HR Block 2009 Annual Report Download - page 9

information. In addition, the IRS generally prohibits the use or disclosure by tax return preparers of taxpayer
information without the prior written consent of the taxpayer.
Federal statutes and regulations also regulate an electronic filer’s involvement in RALs. Electronic filers must
clearly explain the RAL is a loan and not a substitute for or a quicker way of receiving an income tax refund.
Federal laws place restrictions on the fees an electronic filer may charge in connection with RALs. In addition,
some states and localities have enacted laws and adopted regulations for RAL facilitators and/or the advertising of
RALs.
Certain states have regulations and requirements relating to offering income tax courses. These requirements
include licensing, bonding and certain restrictions on advertising.
As noted above under “Offices,” many of the income tax return preparation offices operating in the U.S. under
the name “H&R Block” are operated by franchisees. Our franchising activities are subject to the rules and
regulations of the FTC and various state laws regulating the offer and sale of franchises. The FTC and various state
laws require us to furnish to prospective franchisees a franchise offering circular containing prescribed
information. A number of states in which we are currently franchising regulate the sale of franchises and
require registration of the franchise offering circular with state authorities and the delivery of a franchise offering
circular to prospective franchisees. We are currently operating under exemptions from registration in several of
these states based on our net worth and experience. Substantive state laws regulating the franchisor/franchisee
relationship presently exist in a substantial number of states, and bills have been introduced in Congress from time
to time that would provide for federal regulation of the franchisor/franchisee relationship in certain respects. The
state laws often limit, among other things, the duration and scope of non-competition provisions, the ability of a
franchisor to terminate or refuse to renew a franchise and the ability of a franchisor to designate sources of supply.
From time to time, we may make appropriate amendments to our franchise offering circular to comply with our
disclosure obligations under federal and state law.
We also seek to determine the applicability of all government and self-regulatory organization statutes,
ordinances, rules and regulations in the other countries in which we operate (collectively, Foreign Laws) and
to comply with these Foreign Laws. In addition, the Canadian government regulates the refund-discounting
program in Canada. These laws have not materially affected our international operations.
See discussion in Item 1A, “Risk Factors” for additional information.
BUSINESS SERVICES
GENERAL –Our Business Services segment offers accounting, tax and business consulting services, wealth
management and capital markets services to middle-market companies. Segment revenues constituted 22.0% of
our consolidated revenues from continuing operations for fiscal year 2009, 23.0% for fiscal year 2008 and 25.1% for
fiscal year 2007.
This segment consists primarily of RSM, which provides accounting, tax and business consulting services in
93 cities and 25 states and offers services in 21 of the 25 top U.S. markets.
From time to time, we have acquired related businesses and may continue to do so if future conditions warrant
and satisfactory terms can be negotiated.
RELATIONSHIP WITH ATTEST FIRMS –By regulation, we cannot provide financial statement attest services.
McGladrey & Pullen LLP (M&P) and other public accounting firms (collectively, “the Attest Firms”) operate in an
alternative practice structure with RSM, and provide attest and other services related to client financial
statements. Through a number of agreements with these Attest Firms, we provide accounting, payroll, human
resources, marketing and other administrative services to the Attest Firms. We receive a management fee for these
services. We also have a cost-sharing arrangement with the Attest Firms, whereby they reimburse us for certain
costs, mainly for the use of RSM-owned or leased real estate, property and equipment. The Attest Firms generally
may terminate these arrangements upon 210 days notice. Following such a termination, the Attest Firms generally
are prohibited for a period of three years from engaging in businesses in which RSM engages or soliciting RSM
clients. In addition, we provide working capital to M&P through a revolving credit facility in an amount equal to the
lower of the value of their accounts receivable, work-in-process and fixed assets or $125.0 million. This credit
facility is secured by M&P’s accounts receivable, work-in-process and fixed assets. The Attest Firms are limited
liability partnerships with their own independent management, legal and business advisors, professional liability
insurance, quality assurance and risk management policies. Accordingly, the Attest Firms are separate legal
entities and not affiliates. Some partners and employees of the Attest Firms are also employees of RSM. The terms
of the RSM/Attest Firms arrangements are based on the mutual agreement of the parties. As a result, from time to
time, the parties assess various aspects of the relationship, such as the extent and cost of the RSM services,
mutually supportive marketing initiatives, acquisition strategies and financing, and, when mutually agreed, have
H&R BLOCK 2009 Form 10K 5