The Future and Past of Tax Research
Better searched, more options, and paper's surprising survival
By Ted Needleman
Tax season is just not fun. It seems like it’s going to go on forever, and the seemingly endless days and evenings at work drain the energy out of even the staunchest preparer. But preparing the returns, as tedious as it may be, isn’t usually the worst part of tax season.
The worst part is trying to unravel the sticky tax questions that always seem to pop up.
The need for tax research tools hasn’t diminished over time, even as tax preparation software has gained increased intelligence. Rather, it has increased due to the continually growing complexity of the various tax codes, laws, private letter rulings and other morass of information that has to be perused and interpreted. And with the increasing amount of clients moving into the global economy, don’t count on things getting any simpler in the future.
FREE, AND NOT-SO-FREE
While many practitioners do subscribe to one or more tax research providers, there is a considerable amount of information available for free over the Internet. However, there are several problems with using the Internet as your primary source for researching tax issues. One is that, in many cases, it’s not possible to determine the veracity of the information you find, especially if it’s not from a trusted source such as the agency responsible for creating the code, rulings or findings in the first place.
Another problem is that, in many cases, the information provided is unfiltered. It’s just raw code, citations or case law, all provided without any interpretation. And for many, it’s the expert opinions and interpretations that provide the value-add. And while natural-language search engines like Google are easy to use, they can return hundreds or even thousands of responses.
That’s not to say that there’s no value in using the Internet as a resource in addressing your research questions. Almost all code is available online, whether it is federal, state, local jurisdictional or even international. One area that often gets short shrift is case law. While most tax research vendors do offer case law databases and often options on code and rulings as well, there are some free or inexpensive places to look. Many of the major law schools have law libraries online that are available for free or paid access. Also useful: Mayfield Publishing’s legalbitstream.com Web site and the American Institute of CPAs’ Tax Research Information and Tools Web page. The U.S. Federal Tax Law Hierarchy Quick Reference Chart is something that most practitioners should probably print out and post in a prominent place.
But for many practitioners, access to free or inexpensive resources isn’t going to be sufficient. There aren’t a lot of tax research vendors in the market. Fortunately, those that do exist offer a variety of products and services to meet the requirements of many tax preparers. And some of these vendors have paired with tax preparation software vendors to allow access to their research databases directly from the tax prep product, sometimes directly from a particular line item.
We asked the major vendors of tax research services for their thoughts on where the industry is at the moment, and where they think it’s headed. Experts from Bloomberg BNA, Parker Tax Publishing, Tax Materials Inc., Thomson Reuters and Wolters Kluwer graciously shared their insights.
A MOVING TARGET
One of the more obvious trends in the industry is that it can’t afford to be static. With more data to search through, coming up with more efficient and effective ways to conduct searches is, and will continue to be, a priority. Paper-based loose-leaf services, which still exist, had some severe limitations in how you searched them.
Things have gotten a bit better since those days, but we haven’t come as far as any of us, including the vendors, would like. Effective searching still requires skills honed in the early days of electronic research. And while many practitioners have developed skills in using Boolean operators like “and,” “or” and “not,” natural-language processing still remains the Holy Grail. Google is a good example of natural-language search technology.
George Farrah, editorial director at Bloomberg BNA, points out one of the challenges that vendors and users face: “Tax research solutions have had to evolve to meet the expectations born out of the Google effect. Researchers want systems that effectively interpret their search terms and display on-point results that they can quickly and easily review to find answers to their questions. Of course, the quality of those answers is still paramount, especially in an increasingly complex area of law and a growing pressure on businesses to be more efficient.”
But while natural-language searching may seem like a panacea, it’s not, at least not yet. To see why not, go to Google and type in the word “soda.” You’ll wind up with 195 million hits! Obviously, even natural-language searching needs to be approached with a search plan and knowledge of relevant terms and search techniques in hand.
Both Thomson Reuters and Bloomberg BNA report that they are making strides in natural-language search, while Tax Materials’ business development manager Jacob Meyer told us that, “Natural-language search is on the radar screen but not a near-term goal.”
According to Colleen Dillon, director of the Tax Practitioner Segment at Thomson Reuters Tax & Accounting, “Thomson Reuters Checkpoint’s unique Intuitive Search employs ‘triple-powered relevancy’ factors to amplify what is traditionally thought of as natural-language searching and enables users to search the way they think. Our Intuitive Search capability uses a multi-layered approach that goes beyond keyword matching to intuitively interpret the meaning behind search terms.”
Bloomberg BNA’s Farrah added, “We have focused much development [effort] to make searching simple and easy and to deliver the most relevant and reliable results through tax-specific search suggestions as well as an automatic function to true up the search string with alternate terms to include all variations of a topic. This greatly streamlines the search experience and delivers comprehensive results on the first attempt. Natural language is still evolving in tax-specific research. We continue to leverage new approaches as they prove to be effective in moving the performance needle forward.”
Wolters Kluwer’s product manager for CCH IntelliConnect, Jill Weinstein, agreed about the importance of making searching more productive: “We have been developing natural-language search for a long time now, and are always working to strengthen and refine this. Professionals want to search quickly and easily using the everyday language they use in their offices with clients and colleagues.”
Parker Tax Publishing is also gung ho on natural-language searching. “We see natural-language processing as being second only to predictive autocomplete in the future of search engine capabilities, and we’ve allocated our development time accordingly,” said publisher James Levey. “Natural-language search has been around in some form for decades, but until recently it has been more of a gimmick than a truly beneficial feature. But in the past five years, it’s become a highly effective technology, and we’ve been incorporating it into our search engine at a rapid clip. We still see ourselves as being a year or two behind popular public search engines like Google on natural language, but we’re closing the gap.”
Searching is getting easier and more direct, but obviously, there’s still a lot of room for improvement. And while natural language is one goal, in the end it may not turn out to be the most effective way to conduct a search. Vendors certainly see ease of use as a major consideration in their product development, and an ongoing challenge. And whether the answer is natural-language search or some other approach, you can be sure vendors are trying to make searching as productive and easy as possible.
THE MEDIUM IS A MESSAGE
Another industry trend that ties into the overall ease of use mentioned above is delivery of data and the results of searches. Back in the “good old days” of tax research, paper was pretty much the only media that tax research subscriptions were delivered on. In the late 1980s, CD-ROM drives became available and affordable, and many of the vendors started to provide their research services on CDs, and later on higher-capacity DVDs.
Today, DVDs are pretty much forgotten, having been replaced by online services. Still, paper-based research not only still exists — it’s actually flourishing. All of the major players in the tax research market still offer paper products and services. And it looks as if this mode of information delivery is not going to vanish any time in the near future.
Tax Materials’ Meyer told us, “Our paper-based tax research products continue to grow and the renewal rates have remained strong. In addition, we have seen a trend in which our ‘book-only’ customers have started to order both hard-copy books and online tax research. Because our online tax research products are intuitive and easy to use, the transition from book to online is seamless. As the demographics change and the industry ages I foresee more of a shift to online tax research. But I don’t foresee a major dropoff over the next five years. The transition will be very gradual. Tax professionals love having a hard-copy book and are very hesitant to change.”
And he is far from alone in this assessment. Thomson Reuters’ Dillon and Bloomberg BNA’s Farrah both agree.
“Paper-based formats are expected to continue for the foreseeable future as part of an extended ecosystem for knowledge-based resources; the most popular print formats tend to be those used for quick reference purposes, desktop guides and journals,” Dillon told us.
Bloomberg’s Farrah added, “Because of the unique nature of the BNA Tax Management Portfolios, many of our customers continue to express a desire to access them in print form, and we feel it is important to continue to provide print versions for those who still value the media.” DVDs and Blu-Ray discs, however, have lost popularity, Farrah reported.
TAKING IT TO THE STREETS
The retirement of DVD and Blu-Ray search materials has been hastened by several factors. The most obvious one is the all-encompassing use of the Internet, but it’s also a side-effect of the fact that many computing devices simply don’t have an optical media drive. That’s a result of the small form factor of these devices, which simply provide no room for an optical drive, as well as the ubiquitous access to and use of the Internet, which pretty much obviates the need for an optical drive.
With almost universal access to the Internet, it’s not surprising that there has been a tremendous shift in recent years for vendors to offer mobile access. Cloud-based research services just make sense, largely for the same reasons that almost every cloud-based application does: There are no capital equipment costs, no maintenance, and instant updates. When it comes to tax research, that instant update capability is a real crowd-pleaser.
And all the vendors we surveyed are enthusiastic about providing mobile access to their products. For instance, Parker Publishing’s Levey is very optimistic about mobile access, but not sure doing even initial research while sitting in front of the client is a particularly good idea: “During each of the past three years, we’ve seen double-digit increases in mobile access to our tax news bulletins, but far more modest increases in mobile access for core research. To the extent the research is being done in a client’s presence, it’s mainly about providing quick answers to straightforward questions about rates, limits, credit amounts, or perhaps a list of requirements to qualify for a tax break. Most practitioners we talk to remain averse to doing preliminary research on more complex questions in the presence of clients, and not just because it’s easy to get this stuff wrong. They feel that doing quickie research on a phone or an iPad in front of a client tends to trivialize the skill and professionalism required to answer tougher tax questions (even with the best research materials), and that getting back to a client later the same day or the next with an actual answer allows them to provide great service without underselling themselves.”
But a quick response to a client is important. “Clients of accounting firms expect rapid responses from their tax and accounting professionals,” noted Wolters Kluwer’s Weinstein. “This means if a client sends a text, e-mail or phone call to their professional, they are expecting a near-immediate reply. This is where mobility really drives value for professionals because they now have answers at their fingertips wherever they are, at any time, so they can respond quickly and appropriately to their clients. Interaction with clients is not just during face-to-face meetings and phone calls. Rather, it takes place on a 24/7 basis, and products that deliver strong mobility and are optimized for rapid use on-the-go are invaluable to professionals.”
BACK TO THE FUTURE?
Finally, we asked each vendor what they see happening in the foreseeable future. Bloomberg BNA’s Farrah believes much of the change will happen as clients become multinational, and practitioners younger. “As companies become more multi-jurisdictional, both in the U.S. and globally, and as tax laws become more complex, we see a growing need for information and analysis that help resource-constrained tax departments and service providers stay current and comply. Some examples of this include BEPS and state sourcing rules,” he said. “Like corporations, CPA firms will need to continue to increase efficiencies in order to do more with less — while maintaining a competitive edge in a market that continues to contract due to mergers and acquisitions. And as the demographics of CPA firms become younger, firms need to provide their staff with tools to help them become more knowledgeable and that work the way they do.”
“The optimal tax research service will need to provide a Google-like experience built on the foundation of trusted content, including efficiency-focused practice aids — like step-by-step instructions for transactions,” he concluded.
Thomson Reuters’ Dillon added that she expects to see improvement in the workflow: “We continue to transform our solutions to deliver information at the point in the workflow where it is of most relevance and value.”
Wolters Kluwer’s Weinstein also agreed that workflow is important: “Professionals should also work with a provider who connects to their workflows in order to save them time, which can easily be a challenge with so many options for information out there today.”
We also asked our vendor panel about offering “pay as you go” for research services, similar to the pay-per-return that some tax preparation software vendors offer. The resounding answer we got was that there doesn’t seem to be a desire on the part of practitioners for this kind of approach, and customers were quite satisfied with the available subscription plans.
One thing is certain: Tax research down the road a few years will look very different than it does today.