The following discussion is intended to provide a general overview of the U.S. and Canadian tax treatment of holding Brookfield Corporation (formerly Brookfield Asset Management Inc.) (“Brookfield” or the “Corporation”) Class A shares and preferred shares.
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 shares, and no representation with respect to the U.S. and Canadian, income tax consequences to any particular holder is made. Consequently, holders of Brookfield are advised to consult their own tax advisors with respect to their particular circumstances.
Nature of Brookfield Dividends
Brookfield Corporation is a “qualified foreign corporation” for U.S. federal income tax purposes and its dividends are therefore generally eligible for “qualified dividend” treatment. Whether dividends paid by Brookfield will in fact be “qualified dividends” to any shareholder will depend on that shareholder’s specific circumstances, including the shareholder’s holding period for the Brookfield shares on which such dividends are received. U.S. shareholders are advised to consult their own tax advisors concerning the treatment of dividends paid by Brookfield.
Based on the current and anticipated composition of the income, assets and operations of Brookfield and its subsidiaries, Brookfield does not believe that it will be a PFIC for U.S. federal income tax purposes for the current taxable year or for future taxable years. However, the application of the PFIC rules is subject to uncertainty in several respects, and a separate determination must be made after the close of each taxable year as to whether Brookfield is a PFIC for that year. Changes in the composition of Brookfield’s income or assets may cause Brookfield to become a PFIC. Accordingly, there can be no assurance that Brookfield will not be a PFIC for any taxable year.
Tax Reporting
Dividends paid by Brookfield are reported annually on Form 1099 which is distributed to shareholders in February.
Withholding Tax on Dividends
Under Canadian domestic law, dividends paid by Brookfield to a non-resident shareholder are subject to 25% withholding tax. Generally, the Canada – U.S. Income Tax Treaty will reduce the rate of dividend withholding tax from 25% down to 15% for a resident of the United States. Where the U.S. resident owns the shares of Brookfield in a 401K, IRA or similar plan, the Canada – U.S. Income Tax Treaty will reduce the rate of dividend withholding tax to nil.
December 2022 Manager Distribution
In exchange for each Brookfield Class A share held, shareholders continue to own 1 share of the Corporation and received 0.25 shares of Brookfield Asset Management Ltd (“Manager”).
The distribution should qualify as a tax-free distribution under section 355(a) of the Internal Revenue Code, resulting in no capital gain or loss to U.S. shareholders in respect of your Brookfield shares. The U.S. tax basis of your Brookfield shares will be allocated between the shares of the Corporation and Manager based on the relative fair market values of the shares. A commonly used method to determine the fair market values of the shares is the volume weighted average trading prices (“VWAPs”) on the first day following the distribution, which is December 12, 2022. Based on the VWAPs of US$33.77 for Corporation and US$32.071 for Manager, the allocation of tax basis is 80.81% to Corporation shares and 19.19% to Manager shares.
The IRS Form 8937 can be accessed here for further details.
1One Manager share was received for each four shares of Brookfield held and the proportion takes that into account.
Special Dividend History for Brookfield Class A Shares (“BN”, formerly BAM)
| Date | Entity Distributed | Distribution Ratio | Cost Base Per Unit/Share1 | Equivalent Dividend Value Per BN Share2 |
| June 28, 2021 | Brookfield Reinsurance Ltd.3 | 1 BNRE exchangeable share for 145 BN shares held | US$51.6863 | US$0.3565 |
| June 22, 2017 | Trisura Group Ltd. | 1 TSU Unit for 170 BN shares held | Please refer to the IRS Form 8937 for details on the U.S. tax treatment of the special distribution. | |
| June 20, 2016 Unit/Share1 | Brookfield Business Partners L.P. | 1 BBU Unit for 50 BN shares held | US$21.3873 | US$0.4277 |
| April 15, 2013 | Brookfield Property Partners L.P. | 1 BPY Unit for 17.42 BN shares held | US$21.8271 | US$1.2529 |
| January 31, 2008 | Brookfield Infrastructure Partners L.P. | 1 BIP Unit for 25 BN shares held | US$20.556 | US$0.8222 |
Notes:
1) Cost Base for Tax Purposes: A commonly used method in determining the initial cost base is the volume-weighted average trading price (5-day VWAP) of the units/shares on the New York and/or Toronto Stock Exchanges for the five trading days commencing on the dividend payment date.
2) Equivalent Dividend Value Per BN (formerly BAM) Share: The dividend per BN share, is determined by dividing (i) the 5-day VWAP commencing on the dividend payment date by (ii) the number of units/shares received for each BN Class A share. (One example, each BN Class A shareholder received one BBU unit for every 50 common shares held of BN: VWAP US$21.3873 / 50 BBU units = US$0.4277 equivalent value of dividend received per BN share held).
3) On December 9, 2022, Brookfield Asset Management Reinsurance Partners Ltd. changed its name to Brookfield Reinsurance Ltd. and changed its ticker from BAMR to BNRE.
Nature of Brookfield Dividends
For purposes of the enhanced dividend tax credit rules contained in the Income Tax Act (Canada) and any corresponding provincial and territorial tax legislation, all dividends (and deemed dividends) paid by Brookfield to Canadian residents on our common and preferred shares after December 31, 2005 are designated as “eligible dividends.” Unless stated otherwise, all dividends (and deemed dividends) are designated as “eligible dividends” for the purposes of these rules.
Tax Reporting
Dividends paid by Brookfield are reported annually on Form T5 which is distributed to shareholders in February.
December 2022 Manager Distribution
In exchange for each Brookfield Class A share held, shareholders continue to own 1 share of the Corporation and received 0.25 shares of Brookfield Asset Management Ltd (“Manager”).
The distribution should be tax-deferred, and no capital gain or loss will be realized in respect of your Brookfield shares. The tax basis of your Brookfield shares should be allocated based on the relative fair market values of the shares, which have been determined to be 88% to Corporation shares and 12% to Manager shares.
Click here for an example of the tax basis allocation for Canadian shareholders.
Special Dividend History for Brookfield Class A Shares ("BN” (formerly “BAM”))
| Date | Entity Distribute | Distribution Ratio | Cost Base Per Unit/Share1 | Equivalent Dividend Value Per BN Share2 |
| June 28, 2021 | Brookfield Reinsurance Ltd.3 | 1 BNRE exchangeable share for 145 BN share held | US$51.6863 / C$63.8481 | US$0.3565 / C$0.4403 |
| June 22, 2017 | Trisura Group Ltd. | 1 TSU Unit for 170 BN shares held | C$21.3170 | C$0.1254 |
| June 20, 2016 | Brookfield Business Partners L.P. | 1 BBU Unit for 50 BN shares held | US$21.3873 / C$27.41962 | US$0.4277 / C$0.5484 |
| April 15, 2013 | Brookfield Property Partners L.P. | 1 BPY Unit for 17.42 BN shares held | US$21.8271 / C$22.3805 | US$1.2529 / C$1.2847 |
| January 31, 2008 | Brookfield Infrastructure Partners L.P. | 1 BIP Unit for 25 BN shares held | US$20.556 / C$20.5935 | US$0.8222 / C$0.8237 |
Notes:
1) Cost Base for Tax Purposes: A commonly used method in determining the initial cost base is the volume-weighted average trading price (5-day VWAP) of the units/shares on the New York and/or Toronto Stock Exchanges for the five trading days commencing on the dividend payment date.
2) Equivalent Dividend Value Per BN (formerly BAM) Share: The dividend per BN share, is determined by dividing (i) the 5-day VWAP commencing on the dividend payment date by (ii) the number of units/shares received for each BN Class A share. (One example, each BN Class A shareholder received one BBU unit for every 50 common shares held of BN: VWAP US$21.3873 / 50 BBU units = US$0.4277 equivalent value of dividend received per BN share held).
3) On December 9, 2022, Brookfield Asset Management Reinsurance Partners Ltd. changed its name to Brookfield Reinsurance Ltd. and changed its ticker from BAMR to BNRE.
This U.K. tax strategy is consistent with Brookfield Corporation’s (“Brookfield” or the “Corporation”) overall global tax strategy and covers all U.K. entities consolidated in Brookfield’s financial statements prepared under International Accounting Standards. Brookfield regards the publication of the information set out below as compliance with the duty under Finance Act 2016, Schedule 19, paragraph 16 to publish a tax strategy and applies for accounting periods ending within the 2024 calendar year.
Brookfield is committed to full compliance with all statutory obligations and full disclosure to tax authorities. The company’s tax affairs are managed in a way which takes into account the corporate reputation in line with Brookfield’s overall high standards of governance.
Risk Management and Governance
Brookfield’s Risk Management Committee (“RMC”), which is comprised of members of Brookfield’s Board of Directors, has oversight for risk management for the Brookfield group, including those risks related to taxation. The RMC approves Brookfield’s Tax Risk Management Policy (the “Policy”) annually and reviews material tax risks quarterly. The RMC reports relevant tax matters to the Board of Directors if appropriate. Consistent with how all risks are managed, tax risks are managed on a decentralized basis and the senior management of each business unit is responsible for adhering to the Policy. The Chief Financial Officer and Managing Partner responsible for taxation have oversight of tax risks across the organization and are authorized to manage the tax risks and approve tax positions, tax settlements and payments, in accordance with the Policy.
Tax Planning
Brookfield seeks to comply with tax laws and filing deadlines in the jurisdictions in which Brookfield operates having regard to the legal and administrative practices in each jurisdiction. Brookfield may utilize available tax incentives, reliefs and exemptions provided these are aligned with the associated tax legislation.
Managing Tax Risk
Brookfield actively seeks to identify, evaluate, monitor and manage tax risks to ensure that they are consistent with Brookfield’s objectives. In reviewing the tax risks associated with the business operations, Brookfield will consider the following:
- legal duties of directors and employees;
- compliance with internal policies and procedures;
- impact on Brookfield’s relationships with tax authorities; and
- maintenance of Brookfield’s reputation as a world class asset manager.
In situations where tax law is unclear or subject to interpretation or Brookfield does not have the internal expertise to assess a particular tax position, tax advice is obtained from external advisors who have the appropriate technical expertise.
Relationship with HMRC
Brookfield is committed to maintaining a cooperative and open working relationship with HMRC and ensuring that any tax audits are efficiently and effectively managed. Brookfield seeks to make fair, accurate and timely disclosures in correspondence and tax returns and respond to queries in a timely manner.
December 2024