CRA stuff On November 14, 2013, the Company received a proposal letter from the Canada Revenue agency (CRA) which
stated its intention to challenge the tax consequences of Bonterra’s reorganization from a trust to a Corporation,
which occurred on November 18, 2008. The CRA position is based on the acquisition and control rules in addition
to the general anti-tax avoidance rules in the Income Tax Act. In 2014, if CRA issues a Notice of Reassessment for
Bonterra’s 2008 and subsequent taxation periods, Bonterra would be required to make a payment of 50% of the
tax liability claimed by the CRA in order to appeal this reassessment. If such reassessments are issued and
maintained on appeal, Bonterra will owe total cash taxes of approximately $49 million and have to pay
approximately 50% or $24.5 million for the taxation years since the conversion including the first six months of
2014. Bonterra would have 90 days from the Notice of Reassessment to prepare and file a Notice of Objection. If
the CRA is not in agreement with Bonterra’s Notice of Objection, Bonterra has the option to file its case with the
Tax Court of Canada. Bonterra anticipates that legal proceedings through various tax courts would take
approximately 2 to 4 years. If Bonterra receives a positive ruling, then any taxes, interest and penalties paid to the
CRA will be refunded plus interest. If Bonterra is unsuccessful then any remaining taxes payable plus interest and
penalties will be remitted.
The impact of the proposal on Bonterra’s tax provision has been considered by management. Management
remains of the opinion, that after careful consideration and consultation at the time of the conversion, Bonterra’s
subsequent tax filings were correct as filed.