Today we discuss artificial intelligence, or AI. This is a hot topic following the introduction of tools such as ChatGPT.
AI generated excitement in 1997 when the IBM computer Deep Blue defeated the renowned chess Grandmaster Gary Kasparov 3½ to 2½.
More recently, academics have raised concerns about students submitting assignment prepared by ChatGPT. This tool recently passed the U.S. Medical Licensing Exam and several law school exams at the University of Minnesota.
Business faculty at the University of Pennsylvania’s Wharton School were generally impressed with ChatGPT’s exam performance, but also noted “surprising mistakes with basic math.”
At a recent conference I heard several tax faculty who have tried ChatGPT say it does a great job of writing, but a terrible job of properly citing authoritative sources for tax answers.
People have even had ChatGPT attempt to write song lyrics. Songwriters criticized the results as lacking the feeling that goes into great song lyrics.
At age 17 Jackson Browne wrote a song that ended with “don’t confront me with my failures, I had not forgotten them.” At 17 my biggest contribution to culture was eating an enormous quantity of pizza at an all-you-can-eat buffet.
Neil Young started a song with “My life’s an open book, you read it on the radio.” What a brilliant way of showing how a songwriter opens up his life in a song.
I’m not sure that AI could ever write lyrics like Joni Mitchell, “I could drink a case of you, darling, and I would still be on my feet, I would still be on my feet.”
We need to understand the limits of AI. This is because it can do wonderful and important things, but it still requires human involvement to be sure it gets things right.
Tax people who have used ChatGPT suggest that perhaps it could be an efficient way to write a first draft of a memo to a client. The human expert could then be sure the authorities cited are correct and that there were no errors in logic (or calculation).
I can accept that. I know from experience that many tax questions do have an optimal answer. However, that does not mean the client wants to do the optimal thing.
I have suggested the optimal thing that is rejected because it requires cooperation and interaction with another human who the client refuses to talk to. This is often a member of that client’s family.
Technology can save us time. But in areas that require human judgment and human preference for actions and outcomes, I don’t think it will ever replace the judgment and experience of a human.
In a recent article for the publication “Tax Notes,” Robert Kovacev of the law firm Miller & Chevalier discussed the IRS use of AI to determine penalty relief for failure to file and failure to pay taxes.
IRS has an AI tool called “Reasonable Cause Assistant,” (RCA). The decisions of this tool are supposed to be reviewed by humans.
Kovacev notes that an older study by the Treasury Inspector General showed that the RCA tool incorrectly identified penalty relief justifications 89% of the time.
More shocking, exactly zero of these incorrect judgments were reviewed by a human. IRS uses other AI tools. The Inspector General has not released data on how efficient those other tools are.
One would have to expect that the AI tools have significant deficiencies in administering the tax laws if their decisions are not human-reviewed.
IRS resource problems will make it easier to justify use of AI as a way of administering the law. But tax administration is not like use of robotics in a manufacturing plant.
A reasonable approach may be a combination of AI to get a process started, with human review used to ensure that taxpayers are dealt with fairly and in a way that builds confidence in the tax system.
Kovacev suggests that courts can no longer presume IRS penalty judgments to be correct. If made by AI, he recommends a transfer of burden of proof to the IRS.
Taxpayers should not be judged by AI that uses non-disclosed judgment criteria with the expectation that the taxpayer must prove the judgment to be incorrect.
Jim Hamill is the director of Tax Practice at Reynolds, Hix & Co. in Albuquerque. He can be reached at firstname.lastname@example.org.