INCOME TAXES

Our partnership is a flow through entity for tax purposes and as such is not subject to taxation. However, income taxes are recognized for the amount of taxes payable by the partnership’s corporate subsidiaries and for the impact of deferred tax assets and liabilities related to such subsidiaries.


(a)	Deferred Income Tax Balances

The sources of deferred income tax balances are as follows:



	As of December 31,
US$ MILLIONS	2019			2018
Deferred income tax assets
Tax losses carried forward	$	397		$	394
Financial instruments and other	350			77
	$	747		$	471
Deferred income tax liabilities
Property, plant and equipment and investment properties	$	(2,541	)	$	(1,702	)
Intangible assets	(2,714		)	(2,115		)
	$	(5,255	)	$	(3,817	)
Net deferred income tax liabilities	$	(4,508	)	$	(3,346	)
Reflected in the Consolidated Statements of Financial Position as follows:
Deferred income tax assets	$	112		$	75
Deferred income tax liabilities	(4,620		)	(3,421		)
Net deferred income tax liabilities	$	(4,508	)	$	(3,346	)

The sources of deferred income tax balances and movements are as follows:



				Recognized in
US$ MILLIONS	Jan. 1, 2019			Net Income			Other Comprehensive Income			Other⁽¹⁾			Acquisitions/ Dispositions			Dec. 31, 2019
Deferred income tax assets related to non-capital losses and capital losses	$	394		$	40		$	—		$	(22	)	$	(15	)	$	397
Deferred income tax liabilities related to differences in tax and book basis, net	(3,740		)	(68		)	(142		)	54			(1,009		)	(4,905		)
Net deferred income tax liabilities	$	(3,346	)	$	(28	)	$	(142	)	$	32		$	(1,024	)	$	(4,508	)



				Recognized in
US$ MILLIONS	Jan. 1, 2018			Net Income			Other Comprehensive Income			Other⁽¹⁾		Acquisitions/ Dispositions			Dec. 31, 2018
Deferred income tax assets related to non-capital losses and capital losses	$	361		$	(13	)	$	—		$	8	$	38		$	394
Deferred income tax liabilities related to differences in tax and book basis, net	(3,144		)	(33		)	(97		)	266		(732		)	(3,740		)
Net deferred income tax liabilities	$	(2,783	)	$	(46	)	$	(97	)	$	274	$	(694	)	$	(3,346	)


(1)	Other items relates to foreign exchange as deferred income taxes are calculated based on the functional currency of each operating entity.

The amount of non-capital and capital losses and deductible temporary differences for which no deferred income tax assets have been recognized is approximately $990 million (2018: $765 million). Of the $990 million (2018: $765 million) deductible temporary differences not recognized, $332 million (2018: $433 million) relates to capital losses which can be carried forward indefinitely and have no expiry dates. The remaining $658 million (2018: $332 million) relates to non-capital losses, of which $335 million (2018: $26 million) expire between 2022 to 2032 and $323 million (2018: $306 million) that carry forward indefinitely and have no expiry dates.


(b)	Income Tax Recognized in Profit or Loss

The major components of income tax expense include the following:



	For the year ended December 31,
US$ MILLIONS	2019			2018			2017
Tax expense comprises:
Current income tax expense	$	250		$	318		$	106
Deferred income tax expense (recovery)
Origination and reversal of temporary differences	29			53			92
Changes in tax rates or the imposition of new taxes	(20		)	(11		)	(41		)
Previously unrecognized deferred taxes	19			4			16
Total income tax expense	$	278		$	364		$	173
Net income before income tax expense reconciles to income tax expense as follows:
Net income before income tax	$	928		$	1,170		$	747
Income tax expense calculated at the domestic rates applicable to profits in the country concerned	354			278			304
Change in substantively enacted tax rates	(20		)	(11		)	(41		)
Earnings from investments in associates and joint ventures	(50		)	(3		)	(12		)
Portion of gains subject to different tax rates	34			141			2
Taxable income attributable to non-controlling interests	(62		)	(35		)	(65		)
International operations subject to different tax rates	(6		)	(17		)	(39		)
Deferred tax assets not recognized	19			4			15
Permanent differences and other	9			7			9
Income tax expense recognized in profit or loss	$	278		$	364		$	173

As the partnership is not subject to tax, the above reconciliation has been prepared using a composite statutory rate for jurisdictions where Brookfield Infrastructure’s subsidiaries operate. The composite rate has decreased due to changes in the related operating income in the various subsidiaries and changes in local statutory rates.

The partnership has approximately $2,441 million (2018: $2,867 million) of temporary differences associated with investments in subsidiaries, and associates for which no deferred income taxes have been provided.


(c)	Income Tax Recognized Directly in Other Comprehensive Income



US$ MILLIONS	2019			2018			2017
Deferred income tax arising on income and expenses recognized in other comprehensive income:
Revaluation of property, plant and equipment	$	(148	)	$	(95	)	$	(204	)
Cash flow hedges	3			3			8
Other	3			(5		)	(4		)
Total income tax expense recognized directly in other comprehensive income	$	(142	)	$	(97	)	$	(200	)