Lawsuits Against Google And Meta Allege Websites Are Spying On Taxpayers

Users of tax prep websites in seven states have filed a class action lawsuit against Google
GOOG
, LLC, claiming the company engaged in wiretapping. According to court documents, the company’s actions allegedly resulted in the involuntary transmission of sensitive personal information including income, refund amounts, filing status, and scholarship information.

Google Analytics

According to the complaint, Google Analytics’ tracking pixel made the wiretapping possible. If you own a website, you’re familiar with Google Analytics. At its most basic, it helps you measure traffic to the site. But it’s more sophisticated than a simple counter—it can collect information about how users interact with the features on a website.

Websites that use Google Analytics add a small piece of JavaScript measurement code to each page on the site that they want to monitor. That code can gather all kinds of information, including the user’s browser, operating system—and what brought the user to the site in the first place. That data is then collected, packaged, and sent off to Google Analytics to be processed and stored—it can also be arranged into reports that help website owners better understand the behavior of visitors to their websites.

Class Action

The case was initially filed by nine plaintiffs (Malissa Adams, Tracylyn Patterson, Cary Goldberg, Tyisha Shepherd, Teresa Wright, Rheazene Taylor, Tiffany Layton, Jamila Armstrong, and Monica Townsend) from seven states (California, Florida, Georgia, Illinois, New York, South Carolina, and Texas). The plaintiffs are seeking to have the matter certified as a class action.

A class action allows one or plaintiffs to file a legal action on behalf of a group, called a class. The idea is to allow a large group of individuals who have allegedly suffered similar harm to join together and file a single suit—keeping the court’s caseload manageable. Typically, if a lawsuit is certified as a class action, members of the class are bound by the outcome of the lawsuit and can’t bring their own case to court.

To file as a class action, the plaintiffs and the putative class must have common (though not identical) stories resulting in similar harm. In this case, the named plaintiffs in the lawsuit used online tax preparation providers like H&R Block
SQ
, TaxAct, or TaxSlayer—those websites had the Google Analytics pixel installed. They seek to include other taxpayers who similarly used websites to file their taxes. That likely includes many potential plaintiffs who would qualify for the class, assuming it’s certified as a class action.

Why Google?

According to the complaint, Google’s goal has always been to collect data. “From its inception,” the complaint says, “Google has been preoccupied with the idea of ‘extracting meaning from the mass of data accumulating on the Internet’ and has made a lucrative industry out of this venture.” Google did this, the plaintiffs claim, by expanding its search engine business into advertising—the aim being, of course, to be able to tailor ads to consumers’ individual preferences.

How lucrative was that strategy? The plaintiffs cite data reporting that Google earned nearly all of its revenue from advertising based on users’ search requests. Further, they say, by 2020, Google generated $104 billion through advertising (71% of Google’s entire revenue for that year) and is expected to reach $201.05 billion by 2024.

Keeping advertisers happy, though, requires a measure of precision. And the plaintiffs allege that Google’s data mining has to be specific to be successful at targeted advertising.

Allegations

According to the complaint, tax preparation companies like H&R Block, TaxAct, and TaxSlayer sent private tax return information to Google using Google Analytics technology. The plaintiffs allege that data may include email addresses, data on users’ income, filing status, refund amounts, buttons clicked, and year of return, and was used by Google to improve its ad business and enhance its other business tools.

Included in the filings were allegations involving specific companies. For example, the complaint states that H&R Block “reportedly transmitted information about tax filers’ filings to Google, and Google has admitted that its technology would permit such transmissions.” That means, they continue, that the plaintiffs’ tax return data would have been sent to Google.

In terms of the kinds of data that could be transmitted, the plaintiffs allege that it drills down pretty deep. For example, they claim that in a recently published Senate investigation, both TaxAct and TaxSlayer revealed that taxpayers’ adjusted gross income and refund amounts were disclosed to Google.

While Google claims that information gleaned using Google Analytics is not associated with the user’s name or other identifiable information, the plaintiffs allege that a Stanford and Princeton study found that Google’s tracking software can “successfully carry out de-anonymization” through a simple process that leverages a user’s web browsing history collected by Google’s tracking tools. Even if that were not the case, the plaintiffs suggest that data can be compiled and used by Google Analytics customers to target ad content, limiting the extent that anonymity can be protected. And, they allege that Google company officials have admitted the settings can be configured to track sensitive taxpayer information such as adjusted gross income, and Google’s systems would not filter this information or even alert anyone.

“Google would have known,” the complaint says, “or at best recklessly turned a blind eye to, the fact that it was collecting vast amounts of confidential tax information. Income and other related financial information are highly valuable demographic markers for advertising purposes.”

Purported Wrongs

The plaintiffs claim a number of wrongs were committed by Google, including an invasion of privacy and violations of state and federal wiretapping statutes. The Federal Wiretap Act, for example, prohibits the intentional interception of the contents of any wire, oral, or electronic communications through the use of a device. Google’s actions, they say, fit that description.

Responses

When asked about the case, José Castañeda, a spokesperson for Google, said, “We have strict policies and technical features that prohibit Google Analytics customers from collecting data that could be used to identify an individual. Site owners – not Google – are in control of what information they collect and must inform their users of how it will be used. Additionally, Google has strict policies against advertising to people based on sensitive information.”

Michael Liskow of George Feldman McDonald PLLC, the attorney who filed the action, did not respond immediately to a request for comment.

The case is Adams et al. v. Google, LLC, case number 5:23-cv-04191, in the U.S. District for the Northern District of California.

Similar Complaint

The complaint follows a similar action filed against Meta Platforms
META
, Inc. The plaintiff’s counsel in that action is Lori Feldman, also of George Feldman McDonald PLLC, together with Joel D. Smith of Bursor & Fisher PA. Neither Smith nor attorneys representing Meta from Gibson Dunn & Crutcher LLP responded to a request for comment. But the attorneys are hashing it out in court.

The complaint against Meta was also filed as a class action. In that suit, Facebook users allege that tax preparation software companies like H&R Block, TaxAct, and TaxSlayer, used Meta’s Pixel software to gather private information from their tax returns to send to Meta—sound familiar?

Last month, Meta filed its response, asking the court to dismiss the suit. Their primary defense is that “there is nothing inherently unlawful about Meta’s Pixel, a version of a commonplace internet analytics tool that third-party web developers can use to improve their online services.” The technology is, they say, useful and ubiquitous. Additionally, they argue that the web developers, and not Meta, decide how they will use the technology. Those developers can, the defense argues, “use the Pixel without sending any sensitive information to Meta, and they are expected to do so in compliance with Meta’s terms.” The response says that “Calling the Pixel ‘primarily useful’ for spying is like calling a car ‘primarily useful’ for bank heists.”

That case, also filed in the U.S. District Court for the Northern District of California, is In Re Meta Pixel Tax Filing Cases, case number 3:22-cv-07557.

Congress Already Got An Earful

If these themes sound familiar, it’s because they are variations on concerns that lawmakers shared earlier this year. Members of Congress, including U.S. Senators Elizabeth Warren (D-Mass.), Ron Wyden (D-Ore.), Chair of the Senate Finance Committee, Richard Blumenthal (D-Conn.), Tammy Duckworth (D-Ill.), Bernie Sanders (I-Vt.), and Sheldon Whitehouse (D-R.I.), and Representative Katie Porter (D-Calif.), were involved in a months-long investigation into allegations of “outrageous, extensive, and potentially illegal sharing of taxpayers’ sensitive personal and financial information with Meta by online tax preparation companies.” The result was a report, Attacks on Tax Privacy: How the Tax Prep Industry Enabled Meta to Harvest Millions of Taxpayers’ Sensitive Data, which you can read here.

Those same lawmakers have suggested that the free, direct-file pilot that the IRS has been tasked with designing under the Inflation Reduction Act could offer a potential solution by allowing taxpayers to file taxes “without sharing their data with untrustworthy and incompetent tax preparation firms.”

This isn’t the first time that the country has considered an IRS-driven system. In 2002, the George W. Bush administration proposed a similar system that never found its footing. In 2019, ProPublica reported that tax prep businesses, including Intuit
INTU
, the parent company of TurboTax, lobbied heavily against the move, and subsequently, Republican members of Congress sent a letter to the IRS warning the agency not to “compete” with the “well-established” private tax prep companies.

Free File

Instead, the IRS worked with tax prep companies to form the Free File Alliance—still in existence today—which offers low-to-middle-income taxpayers the opportunity to e-file tax returns for free. As part of the deal, each year, the IRS promised not to compete with private companies on tax prep—that is, until 2019 when that language was quietly removed from the agreement.

Around the same time, the IRS announced that participation in the Free File program would require tax prep software companies to ensure taxpayers understood it was completely free, and it would ban companies from excluding their Free File option in internet searches. Those changes were clearly in response to reporting from ProPublica that accused Intuit and H&R Block of misleading taxpayers so they didn’t click through to the Free File software (and instead paid to use tax filing software).

The impact was immediate. In 2020, H&R Block announced it would no longer participate in the program. Intuit followed suit the next year, noting that it would leave the program as of the 2022 filing season.

IRS Study

The IRS has pressed on with its investigation into whether an agency solution would be feasible—or desirable. According to their study, when taxpayers were asked whether they would be interested in using a free IRS-provided online tool to prepare and file their taxes, a “significant majority (72%) of taxpayers” responded that they would be either “very interested” or “somewhat interested.” In the same study, of taxpayers who currently self-prepare their taxes using commercial software, 68% reported that they would be either “very likely” or “somewhat likely” to switch to a free IRS-provided online tool.