing: Brookfield Infrastructure Partners and Registered Plans

For Canadian investors seeking tax-efficient investment strategies, Brookfield Infrastructure Partners offers an advantage. BIP units are qualified investments for various Canadian registered plans, including:

Registered Retirement Savings Plans (RRSPs)
Deferred Profit-Sharing Plans (DPSPs)
Registered Retirement Income Funds (RRIFs)
Registered Education Savings Plans (RESPs)
Registered Disability Savings Plans (RDSPs)
Tax-Free Savings Accounts (TFSAs)

This eligibility means Canadians can hold BIP units within these registered accounts, allowing investment growth to occur tax-deferred or tax-free, depending on the plan type. This makes BIP an attractive option for long-term retirement savings or other tax-advantaged investment goals.

Navigating Tax Forms: T5013 and Schedule K-1 for Unitholders

Understanding the tax forms associated with Brookfield Infrastructure Partners is crucial for accurate tax reporting. Canadian unitholders will primarily receive Form T5013, Statement of Partnership Income. This form is the Canadian equivalent for reporting partnership income and is not Form T5, which is used for dividends and interest from corporations.

Alt text: Sample Form T5013, Statement of Partnership Income, highlighting its relevance for Canadian unitholders of Brookfield Infrastructure Partners for reporting partnership income.

Form T5013 details the Canadian taxable income allocated to each unitholder after the end of BIP’s tax year (December 31st). This income needs to be reported on the unitholder’s Canadian tax return.

Distribution vs. T5013 Income: Generally, the cash distributions received by unitholders should roughly equal the sum of the net income/expenses and return of capital reported on Form T5013. Minor discrepancies might occur due to currency exchange rate fluctuations.

Schedule K-1: The U.S. Equivalent: In addition to Form T5013, Brookfield Infrastructure Partners also sends Schedule K-1 to all unitholders. This is the U.S. equivalent of Form T5013. Receiving a Schedule K-1 does not automatically obligate Canadian unitholders to file a U.S. tax return. It’s provided for informational purposes and for those who may have U.S. tax filing requirements for other reasons. For most Canadian unitholders, the T5013 is the primary tax form to focus on.

Receiving Your Tax Forms: Broker vs. Registered Holders

The method of receiving your tax forms depends on how you hold your Brookfield Infrastructure Partners units:

Beneficial Holders (Street Name): If you hold your units through a brokerage account (in “street name”), your Canadian broker will send you Form T5013. If you don’t receive it, contact your brokerage firm directly. Brookfield Infrastructure Partners cannot provide replacement forms to beneficial holders. Brokers rely on information provided by BIP through CDS Innovations to prepare and distribute T5013 forms, typically in late March, aligning with the statutory filing deadline.
Registered Holders: If you hold your units directly registered with Brookfield Infrastructure Partners, BIP will send Form T5013 directly to you. If you are a registered holder and haven’t received your form, contact Brookfield Infrastructure Partners’ tax package support at (866) 949-2771 or www.taxpackagesupport.com/brookfield.

Alt text: Illustration depicting a registered holder receiving a T5013 form directly from Brookfield Infrastructure Partners, emphasizing the direct communication channel for registered unitholders.

Understanding Withholding Tax on Distributions

A common question for Canadian residents investing in Brookfield Infrastructure Partners is whether distributions are subject to withholding tax. BIP operates as a “flow-through” entity, with income originating from holding companies in Canada, the U.S., and Bermuda.

Distributions from Canadian and Bermuda Holdings: Payments from holding companies in Canada and Bermuda to Canadian residents are generally not subject to withholding tax.
Distributions from U.S. Holdings: Payments from U.S. holding companies, such as dividends, may be subject to U.S. withholding taxes. The withholding rate varies based on account type and whether the unitholder has provided the appropriate IRS form (e.g., Form W-8BEN) to their broker or BIP’s transfer agent (for registered holders).

Brookfield Infrastructure Partners does not anticipate generating Effectively Connected Income (ECI), minimizing the likelihood of U.S. tax withholding under IRC Section 1446(b) and 1446(f) for non-U.S. investors.

Withholding tax information for quarterly distributions is typically posted on the tax section of BIP’s website approximately two weeks before each distribution payment date. This allows unitholders to stay informed about potential withholding tax implications.

Key Tax Identifiers and Codes: Partnership ID, Box 135, NAICS, and Tax Shelter Number

For tax reporting, you might need specific identifiers and codes related to Brookfield Infrastructure Partners:

Canadian Tax Identification Number (Business Number): Brookfield Infrastructure Partners’ Canadian tax ID is 83812 9450 RZ0001.
Box 135 (Foreign Income Source): Box 135 on Form T5013 indicates the country code for the source of foreign income. BMU represents Bermuda, and USA represents the United States.
North American Industry Classification System (NAICS) Code: Form T5013 does not require a NAICS code. If your tax software requests one, select the code you deem most appropriate. It should not impact your tax calculation.
Tax Shelter (TS) Number: Brookfield Infrastructure Partners is not a tax shelter and does not have a TS number. If your tax software requires this number, contact the software provider’s customer support for assistance.

Other Important Tax Considerations

E-filing: The T5013 form should contain all necessary information for e-filing your Canadian tax return. However, personal tax situations vary, and the CRA may require paper filing in certain cases.
Specified Foreign Property: Brookfield Infrastructure Partners units are not considered specified foreign property under section 233.3 of the Canadian Income Tax Act and do not need to be reported on Form T1135 Foreign Income Verification Statement.
Quebec Tax ID: BIP does not have a Quebec Tax ID as it is non-resident of Quebec.
Foreign Tax Credit: Box 171 on Form T5013 shows foreign taxes withheld. Alternatively, broker statements may also provide this information. This is relevant for claiming foreign tax credits if applicable.
Adjusted Cost Base (ACB): For Canadian residents, the ACB of BIP units is generally calculated as the purchase price plus net income/expenses reported on T5013, minus cash distributions received. BIP does not track individual unitholder ACB. Unitholders are responsible for accurately calculating their ACB in Canadian dollars.
Unrelated Business Taxable Income (UBTI), Effectively Connected Income (ECI), Commercial Activity Income: Brookfield Infrastructure Partners does not generate and is not expected to generate UBTI, ECI, or commercial activity income globally. Its U.S. operations are conducted through U.S. resident corporate subsidiaries.
Foreign Investment Real Property Tax Act (FIRPTA): Non-U.S. investors owning 5% or less of BIP units should not be subject to FIRPTA taxation on unit disposition. Larger unitholders may be subject to FIRPTA.
IRC Section 1446(f) Withholding: Non-U.S. investors are not expected to be subject to U.S. tax withholding under IRC Section 1446(f) on unit disposition.
2020 Special Distribution of Brookfield Infrastructure Corporation Shares: The special distribution of Brookfield Infrastructure Corporation shares in 2020 should not be taxable for Canadian federal income tax purposes if the ACB of BIP units remained positive after the distribution. This distribution reduced the ACB of BIP units and established the ACB for the newly received Brookfield Infrastructure Corporation shares.

Disclaimer: This article provides general information for educational purposes and should not be considered professional tax advice. Consult with a qualified tax advisor for personalized guidance regarding your specific circumstances and Brookfield Infrastructure Partners investments.