Commitments And Contingencies

12 Months Ended

Jun. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments And Contingencies

NOTE 10: COMMITMENTS AND CONTINGENCIES

Our U.S. and Canadian businesses offer our 100% accuracy guarantee. Assisted tax returns are covered by our 100% accuracy guarantee, whereby we will reimburse a client for penalties and interest attributable to an H&R Block error on a return. DIY tax returns are covered by our 100% accuracy guarantee, whereby we will reimburse a client up to a maximum of $10,000, if our software makes an arithmetic error that results in payment of penalties and/or interest to the respective taxing authority that a client would otherwise not have been required to pay. Our liability related to estimated losses under the 100% accuracy guarantee was $14.1 million and $15.8 million as of June 30, 2024 and 2023, respectively. The short-term and long-term portions of this liability are included in deferred revenue and other liabilities in the consolidated balance sheets.

Liabilities related to acquisitions for (1) estimated contingent consideration based on expected financial performance of the acquired business and economic conditions at the time of acquisition and (2) estimated accrued compensation related to continued employment of key employees were $26.9 million and $18.3 million as of June 30, 2024 and 2023, respectively, with amounts recorded in deferred revenue and other liabilities. These liabilities will be settled within the nine years. Should actual results differ from our estimates, future payments made will differ from the above estimate and any differences will be recorded in results from continuing operations.

We have contractual commitments to fund certain franchises with approved short-term lines of credit for the purpose of meeting their seasonal working capital needs. Our total obligation under these lines of credit was $0.4 million as of June 30, 2024, and net of amounts drawn and outstanding, our remaining commitment to fund totaled $0.2 million.

In March 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to provide economic and other relief as a result of the COVID-19 pandemic. The CARES Act includes, among other items, provisions relating to refundable employee retention payroll tax credits. Due to the complex nature of the employee retention credit computations, we deferred benefits related to these credits until both the receipt of the benefit and the resolution of the uncertainties, including, but not limited to, the completion of any potential audit or examination, or the expiration of the related statute of limitations. As of June 30, 2023, we had deferred $15.4 million related to these credits which were recorded in deferred revenue and other current liabilities. Due to the expiration of the statute of limitations, we recognized the deferred credits during fiscal year 2024 as an offset to related operating expenses.

We are self-insured for certain risks, including employer provided medical benefits, workers' compensation, property, general liability, tax errors and omissions, and claims related to POM. These programs maintain various self-insured retentions and commercial insurance is purchased in excess of the self-insured retentions for all but POM in company-owned offices and employer provided medical benefits. We accrue estimated losses for self-insured retentions using actuarial models and assumptions based on historical loss experience.

We have a deferred compensation plan that permits certain employees to defer portions of their compensation and accrue income on the deferred amounts. Included in deferred revenue and other liabilities is $10.1 million and $10.5 million as of June 30, 2024 and 2023, respectively, reflecting our obligation under this plan.

Effective October 20, 2023, we amended the Program Management Agreement and entered into a new participation agreement related to EA term loans originated by Pathward. In fiscal year 2024, EAs were offered as term loans and we discontinued EA lines of credit. We continue to purchase a 90% participation interest in each loan made by Pathward in accordance with the participation agreement. See note 4 for additional information about these balances.

Refund Advance loans are originated by Pathward and offered to certain assisted U.S. tax preparation clients, based on client eligibility as determined by Pathward. We pay fees primarily based on loan size and customer type.

We have provided a guarantee up to $18.0 million related to certain loans to clients prior to the IRS accepting electronic filing. We accrued an estimated liability of $1.4 million at June 30, 2024 related to this guarantee. As of June 30, 2023 we had $0.7 million accrued under the Refund Advance guarantee agreement, and we paid $0.7 million, net of recoveries, related to that guarantee during the fiscal year ended June 30, 2024.

We offer POM to U.S. and Canadian clients, whereby we (1) represent our clients if they are audited by a taxing authority, and (2) assume the cost, subject to certain limits, of additional taxes owed by a client resulting from errors attributable to H&R Block. The additional taxes paid under POM have a cumulative limit of $6,000 for U.S. clients and $3,000 CAD for Canadian clients with respect to the federal, state/provincial and local tax returns we prepared for applicable clients during the taxable year protected by POM. A loss on POM would be recognized if the sum of expected costs for services exceeded unearned revenue.