H & R Block won’t end Tax Act’s free federal filing after acquisiton

H & R Block won't end TaxACT's free online federal income tax return filing or change its pricing model after the acquisition of its parent company, H & R Block President Alan Bennett said on Thursday, Oct. 14.

H & R Block, the nation's largest tax preparation company, announced late Wednesday that it has agreed to acquire Cedar Rapids-based 2SS Holdings, the developer of TaxACT digital tax preparation solutions, for $287.5 million.

Bennett told Wall Street analysts in a conference call Thursday morning that TaxACT has  a lower-cost business model than H & R Block's digital tax preparation model, which H & R Block plans to emulate.

TaxACT's pioneered the business model of offering free basic online filing of federal tax returns, deriving income from clients who also want to purchase related products such as online state filing, Bennett said.

TaxACT will continue to offer the free basic federal filing, Bennett said.

In acquiring TaxACT, Bennett said H & R Block isn't trying to drive customers from  its retail storefront tax preparation services into digital, “but to serve them where they want to be served.”

Bennett had praise for TaxACT's management team as he answered one analyst who wanted to know what H & R Block planned to offer Lance Dunn, the president of TaxACT, to keep him from leaving after the merger.

Bennett said H & R Block had no real “hook” to keep Dunn. He said H & R Bock of offering market-based compensation to TaxACT's management team.

“I think there's motivation to stay on,” Bennett said. “We had an agreement that they're going to stay on, and they're very excited about the integration process.”

Bennett said he expected both H & R Block's At Home digital offerings and TaxACT's offferings to remain the same for the upcoming tax season. The TaxACT management team will oversee the company's digital products, but H & R Block has no plans to phase out either the TaxACT or At Home lines.

Revenue growth at TaxACT had a compounded annual growth rate of 22 percent from 2006 to 2010, Bennett said. In the fiscal year ended April 1, it generated $70 million in revenue.