General U.S. and Canadian Tax Summary
The following discussion is intended to provide a general explanation of the U.S. and Canadian tax treatment of holding Brookfield Renewable Partners units.
This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular holder of Brookfield Renewable Partners units, and no representation with respect to the U.S. or Canadian income tax consequences to any particular holder is made. Consequently, holders of Brookfield Renewable Partners units are advised to consult their own tax advisors with respect to their particular circumstances.
Characterization of Brookfield Renewable Partners for Tax Purposes
Brookfield Renewable Partners L.P. is a Bermuda based limited partnership that is treated as a partnership for U.S. and Canadian tax purposes. Brookfield Renewable Partners is not a corporation or a trust. Brookfield Renewable Partners is a publicly traded partnership that does not earn active business income. Instead, Brookfield Renewable Partners receives various types of investment income, such as interest, dividends and return of capital, from subsidiary corporations that carry on business in various jurisdictions.
The amount of interest, dividends and returns of capital that is earned and then allocated to unitholders) will vary depending upon the particular business unit(s) from which funds are sourced. The source of funds for the distributions will also affect how much if any of the distributions are subject to withholding tax.
Income for U.S. and Canadian tax purposes is unlikely to be equal because of (i) the different currencies used to compute the taxable income for each jurisdiction and (ii) the difference in the tax rules of the two countries applicable to the income and expenses of Brookfield Renewable Partners and its subsidiaries for a particular taxation year. Also, taxable income may be less than the distribution for a particular period due to returns of capital paid by Brookfield Renewable Partners in that period. Brookfield Renewable Partner's taxable income will typically be comprised of various types of income and expenses and may include such items as interest income, foreign source dividends, local source dividends, eligible and qualified dividends, and short-term and long term capital gains.
Eligibility for Tax-Deferred Plans
In the United States, units of Brookfield Renewable Partners qualify for IRA and 401(k) accounts. In Canada, Brookfield Renewable Partners is a qualified investment for RRSPs, deferred profit sharing plans, RRIFs, registered education savings plans, registered disability savings plans and TFSAs.
Communication of Tax Information
After the end of Brookfield Renewable Partner's taxation year (December 31), the U.S. and Canadian taxable income of Brookfield Renewable Partners is determined and allocated to all unitholders that are in turn required to report such income on their respective tax returns. The allocation of U.S. taxable income will be communicated using Schedule K-1 (not a Form 1099). The allocation of Canadian taxable income is communicated using Form T5013 (not a Form T5).
We are required to use reasonable efforts to send a Schedule K-1 to all unitholders who are U.S. residents or who may have U.S. tax reporting obligations. Schedule K-1 forms are expected to be mailed to U.S. unitholders each year by the end of March for the prior tax year.
If you are a U.S. unitholder and did not receive your Schedule K-1 for the previous taxation year please contact us at (877) 209-9981 or at www.taxpackagesupport.com/BREP. Alternatively, use the link to Tax Package Support at the right side of this page.
Please note that no Schedule K-1 forms were issued in 2012 for the 2011 tax year, or for any prior year. The first time Brookfield Renewable was required to issue Schedule K-1s was for its 2012 taxation year, which were issued in March 2013.
If you believe you have received a Schedule K-1 in error, wish to correct the K-1 you have been issued, or have any other questions related to your K-1, please contact Tax Package Support at (877) 209-9981.
Please note that we are required to issue K-1 forms to all U.S. unitholders, regardless if their units are held in a tax deferred account such as an IRA. If your units are held in an IRA, you generally do not need to report the amounts on your K-1 and you should keep your K-1 for your records.
Only registered Canadian unitholders will receive a T5013 directly from Brookfield Renewable Partners. All other Canadian unitholders (the vast majority of unitholders) should receive a T5013 from their Canadian broker. Brookfield Renewable Partners uses the CDS Innovations facility to provide information to Canadian brokers so that they can produce T5013 Forms. If you have any questions about Form T5013 you should contact your broker.
If you are a registered Canadian resident holder and did not receive your Form T5013 for the previous taxation year please contact (877) 209-9981 or at www.taxpackagesupport.com/BREP. If you are a beneficial Canadian resident unitholder and did not receive your Form T5013, please contact the brokerage firm with whom your units are held.
Non-North American Unitholders
Generally, a non-North American holder of Brookfield Renewable units will not receive any tax reporting forms (i.e. Form T5013 or Schedule K-1).
Withholding Tax Treatment of Distribution
The income Brookfield Renewable Partners earns from underlying subsidiaries includes dividends and interest paid by subsidiaries in jurisdictions that levy withholding tax. Since Brookfield Renewable Partners is a "flow-through" for U.S. and Canadian income tax purposes, a portion of the income may be subject to withholding taxes levied by jurisdictions such as Canada and the U.S. (including back-up withholding tax). The rate of withholding varies, amongst other factors, depending on a holder’s country of tax residence, type of ownership account, and whether holders have provided their broker (or Brookfield Renewable’s transfer agent in the case of registered unitholders) with the appropriate Internal Revenue Service (“IRS”) Form (Form W-8BEN, W-ECI, W-8EXP, W-8IMY or W-9) and Canada Revenue Agency (“CRA”) Form (Form NR301). The type of documentation for U.S. withholding tax purposes will differ depending on a holder’s tax profile for U.S. tax purposes. We encourage holders to submit the appropriate IRS Form and CRA Form to their broker (or Brookfield Renewable Partners’ transfer agent in the case of registered unitholders) so their account can be (and will continue to be) certified and the most appropriate rates of withholding can be applied to distributions.
Withholding tax information for quarterly distributions will be posted approximately two weeks prior to each distribution payment date on the tax section of our website at www.brookfieldrenewable.com.
Relationship of Taxable Income to Distributions
The computation of Brookfield Renewable Partners' annual U.S. and Canadian taxable income for a particular taxation year is independent of (i) the annual accounting income of Brookfield Renewable Partners; (ii) the annual cash generated by Brookfield Renewable Partners and (iii) the annual distributions. The U.S. and Canadian taxable income of Brookfield Renewable Partners is determined using U.S. and Canadian tax rules and will vary from year to year depending on the nature of the income of Brookfield Renewable Partners and its subsidiaries for the particular taxation year.
Computation of Tax Cost (Adjusted Cost Basis)
For U.S. and Canadian residents, in general, a unitholder's tax cost of his/her Brookfield Renewable Partners units should equal the sum of (i) the amount paid to acquire the units and (ii) the net taxable income allocated to the unitholder, minus the cash distributions received.1
The schedules distributed with Schedule K-1 compute the tax cost of Brookfield Renewable Energy Partners units for U.S. residents.
For Canadian residents, the tax cost of units is determined in Canadian dollars so all three components should be determined in Canadian dollars. Brookfield Renewable Partners does not have sufficient information to track the tax cost of units for each individual holder. Unitholders are solely responsible to accurately compute and track the tax cost of their Brookfield Renewable Partners units.
The website includes a schedule entitled “Brookfield Renewable Partners L.P. Adjusted Cost Base of One Unit Received on Merger (No Tax Rollover)” that contains information to assist a unitholder in computing the adjusted cost base of their Brookfield Renewable Partners L.P. units. That schedule reflects the adjusted cost base to a holder of one original unit received on the merger in November 2011 that did not file a Tax Election and did not reinvest distributions in additional units under the distribution reinvestment plan. Had any distributions been reinvested under the distribution reinvestment plan such amounts would be added to the adjusted cost base. A former Brookfield Renewable Power Fund unitholder that received their Brookfield Renewable units as a result of the November 2011 merger and filed a Tax Election should start the adjusted cost base calculation with the adjusted cost base of their Brookfield Renewable Power Fund units immediately prior to the merger instead of the CDN$25.53 value of a Brookfield Renewable Energy unit used in the schedule that is applicable to a unitholder that did not file a Tax election. Additional historical information is available on the website to assist a unitholder with the computation of their Brookfield Renewable Power Fund units adjusted cost base immediately prior to the November 2011 merger.
Some Canadian tax return software requires the input of a NAICS code even though an NAICS code is not reported on Form T5013. Therefore, please select the NAICS code you deem most appropriate. The NAICS codes should have no impact on the computation of your taxes.
Other Tax Matters
Effectively Connected Income (ECI)
Brookfield Renewable Partners has not and is not expected to generate effectively connected income (ECI). Brookfield Renewable Partners' U.S. operations are carried out through its wholly owned U.S. resident subsidiary, Brookfield Power US Holding America Co and its subsidiaries.
Unrelated Business Taxable Income (UBTI)
Brookfield Renewable is not anticipated to generate UBTI and has not generated any in prior years.
Foreign Investment Real Property Tax Act (FIRPTA)
Non-U.S investors that own 5% or less of Brookfield Renewable Partners publicly traded units should not be subject to FIRPTA taxation on a disposition of their units. Investors that own more than 5% of Brookfield Renewable Partners publicly traded units may be subject to FIRPTA taxation on a disposition of their units.
Regulated Investment Corporations (RICs)
The 25% limitation imposed on the ownership of master limited partnerships (“MLPs”, technically “qualifying PTPs”) by regulated investment corporations (“RICs”) has not been relevant to units of Brookfield Renewable because it is not a MLP (not a “qualifying PTP”) as defined for U.S. tax purposes because more than 90% of Brookfield Renewable’s gross income on annual basis has been investment income. It is anticipated that more than 90% of Brookfield Renewable’s income on an annual basis will continue to be investment income.
Specified Foreign Property
For the purpose of reporting foreign property by Canadian investors, pursuant to section 233.3 of the Canadian Income Tax Act, Brookfield Renewable Partners is not a specified foreign property and therefore does not need to be reported on Form T1135 Foreign Income Verification Statement.
Passive Foreign Investment Company (PFIC)
Brookfield Renewable is not considered a Passive Foreign Investment Company (PFIC) for U.S. tax purposes.
Quebec Tax ID Number
BREP does not have a Quebec number because it is non-resident.
Tax Questions and Answers
Q. Why do I receive a 1099 as well as a K-1 and what is the significance of each?
A. Generally, you should receive Form 1099-INT and/or Form 1099-DIV from your broker in respect of units of our partnership. Form 1099-INT is used to report interest income and Form 1099-DIV is used to report dividend income. Form K-1 (prepared by us) is used to report income and expenses earned/incurred by a partnership and also provides additional information such as the amount of distributions paid to a unitholder. Historically, our income for U.S. tax purposes has included interest and dividends earned from subsidiaries of the partnership. Even though the interest and dividend income is reported on Form K-1 that we issue, brokers are nonetheless required to also report the interest and dividend income on Forms 1099-INT and 1099-DIV. The Forms 1099-INT and DIV prepared by your broker will include information on any foreign withholding taxes that they withheld so that you may claim a credit and/or deduction on your tax return, if eligible. Because the withholding tax process is administered by the brokerage community rather than by us, taxes withheld are only reported on Forms 1099-INT and 1099-DIV (and not on Form K-1). Do not report the 1099 DIV and INT amounts in your tax return as those amounts are already included in the Form K-1.
Q. Why haven’t I received a K-1?
A: Generally, our unitholders own their units in “nominee form” through brokerages and we rely on information acquired from brokers and/or clearing houses to prepare the Schedule K-1. We are not always able to acquire information for all unitholders and accordingly some unitholders may not receive a Schedule K-1 for a particular year despite our best efforts to do so. If you do not receive a K-1 and require one, please contact Tax Package Support at(877) 209-9981 or www.taxpackagesupport.com/BREP and they will assist you.
Q: I believe my K-1 is incorrect?
A: We rely on information provided by brokers and/or clearing houses to prepare Schedule K-1. In limited cases the information provided to us may be incomplete and/or inaccurate. In the event you believe your K-1 is incorrect please contact Tax Package Support at (877) 209-9981 or www.taxpackagesupport.com/BREP and an amended Form K1 will be issued.
Q: How can I obtain a tax credit for foreign taxes withheld?
A: The Forms 1099-INT and DIV prepared by your broker will include information on any foreign withholding taxes that were withheld by your broker so that you may claim them, if eligible, in your tax return as a credit and/or deduction. Because the withholding tax process is administered by the brokerage community rather than us, taxes withheld are only reported on Forms 1099-INT and 1099-DIV (and not on Schedule K-1).
Q: My tax software requires a NAICS number for Brookfield Renewable. What is it?
A: Some Canadian tax return software requires the input of a NAICS code even though an NAICS code is not reported on Form T5013. Therefore, please select the NAICS code you deem most appropriate. The NAICS should not impact the amount of taxes owing.
Q: I haven’t received my T5013? Can you send a replacement form?
A: Generally, T5013 forms are prepared and distributed by brokers based on information we provide on or before the end of February following the end of each taxation year to CDS Innovations which is typically for publicly traded securities. The statutory filing/mailing requirement for Form T5013 is the end of March. Typically, brokers will prepare and distribute the Form T5013 in late March.
Q: Who applies the withholding tax? Why don’t I receive the full distribution amount?
A: Generally, our unitholders own their units in “nominee form” through brokers (also known as “beneficial” holders). Consequently, the brokers are responsible for withholding taxes as only they possess the requisite information about the unitholder that is necessary to calculate the appropriate amount to withhold as is typical for publicly traded securities. Because the withholding tax process is administered by the brokerage community rather than us, taxes withheld are only reported on Forms 1099-INT and 1099-DIV (and not on Schedule K-1). Historically our partnership’s income has included Canadian source interest and dividends earned from subsidiaries that when paid to a non-Canadian unitholder are subject to varying rates of Canadian withholding taxes ranging from nil to 25%.
Q: Can I e-file my tax return?
A: Yes, the T5013 From you receive should include all information that is required by law for you to e-file your Canadian personal tax return.
Q: Why does the $CAD cash I received not equal the amount reflected on my T5013?
A: In general, the distributions you receive should equal the sum of (i) the net of all income and expenses and (ii) return of capital, reported on Form T5013. There may be minor differences due to exchange rates.
Q: What is my Adjusted Cost Basis and how was it impacted by the combination in November 2011?
A: The website includes a schedule entitled “Brookfield Renewable Partners L.P. Adjusted Cost Base of One Unit Received on Merger (No Tax Rollover)” that contains information to assist a unitholder in computing the adjusted cost base of their Brookfield Renewable Partners L.P. units. That schedule reflects the adjusted cost base to a holder of one original unit received on the merger in November 2011 that did not file a Tax Election and did not reinvest distributions in additional units under the distribution reinvestment plan. Had any distributions been reinvested under the distribution reinvestment plan such amounts would be added to the adjusted cost base.
A former Brookfield Renewable Power Fund unitholder that received their Brookfield Renewable Energy units as a result of the November 2011 merger and filed a Tax Election should start the adjusted cost base calculation with the adjusted cost base of their Brookfield Renewable Power Fund units immediately prior to the merger instead of the CDN$25.53 value of a Brookfield Renewable unit used in the schedule that is applicable to a unitholder that did not file a Tax election. Additional historical information is available on the website to assist a unitholder with the computation of their Brookfield Renewable Power Fund units adjusted cost base immediately prior to the November 2011 merger.
Q: Are units considered foreign property for the purposes of the Canadian Revenue Agency T-1135 Form – Foreign Income Verification Statement?
Q: Are any of the amounts reported on Schedule K-1 considered part of the new Net Investment Income Tax?
A: Effective January 1, 2013, all income and expense items reported on your Schedule K-1 are components of net investment income and may be subject to the net investment income tax.
Q: My tax software requires that I insert a North American Industry Classification System (NAICS) code. What is Brookfield Renewable’s NAICS?
A: The T5013 form does not require us to report a NAICS code but it would seem some personal software tax programs ask for them. If the field cannot be left blank, one option is to use code 221111 which comprises companies primarily engaged in the generation of electricity using hydro-electric generation.
Q: What does BMU on box 135 signify?
A: BMU identifies the source of the income as Bermuda.
Q: My tax software requires that I insert a six-digit Tax Shelter (TS) number. What is Brookfield Renewable's TS number?
A: Brookfield Renewable is not a tax shelter and therefore does not have an applicable TS number. If your tax software requires this number to proceed with your filing, please contact customer support for the tax preparation software that you are using and they may be able to assist you.
1The U.S. dollar distributions must be converted to Canadian dollars before reducing the tax cost of Brookfield Renewable Partners units for Canadian tax purposes. Brookfield Renewable Partners does not prescribe a particular foreign exchange rate that unitholders should use to make such conversions. Unitholders and/or their brokers would generally be expected to use the conversion rate on the date of receipt of the distribution.
Note: The information provided on this website does not constitute tax advice and is not intended to be a substitute for tax planning. Investors are encouraged to consult their tax advisors concerning the income tax consequences particular to their receipt, ownership and disposition of units, as well as any consequences under the laws of any other taxing jurisdiction.