Tax research software: More relevant than ever

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It’s been an interesting year. President Trump promised major revisions to the Tax Code, and the Supreme Court was deciding whether or not to overturn the Quill decision in the South Dakota v. Wayfair case. In both cases, events unfolded to produce a lot more questions than answers.

And that makes the process of obtaining answers with tax research options more important this year than it has been in a long time.

With the Tax Cuts and Jobs Act one of the most significant changes to tax law in three decades, how are tax research vendors handling the huge job of providing answers to practitioners who are somewhat puzzled by exactly how to apply these changes with their clients? In our annual survey of tax research software, this was one of the primary questions we posed to our vendor panel of four of the primary suppliers of research software and materials.

So, what’s new?

Obviously of major interest is how the vendors are addressing the new aspects that the TCJA brings to the table. And in these reactions, we noticed two major courses of action — reporting and analysis.

“Immediately upon enactment, we added visible alerts to all code sections and analysis that was impacted by tax reform,” explained George Farrah, editorial director for Bloomberg Tax. “Within days, we had updated the Internal Revenue Code and had added Legislative Change Notes to all analysis impacted by tax reform. We expanded our Tax Reform Roadmap to include linked references to analysis.”

Reporting was also a key priority for Thomson Reuters and Wolters Kluwer.

Thomson Reuters’ Adam Gretz, senior manager of the tax practitioners segment, said, “The complete analysis of the Tax Cuts and Jobs Act was released to Checkpoint customers within 24 hours of the bill’s passage; the Internal Revenue Code was also immediately updated on Checkpoint to reflect TCJA changes. Prior to and after enactment of TCJA, developments were reported and pushed to customers through daily news updates.”

And Wolters Kluwer’s Bas Kniphorst, vice president of product management, research and learning, added, “Our first priority is to report and provide guidance on the changes as timely and as accurately as possible. Although the Tax Cuts and Jobs Act is the most significant change to the Tax Code in 30 years, our approach has not changed. We consistently provide commentary and usable insights within hours of legislation signing.”

And for practices with more limited budgets and needs, Tax Materials updated its line of research products as well, according to Jacob Meyer, who is in charge of business development for the research provider.

The vendor brought out a new Tax Law Package, which includes three books, starting with the “TCJA Summer Edition,” which was released on June 15 to explain where everything related to the law was at that point of time.

“We have a ‘TCJA Winter Edition’ which will be released Dec. 15 to provide an update pre-tax season,” Meyer said, “and our ‘What’s New In-Depth Edition,’ which releases on Feb. 1, 2019, to cover any late-breaking tax laws, regulations and extenders, along with all the major changes over the past year. We provide an update service with new articles to keep our customers in the know on tax updates throughout the year that is free and included with purchase, and of course all of our publications will be updated for 2018 and the federal editions, which will be released on Dec. 15.”

Report, then explain

But reporting is just part of the process of providing answers. Just as important, or possibly even more important, is the expert analysis that the vendors bring in understanding what these changes mean, and how and where they need to be applied.

Some of this analysis is provided in updated products that reflect changes in code and procedures.

For example, Bloomberg Tax approached the process by prioritizing analysis that was significantly impacted to be updated first. “As we amended content, we indicated that the discussion had been updated, making it easy for customers to know if a section had been impacted, and updated,” Farrah said. “Taking a staged approach based on level of impact, we were able to complete updates quickly to meet our customers’ expectations. We felt it was imperative to make our updates, not only quickly, but with transparency to give our customers confidence that the information they were relying upon was accurate and comprehensive.”

And the vendors were quick to point out that the large number and impact of changes resulted in the introduction of new products to help practitioners cope with them.

One of the ways that Wolters Kluwer reacted was by expanding their AnswerConnect product introduced in 2017.

According to Kniphorst, “We have added tools to CCH AnswerConnect to assist with answering questions on items like 199A qualification, as well as enhanced existing tools to reflect legislation and other changes, such as updating our nexus information to reflect the implications of U.S. Supreme Court decisions such as the definition of sales nexus resulting in the South Dakota vs. Wayfair case.”

“We also recently introduced CCH AnswerConnect Tax Cuts and Jobs Act guides to provide a primer on the changes that impact specific taxpayers, or situations covering topics like corporate taxation, high-net worth individuals and small businesses,” he said. “In addition, we are developing and releasing products which will allow CPAs to find specific clients impacted by any law changes or guidance from the IRS and Treasury. This will allow CPAs to contact clients through prepared and customizable communications detailing the impacts of any changes as soon as possible.”

Bloomberg Tax has also introduced a host of new products, including adding insight into the impact of the tax reform through practitioner insight articles, ongoing news coverage, and special reports, as well as a continuously updated set of frequently asked questions. Also available is a timeline to track IRS guidance on the impact of tax reform as it is released, a series of “Jumpstart” podcasts that allow customers to quickly understand the impact of various major changes made by tax reform, as well as a Tax Reform Watch landing page that includes full-text documents, news, analysis and more on tax reform.

The goal is to provide subscribers with an easy-to-access, centralized place to find all things related to the TCJA, according to Farrah.

Thomson Reuters hasn’t been idle in this area either. “We introduced the Complete Analysis of the Tax Cuts and Jobs Act, which provided a comprehensive analysis of all the complicated changes, client letters, and finding tables to help users find the coverage they need,” Gretz said. “In addition to the Complete Analysis, we have added TCJA-related interactive tools to our planning and advisory guides, such as the Qualified Business Income Deduction Worksheet, the Business Interest Expense Worksheet, the Kiddie Tax Calculator, and the Choice of Entity Analyzer. In parallel, we have also published new Checkpoint Catalyst topics, such as qualified business deduction from partnerships, S corporations, LLCs and sole proprietorships (IRC Section 199A) and Section 965 transition tax on accumulated foreign earnings.”

Tell it to the machines

We were also curious about what technological advances vendors have seen in the past few years. Much of what we were told involves the implementation of machine learning and artificial intelligence, especially in the area of natural-language queries and searching. While Boolean queries are still fairly prevalent in tax research applications, the huge influence that Google and other natural-language search engines has had on the use of computers has certainly had an influence on tax research as well. And the ability of the application to learn and adopt to a user’s techniques, workflows and needs is an important step up in ease of use.

Bloomberg Tax is on board with this technology. “We have employed artificial/machine intelligence to improve search performance, helping results become more relevant. Our search algorithm is continually being improved based on machine learning and usage,” said Farrah. “The next advancements will be in the application of AI in developing workflow tools to assist practitioners with tasks like the documentation of tax research, as well as data analysis of financial statements and disclosures to provide better business intelligence for firms and their customers.”

“Checkpoint Intuitive Search extends natural-language search beyond keyword matching, interprets meaning, and displays results that can be scanned easily to get to the most useful information. Natural-language searching is a commonplace expectation of today’s users,” added Gretz.

But Tax Materials’ Meyer isn’t quite as enthusiastic about handing the reins to technology.

He pointed out that, “AI certainly is helpful and good at pointing people in the right direction, but it’s on the tax preparer to decipher the results and find the appropriate answer.”

Just ask Alexa

Also starting to make their way into research software are voice-assist systems such as Alexa. While Alexa (and Google’s version, Google Home) are becoming ever more common in the day-to-day world of connected devices, they depend on “skills” that are the programmed algorithms that operate in the background. These need to be developed to do specific types of operations, so implementing voice search capability for detailed Tax Code searches is not something that comes standard with your Amazon Echo.

Given the extension to natural language capability that voice-assistant systems like Alexa offer, three of the four vendors we surveyed are investigating this technology or have already added it to their tax research repertoire.

“Bloomberg has voice assistant functionality and we are actively exploring ways to leverage this technology in our tax products,” Farrah said. “Our goal is to employ this technology in a manner that will provide tax professionals with real benefits, such as increased efficiency and greater understanding of tax law. As with all of our enhancements, we are working closely with tax practitioners to understand how this technology can best be used to effectively save them time and increase the quality of their research.”

Thomson Reuters is also interested in being able to offer its subscribers this kind of search capability. According to Gretz, “We expect there will be a place for voice assistants in tax research, most likely in the quick reference arena or tied to workflow or schedule management. It’s also important to continue to evolve search capabilities so that professionals searching for answers or guidance in complex, developing or unfamiliar areas of law can search broadly and still find what they are looking for by having a conversation with the search engine.”

And Wolters Kluwer has already implemented voice-assist technology to some extent. According to Kniphorst, “We collaborate closely with customers and witnessed firsthand how professionals call out questions to colleagues across a room to get the answer to a tax research question. We realized we could augment our CCH AnswerConnect with a voice-enabled Tax Assistant. Allowing users to get their answers — find a rate, look up a threshold — without leaving their workflow is a great achievement in productivity.”

Still a ways to go

As far as tax research technology and capability has come, as technology improves, so too will the accuracy and ease of use. Our vendors had some very definite ideas of where technology will go. According to Wolters Kluwer’s Kniphorst, “In the future, AI will understand free-form text, make an analysis, and then place it in the right place in a report or compliance document. Tax planning and optimization strategies for individuals or even multinational corporations will be possible. AI will automate many workflow processes, like monitoring changes in legal and regulatory disciplines, and updating previous documents or systems with the relevant changes.”

He continued, “In the mid-to-large area where we see many mergers, ensuring the health of the firm will be critical. As such, tax professionals will need targeted practical guidance based on the situations their clients face and be aware of any new laws or programs that affect their clients specifically. For a professional to be able to send key information directly to a client — as it is happening — is paramount. Content delivery combined with predictive analytics will be areas to continue to watch over the next few years.”

Finally, Thomson Reuters’ Gretz added, “Several technologies are likely to transform our industry, including artificial intelligence, blockchain, big data and data analytics. These advances will set the foundation for new products and services along with potential new business models.”

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Tax research Tax reform Trump tax plan Tax nexus South Dakota v. Wayfair Bloomberg Thomson Reuters Wolters Kluwer Tax & Accounting