TA buys majority stake in tax software firm

Boston private equity firm completes $85 million recapitalization of an Iowa-based tax software firm.

Boston-based TA Associates has completed a $85 million recapitalization of Cedar Rapids, Iowa-based 2nd Story Software, a producer of US tax filing software.

With the recap, TA is the majority shareholder in the company. The owners retain minority shareholder positions. The firm did not disclose their stake in 2nd Story.

TA Principal Todd Crockett said the firm became interested in the tax preparation software market about three years ago, noting the Internal Revenue Service’s plans to increase online US income tax filing to 70 percent by 2007. Crockett said TA began talking to 2nd Story around the same time.

“Last year, the company decided the time was right to look at some alternatives,” he said.  

2nd Story’s flagship software product is TaxACT, a free, online federal tax preparation program. The firm said it was growing based on upgrading customers to the non-gratis Deluxe and State programs, as well as e-filing services.

TA manages more than $6 billion. They recently invested $75 million (€57 million) in Cardtronics, the largest independent owner and operator of automatic teller machines in the US.

Crockett said TA planned to raise its next fund over the next 18 months, adding the target would be larger than the last, $2 billion fund.