On Wednesday, Intuit Inc., owner of online tax-preparation product TurboTax, settled potential claims related to its marketing practices with the state attorneys general of all 50 states. Letitia James, the New York Attorney General, announced that not only will Intuit pay $141 million in restitution, it will also make business practice reforms.
According to James’ press release, her office began investigating Intuit after an exposé by ProPublica revealed that the company was employing deceptive tactics to steer low-income consumers toward its commercial products and away from federally-supported free tax services. James’ investigation made several findings, including that Intuit used “confusingly similar names for both its IRS Free File product and its commercial ‘freemium’ product.”
In addition, it sought to place paid search ads to redirect consumers searching for the IRS Free File service to TurboTax. Intuit also intentionally blocked its IRS Free File landing page from search results during the 2019 filing season, in effect preventing eligible taxpayers from filing their taxes free of charge, the press release said. Lastly, the TurboTax website included a page that said it would “recommend the right tax solution,” but never recommended the IRS Free File program, even when taxpayers were ineligible for the freemium product.
Under this week’s agreement, Intuit will provide restitution to nearly 4.4 million consumers for tax years 2016 through 2018. The expected refund is $30 for each year that tax filers were deceived into paying for filing services.
In a separate proceeding initiated last month by the Federal Trade Commission (FTC), the agency asked for help halting Intuit’s allegedly deceptive advertising in a motion for both a preliminary injunction and a temporary restraining order. Judge Charles R. Breyer denied the request on April 22.
In his two-page decision, Judge Breyer made light of the fact that the FTC moved for relief after tax day, rendering the potential harm attenuated. Also related to the timing of its requests, the court noted that the ongoing administrative proceeding, overseen by an administrative law judge with subject matter expertise, will likely resolve extant issues prior to next year’s tax filing deadline. Finally, Judge Breyer noted that Intuit already removed many of the misleading advertisements from the internet.
In its notification of the settlement with the state attorneys general, Intuit said that it did not admit liability, and if necessary, will continue to defend its practices in the Northern District of California litigation as well as the FTC administrative proceeding.
Intuit is represented by Wilmer Cutler Pickering Hale and Dorr LLP.