HR Block 2015 Annual Report Download - page 12

H&R Block, Inc. | 2015 Form 10-K 5
HRB Bank provides banking services primarily to our assisted and DIY tax clients and for many of these clients, HRB
Bank is their only provider of banking services. HRB Bank does not seek to compete broadly with regional or national
retail banks.
GOVERNMENT REGULATION – TAX PREPARERS – Our tax preparation business is subject to various forms of
government regulation, including the following:
U.S. Federal Tax Preparer Regulations. U.S. federal legislation requires income tax return preparers to, among
other things, set forth their signatures and identification numbers, including their Preparer Tax Identification Number
(PTIN), on all tax returns prepared by them and retain all tax returns prepared by them for three years. U.S. federal
laws also subject income tax return preparers to accuracy-related penalties in connection with the preparation of
income tax returns. Preparers may be prohibited from continuing to act as income tax return preparers if they
continuously and repeatedly engage in specified misconduct.
The U.S. federal government regulates the electronic filing of income tax returns in part by requiring electronic
filers to comply with all publications and notices of the IRS applicable to electronic filing. We are required to provide
certain electronic filing information to taxpayers and comply with advertising standards for electronic filers. We are
also subject to possible monitoring by the IRS, and if deemed appropriate, the IRS could impose various penalties,
including penalties for improper disclosure or use of taxpayer information, other preparer penalties or suspension
from the IRS electronic filing program.
Financial Privacy Regulations. The Gramm-Leach-Bliley Act and related Consumer Financial Protection Bureau
(CFPB) and Federal Trade Commission (FTC) regulations require income tax preparers to (1) adopt and disclose
consumer privacy notices, (2) provide consumers a reasonable opportunity to control (via "opt-out") whether their
nonpublic personal information is disclosed to unaffiliated third-parties (subject to certain exceptions), and (3)
implement reasonable safeguards to protect the security and confidentiality of nonpublic personal information. In
addition, the IRS generally prohibits the use or disclosure of taxpayer information by tax return preparers for purposes
other than tax return preparation without the prior written consent of the taxpayer.
State Regulations. Certain states have privacy laws and regulations similar to the U.S. federal regulations described
above. Most states also have data security breach notice laws which may require notice to impacted individuals and
others if there is unauthorized access to certain nonpublic personal information. Several states require income tax
return preparers to, among other things, register as a return preparer and comply with certain registration
requirements such as testing and continuing education requirements. State regulations also subject income tax return
preparers to accuracy-related penalties in connection with the preparation of income tax returns, and may prohibit
preparers from continuing to act as income tax return preparers if they continuously engage in specified misconduct.
Certain states have regulations and requirements relating to offering income tax courses. These requirements may
include licensing, bonding and certain restrictions on advertising.
Franchise Regulations. 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,
potential enforcement by the CFPB, 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 disclosure document containing certain
prescribed information. A number of states in which we are currently franchising regulate the sale of franchises and
require registration of the franchise disclosure document with certain state authorities. 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 large 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
disclosure document to comply with our disclosure obligations under U.S. federal and state laws.
REGULATION AND SUPERVISION – BANK AND HOLDING COMPANIES – Our subsidiary, HRB Bank, is a federal
savings bank chartered under the Home Owner's Loan Act, as amended (HOLA). Our Holding Companies are SLHCs
because they control HRB Bank. The following is a general description of certain U.S. federal banking statutes and
regulations that apply to HRB Bank and our Holding Companies.