Tracking federal tax laws can be an exercise in endurance. The challenge is even greater at the state level, given the countless draft bills and revisions across 50 jurisdictions.
But what if machine learning could help track those legislative changes, categorize tax laws, and predict policy trends long term? Researchers in neural linguistic programming have now achieved this. They used machine learning to train text classifiers to extract tax law changes from a century’s worth of US state legislative proceedings.
Text classifiers use keywords and phrases to classify documents. This makes it easier to understand why a piece of legislation was categorized as tax-related, compared with a sophisticated but opaque large language model.
Such transparency is essential for legal and tax purposes. Governments, courts, and businesses must be able to audit how automated decisions are made. The machine-learning tax classifier allows this by providing clear decision boundaries—points at which legislation shifts from being labeled as one kind of tax bill to another.
Following tax law changes currently requires either a mix of professional expertise and specialized databases or trust in an artificial intelligence system. A machine-learning model that can automatically classify and track changes to local tax codes could revolutionize this process while being transparent.
This is promising for policymaking. By analyzing historical tax law changes, researchers can identify trends in tax policy, measure their impact on revenue and economic growth, and use that data to predict proposed reforms’ effects—without the help of more resource-intensive LLMs.
Despite our best efforts, tax law may never be simple, but it might soon be easier to navigate. Your best tax assistant may not need a paycheck, coffee break, or even a law or accounting degree—it may not be human at all. Instead, it could be a well-trained and auditable machine-learning algorithm.
—Andrew Leahey
Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts discussed reasons to question the Department of Government Efficiency’s access to IRS taxpayer data, the impact of accounting firms’ withdrawal of DEI policies, and more.
Insights
DOGE Getting IRS Data Like Giving Custodians Vault Keys: Werfel
Former IRS Commissioner Danny Werfel explains why remaining IRS officials must closely question why DOGE staffers want access to IRS taxpayer data.
IRS Criminal Investigators Face Competing Priorities Under Trump
Former IRS-CI agent Robert Nordlander says a shift in crime enforcement is typical with a new administration, but small business tax investigations are likely to decrease with the IRS’s new focus on border concerns.
DEI Reversals at Accounting Firms Will Worsen Talent Pipelines
Hofstra University’s Jack Castonguay criticizes accounting companies’ retreat from DEI initiatives, arguing that such moves will exacerbate the industry’s image problem.
Shifting Crypto Rules Requires Knowing What Drives Token Values
Groots Valuation’s Meenal Aggarwal explains the importance of accurate crypto valuations for tax reporting purposes, saying a token’s underlying assets and marketing costs can influence values.
How E-Commerce’s Influence Is Reshaping Global Supply Chains
Alvarez & Marsal’s Eu-Kim Chan, Andy Winthrop, and Beilu Ge analyze how supply chains are adapting to changing market developments and and explore how global systems are being impacted by tariffs and tax challenges.
Columnist Corner
A bill to enhance New Jersey’s angel investor tax credit highlights that the state should exclude carbon capture technologies from eligibility, Andrew Leahey argues in his latest Technically Speaking column.
“Carbon capture remains an expensive, inefficient, and unproven technology at scale,” Andrew writes, adding that states must optimize their startup incentive programs given uncertainty over federal climate funding. Read More
How Are You Handling This Tax Season?
Bloomberg Tax Insights & Commentary is collecting a series of short essays (250-350 words) about how tax practitioners are coping with this year’s unusual—and somewhat chaotic—tax season. We want to hear:
- How you are managing client expectations with so many changes
- Go-to practices for dealing with the IRS during tax season
- How you’re dealing with stress and finding time to relax
The deadline for submissions is March 19, 2025. We’ll publish the best answers at the end of March.
Please send draft essays or any questions to rbaker@bloombergindustry.com with the words “Tax Season Essay” in the subject line of your email. Thank you!
News Roundup
Musk Group Seeks to Cut 20% of IRS Workforce by May 15
The Trump administration wants to cut the IRS workforce by 20% by May 15—including those who have already left or were fired, according to a person familiar with the matter.
Trump IRS Pick Defends Work Pushing Pandemic-era Tax Credits
Former Rep. Billy Long defended his advocacy for pandemic-era tax credits that have been the subject of widespread fraud as he works to bolster his nomination to lead the IRS.
Historic Building Owners Battle for Tax Breaks Despite Distrust
Property owners looking to preserve historic buildings are vying to adapt a common tax tool to their advantage—if they can convince the IRS and the courts to back them.
Global Tax Upheaval Stalls Adoption of New Transfer Pricing Plan
The US and business groups are making a big push for global adoption of a simplified framework for transfer pricing—but without much success so far, as countries grapple with an uncertain and chaotic international tax landscape.
Tax Management International Journal
VAT in the Digital Age Finally Receives Approval
Although the VAT in the Digital Age package changes will take a few years to be implemented, businesses need to start considering how they will be impacted and make appropriate plans, says a Crowe UK practitioner.
Tax Management Memorandum
The Tax Tail Can’t Wag the Valuation Dog: Five Key FMV Rules
By applying five valuation principles that are frequently ignored or misapplied by the tax community, the IRS and taxpayers could resolve more valuation disputes amicably and without court involvement, say Jones Day practitioners.
Career Moves
Robert Phillpott rejoined Norton Rose Fulbright as a partner in its business practice group in Houston.
Suresh Kanwar was chosen to head Deloitte UK’s financial services team.
Natasha Kaye joined Akin as a partner in its tax practice in London.
Anshuman Vaidya joined Hinshaw & Culbertson as a partner in its government practice group in Chicago.
Mary Alexander joined Akin as a tax partner in Washington.
Varoon Saccaram and Dayalan Thangaraj joined Edwin Coe as tax managers.
If you’re changing jobs or being promoted, send your submission to TaxMoves@bloombergindustry.com for consideration.
To contact the editors responsible for this story:
Learn more about Bloomberg Tax or Log In to keep reading:
Learn About Bloomberg Tax
From research to software to news, find what you need to stay ahead.
Already a subscriber?
Log in to keep reading or access research tools.