INCOME TAXES

12 Months Ended

Dec. 31, 2021

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	2021		2020
Deferred income tax assets
Tax losses carried forward	$	1,731	$	1,002
Financial instruments and other	284		408
	$	2,015	$	1,410
Deferred income tax liabilities
Property, plant and equipment	$	(5,472)	$	(3,367)
Intangible assets	(2,316)		(2,458)
Investment in associates and investment properties	(78)		(73)
	$	(7,866)	$	(5,898)
Net deferred income tax liabilities	$	(5,851)	$	(4,488)
Reflected in the Consolidated Statements of Financial Position as follows:
Deferred income tax assets	$	160	$	124
Deferred income tax liabilities	(6,011)		(4,612)
Net deferred income tax liabilities	$	(5,851)	$	(4,488)

The deferred tax asset related to losses available for carry forward includes $150 million (2020: $80 million) of tax benefits that have been recognized based on projections of future taxable profits. In addition, we also consider tax planning opportunities that will create taxable income in the period in which the unused tax losses can be utilized.

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


			Recognized in
US$ MILLIONS	Jan. 1, 2021		Net Income		Other Comprehensive Income		Other(1)		Acquisitions/ Dispositions		Dec. 31, 2021
Deferred income tax assets related to non-capital losses and capital losses	$	999	$	377	$	—	$	(16)	$	371	$	1,731
Deferred income tax liabilities related to differences in tax and book basis, net	(5,487)		(617)		(260)		100		(1,318)		(7,582)
Net deferred income tax liabilities	$	(4,488)	$	(240)	$	(260)	$	84	$	(947)	$	(5,851)


			Recognized in
US$ MILLIONS	Jan. 1, 2020		Net Income		Other Comprehensive Income		Other(1)		Acquisitions/ Dispositions		Dec. 31, 2020
Deferred income tax assets related to non-capital losses and capital losses	$	397	$	506	$	—	$	146	$	(50)	$	999
Deferred income tax liabilities related to differences in tax and book basis, net	(4,905)		(560)		(125)		(126)		229		(5,487)
Net deferred income tax liabilities	$	(4,508)	$	(54)	$	(125)	$	20	$	179	$	(4,488)

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

A deferred tax asset is not recognized in respect of deductible temporary differences of $134 million (2020: $143 million), unused capital losses of $1,799 million (2020: $143 million) and unused non-capital losses of $1,362 million (2020: $963 million). Of the total deductible temporary differences of $134 million (2020: $143 million), $24 million expire after five years from the reporting date and $110 million do not expire. Of the unused capital losses of $1,799 million (2020: $143 million), $1,703 million expire after five years from the reporting date and $96 million do not expire.

The following table details the expiry date, if applicable, of the non-capital losses:


	Year of Expiration
US$ MILLIONS	2022		2023		2024		2025		2026		Beyond		Do not expire		Total
As of December 31, 2021	$	35	$	35	$	18	$	4	$	5	$	269	$	996	$	1,362
As of December 31, 2020	36		37		18		7		5		287		573		963

(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	2021		2020		2019
Tax expense comprises:
Current income tax expense	$	374	$	237	$	250
Deferred income tax expense (recovery)
Origination and reversal of temporary differences	13		(37)		29
Changes in tax rates or the imposition of new taxes	188		41		(20)
Previously unrecognized deferred taxes	39		50		19
Total income tax expense	$	614	$	291	$	278
Net income before income tax expense reconciles to income tax expense as follows:
Net income before income tax	$	3,333	$	1,195	$	928
Income tax expense calculated at the domestic rates applicable to profits in the country concerned	829		431		304
Change in substantively enacted tax rates	188		41		(20)
International operations subject to different tax rates	(9)		(21)		(6)
Taxable income attributable to non-controlling interests	(325)		(91)		(62)
Portion of gains subject to different tax rates	(115)		(117)		34
Deferred tax assets not recognized	39		50		19
Permanent differences and other	7		(2)		9
Income tax expense recognized in profit or loss	$	614	$	291	$	278

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 $40 million (2020: $15 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	2021		2020		2019
Deferred income tax arising on income and expenses recognized in other comprehensive income:
Revaluation of property, plant and equipment	$	(164)	$	(219)	$	(148)
Cash flow hedges	(63)		63		3
Pension plan actuarial changes	(33)		31		3

Total income tax expense recognized directly in other comprehensive income	$	(260)	$	(125)	$	(142)