COMMITMENTS AND CONTINGENCIES

9 Months Ended

Jan. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 9: COMMITMENTS AND CONTINGENCIES

All 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 IRS that a client would otherwise not have been required to pay. Our liability related to estimated losses under the 100% accuracy guarantee was $9.2 million, $7.0 million and $9.4 million as of January 31, 2021 and 2020 and April 30, 2020, 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 $18.8 million, $11.4 million and $14.2 million as of January 31, 2021 and 2020 and April 30, 2020, respectively, with amounts recorded in deferred revenue and other liabilities. 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 revolving lines of credit. Our total obligation under these lines of credit was $29.3 million at January 31, 2021, and net of amounts drawn and outstanding, our remaining commitment to fund totaled $13.7 million.

Both the U.S. and Canada implemented emergency economic relief programs as a way of minimizing the economic impact of the global COVID-19 pandemic. In the U.S., the CARES Act includes, among other items, provisions relating to refundable payroll tax credits and deferment of certain tax payments through the end of calendar 2020. In Canada the COVID-19 Economic Response Plan includes the Canada Emergency Wage Subsidy (CEWS). For our U.S. businesses we have elected to defer the employer-paid portion of social security taxes and are evaluating the employee retention credit, and in Canada we have received $15.9 million in wage subsidies during the nine months ended January 31, 2021 which has been treated as a government subsidy to offset related operating expenses.

On August 5, 2020, we entered into a Program Management Agreement with MetaBank®, N.A. (Meta), a wholly-owned subsidiary of Meta Financial Group, Inc. Under the Meta Program Management Agreement and its ancillary agreements and related product schedules, Meta acts as the bank provider of H&R Block-branded financial products. Emerald AdvanceSM lines of credit (EAs) are originated by Meta, and we purchase a 90% participation interest, at par, in the advances originated by Meta. At January 31, 2021, the principal balance of purchased participation interests for the current year totaled $303.2 million.

Refund Advance loans are originated by Meta and offered to certain assisted U.S. tax preparation clients, based on client eligibility as determined by Meta. We pay fees based on loan size and customer type. The fees are intended to cover expected loan losses and payments to capital providers, among other items. We have provided two guarantees related to this agreement. We have provided a guarantee up to $18.0 million related to certain loans to clients prior to the IRS accepting electronic filing. At January 31, 2021, we accrued an estimated liability of $1.3 million related to this guarantee, compared to $1.9 million at January 31, 2020, under a similar guarantee with our prior bank partner. Additionally, we provided a guarantee related to loans to virtual assisted clients. There is no maximum exposure under this guarantee. At January 31, 2021, we had no amounts accrued under this guarantee and we do not expect that a material amount will be paid for this guarantee under anticipated loss scenarios related to the fiscal year 2021 tax season.