AB537 - Enacts provisions relating to the use of artificial intelligence by the Department of Taxation. (BDR 32-420)

A.B. 537 - *AB537* ASSEMBLY BILL NO. 537–COMMITTEE ON REVENUE (ON BEHALF OF THE JOINT INTERIM STANDING COMMITTEE ON REVENUE) MARCH 24, 2025 ____________ Referred to Committee on Revenue SUMMARY—Enacts provisions relating to the use of artificial intelligence by the Department of Taxation. (BDR 32-420) FISCAL NOTE: Effect on Local Government: No. Effect on the State: Yes. ~ EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. AN ACT relating to the Department of Taxation; requiring, under certain circumstances, the Department to ensure that a person is informed when the person is communicating or interacting with artificial intelligence; clarifying that records and files of the Department that are generated by artificial intelligence used by the Department are confidential and privileged; and providing other matters properly relating thereto. Legislative Counsel’s Digest: Existing law creates the Department of Taxation, which has various powers and 1 duties related to the administration and collection of certain taxes, fees, assessments 2 and other amounts of money or the imposition of disciplinary action. (Chapter 360 3 of NRS) Section 1 of this bill provides that if the Department uses artificial 4 intelligence to communicate or interact with a person concerning the administration 5 and collection of certain taxes, fees, assessments and other amounts of money or 6 the imposition of disciplinary action, the Department must ensure that the person is 7 informed that the person is communicating or interacting with artificial intelligence. 8 Existing law makes confidential and privileged the records and files of the 9 Department concerning the administration or collection of any tax, fee, assessment 10 or other amount required by law to be collected or the imposition of disciplinary 11 action, but authorizes the disclosure of such records and files under certain 12 circumstances. (NRS 360.255) Section 2 of this bill clarifies that these 13 requirements concerning confidentiality and privilege apply to any records and files 14 that are generated by artificial intelligence used by the Department. 15 – 2 – - *AB537* THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. Chapter 360 of NRS is hereby amended by adding 1 thereto a new section to read as follows: 2 1. If the Department uses artificial intelligence to 3 communicate or interact with a person concerning the 4 administration and collection of any tax, fee, assessment or other 5 amount required by law to be collected or the imposition of 6 disciplinary action, the Department shall ensure that the person is 7 informed that the person is communicating or interacting with 8 artificial intelligence. 9 2. As used in this section, “artificial intelligence” means a 10 machine-based system that can, for a given set of human-defined 11 objectives, make predictions, recommendations or decisions 12 influencing real or virtual environments. 13 Sec. 2. NRS 360.255 is hereby amended to read as follows: 14 360.255 1. Except as otherwise provided in this section and 15 NRS 239.0115, 360.250 and 607.217, the records and files of the 16 Department , including, without limitation, any records and files 17 that are generated by artificial intelligence used by the 18 Department, concerning the administration or collection of any tax, 19 fee, assessment or other amount required by law to be collected or 20 the imposition of disciplinary action are confidential and privileged. 21 The Department, an employee of the Department and any other 22 person engaged in the administration or collection of any tax, fee, 23 assessment or other amount required by law to be collected or the 24 imposition of disciplinary action or charged with the custody of any 25 such records or files: 26 (a) Shall not disclose any information obtained from those 27 records or files; and 28 (b) May not be required to produce any of the records or files for 29 the inspection of any person or governmental entity or for use in any 30 action or proceeding. 31 2. The records and files of the Department concerning the 32 administration and collection of any tax, fee, assessment or other 33 amount required by law to be collected or the imposition of 34 disciplinary action are not confidential and privileged in the 35 following cases: 36 (a) Testimony by a member or employee of the Department and 37 production of records, files and information on behalf of 38 the Department or a person in any action or proceeding before the 39 Nevada Tax Commission, the State Board of Equalization, the 40 Department, a grand jury or any court in this State if that testimony 41 – 3 – - *AB537* or the records, files or information, or the facts shown thereby, are 1 directly involved in the action or proceeding. 2 (b) Delivery to a person or his or her authorized representative 3 of a copy of any document filed by the person pursuant to the 4 provisions of any law of this State. 5 (c) Publication of statistics so classified as to prevent the 6 identification of a particular business or document. 7 (d) Exchanges of information with the Internal Revenue Service 8 in accordance with compacts made and provided for in such cases, 9 or disclosure to any federal agency, state or local law enforcement 10 agency, including, without limitation, the Cannabis Compliance 11 Board, or local regulatory agency that requests the information for 12 the use of the agency in a federal, state or local prosecution or 13 criminal, civil or regulatory investigation. 14 (e) Disclosure in confidence to: 15 (1) The Governor or his or her agent in the exercise of the 16 Governor’s general supervisory powers; 17 (2) The Budget Division of the Office of Finance for use in 18 the projection of revenue; 19 (3) Any person authorized to audit the accounts of the 20 Department in pursuance of an audit; 21 (4) The Attorney General or other legal representative of the 22 State in connection with an action or proceeding relating to a 23 taxpayer or licensee; or 24 (5) Any agency of this or any other state charged with the 25 administration or enforcement of laws relating to workers’ 26 compensation, unemployment compensation, public assistance, 27 taxation, labor or gaming. 28 (f) Exchanges of information pursuant to an agreement between 29 the Nevada Tax Commission and any county fair and recreation 30 board or the governing body of any county, city or town. 31 (g) Upon written request made by a public officer of a local 32 government, disclosure of the name and address of a taxpayer or 33 licensee who must file a return with the Department. The request 34 must set forth the social security number of the taxpayer or licensee 35 about which the request is made and contain a statement signed by 36 the proper authority of the local government certifying that the 37 request is made to allow the proper authority to enforce a law to 38 recover a debt or obligation owed to the local government. Except 39 as otherwise provided in NRS 239.0115, the information obtained 40 by the local government is confidential and privileged and may not 41 be used or disclosed for any purpose other than the collection of a 42 debt or obligation owed to that local government. The Executive 43 Director may charge a reasonable fee for the cost of providing the 44 requested information. 45 – 4 – - *AB537* (h) Disclosure of information as to amounts of any unpaid tax or 1 amounts of tax required to be collected, interest and penalties to 2 successors, receivers, trustees, executors, administrators, assignees 3 and guarantors, if directly interested. 4 (i) Disclosure of relevant information as evidence in an appeal 5 by the taxpayer from a determination of tax due if the Nevada Tax 6 Commission has determined the information is not proprietary or 7 confidential in a hearing conducted pursuant to NRS 360.247. 8 (j) Disclosure of the identity of a person and the amount of tax 9 assessed and penalties imposed against the person at any time after a 10 determination, decision or order of the Executive Director or other 11 officer of the Department imposing upon the person a penalty for 12 fraud or intent to evade a tax imposed by law becomes final or is 13 affirmed by the Nevada Tax Commission. 14 (k) Disclosure of the identity of a licensee against whom 15 disciplinary action has been taken and the type of disciplinary action 16 imposed against the licensee at any time after a determination, 17 decision or order of the Executive Director or other officer of the 18 Department imposing upon the licensee disciplinary action becomes 19 final or is affirmed by the Nevada Tax Commission. 20 (l) Disclosure of information pursuant to subsection 2 of 21 NRS 370.257. 22 (m) With respect to an application for a registration certificate to 23 operate a medical marijuana establishment pursuant to chapter 453A 24 of NRS, as that chapter existed on June 30, 2020, or a license to 25 operate a marijuana establishment pursuant to chapter 453D of 26 NRS, as that chapter existed on June 30, 2020, which was submitted 27 on or after May 1, 2017, and on or before June 30, 2020, and 28 regardless of whether the application was ultimately approved, 29 disclosure of the following information: 30 (1) The identity of an applicant, including, without 31 limitation, any owner, officer or board member of an applicant; 32 (2) The contents of any tool used by the Department to 33 evaluate an applicant; 34 (3) The methodology used by the Department to score and 35 rank applicants and any documentation or other evidence showing 36 how that methodology was applied; and 37 (4) The final ranking and scores of an applicant, including, 38 without limitation, the score assigned to each criterion in the 39 application that composes a part of the total score of an applicant. 40 (n) Disclosure of the name of a licensee and the jurisdiction of 41 that licensee pursuant to chapter 453A or 453D of NRS, as those 42 chapters existed on June 30, 2020, and any regulations adopted 43 pursuant thereto. 44 – 5 – - *AB537* 3. The Executive Director shall periodically, as he or she 1 deems appropriate, but not less often than annually, transmit to the 2 Administrator of the Division of Industrial Relations of the 3 Department of Business and Industry a list of the businesses of 4 which the Executive Director has a record. The list must include the 5 mailing address of the business as reported to the Department. 6 4. The Executive Director may request from any other 7 governmental agency or officer such information as the Executive 8 Director deems necessary to carry out his or her duties with respect 9 to the administration or collection of any tax, fee, assessment or 10 other amount required by law to be collected or the imposition of 11 disciplinary action. If the Executive Director obtains any 12 confidential information pursuant to such a request, he or she shall 13 maintain the confidentiality of that information in the same manner 14 and to the same extent as provided by law for the agency or officer 15 from whom the information was obtained. 16 5. As used in this section: 17 (a) “Applicant” means any person listed on the application for a 18 registration certificate to operate a medical marijuana establishment 19 pursuant to chapter 453A of NRS, as that chapter existed on June 20 30, 2020, or a license to operate a marijuana establishment pursuant 21 to chapter 453D of NRS, as that chapter existed on June 30, 2020. 22 (b) “Artificial intelligence” has the meaning ascribed to it in 23 section 1 of this act. 24 (c) “Disciplinary action” means any suspension or revocation of 25 a license, registration, permit or certificate issued by the Department 26 pursuant to this title or chapter 453A or 453D of NRS, as those 27 chapters existed on June 30, 2020, or any other disciplinary action 28 against the holder of such a license, registration, permit or 29 certificate. 30 [(c)] (d) “Licensee” means a person to whom the Department 31 has issued a license, registration, permit or certificate pursuant to 32 this title or chapter 453A or 453D of NRS, as those chapters existed 33 on June 30, 2020. The term includes, without limitation, any owner, 34 officer or board member of an entity to whom the Department has 35 issued a license. 36 [(d)] (e) “Records” or “files” means any records and files 37 related to an investigation or audit or a disciplinary action, financial 38 information, correspondence, advisory opinions, decisions of a 39 hearing officer in an administrative hearing and any other 40 information specifically related to a taxpayer or licensee. 41 – 6 – - *AB537* [(e)] (f) “Taxpayer” means a person who pays any tax, fee, 1 assessment or other amount required by law to the Department. 2 H