|
þ
|
|
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
|
For the quarterly period ended October 31, 2018
|
o
|
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
|
For the transition period from ____________ to ____________ .
|
Delaware
(State of incorporation)
|
|
77-0034661
(IRS employer identification no.)
|
|
2700 Coast Avenue, Mountain View, CA 94043
(Address of principal executive offices)
|
|
|
|
|
|
(650) 944-6000
(Registrant’s telephone number, including area code)
|
|
Large accelerated
filer
|
þ
|
Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
Smaller reporting
company
|
o
|
Emerging growth
company
|
o
|
|
INTUIT INC.
FORM 10-Q
INDEX
|
|
Page
|
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|
|
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|
|
|
|
|
EX-10.01
|
|
EX-10.02
|
|
EX-10.03
|
|
EX-10.04
|
|
EX-31.01
|
|
EX-31.02
|
|
EX-32.01
|
|
EX-32.02
|
|
EX-101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
|
EX-101.SCH XBRL Taxonomy Extension Schema
|
|
EX-101.CAL XBRL Taxonomy Extension Calculation Linkbase
|
|
EX-101.LAB XBRL Taxonomy Extension Label Linkbase
|
|
EX-101.PRE XBRL Taxonomy Extension Presentation Linkbase
|
|
EX-101.DEF XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
2
|
|
•
|
our expectations and beliefs regarding future conduct and growth of the business;
|
•
|
our beliefs and expectations regarding seasonality, competition and other trends that affect our business;
|
•
|
our expectation that we will continue to invest significant resources in our product development, marketing and sales capabilities;
|
•
|
our expectation regarding the impact of recent U.S. tax legislation on Intuit's business and its corporate tax rate;
|
•
|
our expectation that we will continue to invest significant management attention and resources in our information technology infrastructure and in our privacy and security capabilities;
|
•
|
our expectation that we will work with the broader industry and government to protect our customers from fraud;
|
•
|
our expectation that we will generate significant cash from operations;
|
•
|
our expectation that total service and other revenue as a percentage of our total revenue will continue to grow;
|
•
|
our expectations regarding the development of future products, services, business models and technology platforms and our research and development efforts;
|
•
|
our assumptions underlying our critical accounting policies and estimates, including our judgments and estimates regarding revenue recognition; stock volatility and other assumptions used to estimate the fair value of share-based compensation; the fair value of goodwill; and expected future amortization of acquired intangible assets;
|
•
|
our intention not to sell our investments and our belief that it is more likely than not that we will not be required to sell them before recovery at par;
|
•
|
our belief that the investments we hold are not other-than-temporarily impaired;
|
•
|
our belief that we take prudent measures to mitigate investment related risks;
|
•
|
our belief that our exposure to currency exchange fluctuation risk will not be significant in the future;
|
•
|
our assessments and estimates that determine our effective tax rate;
|
•
|
our belief that it is not reasonably possible that there will be a significant increase or decrease in our unrecognized tax benefits over the next 12 months;
|
•
|
our belief that our cash and cash equivalents, investments and cash generated from operations will be sufficient to meet our seasonal working capital needs, capital expenditure requirements, contractual obligations, debt service requirements and other liquidity requirements associated with our operations for at least the next 12 months;
|
•
|
our expectation that we will return excess cash generated by operations to our stockholders through repurchases of our common stock and the payment of cash dividends, after taking into account our operating and strategic cash needs;
|
•
|
our judgments and assumptions relating to our loan portfolio;
|
•
|
our belief that the credit facility will be available to us should we choose to borrow under it; and
|
•
|
our assessments and beliefs regarding the future outcome of pending legal proceedings and inquiries by regulatory authorities, the liability, if any, that Intuit may incur as a result of those proceedings and inquiries, and the impact of any potential losses associated with such proceedings or inquiries on our financial statements.
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
3
|
|
PART I - FINANCIAL INFORMATION
|
ITEM 1 - FINANCIAL STATEMENTS
|
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
|
|||||||
|
|
||||||
|
Three Months Ended
|
||||||
(In millions, except per share amounts)
|
October 31,
2018 |
|
October 31,
2017 |
||||
Net revenue:
|
|
|
|
||||
Product
|
$
|
347
|
|
|
$
|
370
|
|
Service and other
|
669
|
|
|
540
|
|
||
Total net revenue
|
1,016
|
|
|
910
|
|
||
Costs and expenses:
|
|
|
|
||||
Cost of revenue:
|
|
|
|
||||
Cost of product revenue
|
15
|
|
|
18
|
|
||
Cost of service and other revenue
|
227
|
|
|
178
|
|
||
Amortization of acquired technology
|
5
|
|
|
2
|
|
||
Selling and marketing
|
346
|
|
|
308
|
|
||
Research and development
|
294
|
|
|
293
|
|
||
General and administrative
|
137
|
|
|
145
|
|
||
Amortization of other acquired intangible assets
|
2
|
|
|
1
|
|
||
Total costs and expenses
|
1,026
|
|
|
945
|
|
||
Operating loss
|
(10
|
)
|
|
(35
|
)
|
||
Interest expense
|
(4
|
)
|
|
(5
|
)
|
||
Interest and other income, net
|
—
|
|
|
3
|
|
||
Loss before income taxes
|
(14
|
)
|
|
(37
|
)
|
||
Income tax provision (benefit)
|
(48
|
)
|
|
(35
|
)
|
||
Net income (loss)
|
$
|
34
|
|
|
$
|
(2
|
)
|
|
|
|
|
||||
Basic net income (loss) per share
|
$
|
0.13
|
|
|
$
|
(0.01
|
)
|
Shares used in basic per share calculations
|
260
|
|
|
256
|
|
||
|
|
|
|
||||
Diluted net income (loss) per share
|
$
|
0.13
|
|
|
$
|
(0.01
|
)
|
Shares used in diluted per share calculations
|
264
|
|
|
256
|
|
||
|
|
|
|
||||
Cash dividends declared per common share
|
$
|
0.47
|
|
|
$
|
0.39
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
4
|
|
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
|
|||||||
|
|
||||||
|
Three Months Ended
|
||||||
(In millions)
|
October 31,
2018 |
|
October 31,
2017 |
||||
|
|
|
|
||||
Net income (loss)
|
$
|
34
|
|
|
$
|
(2
|
)
|
Other comprehensive loss, net of income taxes:
|
|
|
|
||||
Foreign currency translation loss
|
(4
|
)
|
|
(7
|
)
|
||
Total other comprehensive loss, net
|
(4
|
)
|
|
(7
|
)
|
||
Comprehensive income (loss)
|
$
|
30
|
|
|
$
|
(9
|
)
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
5
|
|
INTUIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
|
|||||||
|
|
|
|
||||
(In millions)
|
October 31,
2018 |
|
July 31,
2018 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,084
|
|
|
$
|
1,464
|
|
Investments
|
248
|
|
|
252
|
|
||
Accounts receivable, net
|
77
|
|
|
98
|
|
||
Income taxes receivable
|
116
|
|
|
39
|
|
||
Prepaid expenses and other current assets
|
269
|
|
|
202
|
|
||
Current assets before funds held for customers
|
1,794
|
|
|
2,055
|
|
||
Funds held for customers
|
438
|
|
|
367
|
|
||
Total current assets
|
2,232
|
|
|
2,422
|
|
||
Long-term investments
|
13
|
|
|
13
|
|
||
Property and equipment, net
|
805
|
|
|
812
|
|
||
Goodwill
|
1,610
|
|
|
1,611
|
|
||
Acquired intangible assets, net
|
55
|
|
|
61
|
|
||
Other assets
|
213
|
|
|
215
|
|
||
Total assets
|
$
|
4,928
|
|
|
$
|
5,134
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Short-term debt
|
$
|
50
|
|
|
$
|
50
|
|
Accounts payable
|
209
|
|
|
178
|
|
||
Accrued compensation and related liabilities
|
174
|
|
|
369
|
|
||
Deferred revenue
|
513
|
|
|
581
|
|
||
Other current liabilities
|
202
|
|
|
198
|
|
||
Current liabilities before customer fund deposits
|
1,148
|
|
|
1,376
|
|
||
Customer fund deposits
|
438
|
|
|
367
|
|
||
Total current liabilities
|
1,586
|
|
|
1,743
|
|
||
Long-term debt
|
375
|
|
|
388
|
|
||
Long-term deferred income tax liabilities
|
65
|
|
|
68
|
|
||
Other long-term obligations
|
120
|
|
|
119
|
|
||
Total liabilities
|
2,146
|
|
|
2,318
|
|
||
Commitments and contingencies
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock
|
—
|
|
|
—
|
|
||
Common stock and additional paid-in capital
|
5,501
|
|
|
5,338
|
|
||
Treasury stock, at cost
|
(11,151
|
)
|
|
(11,050
|
)
|
||
Accumulated other comprehensive loss
|
(40
|
)
|
|
(36
|
)
|
||
Retained earnings
|
8,472
|
|
|
8,564
|
|
||
Total stockholders’ equity
|
2,782
|
|
|
2,816
|
|
||
Total liabilities and stockholders’ equity
|
$
|
4,928
|
|
|
$
|
5,134
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
6
|
|
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
(In millions, except shares in thousands)
|
Shares of
Common
Stock
|
|
Common
Stock and
Additional
Paid-In
Capital
|
|
Treasury
Stock
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Retained
Earnings
|
|
Total
Stockholders'
Equity
|
|||||||||||
Balance at July 31, 2018
|
258,616
|
|
|
$
|
5,338
|
|
|
$
|
(11,050
|
)
|
|
$
|
(36
|
)
|
|
$
|
8,564
|
|
|
$
|
2,816
|
|
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
34
|
|
|
30
|
|
|||||
Issuance of stock under employee stock plans, net of shares withheld for employee taxes
|
1,422
|
|
|
57
|
|
|
|
|
|
—
|
|
|
—
|
|
|
57
|
|
|||||
Stock repurchases under stock repurchase programs
|
(467
|
)
|
|
—
|
|
|
(101
|
)
|
|
—
|
|
|
—
|
|
|
(101
|
)
|
|||||
Dividends and dividend rights declared ($0.47 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(126
|
)
|
|
(126
|
)
|
|||||
Share-based compensation expense
|
—
|
|
|
106
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
106
|
|
|||||
Balance at October 31, 2018
|
259,571
|
|
|
$
|
5,501
|
|
|
$
|
(11,151
|
)
|
|
$
|
(40
|
)
|
|
$
|
8,472
|
|
|
$
|
2,782
|
|
(In millions, except shares in thousands)
|
Shares of
Common
Stock
|
|
Common
Stock and
Additional
Paid-In
Capital
|
|
Treasury
Stock
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Retained
Earnings
|
|
Total
Stockholders'
Equity
|
|||||||||||
Balance at July 31, 2017
|
255,668
|
|
|
$
|
4,857
|
|
|
$
|
(10,778
|
)
|
|
$
|
(22
|
)
|
|
$
|
7,642
|
|
|
$
|
1,699
|
|
Comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
(2
|
)
|
|
(9
|
)
|
|||||
Issuance of stock under employee stock plans, net of shares withheld for employee taxes
|
1,224
|
|
|
44
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
44
|
|
|||||
Stock repurchases under stock repurchase programs
|
(1,225
|
)
|
|
—
|
|
|
(170
|
)
|
|
—
|
|
|
—
|
|
|
(170
|
)
|
|||||
Dividends and dividend rights declared ($0.39 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
|
(100
|
)
|
|||||
Share-based compensation expense
|
—
|
|
|
98
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
98
|
|
|||||
Balance at October 31, 2017
|
255,667
|
|
|
$
|
4,999
|
|
|
$
|
(10,948
|
)
|
|
$
|
(29
|
)
|
|
$
|
7,540
|
|
|
$
|
1,562
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
7
|
|
INTUIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
|
|||||||
|
|
|
|
||||
|
Three Months Ended
|
||||||
(In millions)
|
October 31,
2018 |
|
October 31,
2017 |
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
34
|
|
|
$
|
(2
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
||||
Depreciation
|
51
|
|
|
60
|
|
||
Amortization of acquired intangible assets
|
6
|
|
|
5
|
|
||
Share-based compensation expense
|
105
|
|
|
97
|
|
||
Deferred income taxes
|
(9
|
)
|
|
(4
|
)
|
||
Other
|
2
|
|
|
2
|
|
||
Total adjustments
|
155
|
|
|
160
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
21
|
|
|
(14
|
)
|
||
Income taxes receivable
|
(47
|
)
|
|
2
|
|
||
Prepaid expenses and other assets
|
(72
|
)
|
|
(25
|
)
|
||
Accounts payable
|
24
|
|
|
61
|
|
||
Accrued compensation and related liabilities
|
(191
|
)
|
|
(147
|
)
|
||
Deferred revenue
|
(69
|
)
|
|
(120
|
)
|
||
Other liabilities
|
2
|
|
|
7
|
|
||
Total changes in operating assets and liabilities
|
(332
|
)
|
|
(236
|
)
|
||
Net cash used in operating activities
|
(143
|
)
|
|
(78
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of corporate and customer fund investments
|
(70
|
)
|
|
(86
|
)
|
||
Sales of corporate and customer fund investments
|
33
|
|
|
38
|
|
||
Maturities of corporate and customer fund investments
|
41
|
|
|
46
|
|
||
Net change in customer fund deposits
|
71
|
|
|
(53
|
)
|
||
Purchases of property and equipment
|
(35
|
)
|
|
(50
|
)
|
||
Originations of term loans to small businesses
|
(76
|
)
|
|
(12
|
)
|
||
Principal repayments of term loans from small businesses
|
52
|
|
|
4
|
|
||
Other
|
4
|
|
|
(15
|
)
|
||
Net cash provided by (used in) investing activities
|
20
|
|
|
(128
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from borrowings under revolving credit facility
|
—
|
|
|
400
|
|
||
Repayment of debt
|
(13
|
)
|
|
(13
|
)
|
||
Proceeds from issuance of stock under employee stock plans
|
120
|
|
|
83
|
|
||
Payments for employee taxes withheld upon vesting of restricted stock units
|
(63
|
)
|
|
(39
|
)
|
||
Cash paid for purchases of treasury stock
|
(95
|
)
|
|
(168
|
)
|
||
Dividends and dividend rights paid
|
(129
|
)
|
|
(105
|
)
|
||
Other
|
(2
|
)
|
|
—
|
|
||
Net cash provided by (used in) financing activities
|
(182
|
)
|
|
158
|
|
||
Effect of exchange rates on cash, cash equivalents, restricted cash, and restricted cash equivalents
|
(4
|
)
|
|
(5
|
)
|
||
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents
|
(309
|
)
|
|
(53
|
)
|
||
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period
|
1,631
|
|
|
701
|
|
||
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period
|
$
|
1,322
|
|
|
$
|
648
|
|
|
|
|
|
||||
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents reported within the consolidated balance sheets to the total amounts reported on the consolidated statements of cash flows
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,084
|
|
|
$
|
529
|
|
Restricted cash and restricted cash equivalents included in funds held for customers
|
238
|
|
|
119
|
|
||
Total cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period
|
$
|
1,322
|
|
|
$
|
648
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
8
|
|
1. Description of Business and Summary of Significant Accounting Policies
|
Description of Business
|
Basis of Presentation
|
Seasonality
|
Significant Accounting Policies
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
9
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
10
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
11
|
|
Use of Estimates
|
Computation of Net Income (Loss) Per Share
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
12
|
|
|
Three Months Ended
|
||||||
(In millions, except per share amounts)
|
October 31,
2018 |
|
October 31,
2017 |
||||
Numerator:
|
|
|
|
||||
Net income (loss)
|
$
|
34
|
|
|
$
|
(2
|
)
|
|
|
|
|
||||
Denominator:
|
|
|
|
||||
Shares used in basic per share amounts:
|
|
|
|
||||
Weighted average common shares outstanding
|
260
|
|
|
256
|
|
||
|
|
|
|
||||
Shares used in diluted per share amounts:
|
|
|
|
||||
Weighted average common shares outstanding
|
260
|
|
|
256
|
|
||
Dilutive common equivalent shares from stock options
|
|
|
|
||||
and restricted stock awards
|
4
|
|
|
—
|
|
||
Dilutive weighted average common shares outstanding
|
264
|
|
|
256
|
|
||
|
|
|
|
||||
Basic and diluted net income (loss) per share:
|
|
|
|
||||
Basic net income (loss) per share
|
$
|
0.13
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
||||
Diluted net income (loss) per share
|
$
|
0.13
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
||||
Shares excluded from diluted net income (loss) per share:
|
|
|
|
||||
Weighted average stock options and restricted stock units that have been excluded from dilutive common equivalent shares outstanding due to their anti-dilutive effect
|
—
|
|
|
14
|
|
Notes Receivable and Allowances for Loan Losses
|
Concentration of Credit Risk and Significant Customers
|
Accounting Standards Recently Adopted
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
13
|
|
|
Three Months Ended October 31, 2017
|
||||||||||
(Dollars in millions)
|
As Reported
|
|
ASU 2016-18 Adjustment
|
|
As Adjusted
|
||||||
Net cash provided by (used in):
|
|
|
|
|
|
||||||
Operating activities
|
$
|
(78
|
)
|
|
$
|
—
|
|
|
$
|
(78
|
)
|
Investing activities
|
(75
|
)
|
|
(53
|
)
|
|
(128
|
)
|
|||
Financing activities
|
158
|
|
|
—
|
|
|
158
|
|
|||
Effect of exchange rates on cash, cash equivalents, restricted cash, and restricted cash equivalents
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|||
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents
|
$
|
—
|
|
|
$
|
(53
|
)
|
|
$
|
(53
|
)
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
14
|
|
|
July 31, 2018
|
||||||||||
(In millions)
|
As Reported
|
|
Topic 606 Adjustment
|
|
As Adjusted
|
||||||
Prepaid expenses and other current assets
|
$
|
184
|
|
|
$
|
18
|
|
|
$
|
202
|
|
Long-term deferred income taxes (1)
|
87
|
|
|
(85
|
)
|
|
2
|
|
|||
Other assets (1)
|
190
|
|
|
23
|
|
|
213
|
|
|||
Deferred revenue
|
961
|
|
|
(380
|
)
|
|
581
|
|
|||
Other current liabilities
|
191
|
|
|
7
|
|
|
198
|
|
|||
Long-term deferred revenue (2)
|
197
|
|
|
(194
|
)
|
|
3
|
|
|||
Other long-term obligations (2)
|
123
|
|
|
61
|
|
|
184
|
|
|||
Stockholders’ equity
|
2,354
|
|
|
462
|
|
|
2,816
|
|
|
Three Months Ended October 31, 2017
|
||||||||||
(In millions, except per share amounts)
|
As Reported
|
|
Topic 606 Adjustment
|
|
As Adjusted
|
||||||
Net revenue
|
$
|
886
|
|
|
$
|
24
|
|
|
$
|
910
|
|
Selling and marketing expense
|
308
|
|
|
—
|
|
|
308
|
|
|||
Operating loss
|
(57
|
)
|
|
22
|
|
|
(35
|
)
|
|||
Income tax benefit
|
(42
|
)
|
|
7
|
|
|
(35
|
)
|
|||
Net loss
|
(17
|
)
|
|
15
|
|
|
(2
|
)
|
|||
Diluted net loss per share
|
(0.07
|
)
|
|
0.06
|
|
|
(0.01
|
)
|
Accounting Standards Not Yet Adopted
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
15
|
|
2. Fair Value Measurements
|
Fair Value Hierarchy
|
•
|
Level 1 uses unadjusted quoted prices that are available in active markets for identical assets or liabilities.
|
•
|
Level 2 uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data for substantially the full term of the assets or liabilities.
|
•
|
Level 3 uses one or more unobservable inputs that are supported by little or no market activity and that are significant to the determination of fair value. Level 3 assets and liabilities include those whose fair values are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation.
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
16
|
|
Assets and Liabilities Measured at Fair Value on a Recurring Basis
|
|
October 31, 2018
|
|
July 31, 2018
|
||||||||||||||||||||||||||||
(In millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
Fair Value
|
||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cash equivalents, primarily money market funds and savings deposit accounts
|
$
|
512
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
512
|
|
|
$
|
1,143
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,143
|
|
Available-for-sale debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Municipal bonds
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
31
|
|
||||||||
Corporate notes
|
—
|
|
|
420
|
|
|
—
|
|
|
420
|
|
|
—
|
|
|
412
|
|
|
—
|
|
|
412
|
|
||||||||
U.S. agency securities
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
||||||||
Total available-for-sale securities
|
—
|
|
|
448
|
|
|
—
|
|
|
448
|
|
|
—
|
|
|
452
|
|
|
—
|
|
|
452
|
|
||||||||
Total assets measured at fair value on a recurring basis
|
$
|
512
|
|
|
$
|
448
|
|
|
$
|
—
|
|
|
$
|
960
|
|
|
$
|
1,143
|
|
|
$
|
452
|
|
|
$
|
—
|
|
|
$
|
1,595
|
|
|
October 31, 2018
|
|
July 31, 2018
|
||||||||||||||||||||||||||||
(In millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
Fair Value
|
||||||||||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
In cash and cash equivalents
|
$
|
512
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
512
|
|
|
$
|
1,143
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,143
|
|
Available-for-sale debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
In investments
|
$
|
—
|
|
|
$
|
248
|
|
|
$
|
—
|
|
|
$
|
248
|
|
|
$
|
—
|
|
|
$
|
252
|
|
|
$
|
—
|
|
|
$
|
252
|
|
In funds held for customers
|
—
|
|
|
200
|
|
|
—
|
|
|
200
|
|
|
—
|
|
|
200
|
|
|
—
|
|
|
200
|
|
||||||||
Total available-for-sale debt securities
|
$
|
—
|
|
|
$
|
448
|
|
|
$
|
—
|
|
|
$
|
448
|
|
|
$
|
—
|
|
|
$
|
452
|
|
|
$
|
—
|
|
|
$
|
452
|
|
3. Cash and Cash Equivalents, Investments, and Funds Held for Customers
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
17
|
|
|
October 31, 2018
|
|
July 31, 2018
|
||||||||||||
(In millions)
|
Amortized
Cost
|
|
Fair Value
|
|
Amortized
Cost
|
|
Fair Value
|
||||||||
Classification on consolidated balance sheets:
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
1,084
|
|
|
$
|
1,084
|
|
|
$
|
1,464
|
|
|
$
|
1,464
|
|
Investments
|
250
|
|
|
248
|
|
|
253
|
|
|
252
|
|
||||
Funds held for customers
|
438
|
|
|
438
|
|
|
368
|
|
|
367
|
|
||||
Long-term investments
|
13
|
|
|
13
|
|
|
13
|
|
|
13
|
|
||||
Total cash and cash equivalents, investments, and funds
held for customers
|
$
|
1,785
|
|
|
$
|
1,783
|
|
|
$
|
2,098
|
|
|
$
|
2,096
|
|
|
October 31, 2018
|
|
July 31, 2018
|
||||||||||||
(In millions)
|
Amortized
Cost
|
|
Fair Value
|
|
Amortized
Cost
|
|
Fair Value
|
||||||||
Type of issue:
|
|
|
|
|
|
|
|
||||||||
Total cash, cash equivalents, restricted cash,
and restricted cash equivalents
|
$
|
1,322
|
|
|
$
|
1,322
|
|
|
$
|
1,631
|
|
|
$
|
1,631
|
|
Available-for-sale debt securities:
|
|
|
|
|
|
|
|
||||||||
Municipal bonds
|
13
|
|
|
13
|
|
|
31
|
|
|
31
|
|
||||
Corporate notes
|
422
|
|
|
420
|
|
|
414
|
|
|
412
|
|
||||
U.S. agency securities
|
15
|
|
|
15
|
|
|
9
|
|
|
9
|
|
||||
Total available-for-sale debt securities
|
450
|
|
|
448
|
|
|
454
|
|
|
452
|
|
||||
Other long-term investments
|
13
|
|
|
13
|
|
|
13
|
|
|
13
|
|
||||
Total cash and cash equivalents, investments, and funds
held for customers
|
$
|
1,785
|
|
|
$
|
1,783
|
|
|
$
|
2,098
|
|
|
$
|
2,096
|
|
|
October 31, 2018
|
|
July 31, 2018
|
||||||||||||
(In millions)
|
Amortized
Cost
|
|
Fair Value
|
|
Amortized
Cost
|
|
Fair Value
|
||||||||
Due within one year
|
$
|
262
|
|
|
$
|
261
|
|
|
$
|
250
|
|
|
$
|
250
|
|
Due within two years
|
119
|
|
|
118
|
|
|
117
|
|
|
116
|
|
||||
Due within three years
|
47
|
|
|
47
|
|
|
66
|
|
|
65
|
|
||||
Due after three years
|
22
|
|
|
22
|
|
|
21
|
|
|
21
|
|
||||
Total available-for-sale debt securities
|
$
|
450
|
|
|
$
|
448
|
|
|
$
|
454
|
|
|
$
|
452
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
18
|
|
|
October 31, 2018
|
|
July 31, 2018
|
||||
(In millions)
|
|
|
|
||||
Restricted cash and restricted cash equivalents
|
$
|
238
|
|
|
$
|
167
|
|
Available-for-sale debt securities
|
200
|
|
|
200
|
|
||
Total funds held for customers
|
$
|
438
|
|
|
$
|
367
|
|
|
October 31, 2017
|
|
July 31, 2017
|
||||
(In millions)
|
|
|
|
||||
Restricted cash and restricted cash equivalents
|
$
|
119
|
|
|
$
|
172
|
|
Available-for-sale debt securities
|
200
|
|
|
200
|
|
||
Total funds held for customers
|
$
|
319
|
|
|
$
|
372
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
19
|
|
4. Current Liabilities
|
Short-Term Debt
|
Unsecured Revolving Credit Facility
|
Other Current Liabilities
|
(In millions)
|
October 31,
2018 |
|
July 31,
2018 |
||||
Executive deferred compensation plan liabilities
|
$
|
103
|
|
|
$
|
97
|
|
Reserve for promotional discounts and rebates
|
10
|
|
|
10
|
|
||
Reserve for product returns
|
16
|
|
|
17
|
|
||
Current portion of license fee payable
|
10
|
|
|
9
|
|
||
Current portion of deferred rent
|
5
|
|
|
6
|
|
||
Current portion of dividend payable
|
7
|
|
|
10
|
|
||
Other
|
51
|
|
|
49
|
|
||
Total other current liabilities
|
$
|
202
|
|
|
$
|
198
|
|
5. Long-Term Obligations and Commitments
|
Long-Term Debt
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
20
|
|
Other Long-Term Obligations
|
(In millions)
|
October 31,
2018 |
|
July 31,
2018 |
||||
Total deferred rent
|
$
|
48
|
|
|
$
|
47
|
|
Long-term income tax liabilities
|
61
|
|
|
61
|
|
||
Total license fee payable
|
10
|
|
|
9
|
|
||
Total dividend payable
|
10
|
|
|
14
|
|
||
Other
|
14
|
|
|
15
|
|
||
Total long-term obligations
|
143
|
|
|
146
|
|
||
Less current portion (included in other current liabilities)
|
(23
|
)
|
|
(27
|
)
|
||
Long-term obligations due after one year
|
$
|
120
|
|
|
$
|
119
|
|
Operating Lease Commitments and Unconditional Purchase Obligations
|
6. Income Taxes
|
Effective Tax Rate
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
21
|
|
Unrecognized Tax Benefits and Other Considerations
|
7. Stockholders’ Equity
|
Stock Repurchase Programs and Treasury Shares
|
Dividends on Common Stock
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
22
|
|
Share-Based Compensation Expense
|
|
Three Months Ended
|
||||||
(In millions)
|
October 31,
2018 |
|
October 31,
2017 |
||||
Cost of revenue
|
$
|
14
|
|
|
$
|
3
|
|
Selling and marketing
|
30
|
|
|
25
|
|
||
Research and development
|
35
|
|
|
39
|
|
||
General and administrative
|
26
|
|
|
30
|
|
||
Total share-based compensation expense
|
$
|
105
|
|
|
$
|
97
|
|
Share-Based Awards Available for Grant
|
(Shares in thousands)
|
Shares
Available
for Grant
|
|
Balance at July 31, 2018
|
22,791
|
|
Options granted
|
(64
|
)
|
Restricted stock units granted (1)
|
(340
|
)
|
Share-based awards canceled/forfeited/expired (1) (2)
|
1,441
|
|
Balance at October 31, 2018
|
23,828
|
|
(1)
|
RSUs granted from the pool of shares available for grant under our 2005 Equity Incentive Plan reduce the pool by 2.3 shares for each share granted. RSUs forfeited and returned to the pool of shares available for grant increase the pool by 2.3 shares for each share forfeited.
|
(2)
|
Stock options and RSUs canceled, expired or forfeited under our 2005 Equity Incentive Plan are returned to the pool of shares available for grant. Shares withheld for income taxes upon vesting of RSUs that were granted on or after July 21, 2016 are also returned to the pool of shares available for grant. Stock options and RSUs canceled, expired or forfeited under older expired plans are not returned to the pool of shares available for grant.
|
Stock Option Activity and Related Share-Based Compensation Expense
|
|
Options Outstanding
|
|||||
(Shares in thousands)
|
Number
of Shares
|
|
Weighted
Average
Exercise
Price
Per Share
|
|||
Balance at July 31, 2018
|
5,154
|
|
|
$
|
120.26
|
|
Granted
|
64
|
|
|
225.47
|
|
|
Exercised
|
(890
|
)
|
|
97.90
|
|
|
Canceled or expired
|
(169
|
)
|
|
128.19
|
|
|
Balance at October 31, 2018
|
4,159
|
|
|
$
|
126.33
|
|
|
|
|
|
|||
Exercisable at October 31, 2018
|
2,331
|
|
|
$
|
105.63
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
23
|
|
Restricted Stock Unit Activity and Related Share-Based Compensation Expense
|
|
Restricted Stock Units
|
|||||
(Shares in thousands)
|
Number
of Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
|||
Nonvested at July 31, 2018
|
7,383
|
|
|
$
|
131.50
|
|
Granted
|
148
|
|
|
214.57
|
|
|
Vested
|
(825
|
)
|
|
94.49
|
|
|
Forfeited
|
(494
|
)
|
|
74.75
|
|
|
Nonvested at October 31, 2018
|
6,212
|
|
|
$
|
142.90
|
|
8. Litigation
|
9. Segment Information
|
Small Business & Self-Employed: This segment targets small businesses and the self-employed around the world, and the accounting professionals who serve and advise them. Our offerings include QuickBooks financial and business management online services and desktop software, payroll solutions, merchant payment processing solutions, and financing for small businesses.
Consumer: This segment targets consumers and includes do-it-yourself and assisted TurboTax income tax preparation products and services sold in the U.S. and Canada. Our Mint and Turbo offerings target consumers and help them understand and improve their financial lives by offering a view of their financial health.
Strategic Partner: This segment targets professional accountants in the U.S. and Canada, who are essential to both small business success and tax preparation and filing. Our professional tax offerings include Lacerte, ProSeries, ProFile, and ProConnect Tax Online.
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
24
|
|
|
Three Months Ended
|
||||||
(In millions)
|
October 31,
2018 |
|
October 31,
2017 |
||||
Net revenue:
|
|
|
|
||||
Small Business & Self-Employed
|
$
|
908
|
|
|
$
|
819
|
|
Consumer
|
90
|
|
|
74
|
|
||
Strategic Partner
|
18
|
|
|
17
|
|
||
Total net revenue
|
$
|
1,016
|
|
|
$
|
910
|
|
|
|
|
|
||||
Operating income (loss):
|
|
|
|
||||
Small Business & Self-Employed
|
$
|
460
|
|
|
$
|
424
|
|
Consumer
|
(41
|
)
|
|
(59
|
)
|
||
Strategic Partner
|
(20
|
)
|
|
(25
|
)
|
||
Total segment operating income
|
399
|
|
|
340
|
|
||
Unallocated corporate items:
|
|
|
|
||||
Share-based compensation expense
|
(105
|
)
|
|
(97
|
)
|
||
Other common expenses
|
(297
|
)
|
|
(275
|
)
|
||
Amortization of acquired technology
|
(5
|
)
|
|
(2
|
)
|
||
Amortization of other acquired intangible assets
|
(2
|
)
|
|
(1
|
)
|
||
Total unallocated corporate items
|
(409
|
)
|
|
(375
|
)
|
||
Total operating loss
|
$
|
(10
|
)
|
|
$
|
(35
|
)
|
|
Three Months Ended
|
||||||
(In millions)
|
October 31,
2018 |
|
October 31,
2017 |
||||
Net revenue:
|
|
|
|
||||
|
|
|
|
||||
QuickBooks Online Accounting
|
$
|
217
|
|
|
$
|
149
|
|
Online Services
|
154
|
|
|
113
|
|
||
Total Online Ecosystem
|
371
|
|
|
262
|
|
||
QuickBooks Desktop Accounting
|
228
|
|
|
249
|
|
||
Desktop Services and Supplies
|
309
|
|
|
308
|
|
||
Total Desktop Ecosystem
|
537
|
|
|
557
|
|
||
Small Business & Self-Employed
|
908
|
|
|
819
|
|
||
Consumer
|
90
|
|
|
74
|
|
||
Strategic Partner
|
18
|
|
|
17
|
|
||
Total net revenue
|
$
|
1,016
|
|
|
$
|
910
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
25
|
|
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
• Executive Overview: High level discussion of our operating results and some of the trends that affect our business.
• Critical Accounting Policies and Estimates: Significant changes since our most recent Annual Report on Form 10-K that we believe are important to understanding the assumptions and judgments underlying our financial statements.
• Results of Operations: A more detailed discussion of our revenue and expenses.
• Liquidity and Capital Resources: Discussion of key aspects of our consolidated statements of cash flows, changes in our consolidated balance sheets, and our financial commitments.
|
EXECUTIVE OVERVIEW
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
26
|
|
About Intuit
|
Small Business & Self-Employed: This segment targets small businesses and the self-employed around the world, and the accounting professionals who serve and advise them. Our offerings include QuickBooks financial and business management online services and desktop software, payroll solutions, merchant payment processing solutions, and financing for small businesses.
Consumer: This segment targets consumers and includes do-it-yourself and assisted TurboTax income tax preparation products and services sold in the U.S. and Canada. Our Mint and Turbo offerings target consumers and help them understand and improve their financial lives by offering a view of their financial health.
Strategic Partner: This segment targets professional accountants in the U.S. and Canada, who are essential to both small business success and tax preparation and filing. Our professional tax offerings include Lacerte, ProSeries, ProFile, and ProConnect Tax Online.
|
Our Growth Strategy
|
At Intuit, our strategy starts with a focus on our customers. We listen to our customers, understand their challenges, and then use technology to develop innovative solutions designed to solve their problems and help them prosper. For more than three decades, we have reinvented and disrupted ourselves to better serve our customers, as we continue to transform to a global platform and product company. Our assessment of external trends – the emergence and influence of the digital generation, and the growth in the self-employed workforce – reveals significant opportunities to drive future growth. The result is a global market that is shifting from traditional services that are manual in nature to more automated, interconnected services that work on platforms and increasingly rely on artificial intelligence and machine learning.
Our strategy is built on the strength of our One Intuit Ecosystem, designed to unlock the power of many for the prosperity of each and every participant. Our evolving strategy focuses on three elements:
|
• Personalized experiences: With customer provided data and the use of artificial intelligence and machine learning, we can create increasingly valuable personalized and easy to use experiences that delight and serve our customers. For example, our TurboTax solutions use machine learning to create a customized interview, asking questions uniquely tailored to each individual situation. By delivering an amazing end-to-end experience, we offer customers the value they expect from our offerings as quickly and easily as possible.
• Trusted open platform: Our open platform allows our customers to use and share their financial data with us and third party partners to help improve their financial lives. One example of this is our QuickBooks open platform, where small businesses and accountants can install apps created by third-party developers to enhance the functionality and personalization of the QuickBooks experience.
• Indispensable connections: Within our One Intuit Ecosystem, we strive to build connections between customers, partners, and products on our platform. For example, our TurboTax Live offering connects our TurboTax customers with tax experts. Additionally, QuickBooks offers a match-making service that connects small businesses with accountants, helping small businesses succeed and accountants grow their practices.
|
As part of our strategy, we also develop relationships with strategic partners that enable us to serve consumers, the self-employed and small businesses globally. Strategic partners include financial institutions, enterprise platforms, educational institutions and accountants, and our strategy allows us to co-create indispensable connections by sharing expertise, product integrations, and new solutions to solve more customer problems.
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
27
|
|
Industry Trends and Seasonality
|
Key Challenges and Risks
|
Overview of Financial Results
|
|
|
|
|
|
Revenue of
|
|
Small Business & Self-Employed revenue of
|
|
Cash, cash equivalents, and investments of
|
$1.0 B
|
|
$908 M
|
|
$1.3 B
|
up 12% from same period of fiscal 2018
|
|
up 11% from same period of fiscal 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
28
|
|
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
|
RESULTS OF OPERATIONS
|
Financial Overview
|
||||||||||||||
|
|
|
|
|
|
|
|
|||||||
(Dollars in millions, except per share amounts)
|
Q1
FY19 |
|
Q1
FY18 |
|
$
Change
|
|
%
Change
|
|||||||
Total net revenue
|
$
|
1,016
|
|
|
$
|
910
|
|
|
$
|
106
|
|
|
12
|
%
|
Operating loss
|
(10
|
)
|
|
(35
|
)
|
|
25
|
|
|
(71
|
)%
|
|||
Net income (loss)
|
34
|
|
|
(2
|
)
|
|
36
|
|
|
NM
|
|
|||
Diluted net income (loss) per share
|
$
|
0.13
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.14
|
|
|
NM
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
29
|
|
Segment Results
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
30
|
|
Small Business & Self-Employed
|
|
(Dollars in millions)
|
Q1
FY19 |
|
Q1
FY18 |
|
%
Change
|
|||||
Product revenue
|
$
|
329
|
|
|
$
|
354
|
|
|
(7
|
)%
|
Service and other revenue
|
579
|
|
|
465
|
|
|
25
|
%
|
||
Total segment revenue
|
$
|
908
|
|
|
$
|
819
|
|
|
11
|
%
|
% of total revenue
|
89
|
%
|
|
90
|
%
|
|
|
|||
|
|
|
|
|
|
|||||
Segment operating income
|
$
|
460
|
|
|
$
|
424
|
|
|
8
|
%
|
% of related revenue
|
51
|
%
|
|
52
|
%
|
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
31
|
|
Consumer
|
|
(Dollars in millions)
|
Q1
FY19 |
|
Q1
FY18 |
|
%
Change
|
|||||
Product revenue
|
$
|
6
|
|
|
$
|
5
|
|
|
20
|
%
|
Service and other revenue
|
84
|
|
|
69
|
|
|
22
|
%
|
||
Total segment revenue
|
$
|
90
|
|
|
$
|
74
|
|
|
22
|
%
|
% of total revenue
|
9
|
%
|
|
8
|
%
|
|
|
|||
|
|
|
|
|
|
|||||
Segment operating loss
|
$
|
(41
|
)
|
|
$
|
(59
|
)
|
|
(31
|
)%
|
% of related revenue
|
(46
|
)%
|
|
(80
|
)%
|
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
32
|
|
Strategic Partner
|
|
(Dollars in millions)
|
Q1
FY19 |
|
Q1
FY18 |
|
%
Change
|
|||||
Product revenue
|
$
|
12
|
|
|
$
|
11
|
|
|
9
|
%
|
Service and other revenue
|
6
|
|
|
6
|
|
|
—
|
%
|
||
Total segment revenue
|
$
|
18
|
|
|
$
|
17
|
|
|
6
|
%
|
% of total revenue
|
2
|
%
|
|
2
|
%
|
|
|
|||
|
|
|
|
|
|
|||||
Segment operating loss
|
$
|
(20
|
)
|
|
$
|
(25
|
)
|
|
(20
|
)%
|
% of related revenue
|
(111
|
)%
|
|
(147
|
)%
|
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
33
|
|
Cost of Revenue
|
|||||||||||||
|
|
|
|
|
|
|
|
||||||
(Dollars in millions)
|
Q1
FY19 |
|
% of
Related
Revenue
|
|
Q1
FY18 |
|
% of
Related
Revenue
|
||||||
Cost of product revenue
|
$
|
15
|
|
|
4
|
%
|
|
$
|
18
|
|
|
5
|
%
|
Cost of service and other revenue
|
227
|
|
|
34
|
%
|
|
178
|
|
|
33
|
%
|
||
Amortization of acquired technology
|
5
|
|
|
n/a
|
|
|
2
|
|
|
n/a
|
|
||
Total cost of revenue
|
$
|
247
|
|
|
24
|
%
|
|
$
|
198
|
|
|
22
|
%
|
Operating Expenses
|
|||||||||||||
|
|
|
|
|
|
|
|
||||||
(Dollars in millions)
|
Q1
FY19 |
|
% of
Total
Net
Revenue
|
|
Q1
FY18 |
|
% of
Total
Net
Revenue
|
||||||
Selling and marketing
|
$
|
346
|
|
|
34
|
%
|
|
$
|
308
|
|
|
34
|
%
|
Research and development
|
294
|
|
|
29
|
%
|
|
293
|
|
|
32
|
%
|
||
General and administrative
|
137
|
|
|
14
|
%
|
|
145
|
|
|
16
|
%
|
||
Amortization of other acquired intangible assets
|
2
|
|
|
—
|
%
|
|
1
|
|
|
—
|
%
|
||
Total operating expenses
|
$
|
779
|
|
|
77
|
%
|
|
$
|
747
|
|
|
82
|
%
|
Non-Operating Income and Expenses
|
(In millions)
|
Q1
FY19 |
|
Q1
FY18 |
||||
Interest income
|
$
|
7
|
|
|
$
|
2
|
|
Net gain (loss) on executive deferred compensation plan assets (1)
|
(5
|
)
|
|
2
|
|
||
Other
|
(2
|
)
|
|
(1
|
)
|
||
Total interest and other income, net
|
$
|
—
|
|
|
$
|
3
|
|
(1)
|
In accordance with authoritative guidance, we record gains and losses associated with executive deferred compensation plan assets in interest and other income and gains and losses associated with the related liabilities in operating expenses. The total amounts recorded in operating expenses for each period are approximately equal to the total amounts recorded in interest and other income in those periods.
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
34
|
|
LIQUIDITY AND CAPITAL RESOURCES
|
Overview
|
(Dollars in millions)
|
October 31,
2018 |
|
July 31,
2018 |
|
$
Change
|
|
%
Change
|
|||||||
Cash, cash equivalents, and investments
|
$
|
1,332
|
|
|
$
|
1,716
|
|
|
$
|
(384
|
)
|
|
(22
|
)%
|
Long-term investments
|
13
|
|
|
13
|
|
|
—
|
|
|
—
|
%
|
|||
Short-term debt
|
50
|
|
|
50
|
|
|
—
|
|
|
—
|
%
|
|||
Long-term debt
|
375
|
|
|
388
|
|
|
(13
|
)
|
|
(3
|
)%
|
|||
Working capital
|
646
|
|
|
679
|
|
|
(33
|
)
|
|
(5
|
)%
|
|||
Ratio of current assets to current liabilities
|
1.4 : 1
|
|
|
1.4 : 1
|
|
|
|
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
35
|
|
Statements of Cash Flows
|
|
Three Months Ended
|
||||||||||
(Dollars in millions)
|
October 31,
2018 |
|
October 31,
2017 |
|
$
Change
|
||||||
Net cash provided by (used in):
|
|
|
|
|
|
||||||
Operating activities
|
$
|
(143
|
)
|
|
$
|
(78
|
)
|
|
$
|
(65
|
)
|
Investing activities
|
20
|
|
|
(128
|
)
|
|
148
|
|
|||
Financing activities
|
(182
|
)
|
|
158
|
|
|
(340
|
)
|
|||
Effect of exchange rates on cash, cash equivalents, restricted cash, and restricted cash equivalents
|
(4
|
)
|
|
(5
|
)
|
|
1
|
|
|||
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents
|
$
|
(309
|
)
|
|
$
|
(53
|
)
|
|
$
|
(256
|
)
|
Our primary sources and uses of cash were as follows:
|
||
Three Months Ended
|
||
October 31, 2018
|
|
October 31, 2017
|
Sources of cash:
• Issuance of common stock under employee stock plans
Uses of cash:
• Operations
• Payment of accrued bonuses for fiscal 2018
• Repurchases of shares of our common stock
• Payment of cash dividends and dividend rights
• Capital expenditures
• Repayment of debt
|
|
Sources of cash:
• Borrowings under revolving credit facility
• Issuance of common stock under employee stock plans
Uses of cash:
• Operations
• Payment of accrued bonuses for fiscal 2017
• Repurchases of shares of our common stock
• Payment of cash dividends and dividend rights
• Capital expenditures
• Repayment of debt
|
Stock Repurchase Programs, Treasury Shares, and Dividends on Common Stock
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
36
|
|
Credit Facility
|
Cash Held by Foreign Subsidiaries
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
37
|
|
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
38
|
|
ITEM 4 - CONTROLS AND PROCEDURES
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
39
|
|
PART II - OTHER INFORMATION
|
ITEM 1 - LEGAL PROCEEDINGS
|
ITEM 1A - RISK FACTORS
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
40
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
41
|
|
•
|
inability to successfully integrate the acquired technology, data assets and operations into our business and maintain uniform standards, controls, policies, and procedures;
|
•
|
inability to realize synergies expected to result from an acquisition;
|
•
|
disruption of our ongoing business and distraction of management;
|
•
|
challenges retaining the key employees, customers, resellers and other business partners of the acquired operation;
|
•
|
the internal control environment of an acquired entity may not be consistent with our standards or with regulatory requirements, and may require significant time and resources to align or rectify;
|
•
|
unidentified issues not discovered in our due diligence process, including product or service quality issues, intellectual property issues and legal contingencies;
|
•
|
failure to successfully further develop an acquired business or technology and any resulting impairment of amounts currently capitalized as intangible assets;
|
•
|
risks associated with businesses we acquire or invest in, which may differ from or be more significant than the risks our other businesses face; and
|
•
|
in the case of foreign acquisitions and investments, the impact of particular economic, tax, currency, political, legal and regulatory risks associated with specific countries.
|
•
|
inability to find potential buyers on favorable terms;
|
•
|
failure to effectively transfer liabilities, contracts, facilities and employees to buyers;
|
•
|
requirements that we retain or indemnify buyers against certain liabilities and obligations;
|
•
|
the possibility that we will become subject to third-party claims arising out of such divestiture;
|
•
|
challenges in identifying and separating the intellectual property and data to be divested from the intellectual property and data that we wish to retain;
|
•
|
inability to reduce fixed costs previously associated with the divested assets or business;
|
•
|
challenges in collecting the proceeds from any divestiture;
|
•
|
disruption of our ongoing business and distraction of management;
|
•
|
loss of key employees who leave the Company as a result of a divestiture; and
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
42
|
|
•
|
if customers or partners of the divested business do not receive the same level of service from the new owners, our other businesses may be adversely affected, to the extent that these customers or partners also purchase other products offered by us or otherwise conduct business with our retained business.
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
43
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
44
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
45
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
46
|
|
•
|
different or more restrictive privacy, data protection, data localization, and other laws that could require us to make changes to our products, services and operations, such as mandating that certain types of data collected in a particular country be stored and/or processed within that country;
|
•
|
difficulties in developing, staffing, and simultaneously managing a large number of varying foreign operations as a result of distance, language, and cultural differences;
|
•
|
stringent local labor laws and regulations;
|
•
|
credit risk and higher levels of payment fraud;
|
•
|
profit repatriation restrictions, and foreign currency exchange restrictions;
|
•
|
geopolitical events, including natural disasters, acts of war and terrorism;
|
•
|
import or export regulations;
|
•
|
compliance with U.S. laws such as the Foreign Corrupt Practices Act, and local laws prohibiting corrupt payments to government officials;
|
•
|
antitrust and competition regulations;
|
•
|
potentially adverse tax developments;
|
•
|
economic uncertainties relating to European sovereign and other debt;
|
•
|
trade barriers and changes in trade regulations;
|
•
|
political or social unrest, economic instability, repression, or human rights issues; and
|
•
|
risks related to other government regulation or required compliance with local laws.
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
47
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
48
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
49
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
50
|
|
•
|
increasing our vulnerability to downturns in our business, to competitive pressures and to adverse economic and industry conditions;
|
•
|
requiring the dedication of a portion of our expected cash from operations to service our indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including capital expenditures and acquisitions; and
|
•
|
limiting our flexibility in planning for, or reacting to, changes in our businesses and our industries.
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
51
|
|
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
Total Number
of Shares
Purchased
|
|
Average
Price Paid
per Share
|
|
Total Number
of Shares Purchased as Part of Publicly Announced
Plans
|
|
Approximate
Dollar Value of Shares That May Yet Be Purchased Under
the Plans
|
||||||
August 1, 2018 through August 31, 2018
|
|
44,500
|
|
|
$
|
216.16
|
|
|
44,500
|
|
|
$
|
3,239,571,066
|
|
September 1, 2018 through September 30, 2018
|
|
169,100
|
|
|
$
|
223.17
|
|
|
169,100
|
|
|
$
|
3,201,833,439
|
|
October 1, 2018 through October 31, 2018
|
|
253,882
|
|
|
$
|
211.48
|
|
|
253,882
|
|
|
$
|
3,148,143,404
|
|
Total
|
|
467,482
|
|
|
$
|
216.15
|
|
|
467,482
|
|
|
|
ITEM 6 - EXHIBITS
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
52
|
|
SIGNATURES
|
|
|
INTUIT INC.
(Registrant)
|
|
||
Date:
|
November 20, 2018
|
By:
|
/s/ MICHELLE M. CLATTERBUCK
|
|
|
|
|
|
Michelle M. Clatterbuck
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer (Authorized Officer and Principal Financial Officer)
|
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
53
|
|
EXHIBIT INDEX
|
Exhibit
Number
|
|
Exhibit Description
|
|
Filed
Herewith
|
|
Incorporated by
Reference
|
|
|
|
|
|
|
|
10.01
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
10.02
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
10.03
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
10.04
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
31.01
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
31.02
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
32.01*
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
32.02*
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
|
X
|
|
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
X
|
|
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
X
|
|
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
X
|
|
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
X
|
|
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
X
|
|
|
*
|
This exhibit is intended to be furnished and shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended.
|
|
|
|
|
|
Intuit Q1 Fiscal 2019 Form 10-Q
|
54
|
|
1.
|
In the event of your Voluntary Termination or Termination for Cause, you will not be entitled to any severance benefits.
|
2.
|
In the event of your Involuntary Termination, Termination without Cause or Termination Following a Change in Control, conditioned upon your execution of a general release and waiver of claims (using Intuit’s standard form of release in connection with a termination of employment) against Intuit, its officers and directors and your satisfying all conditions to make the release effective and irrevocable within 21 days after the date of such termination of employment, you will also be entitled to a single lump sum severance payment equal to twelve (12) months of your then current annual base salary and 100% of your target bonus for the then current fiscal year (less applicable deductions and withholdings), payable on the 30th day following such termination of employment.
|
•
|
Each year, following the annual meeting of Intuit’s stockholders, each appointed or elected non-employee director shall automatically receive a grant (a "Annual Director Grant") of restricted stock units equal in number to $260,000 divided by the closing stock price on the grant date. The grant date for these awards shall be the first business day following the annual meeting of the Company's stockholders. If a director joins the board mid-year, the director will receive a pro-rated Annual Director Grant for that year. Each Annual Director Grant will generally vest in full on the first business day of the 12th month following the grant date except for those Annual Director Grants awarded mid-year, which will vest in full on the first business day of the 12th month following the annual meeting of the Company’s stockholders. All of a director's Annual Director grant will become fully vested in the event of death or disability of the director or upon a Corporate Transaction. Payment of the Annual Director Grants shall be automatically deferred until the earliest of: (a) five years from the grant date; (b) termination (for any reason); or (c) a Corporate Transaction. Additional voluntary deferrals will also be permitted.
|
•
|
Within the later of five years after the director joins the Board, each director is required to hold shares of Intuit common stock with an aggregate value of ten times the amount of the annual Board member cash retainer. Owned shares, outstanding restricted stock units, and any deferred cash retainers ultimately paid as restricted stock units (see below) count towards the ownership requirement.
|
•
|
Non-employee directors in good standing are paid their annual cash retainers in four equal installments.
|
•
|
Non-employee directors serving on Committees (as chair or member) are paid annual retainers in addition to the annual cash compensation for service as a member of the Board, as set forth below.
|
•
|
Non-employee directors may elect to defer cash retainers and instead receive restricted stock units, except for cash retainers to be paid in the first calendar year for a non-employee director joining the Board mid-year. Such election must be made prior to the start of the calendar year, and is irrevocable once made. Payment of any cash fees converted into restricted stock units shall be automatically deferred until the earliest of: (a) five years from the grant date; (b) termination (for any reason); or (c) a Corporate Transaction. Additional voluntary deferrals may also be permitted.
|
•
|
Annual cash compensation for service as a non-employee director of the Board: $75,000.
|
•
|
Annual cash retainer for Lead Independent Director: $40,000
|
•
|
Annual cash compensation for non-employee director committee service:
|
1.
|
“Affiliate” of the Member, Executive Director, or other entity shall mean any Person, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the Member, Executive Director, or other entity, as applicable. The term “control,” as used in the immediately preceding sentence, shall mean with respect to a corporation or limited liability company the right to exercise, directly or indirectly, more than 50 percent of the voting rights attributable to the controlled corporation or limited liability company, and, with respect to any individual, partnership, trust, other entity, or association, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled entity.
|
2.
|
“FFI Filers” shall mean those taxpayers with an Adjusted Gross Income (AGI) equal to or less than 70 percent of all United States (U.S.) taxpayers or below for the prior year, including those least able to afford e-filing tax returns, based upon verifiable characteristics in their tax return and, as a result, who for free, online tax return preparation and filing services are offered by an individual Member.
|
3.
|
“Bankruptcy” shall mean: (a) the filing of an application by the Member for, or its consent to, the appointment of a trustee, receiver, or custodian of its assets; (b) the entry of an order for relief with respect to the Member in proceedings under the U.S. Bankruptcy Code, as amended or superseded from time to time; (c) the making by the Member of a general assignment for the benefit of creditors; (d) the entry of an order, judgment, or decree by any court of competent jurisdiction appointing a trustee, receiver, or custodian of the assets of the Member unless the proceedings and the Person appointed are dismissed within ninety (90) days; or (e) the failure by the Member generally to pay its debts as the debts become due within the meaning of Section 303(h)(l) of the U.S. Bankruptcy Code, as determined by the Bankruptcy Court, or the admission in writing of its inability to pay its debts as they become due.
|
4.
|
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the provisions of succeeding law.
|
5.
|
“Coverage” shall mean the lowest 70 percent of taxpayer population calculated using AGI. The IRS uses the prior year tax return information to compute the AGI amount that equates to 70 percent of the tax return population. The number of taxpayers covered each year will be adjusted for each filing season thereafter based on taxpayer population and income changes, but the agreed upon percentage of coverage will not change.
|
6.
|
The “IRS” shall mean the Internal Revenue Service.
|
7.
|
“Executive Director” shall mean the Executive Director of FFI.
|
8.
|
“Member’s Free File Website” shall mean Members’ websites that offer free, online tax return preparation and filing services to FFI Filers.
|
9.
|
“Member” shall mean each company in the electronic tax preparation and filing industry who is a member in good standing with FFI
|
10.
|
“Member Free File Landing Page” shall mean the first page a taxpayer sees when leaving the IRS site to the Member company’s site.
|
11.
|
“New Market Entrant” shall mean a Person who is not yet a Member that intends to offer Services in the upcoming tax season but has not done so for past seasons.
|
12.
|
“Person” shall mean an individual, partnership, limited partnership, limited liability company, corporation, association, or any other entity.
|
13.
|
“Services” Shall mean free, online tax return preparation and Filing of Federal individual income tax returns.
|
14.
|
“Software Programs” shall mean the software program a Member uses to provide online tax return preparation and filing services to taxpayers.
|
15.
|
“Treasury Regulations” shall, unless the context clearly indicates otherwise, mean the regulations in force as final or temporary that have been issued by the U.S. Department of Treasury pursuant to its authority under the Code, and any successor regulations.
|
16.
|
The “IRS Website” refers to www.irs.gov (or IRS.gov).
|
17.
|
The “IRS Free File Website” shall mean the website hosted and maintained by the IRS through which the Services are offered to taxpayers.
|
18.
|
The “IRS Free File Landing Page” shall mean the introductory IRS Free File splash screen or landing site within the IRS Website.
|
19.
|
“Unbranded Fillable Form Utility” shall mean an unbranded software product that is forms based and provided by a FFI Member in compliance with the particular requirements, limitations, and standards applicable to that service as set forth in the IRS Free File Program Fillable Forms Utility Specifications dated December 9, 2008, and is chosen by the IRS for placement on the IRS Website.
|
20.
|
“State Free File Program” shall mean those programs in states that offer free preparation and e-filing of individual tax returns based on criteria that are materially consistent with the federal Free File program, and which do not provide taxpayer- funded online software for tax preparation and e-filing. In 2014, there are 21 states and the District of Columbia participating in the State Free File Program (see
|
21.
|
“Non-Free File States” shall mean those states that have their own taxpayer-funded online software for tax preparation and e-filing.
|
22.
|
“Active Duty Military” shall mean those individual taxpayers currently serving full time in the armed forces, including the United States Army, Navy, Marines, Air Force, Coast Guard, and National Guard, and whose income equates to the lowest 70% of the national AGI.
|
1.
|
Make tax return preparation and filing easier and reduce the burden on individual taxpayers, particularly the economically disadvantaged and underserved populations;
|
2.
|
Support the IRS’s statutory goals of increased electronic filing, pursuant to the IRS Restructuring and Reform Act of 1998;
|
3.
|
Provide greater service and access to the Services to taxpayers; and
|
4.
|
Implement one of the proposals in the President’s Fiscal Year 2003 budget, specifically to encourage further growth in electronic filing by providing taxpayers the option to file their tax return online without charge using cooperation with, and encouraging competition within, the private sector.
|
1.
|
Level of Service.
|
1.
|
Each Member and New Market Entrant shall:
|
(i)
|
Be engaged in the electronic tax preparation and filing industry;
|
(ii)
|
Have processed a cumulative total of 2,500 online returns during previous years, or has processed 25,000 e-file returns before becoming a Member;
|
(iii)
|
Meet a 75 percent acceptance rate for electronic returns for traditional Free File throughout the filing season, excluding business rules and any subsequent codes
|
(iv)
|
Meet any increased standard agreed to for subsequent years by the IRS and FFI
|
2.
|
Any Member who does not meet the minimum acceptance rate set out in
|
3.
|
Each Member and New Market Entrant shall:
|
(i)
|
Make its Services available to not less than 10 percent and not more than 50 percent of the individual taxpayer population, or approximately seventy million (70,000,000) taxpayers, within the Coverage, as annually adjusted through IRS analysis of the taxpayer database to determine the lower 70% of all U.S. taxpayers. Additionally, any free services offered under this MOU to Active Duty Military members who meet the requirement of earning no more than the lowest 70% of the national AGI shall be exempt from this service cap of 50% of the taxpayer population. Notwithstanding other terms in this MOU, this provision exempting eligible Active Duty Military members from the service cap shall become effective in January 2015;
|
(ii)
|
Offer its Services on a non-discriminatory basis;
|
(iii)
|
Be an authorized IRS e-File Provider in accordance with IRS Revenue Procedure 2005-60;
|
(iv)
|
Be in compliance with applicable Department of Treasury/IRS rules, including, but not limited to, 31 C.F.R. Part 10, IRS Revenue Procedure 2005-60, current versions of IRS Publications 1345, 1345-A and 3112, 4164, Modernized e-File (MeF) Guide for Software Developers and Transmitters, 1436 Test Package for Electronic Filers of Individual Income Tax Returns for Tax Year 2014 and IRC Section 7216;
|
(v)
|
Possess and provide appropriate documentation to the IRS and the Executive Director demonstrating they have acquired third party security and privacy certifications which are applicable for the period the company is actively listed on the IRS Free File Website;
|
(vi)
|
Have appropriate logos or seals (for both privacy and security) from acceptable and recognized third party privacy and security certification providers placed in clearly visible locations on the Member’s Free File Landing Page; and
|
(vii)
|
New Market Entrants shall self-certify in writing to the Executive Director, and available upon request to the IRS, that the New Market Entrant has sufficient technical capacity to meet the Level of Service requirements as set forth in this MOU and then current FFI Operating Agreement and are commercial tax preparation software providers aside from their FFI offering.
|
4.
|
Participation of Non-Profits. Non-Profit Organizations will be allowed to participate in the Free File program provided that they meet all of the requirements specified in the MOU, including, but not limited to, that their services and products cannot be paid for with Government funds.
|
2.
|
OMITTED BY INTENTION:
|
3.
|
Only one version of each Software Program permitted other than an unbranded fillable forms utility.
|
1.
|
Only one version of a Software Program is permitted per Member, except that any Member that chooses to offer an unbranded fillable form Software Program may offer that product in addition to the Software Program that is accessible from the Member’s Free File Website. This provision does not preclude a Member from using the same Software Program for access both from the Member’s Free File Website and as an unbranded fillable form accessible from the IRS’s website. A Member may own the copyright in a Software Program or have a valid license to use a Software Program, but a Software Program may not be used by more than one Person to obtain FFI membership.
|
2.
|
Members and/or any New Market Entrant applying for membership with FFI will provide the Executive Director with information as requested by the Executive Director to permit a determination as to whether Software Programs are duplicative and/or substantially similar based upon features, functions, and/or general characteristics and would violate Section 4.3.1. The IRS or the Executive Director shall review the following list of characteristics (i) through (vii), and request any facts needed from the Member or possible New Market Entrant that will assist in this evaluation. No single characteristic below is dispositive of any determination as to whether software is identical or similar. The IRS or the Executive Director may weigh items (i), (ii) and (iii) most heavily, but can take into account any fact or factor:
|
(i)
|
The degree to which the underlying software programs are substantially identical or similar;
|
(ii)
|
Changes in the logo, color, and presentation do not transform similar software programs into different versions;
|
(iii)
|
The degree to which two software programs have a look or feel that is identical or similar;
|
(iv)
|
The relationship, if any, of the respective owners of companies; for example, the degree to which corporate officers are the same or dissimilar; whether locations of incorporation are the same or similar, whether the same Uniform Resource Locator is being used by more than one entity; the degree to which two member companies use the same third party developer, etc.;
|
(v)
|
The degree to which the company’s revenue is related to FFI or principally through commercial sales of software, tax preparation services, and electronic filing to the general public;
|
(vi)
|
The degree to which each company has adequate financial resources;
|
(vii)
|
The degree to which each company has the necessary organization, experience, operational controls, and technical skills to participate in the tax software preparation industry;
|
(viii)
|
The degree to which each company has the necessary technical equipment and facilities; provided that companies are permitted to sell, license, or otherwise transfer software programs for services utilized in FFI offerings, but such sale, license, or other arrangement may be reviewed for its underlying purpose and must be consistent with this entire section; or
|
(ix)
|
The degree to which the company has offered and sold tax preparation software and e-filing services competitively in substantial quantities to the general public in the commercial marketplace based on established
|
3.
|
Members and/or New Market Entrants applying for membership in FFI will make the following disclosures with respect to any licensed Software Programs:
|
(i)
|
Disclose whether another Person owns more than 25 percent of the code of the licensed Software Program. In the event another Person owns more than 25 percent of the code of the proposed Software Program, the Member and/or New Market Entrants applying for membership must additionally disclose the Person from whom the license has been obtained, as well as the business address and contact point to verify the scope of the license and the relationship between the parties.
|
(ii)
|
Disclose whether another Person is providing the Member and/or New Market Entrant with servers or other back-end support other than telecommunications, and provide the business address and contact information for such Person.
|
4.
|
All Members shall adhere to industry best practices to ensure the taxpayer return information entrusted to them is secure and the privacy of such information is maintained. In any instance where a Member company contracts with a service provider to obtain technology services, the service provider must adhere to the established industry best practices standard. To the extent multiple Members rely on a single service provider for front or back office services (not Internet Service Provider services), such Members must maintain such taxpayer security and privacy from others who share these service providers.
|
4.
|
Functionality of Member’s Website and Software Program. Members and/or New Market Entrants will provide the Executive Director and the IRS with a link to the Member’s and/or New Market Entrant’s proposed Member’s Free File Website no less than 15 business days before the Website is expected to go live. Members’ Free File Websites will be functionally adequate in permitting a taxpayer to complete taxpayer’s return if the return is consistent with the Member’s free offer. Prior to launch, the IRS and the Executive Director will review each Member’s Free File Website usability. If the IRS and/or the Executive
|
5.
|
Disclosure of Forms and Schedules and Limitations.
|
1.
|
Each Member will offer all of the same federal forms and schedules as offered in their basic commercial online consumer programs if they are outside of the minimum required core forms and schedules.
|
2.
|
Each Member will offer as a minimum the Core Forms and Schedules as shown in Attachment 1. IRS reserves the right to negotiate with FFI to add new forms before the start of the filing season as necessitated by new legislation.
|
3.
|
Each Member and/or New Market Entrant will disclose any limitations in the forms and schedules that are likely to be needed to support Members and/or New Market Entrant’s free offerings. This disclosure shall take place on Members’ and/or New Market Entrants’ Free File Landing Pages (or such page must have a clear link to such disclosures directly from this page). Representative examples of limitations required to be disclosed include, but are not limited to, the inability to support more than one W-2 Form, and/or the lack of a form necessary to prepare a return that is likely to be based on the offer. Limitations in forms and schedules do not include any form that is not routinely required, e.g., the separate forms required for taxpayers with foreign income, unless a Member’s offering is particularly orientated around such forms.
|
4.
|
Each Member will clearly disclose the supported schedules and forms in addition to the required core forms supported on the Members’ Free File Landing Pages or through links on such page.
|
6.
|
Security.
|
1.
|
Members will comply with the IRS e-file Security and Privacy Standards, http://www.irs.gov/uac/IRS-e-file-Security-Privacy-and-Business-Standards- Mandated-as-of-January-1-2010
|
2.
|
Members will provide no later than December 15th, each year to the IRS the following information:
|
(i)
|
The identity of the company’s Approved Payment Card Industry (PCI) scanning vendor, https://www.pcisecuritystandards.org/approved_companies_providers/ap proved_scanning_vendors.php .
|
(ii)
|
An Executive Summary of the Member’s PCI Vulnerability Security Scan. The summary shall include the name of the certified PCI scanning vendor, the date the scan conducted, how many live hosts were scanned, and a discussion of the findings. Vulnerability severity levels should be used to categorize the vulnerabilities (i.e., critical problem or high risk, areas of concern, or medium risk or low risk but potential problems).
|
3.
|
Members will possess and provide appropriate documentation to the IRS and the Executive Director demonstrating they have acquired third party security and privacy certifications.
|
4.
|
Annually before filing season launch, FFI, or its Members, will conduct penetration and vulnerability assessment of individual Members prior to the start of the filing season. The annual assessments will be conducted prior to, or concurrent with, the annual Acceptance Testing System (ATS) testing. Services relating to this assessment must be obtained from a list of approved vendors jointly created by the IRS and FFI
|
5.
|
If a Member is not listed, or is delisted by agreement of the IRS and Executive Director due to perceived security or privacy vulnerabilities, the IRS and FFI have the independent authority to require a penetration test be conducted by an approved third party vendor chosen by the Member if the Member is delisted for concerns which include, but are not limited to, such penetration.
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6.
|
Only the Executive Director, the IRS, and affected individual company will be apprised of a Member’s deficiencies identified as a result of any assessment by the IRS or Free File Inc.
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7.
|
Implementation of Completely Automated Turning Test to Tell Computers and Humans Apart (CAPTCHA). Members must implement a CAPTCHA program on the Member’s Free File Website as a condition for participation in the program. The CAPTCHA images of text should be distorted randomly and users must then manually enter the text identically as it appears on the screen. The CAPTCHA must be implemented such that a user must successfully complete the CAPTCHA test for proceeding to the next screen. For additional information on the CAPTCHA program, Members may refer to Carnegie Mellon University’s CAPTCHA resource page: http://www.captcha.net
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8.
|
Each Member will ensure that visually impaired taxpayers may access and complete the CAPTCHA program.
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7.
|
Hacker Attacks and Attempts at Intrusion on Member Websites.
|
1.
|
Any Member that learns of an inappropriate disclosure of a taxpayer’s return information to an unauthorized Person, in the course Member’s provision of Services, must immediately:
|
(i)
|
Report as soon as possible the unauthorized disclosure to the Executive Director and the IRS but not later than the next business day after confirmation of the incident. Members shall follow the Instructions on IRS.gov for submitting incident reports, http://www.irs.gov/Tax- Professionals/e-File-Providers-&-Partners/Instructions-for--Reporting- Web-site-Security-Incidents-(updated-10-02-08).
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(ii)
|
Shut down Member’s Free File Website at the time of detection.
|
2.
|
The Executive Director and/or the IRS have complete emergency authority to shut down and/or remove the link to any Member’s Free File Website if the Executive Director and/or the IRS believe, based upon objective information, that
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8.
|
One Time No Cost Refiling of Taxpayer Return. When the IRS has rejected a taxpayer’s return, Members will permit the IRS rejected return to be refiled at least one time without cost to the taxpayer regardless of whether the IRS rejected the taxpayer’s return solely as a result of the taxpayer’s mistake, e.g., the taxpayer’s entry of an incorrect SSN causes the IRS rejection of the taxpayer’s return.
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9.
|
Self-Select Personal Identification Numbers (PINs). Members must permit self- select PINs as an option for taxpayers who qualify for electronic filing of free services.
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10.
|
Time Out Feature. All Members must include a feature in their tax preparation software that will “time out” the session after no changes are made for a period of time consistent with best practices approved by privacy seal certification program.
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11.
|
Guarantee of Calculations.
|
1.
|
Each Member shall guarantee the accuracy of calculations performed by its federal free file offering. State returns are not included in this guarantee. For the purposes of this section, the term “Calculations” is defined to mean the numerical addition, subtraction, or multiplication of numbers, and related automatic features that select numbers from tax tables. Calculations do not include any instance where a taxpayer can make a decision to substitute a number for the one automatically computed by the program, and Members are not responsible for changes in tax law made by the Congress during the tax season. All Members will pay any IRS penalties and/or interest resulting from an error in the Member’s Software Program’s Calculations, notwithstanding the lack of revenue from FFI Filers. The amount of this guarantee shall be limited to the amount accrued when the IRS provides notice to the taxpayer of an improper calculation.
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12.
|
Section 7216 Compliance. Members shall only use or disclose the tax return data Members collect in provision of Services to taxpayers in accordance with the provisions of Section 7216 of the Code.
|
1.
|
Members will validate that the servers and transmission of tax return data are located in the U.S. If the servers or transmitter are located outside the U.S. or any territory or possession of the U.S., the taxpayer must agree and sign a form consenting to the
|
13.
|
Use of SSN. Whenever taxpayers are requested or required to provide their SSN, it must be part of a secure session.
|
14.
|
Returning Free File Tax Filers. If a taxpayer used and completed his/her return with a Member’s Free File products or services in the immediately preceding tax year, and in the subsequent tax year visits the Member’s commercial website(s) for tax preparation and logs into an account registered with the Member, the taxpayer must be given a first option to return to the Member’s Free File offer before receiving any other alternative choices for the Member’s publicly available commercial tax preparation products or services. FFI, in consultation with the IRS, shall prescribe the requirements of this uniform communication to the taxpayer, including but not limited to the text, format and prominence of the messaging. Manipulation of the font size and other graphical elements in order to give prominence to the secondary non-Free File option is prohibited.
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15.
|
Disclosure of Taxpayer Service Options.
|
1.
|
Members must permit a taxpayer who qualifies for a free return to print their return for free on their personal computer system for both e-filed and paper filed returns. This capacity must be provided for the same period of time (e.g., 3 days, 3 weeks, or 3 months) that such services are provided for free to commercial customers.
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2.
|
Members must permit a taxpayer who does not qualify for a free return to print their return after paying the applicable fee, if any, charged to Members’ commercial customers.
|
3.
|
Members must permit taxpayers who have begun to complete a tax return to complete the return during the current tax year.
|
4.
|
Members must clearly list their free customer service options. This disclosure must be available on the Member’s Free File Landing Page (or such page must have a clear and prominent link to such disclosures directly from this page). Members must provide taxpayers a free electronic method to obtain a copy and learn the status of their electronically filed tax return.
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16.
|
Availability of Free Services. If a Member’s services have not been made available on or before March 15 of any tax season, the Member will not be listed after that
|
17.
|
Blackouts. Maintaining a consistent level of service is important.
|
1.
|
No planned blackouts of service are permitted from January 15 through April 15.
|
2.
|
Unplanned blackouts or scheduled maintenance in excess of 5 hours requires electronic notice of unavailability to the IRS, FFI, and, whenever possible, via Member’s Free File Landing Page. Failure to provide this notice on more than one occasion is grounds for delisting.
|
3.
|
During any unplanned blackout or scheduled maintenance, customers seeking to access the Free File option should not be directed to or have access to the fee- based services of the Member.
|
18.
|
Contact Person for Notification. Each Member, in making its offer, shall provide a contact name and number of a person(s) who may be reached 24 hours per day/7 days a week for issues regarding unavailability of the services and security breach of taxpayer data. The IRS (as well as the Executive Director) is entitled to delist any Member if contacts with such person are not successful within a 12 hour period.
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19.
|
Eligible Taxpayers/No Promotional Codes or Rebates/Links to Paid Sites. In providing free services to qualified taxpayers, Member programs cannot utilize promotional codes or rebates as the methodology of providing free services.
|
1.
|
Tagging of Returns. For taxpayers who enter a Member Free File Website from the IRS Free File Website and save any portion of their return, that return should be “tagged” so as to remain eligible for the Member’s free offer. This paragraph does not apply to those services offered by Members in permitting extensions (4868) to be filed.
|
2.
|
Ineligibility Notification. Free File Member programs must unequivocally inform taxpayers who are ineligible for the free offer at the earliest feasible point:
|
(i)
|
That they are ineligible for the Free File offer, and
|
(ii)
|
The reason that they are not eligible for the offer, and
|
(iii)
|
The taxpayer shall be directed back to the IRS Free File Landing Page as the first and most prominent alternative action so that they may immediately consider other Free File offers available from the Free File Program, and
|
(iv)
|
The disqualification practice of each Member must adhere to the standard messaging, language and formatting guidance to be provided by FFI in consultation with the IRS.
|
(v)
|
The taxpayer next may be offered a free alternative for completion of their return, provided that the taxpayer is covered by the Program limit of being among the lowest 70 percent of taxpayers.
|
(vi)
|
The taxpayer would next be offered the option to continue on the Free File Member’s site and pay a fee - which is fully disclosed - to file their federal and/or state return.
|
3.
|
Links to Paid Site. Providing an automatic link from the IRS Free File Website to a
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4.
|
Solicitation for Payment. Members shall not post a billing screen requesting or collecting bank/financial information (e.g., debit/credit card information) from customers who qualify for a free return where no state tax return products have been purchased.
|
20.
|
Date Changes. The IRS has the authority to change any date utilized in this MOU to conform to changes made in regulatory or statutory requirements, or to update the MOU each calendar year. Notice of such change will be tied to such specific regulatory or statutory requirements.
|
21.
|
Disclosure of State Preparation and Filing Options. FFI shall offer free state tax preparation and e-filing in all states that participate in a State Free File Program. FFI is not required to provide free services for state returns in Non-Free File States. The IRS will not provide links to any Non-Free File State Department of Revenue websites from the IRS.gov Free File Website.
|
1.
|
FFI members must disclose their state service offerings on each individual Member’s Free File Landing Page and make clear whether such returns are free or paid. Any offer for paid state return preparation and e-filing services shall state clearly all the details of the offer, including a single, consolidated fee for such service. Free or paid state offers shall be displayed on the Free File Landing Page prominently. Members must provide the list of states that they currently support. This list shall only include states that have completed state testing and whose software programs have been approved by the state and are ready for use. Members shall include a listing of each State Free File Program that the Member participates in and a hyperlink that will allow taxpayers to access the Members’ Department of Revenue State Free File offering.
|
2.
|
The IRS may provide information for taxpayers on the IRS Free File Website. Such information may include, but is not limited to, the following:
|
(i)
|
Federal Free File supports preparation of Federal tax returns. Many member companies also offer free or paid state tax preparation and e-filing services.
|
(ii)
|
Some companies may not offer state tax preparation and e-file services for all states.
|
22.
|
Unilateral Changes by U.S. Government. Any unilateral changes imposed by the
|
23.
|
Compliance with Federal, State, and Local Laws. Each Member shall provide all Services in accordance with all applicable federal, state, and local laws, rules, and regulations. Each Member shall immediately notify the Executive Director upon its receipt of any
|
24.
|
No Transfer or Assignment of Membership Permitted. No Member may transfer its membership interest in FFI to any Person, unless as a result of a merger or acquisition to a successor corporation to the Member reported in a timely fashion to FFI
|
25.
|
Free File Indicator. Members will provide an electronic Free File indicator. If the Member is providing a Spanish version of their Free File product they will provide a Spanish Free File indicator.
|
1.
|
The IRS agrees it will not use the indicator to build a marketing database;
|
2.
|
The IRS agrees it will not use the indicator to compile company specific data or proprietary data; and
|
3.
|
The IRS agrees it will only use the database to create aggregate data profiles of all users.
|
26.
|
Disclosure. The IRS will ensure its Freedom of Information Act office is aware of FFI concerns about disclosure of company specific data, and actively afford notice and opportunity to intervene by FFI and impacted company as is required by statute and regulation.
|
1.
|
The IRS will promptly notify the Executive Director in writing if a governmental agency or entity, including, but not limited to the Congress, any Inspector General, or Taxpayer Advocate, or a private party is requesting aggregate data concerning individual Members; and the IRS has concluded it cannot refuse to provide such data:
|
(i)
|
The Executive Director upon receipt of the IRS’s written notification may immediately advise Members that they can cease providing the indicator;
|
(ii)
|
FFI cannot unilaterally suspend the indicator absent proof which it supplies the IRS that the aggregate data concerning an individual Member described above has been compiled or released;
|
(iii)
|
In the event any domestic law enforcement agency formally subpoenas or provides the IRS with appropriate process for data resulting from the indicator that is not aggregated, notification to the Executive Director can be delayed for a period not to exceed 90 days; and
|
(iv)
|
Any Member(s) which suspends the indicator in accordance with the terms described above shall be expected to provide the total number of accepted e-filed tax returns originating from their Free File service under procedures mutually agreed to by the IRS and the Executive Director.
|
27.
|
Pop-ups, Spyware and other Marketing Tools. The IRS will work with FFI to develop further agreed upon guidance for Members to ensure that their web sites/Free File pages are in compliance with IRC §7216 with respect to pop-ups, pop-unders, adware, spyware, etc.
|
28.
|
Customer Satisfaction Survey. The Members will provide the necessary support to
|
29.
|
Annual Review. For any multi-year agreement between the IRS and the FFI on an annual basis, the parties will review the Free File Program and decide what, if any, improvements need to be made for the next filing season. Any improvements agree to by the parties shall be reflected in an MOU executed by the parties.
|
30.
|
Annual Revision. The IRS and the Executive Director may annually revise the MOU between the parties that provides structure for the roles.
|
31.
|
Modifications to Standards of Practice. The Executive Director and the IRS may unilaterally propose additional standards necessary for the Standards of Practice during the tax season. Any additional standards shall be provided to the Members by email. The Executive Director and/or the IRS shall determine whether the standards need to become effective immediately or can await a Member meeting. In any instance where the Executive Director and/or the IRS believe the standards need to be immediately effective, the immediacy of the effect of the new standard shall be noted in the email transmittal, and the additional standards will become effective 5 days later, or the first business day if the fifth day falls on a weekend or holiday.
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32.
|
Permitted Sales, Limits on Ancillary Sales, and Selling Activity
|
1.
|
Sale of State Tax Returns Permitted But Not Required. Taxpayers who enter a Member’s Free File Landing Page must be able to see a clearly-stated offer for state tax return preparation and e-filing. The free or paid state return offer must be
|
2.
|
Provision of Federal Return When Taxpayer Does Not Qualify for a Member Free File Offer Is Permitted. When a taxpayer enters a Member’s Free File Landing Page and begins to complete a return but ultimately cannot qualify for the Member’s free offer, the Member must provide, as a first option, a prominent hyperlink for the taxpayer to return to the IRS Free File Landing Page (consistent with Paragraph 4.19.2). A Member also may provide free returns to those who do not qualify for the Free File offer, provided they are covered within the terms of the Program. Finally, a Member may inform the taxpayer that he or she has the choice of preparing and filing a federal return using the
|
3.
|
Reasonable and Customary Charges for Taxpayer Use of Credit Card or its Equivalent Are Permitted. A Member company may charge taxpayers who have a balance due reasonable and customary charges from credit card service providers or their equivalent related to payment services they provide. Refund Anticipation Loans, Refund Anticipation Checks, and other forms of payment are not permitted by this section.
|
4.
|
Email Communication with Free File Taxpayers. Free File Members shall communicate not less than once annually via email with their taxpayer customers who used Free File services and completed their returns through Free File in the immediately preceding tax year prior to the opening of the following tax season. The content of this email(s) shall only remind the taxpayer about the availability of the Member’s Free File offer and invite them to return to the Member’s Free File Landing Page. Free File Members shall not use these communications to communicate with the taxpayer about any non-Free File commercial products or services. No marketing, soliciting, sale or selling activity, or electronic links to such activity, will be permitted in these email(s).
|
5.
|
No Other Sales and Selling Activity. No marketing, soliciting, sales or selling activity, or electronic links to such activity, are permitted in the Free File Program, with the exception of the following: (i) the sale of a federal return where, as noted herein, the taxpayer is determined ineligible for the Member’s Free File offer and chooses to complete and file his or her return using the Member’s commercial offer, or (ii) disclosures or sales (as applicable) related to free or paid state tax preparation offers as specifically provided for in this MOU.
|
6.
|
Prohibition on “Value-Added” Button. Members shall not include a “value-added” button (i.e., an icon, link or any functionality that provides a taxpayer with access to a Member’s commercial products or services) on the Member’s Free File Landing Page.
|
7.
|
The Member shall have a prominent link permitting taxpayers on a Member’s Free File Landing Page to easily and clearly return to the IRS.gov Free File Landing Page.
|
33.
|
Names Utilized by Member Companies. Members shall possess a clear association between the company or product name posted on IRS.gov and the Member’s company or product name. Where a company or product name has been used prior to 2007 by a Member company, the Executive Director and the IRS has the authority to accept or reject a proposed name change to company or product name, and if the Executive Director refuses to permit such change, it is subject to the Dispute Resolution Mechanism at Article 7. No change in name of company or product will be permitted once the Member submits its name to FFI and the IRS for the tax season, unless such a change is required by an adjudication regarding such name.
|
34.
|
Use of the Free File Logo. The IRS and the Members agree to use the logo consistent
|
35.
|
Promotion of the Free File Program. The IRS will make consistent, good-faith efforts to promote the Free File Program in appropriate media activities, interactions with other federal agencies, social media and social networking activities, and in its appropriate technology applications.
|
36.
|
Innovations. FFI and IRS agree that specific, continuous, and ongoing efforts should be made to provide further innovations for the benefit of Free File taxpayers.
|
1.
|
Pre-Population of Returning Taxpayer’s Prior Year Tax Information. IRS and FFI share the goal that Members should be encouraged to incorporate technology that pre-populates a taxpayer’s prior year return data into the current year return
|
2.
|
Pre-Population of Taxpayer Data from W-2 and 1099 to Current Year Returns. IRS and FFI agree that Members should incorporate technology that permits taxpayers to upload forms, such as W-2 and 1099, in order to pre-populate individual, current-year tax returns with the data from these forms. FFI will make a good faith effort to offer Members the use of such technology for use in the Free File program, which may be patented, copyrighted, or trade secret protected. If successful in procuring such technology at no cost, FFI will offer the use of such technology for free to Members who choose to provide this service to taxpayers within the Free File program. Notwithstanding the foregoing, any member may use its own technology to provide the services described in this paragraph. IRS will investigate requirements or voluntary agreements it may reach with payroll companies to encourage them to cooperate with this pre-population.
|
3.
|
IRS and FFI mutually agree to support and promote Free File as an “Innovation Lab” to test, pilot, and offer capabilities to simplify taxpayer compliance, such as data importation offered by industry as described herein, and such as IRS’s Application Programming Interface (API) projects, consistent with all other terms and conditions in this MOU.
|
4.
|
This agreement does not limit IRS from providing phone-based, web-based or electronic interaction between the IRS and a taxpayer (or taxpayer’s representative) regarding issues in a previously filed return after such a return has been accepted by IRS. IRS will make an effort to communicate its activities in this respect to FFI and seek opportunities to work with FFI Members.
|
1.
|
Removal from the IRS Free File Website. A Member’s listing may be removed from the IRS Free File Website, or a New Market Entrant may be refused permission to list its offering upon the IRS Free File Website, based upon the occurrence of any of the following:
|
1.
|
The IRS and/or the Executive Director’s determination that a New Market Entrant does not meet the Level of Service and/or Standards of Practice of this MOU;
|
2.
|
The IRS and/or the Executive Director’s determination that a Member has failed to provide Services in accordance with the Standards of Practice set forth in this MOU, and the Member has not taken necessary corrective actions, if any may be taken, in the timeframe allotted by the IRS’s and/or Executive Director’s written notice to the Member;
|
3.
|
The IRS and/or the Executive Director’s determination that a Member has failed to comply with its obligations under this MOU per Section 4.29.1, and that the Member has failed to timely remediate identified deficiencies.
|
4.
|
The IRS and/or the Executive Director’s receipt of notice that a Member has undergone an event of Bankruptcy; or
|
5.
|
The IRS and/or the Executive Director’s receipt of written notice from a Member that the Member does not wish to be listed on the IRS Free File Website and/or continue in FFI
|
2.
|
Determination Process. The Executive Director and/or the IRS may make the determinations described in 6.1.1 through 6.1.4 above (i) in coordination with each other; (ii) upon each party’s own volition with written notice to the other party; or
|
1.
|
Administrative Review. After a determination process pursuant to Article 6 of this MOU, a Member advised by the IRS of the denial or removal of its free offer from posting on the IRS Free File Website has the right to an administrative review. The Member may submit a detailed written explanation with supporting documentation requesting a final determination that the decision to deny or remove their offer from the IRS Free File Website should be withdrawn. Within 3 business days of receipt of the Member’s written response, the IRS will reconsider and may either withdraw or affirm its action. During this administrative review process, the decision remains in effect.
|
2.
|
Administrative Remedy. After a determination process pursuant to Article 6 of this MOU, any Member who has been refused the ability to list on the IRS Free File Website and/or has been removed from the IRS Free File Website by the IRS, or mutually by the IRS and
|
1.
|
The CBCA will be the exclusive venue for resolving disputes concerning any action taken by the IRS or the IRS and FFI under the terms of this MOU as described in 7.2.
|
2.
|
FFI shall be responsible for paying the CBCA for all costs incurred by the CBCA in any proceeding related to this provision. Each party to the adjudication shall initially pay its own costs and fees. For the purposes of this section, a party to adjudication may include any Member, FFI, and/or the IRS.
|
3.
|
If the IRS, or mutually by the IRS and FFI, determines not to permit a New Market Entrant to list its offering on the IRS Free File Website, the IRS and FFI, by mutual agreement, may permit or refuse the New Market Entrant the right to use this provision to review the decision not to permit the New Market Entrant’s listing on the IRS Free File Website. For the purposes of this Section, the payment provisions of Section 7.2.2 apply to any adjudication brought by a New Market Entrant.7.2.4 A Member or New Market Entrant who does not prevail in its appeal before the CBCA is required to pay 100 percent of the costs, fees, and expenses incurred by the CBCA and FFI. FFI will invoice the Member and/or New Market Entrant for such costs, fees and expenses, and the Member and/or New Market Entrant shall pay FFI within 10 days of presentation of an invoice for such amount. If the Member or New Market Entrant does not pay these costs, they are no longer in good standing and cannot participate in FFI meetings or be posted on the IRS website.
|
3.
|
The following rules apply to all CBCA proceedings: the Member and/or New Market Entrant who challenges an IRS determination or a joint determination of the IRS and FFI under Section 6 or 7 of this MOU shall not be entitled to any monetary remedies, and the Member’s and/or New Market Entrant’s sole and only remedy shall be an order directing the IRS to act in accordance with the CBCA’s decision. The CBCA’s decision with respect to the termination or reinstatement of the Member on the IRS Free File Website or any other order shall be final and binding and shall not be subject to review. The CBCA shall have the authority to grant motions, including motions to dismiss and motions for summary judgment, in appropriate circumstances. The CBCA shall have no authority to add to or to modify this MOU, except as permitted by joint agreement of the CBCA, IRS and FFI.
|
1.
|
Either party may terminate this MOU for cause if the other Party fails to comply with this MOU, and such failure is not cured within thirty days of written notice of such failure from the other party.
|
2.
|
The IRS may terminate this MOU without cause, such termination to be effective 12 months after the date of notice of such termination.
|
3.
|
Should the IRS commit funding to offer Services for free to taxpayers the IRS shall notify FFI immediately. If the IRS gives such notice during the tax season (between January 1 and April 15, or the last day of the filing deadline if that date is changed from April 15) of any year, FFI may, by written notice to IRS, terminate this MOU, effective on April 16 (or, if the filing deadline is changed from April 15, on the day following such new deadline) of that year. If the IRS gives such notice between April 16 (or, if the filing deadline is changed from April 15, on the day following such new deadline) and October 15 of any year, then FFI may, by written notice to IRS other than during a tax season, terminate this Agreement, such termination to be effective no fewer than 30 days after the date of FFI’s notice of such termination. If IRS gives such notice between October 15 and December 31, FFI may by written notice immediately terminate this Agreement at any time on or before December 31.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Intuit Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Intuit Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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(1)
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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(1)
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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