AI Guidelines For Tax Agencies Coming Soon, FTA Says

Chicago - A white paper on generative artificial intelligence from the Federation of Tax Administrators, meant to offer state and local tax agencies key guidelines on incorporating the tools into their tax administration practices, is nearly complete and should be available by August, an FTA official said Monday.

Ryan Minnick, the FTA's chief operating officer and one of its leaders on the AI project, said about two dozen state officials have been working on the project, and states can expect a voluminous document. He said they will have a chance to review it and offer suggestions in advance of the FTA's Aug. 10 technology conference in Tacoma, Washington. Minnick spoke on a panel at the FTA's annual meeting in Chicago.

The paper will aim to provide an overview of the generative AI landscape and advice for state and local tax administrators who may be interested in adopting AI tools. Its contents are projected to include discussions of governance policies and legal considerations when using or procuring AI programs, as well as overviews of pilot projects and possible future use cases for the technology. Minnick said he expects the document will have to be frequently updated, given the nature of generative AI.

"We are not talking about something that's done and over," Minnick said. "It's happening right now."

He said the latest technology could have changed between the time the panel began and when it was over, about 50 minutes.

Still, he said, tax agencies around the country either are using AI now, for functions including procurement and customer service, or are interested in using it. So the FTA decided to provide some guidance and expects to continue to do so.

The FTA also intends to formalize the discussion around AI, Minnick said, with a dedicated group for tax administrators to share their thoughts and ideas.

"We anticipate, after the paper going out, that in addition to our many other communities that tax agency employees can belong to, we'll have a community for this kind of AI discussion," Minnick said.

Up to now, he said, AI discussion has been part of conversation on administrative functions such as audits and collections, but the topic has grown so big that it merits its own group.

The FTA's work on the paper, which began last year, coincides with several tax administrators across the country expressing interest in using AI tools to improve their customer service operations and identify noncompliance. Michigan Gov. Gretchen Whitmer, for example, announced in her February budget proposal that she is seeking to provide the state Department of Treasury with $1.3 million to use AI tools to assist the agency with "data analytics and fraud prevention."

The heads of tax agencies in New Jersey and Louisiana have previously told Law360 that they'd be interested in exploring how to use AI-based chat options for customer service purposes. And New York's acting tax commissioner, Amanda Hiller, said in December that advancements in data analytics can help auditors better scrutinize tax returns from large, complex partnerships.

--Additional reporting by Paul Williams. Editing by Tim Ruel.

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