- Associated Press - Tuesday, November 15, 2011

NEW YORK — H&R Block Inc. is formally dropping its bid to buy the maker of TaxACT software, after a federal judge thwarted the deal because of antitrust concerns.

The nation’s largest tax preparer said in a regulatory filing Tuesday that it agreed to end its $287.5 million bid for 2SS Holdings Inc. H&R Block does not expect to pay early termination penalties.

In a statement, the company said it was “obviously disappointed” in the court decision but chose not to appeal.

Kansas City, Mo.-based H&R Block said in October 2010 that it planned to buy the company, whose software is used to file about 5 million returns per year. The move was widely seen as a way to boost H&R Block’s digital business. H&R Block trails rival Intuit Inc.’s TurboTax in the do-it-yourself tax preparation market.

The plan called for H&R Block’s digital business called At Home to be combined with TaxACT into a single unit. The companies originally expected to close the deal by the end of 2010, but the federal government questioned the combination.

In an Oct. 31 opinion, U.S. District Judge Beryl A. Howell agreed with the Department of Justice that the deal would violate antitrust laws by leaving just two major providers of tax software. Judge Howell said that if the deal went through, H&R Block and Intuit, based in Mountain View, Calif., would control more than 90 percent of the market.

The ruling is one of several that recently have stymied corporate mergers, including AT&T’s planned $39 billion takeover of T-Mobile USA. AT&T is fighting that decision.

H&R Block said in the statement that it intends to put the failed acquisition behind it.

For the 2011 tax season, Intuit said it sold more than 23 million units of its TurboTax federal tax program, reflecting growth of 11 percent from 2010.

H&R Block said its digital products were used to prepare about 6.7 million tax returns for the 2011 season, including 3.7 million done online. That was total growth in digital of about 13.5 percent, with online use jumping nearly 29 percent.

Including its retail operations, H&R Block handled more than 21.4 million returns.

Internal Revenue Service statistics show about 133 million individual income tax returns were filed for the year.

H&R Block said its At Home software for the 2012 season will be on store shelves next week. Its 2012 online software will be available for download starting Nov. 30.

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