HR Block 2007 Annual Report Download - page 33

offices and personal tax returns prepared and electronically filed in tax refund. Federal laws place restrictions on the fees an electronic filer
offices, online and via our software, we are the largest company may charge in connection with RALs. In addition, some states and
providing direct tax return preparation and electronic filing services in localities have enacted laws and adopted regulations for RAL
the U.S. We also believe we operate the largest tax return preparation facilitators and/or the advertising of RALs.
businesses in Canada and Australia. Certain states have regulations and requirements relating to offering
Our digital tax solutions businesses compete with a number of income tax courses. These requirements include licensing, bonding and
companies. Intuit, Inc. is the largest supplier of tax preparation software certain restrictions on advertising.
and is also our primary competitor in the online tax preparation market. As noted above under ‘‘Owned and Franchised Offices,’’ many of the
There are many smaller competitors in the online market, as well as free income tax return preparation offices operating in the U.S. under the
state-sponsored online filing programs. Price and marketing name ‘‘H&R Block’’ are operated by franchisees. Our franchising
competition for tax preparation services increased in recent years. activities are subject to the rules and regulations of the FTC, and
GOVERNMENT REGULATION –Federal legislation requires income various state laws regulating the offer and sale of franchises. The FTC
tax return preparers to, among other things, set forth their signatures and various state laws require that we furnish to prospective
and identification numbers on all tax returns prepared by them, and franchisees a franchise offering circular containing prescribed
retain all tax returns prepared for three years. Federal laws also subject information. A number of states in which we are currently franchising
income tax return preparers to accuracy-related penalties in connection regulate the sale of franchises and require registration of the franchise
with the preparation of income tax returns. Preparers may be prohibited offering circular with state authorities and the delivery of a franchise
from further acting as income tax return preparers if they continuously offering circular to prospective franchisees. We are currently operating
and repeatedly engage in specified misconduct. under exemptions from registration in several of these states based
The federal government regulates the electronic filing of income tax upon our net worth and experience. Substantive state laws regulating
returns in part by requiring electronic filers to comply with all the franchisor/franchisee relationship presently exist in a substantial
publications and notices of the IRS applicable to electronic filing. Wenumber of states, and bills have been introduced in Congress from time
are also required to provide certain electronic filing information to the to time that would provide for federal regulation of the
taxpayer, comply with advertising standards for electronic filers, and be franchisor/franchisee relationship in certain respects. The state laws
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subjected to possible monitoring by the IRS, penalties for disclosure or often limit, among other things, the duration and scope of non-
use of income tax return preparation and other preparer penalties, and competition provisions, the ability of a franchisor to terminate or refuse
suspension from the electronic filing program. to renew a franchise and the ability of a franchisor to designate sources
The Gramm-Leach-Bliley Act and Federal Trade Commission of supply. From time to time, we may have to make appropriate
(FTC) regulations adopted thereunder require income tax preparers to amendments to our franchise offering circular used to comply with our
adopt and disclose consumer privacy policies, and provide consumers a disclosure obligations under federal and state law.
reasonable opportunity to ‘‘opt-out’’ of having personal information We also seek to determine the applicability of all government and self-
disclosed to unaffiliated third parties for marketing purposes. Some regulatory organization statutes, ordinances, rules and regulations in
states have adopted or proposed strict ‘‘opt-in’’ requirements in the international countries in which we operate (collectively, Foreign
connection with use or disclosure of consumer information. Laws) and to comply with these Foreign Laws. In addition, the Canadian
Federal statutes and regulations also regulate an electronic filer’s government regulates the refund-discounting program in Canada. These
involvement in RALs. Electronic filers must clearly explain the RAL is a laws have not materially affected our international operations.
loan and not a substitute for or a quicker way of receiving an income See discussion in Item 1A, ‘‘Risk Factors’’ for additional information.
BUSINESS SERVICES
GENERAL –Our Business Services segment offers middle-market From time to time, we have acquired businesses, and will continue to
companies accounting, tax and business consulting services, wealth do so if future conditions warrant and satisfactory terms can be
management and capital markets services. Segment revenues negotiated. During fiscal year 2006, we paid $190.7 million to acquire all
constituted 23.2% of our consolidated revenues of continuing operations the outstanding common stock of American Express Tax and Business
for fiscal years 2007 and 2006 and 17.4% for 2005. Services, Inc. (AmexTBS), which has been merged into RSM. During
This segment consists primarily of RSM McGladrey, Inc. (RSM), fiscal year 2007, we finalized purchase price adjustments relating to this
which provides accounting, tax, and business consulting services in 97 acquisition resulting in a $10.1 million reduction in purchase price,
cities in 25 states and offers services in 18 of the top 25 U.S. markets. which was recorded primarily as a reduction of goodwill.
H&R BLOCK 2007 Form 10K