H&R Block CEO Bill Cobb said Tuesday that he likes President Donald Trump’s tax reform plans and the Republicans’ tax-credit-driven replacement for the Affordable Care Act.
Trump has proposed lowering corporate and individual tax rates. And the American Health Care Act released Monday to replace the law sometimes known as “Obamacare” involves new tax credits to help pay for health care as well as other changes to tax returns.
“People are going to be confused. I think they’re going to turn to us for help,” Cobb said during a session with investment analysts after the company reported its most recent financial results. “I’m puzzled why people think this is a negative for us.”
Trump had said less than three weeks ago that H&R Block “probably won’t be too happy” with his plans for simpler taxes.
Cobb also focused on the benefit of a lower corporate tax rate for H&R Block, which he said generally pays about a 35 percent tax rate.
“The most important benefit to H&R Block ultimately could be the corporate tax reform. The centerpiece of that is to lower the rates,” Cobb said. “That’s going to be a lot of money for us.”
Cobb spoke after H&R Block reported its results during the first half of the tax season.
The company said a steep drop in total tax filings at the IRS contributed to a drop in its revenues and the number of returns it prepared during the early part of the tax season.
Indeed, because Block’s business was down less than total electronic filings at the Internal Revenue Service, the Kansas City-based tax preparation company declared it had gained a larger share of the tax preparation market.
Block based the claim on an IRS report that showed, through Feb. 24, the agency had received 10 percent fewer returns electronically than a year ago. Block’s e-file count was down 7 percent through that date, which the company said showed it gained market share.
Similar comparisons, the company said, showed Block gained share in the assisted and do-it-yourself tax preparation markets.
Block cautioned that it expects the market share gain “to moderate” as the tax season advances because it had ended its free federal 1040EZ filing promotion and refund advance loans at the end of February. The company credited both programs for its market share gains in the early part of the tax season.
Tax returns prepared by Block totaled 10.345 million through the end of February, a later date than that of the latest available IRS totals. Block’s total returns prepared had declined 2.7 percent from the 10.635 million returns it had prepared a year earlier.
Its digital tax business showed a slight increase at 3.637 million returns through Feb. 28, compared with 3.626 million a year ago.
Block’s decline came in its assisted service at company-owned and franchise stores. There, returns prepared totaled 6.410 million at the end of February, down 3.3 percent from 6.632 million a year ago.
Financially, the delay to this tax season cut into H&R Block’s revenues and earnings for the company’s fiscal third quarter.
Revenues totaled $451.9 million in November, December and January, down 4.8 percent from a year earlier. H&R Block reported a net loss of $104.5 million, or 50 cents a share in the quarter. The loss was 27.9 percent larger than the $81.7 million loss a year ago in a quarter that traditionally generates a seasonal loss for the company.
H&R Block has been struggling since 2014 against a decline in the number of customers it sees in stores during the early part of tax season. Declines have been large enough that promotional offers, advertisements and other efforts later in the season still left Block preparing fewer tax returns in total than the year before.
Taxing H&R Block’s returns
Number of U.S. tax returns prepared by H&R Block through Feb. 28 each year, with losses compared to the previous year:
2017 — 10.345 million, down 2.7 percent
2016 — 10.585 million, down 6.1 percent
2015 — 11.277 million, down 4.2 percent
2014 —11.772 million, down 5.9 percent
Source: H&R Block Inc.