Artificial Intelligence being used by SC Department of Revenue to determine who to audit this year

That means the system won’t conduct audits but will suggest where audits should be conducted, partly based on finding anomalies in the data.

“I think there are efficiencies to be gained by using AI,” said Bruckner, who cautioned that human oversight is needed to make sure software programs don’t have unintended discriminatory outcomes.

Bruckner is among the voices stressing the need for a cautious approach. In the conclusion of a paper for the IBM Center for The Business of Government titled “AI and the Modern Tax Agency,” she and co-author Collin Coil wrote that as agencies deploy AI “they must also develop oversight and governance structures to ensure ethical use, mitigate risks, foster transparency, and build trust with taxpayers.”

The South Carolina DOR’s audit process will be a closed-loop, Smith said, with information moving between the agency’s two FAST Enterprises products, the tax system GenTax and the audit review system FAS. The company already houses DOR’s data.

This also means personal financial information won’t be loaded into — or used to train — publicly available AI programs such as ChatGPT and Gemini.

The FAS system is also meant to learn from experience. The software “is nothing the public can get their hands on,” Smith said.

Going forward, and possibly backward, the state’s revenue agency expects to expand the audit reviews to a broader variety of tax returns, such as individuals’ tax returns. In cases where problems are flagged, the agency could look back over up to three years of prior returns.

Meanwhile, over at the state Department of Motor Vehicles, FAST Enterprises was awarded a 17-year contract in January to replace the DMV’s 2002 technology system.

“Customers can expect new services to be introduced incrementally during the implementation phase, with full system functionality projected by mid-2029,” the departments said in an announcement. The remaining 14 years of the contract are for ongoing system support.