Google Data Center, The Dalles, Oregon. Photo by Visitor7 – Own work, CC BY-SA 3.0
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U.S. taxpayers know it is nigh impossible to escape taxes. Those of us who are tax geeks (which includes you, right, since you’re reading this) also tend to expand the tax world, finding connections everywhere. That’s the case this weekend, with three IRS-related reports that bring artificial intelligence, celebrities, and data centers together.
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We finally got some rain in the Austin area, so I slept in this cloudy morning. Then I hunkered down to catch up on some tax reading. And that led to this weekend’s resumption of my recently neglected (and very late) Saturday Shout Out feature.
Three articles caught my eye as I literally and digitally thumbed through publications today. All are related to Internal Revenue Service activities that also are of top-of-mind for many in the tax world right now.
I’m talking about artificial intelligence (AI), celebrities, and data centers. Read on to see how they connect and/or intersect.
Dealing with AI risks in tax prep and administration: This weekend’s first shout goes out to former IRS Commissioner Danny Werfel. In an Aug. 31 article for the American Institute of CPAs magazine The Tax Adviser (like I said, reading backlog), Werfel assesses risks and proposes control practices for use of artificial intelligence by taxing authorities and practitioners.
The piece, “A risk framework for AI use in tax administration and preparation,” a bit in the weeds for most of us. But Werfel, who as IRS commish before Donald J. Trump returned to the White House in 2025, was leading the agency into what he characterized as a generational digital transformation.
So his thoughts on artificial intelligence tax considerations, particularly how to be proactive as far as the risks, are worth considering by everyone, even those whose only tax connection is paying them.
“Of the various business areas that are early movers in AI, tax may be the most AI-compatible professional domain,” writes Werfel. “The reasons are structural: Tax runs on deterministic input-output logic; sits on hundreds of millions of labeled interactions; is anchored to a body of authoritative content in the Internal Revenue Code, Treasury regulations, and state tax laws; and operates at a scale that drives substantial projected results in AI business cases.”
But, he adds, “failure modes in tax are high stakes. Misalignment between AI deployments and the underlying risk associated with them can result in both legal and financial harm at scale.”
And if you’re curious as to what Werfel is up to (aside from writing tax articles) after leaving Uncle Sam’s employ, he’s staying on top of taxes and other public issues as executive in residence at the School of Government and Policy at Johns Hopkins University in Baltimore and Polis Distinguished Fellow at the Polis Center for Politics at Duke University in Durham, North Carolina.
Stopping IRS staff from peeking at celebrities’ tax returns: The second shout out is a dual one, starting with an article from Richard Rubin, U.S. tax policy reporter for the Wall Street Journal.
In his article “IRS Employees Looked at Celebrities’ Tax Records, Report Says,” Rubin highlights the Treasury Inspector General for Tax Administration (TIGTA) warning that the agency doesn’t have effective ways to stop employees from peeking at taxpayer data.
The good news, per Rubin’s piece, is that most of the IRS’ 70,000+ employees, who receive training about unauthorized access, overwhelmingly follow the law.
TIGTA reviewed information obtained from the Privacy Office located at IRS National Headquarters in Washington, D.C., during the period July 2025 through June 2026. That examination identified 86 suspicious access incidents out of nearly six million queries.
The inspector’s Sept. 29 report, “Improvements to the IRS’s Unauthorized Access Program Could Further Protect Taxpayer Privacy,” noted —
“IRS does not have a mechanism to prevent or systemically detect browsing of celebrities. The IRS defines a celebrity as a person who is famous, widely known, or frequently in the media/of media interest, (e.g., music industry, sports, entertainment, etc.). The IRS does not maintain a comprehensive list to help prevent unauthorized access of public officials or celebrities. After the Littlejohn case [in which former IRS contractor Charles Littlejohn gave news outlets the tax records of Donald J. Trump and thousands of wealthy Americans] Cybersecurity management implemented controls that provide post access alerts, (i.e., after access notifications regarding REDACTED accessed). Thus, the technology is available for the IRS to consider adding a similar post access control to the tax information of celebrities.”
IRS Acting Chief Privacy Officer John J. Walker, in a response included as part of the TIGTA report, said the tax agency “remains firmly committed to safeguarding taxpayer information,” and “will implement appropriate corrective actions.” That plan with expected implementation dates also is part of the report’s Appendix III.
Questioning Meta’s dubious deduction strategy: No celebrities were named in the TIGTA report, but a person who meets the IRS definition is Mark Zuckerberg. His company Meta is featured (exposed?) in this weekend’s final shout, which also brings us to where we started, AI and taxes.
Kashmir Hill, Jesse Drucker, Eli Tan and Mike Isaac detail how “Meta Uses A.I. Data Centers to Avoid Billions in Federal Taxes” in their Sept. 30 New York Times exclusive.
The quartet of NYT reporters note that Zuckerberg regularly touts Meta’s AI push as a tremendous success.
“But when Meta files its taxes, it tells the Internal Revenue Service a different story,” they write in the paper of record piece. “It claims that its A.I. data centers are a giant experiment that could fail, according to four people with knowledge of the company’s operations.”
The different characterization is so that Meta can tap into a tax credit intended for research and experimentation. The NYT article also points out that it is an aggressive interpretation of the tax break, one that Meta’s own accountants say is risky.
So why take the tax audit chance? Because it allows Meta to claim billions of dollars in tax credits for data center expansion.
Perhaps Meta’s bean counters are just following the adage that you that you have to spend money to make money, with some of the expenditures being to deal with an IRS audit.
Or, given the way the IRS’ examination ranks have been hollowed out (and the current administration’s fraternization with tech bros and their businesses) maybe it’s not so risky after all.
