Ottawa, Ontario, October 20, 2008…The Canada Revenue Agency (CRA) has revoked the registered charity status of The Banyan Tree Foundation effective September 20, 2008.
On August 13, 2008, the Minister of National Revenue issued a notice of intent to revoke the charitable registration of The Banyan Tree Foundation, in accordance with subsection 168(2) of the Income Tax Act. The letter stated, in part, that:
It is the CRA's position the Charity has operated for the non-charitable purpose of promoting a tax shelter arrangement and for the private benefit of its directors. The Charity has failed to demonstrate that it operated exclusively for charitable purposes and has not demonstrated its purported charitable activities occurred as represented. The Charity improperly issued receipts in excess of $210 million for transactions that do not qualify as gifts and has failed to demonstrate the $10.1 million paid to its directors and corporations controlled by its directors were for bona fide payments.
The audit conducted by the CRA identified that the Charity, based on the overall operation of the Charity and the level of financial activity and resources so devoted, is operating primarily or collaterally for the purpose of furthering The Banyan Tree Foundation Gifting Program, a leveraged donation arrangement. It is our conclusion that the Charity's original purpose, which is simply to provide funding to qualified donees, has been exploited for the purpose of participating in and promotion of an abusive tax shelter arrangement.
It is our position the purpose of the Charity is to promote abusive tax planning arrangements where a majority of the transactions have been artificially created and where motivation is driven by the financial gains of the Charity's directors rather than the charitable purpose for which the Charity was established.
The notice of intent to revoke and other letters relating to the grounds for revocation are available to the public on request by calling 1-800-267-2384.
A charity that has had its charitable status revoked can no longer issue donation receipts for income tax purposes and is no longer a qualified donee under the Income Tax Act. The organization is no longer exempt from income tax, unless it qualifies as a non-profit organization, and it may be subject to a tax equal to the full value of its remaining assets.
Registered charities in Canada perform valuable work in our communities, and Canadians support this work in many ways. The CRA regulates registered charities through the Income Tax Act and is committed to ensuring that charities operate in compliance with the law. Where a registered charity is found not to comply with its legal requirements, the CRA may apply monetary penalties or may suspend or revoke the charity's status under the Act.
The CRA is reviewing all tax shelter-related donation arrangements (for example, schemes that typically promise donors tax receipts worth more than the actual amount of the donation), and it plans to audit every participating charity, promoter, and investor. For more information about tax shelters, visit the CRA's Tax alert Web page at www.cra.gc.ca/alert.
For more information about the registration of Canadian charities, visit the CRA's Charities and Giving Web site at www.cra.gc.ca/charities.