by Roger Russell

Another tax prep software company has been picked off, this time by a newcomer to the arena.   TRE Financial Services, a provider and reseller of professional tax software and electronic filing programs, has completed the acquisition of Orrtax Software Inc., the Seattle-based developer of professional tax preparation software. Under the terms of the agreement, Orrtax Software will become a wholly owned subsidiary of TRE Financial Services, headquartered in Houston. The subsidiary will remain in Seattle and will continue to be managed by Rufe Vanderpool, the chief operating officer of Orrtax.   "The acquisition trend has been going on for some time. There’s already been a lot of consolidation, and you’ll continue to see it at the lower end," said Manhattan, Kan.-based consultant and Accounting Today columnist L. Gary Boomer. "It just makes economic sense."   Most of the recent acquisitions have resulted in the elimination of one of the acquired company’s products, according to Boomer. "One company buys another for the customer base, and kills off the competing product."   The TRE acquisition of Orrtax is atypical, therefore, because "in this one, the product is not being killed but being enhanced," said Andrew Priest, chief executive of TRE Financial Services. TRE plans to promote the Intellitax Suite of products under both the Intellitax and Taxview brands. "The Orrtax division will remain as the development division and the TRE division will continue to focus on marketing programs, new products and the nontraditional tax preparer market," he said.   Priest said that the acquisition of Orrtax Software enables TRE Financial Services to improve its position in the tax preparation software business and gain a brand that is widely respected by tax professionals. "The acquisition also adds an operating division that advances our strategy to drive the development of the products we sell," he said.   Prior to the Orrtax acquisition, TRE was primarily a reseller, according to Priest. "We did everything a software company did except write software. Now we’re a software company."   "Orrtax Software has established a strong foundation with its customers by providing a solid, secure product combined with superior customer service," said Vanderpool. "TRE Financial Services is the best partner to provide Orrtax with the necessary tools to excel to the highest levels of tax software development."   According to Vanderpool, the two companies have fostered a working relationship for 11 years. Now, he believes, that via the combination of TRE driving development of the marketing of the Intellitax suite of products, Orrtax will more effectively compete in the tax preparation software market.   TRE Financial Services, formerly Tax Refund Express, is a privately held, Houston-based firm developing solutions for tax preparers and financial institutions. Established in 1990, TREFS is the largest service bureau in the electronic filing industry, facilitating almost $1 billion in tax refunds in 2001.    TRE will continue to market its own Taxview software. "The personality of TRE Financial has been to try to provide any product that fits the need of the customer. Some high-end accountants prefer Taxview because it has the full corporate package for all states with a corporate tax. It’s a robust package, with deeper depreciation schedules than most programs," said Priest.   Phoenix-based consultant Roman Kepczyk said that the transition to Internet-based platforms will continue to spur the merger market. "It lowers the costs for CPA firms and the developer. We’re beginning to see features in the mid-echelon products that make them a lot more competitive with the medium and higher end products," he said.   While some of the larger firms used to rely solely on products by CCH, RIA and Lacerte, Kepczyk noted, "we’re beginning to see other firms entering the core middle-market area. The mergers and acquisitions will help them enter this arena by making it easier for them to add features and increase functionality."   The combination with Orrtax provides synergy in the potential offerings by TRE, according to Priest. "Many Orrtax customers have been high-volume preparers that also prepare e-filing and refund anticipation loans," he said. "Taxview does this, as well, but Intellitax has DOS, along with Windows, and some of the high-volume preparers still prefer to use a DOS system."   Orrtax will continue to be available in DOS for the foreseeable future, according to Priest. "A lot of preparers are convinced that DOS is one of the reasons why they were so successful in the high-volume business, and we intend to keep it."   Priest said that TRE’s long-range plans are to develop 1099 and payroll software, or produce a bridge to be used with existing software. "We started out as a reseller of Orrtax," he said. "When Harold and John Orr decided to sell, we were a natural fit."   Harold Orr, now in his 80s, is one of the top H&R Block franchise holders in the U.S. He first developed Orrtax software for use in his own Block franchise locations. "The software was hugely successful," said Priest, "because it was written to handle high volume for multiple locations. Many preparers saw how efficient it was for a preparer with multiple locations and that’s when they started marketing the software."

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