COMMITMENTS AND CONTINGENCIES

9 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 8: COMMITMENTS AND CONTINGENCIES

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 $14.6 million and $14.0 million as of March 31, 2023 and June 30, 2022, 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 $19.9 million and $12.9 million as of March 31, 2023 and June 30, 2022, 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 $20.4 million at March 31, 2023, and net of amounts drawn and outstanding, our remaining commitment to fund totaled $9.6 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, any benefits we may receive are uncertain and may significantly differ from our current estimates. We plan to record any benefit related to these credits upon 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. During the nine months ended March 31, 2023, we received $13.2 million related to these credits and recognized $3.7 million as an offset to related operating expenses. As of March 31, 2023 and June 30, 2022, we had deferred balances of $14.6 million and $5.1 million, respectively, which is recorded in deferred revenue and other current liabilities.

Emerald AdvanceSM lines of credit (EAs) are originated by PathwardTM N.A. (Pathward). We purchase a 90% participation interest, at par, in all EAs originated by Pathward in accordance with our participation agreement. At March 31, 2023, the principal balance of purchased participation interests for the current year totaled $277.9 million.

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. At March 31, 2023, we accrued an estimated liability of $0.8 million related to this guarantee, compared to $0.6 million at March 31, 2022.