OpenExempt: A Diagnostic Benchmark for Legal Reasoning and a Framework for Creating Custom Benchmarks on Demand

Reasoning benchmarks have played a crucial role in the progress of language models. Yet rigorous evaluation remains a significant challenge as static question-answer pairs provide only a snapshot of performance, compressing complex behavior into a single accuracy metric. This limitation is especially true in complex, rule-bound domains such as law, where existing benchmarks are costly to build and ill suited for isolating specific failure modes. To address this, we introduce OpenExempt, a framework and benchmark for diagnostic evaluation of legal reasoning. The OpenExempt Framework uses expert-crafted symbolic representations of U.S. Bankruptcy Code statutes to dynamically generate a large space of natural language reasoning tasks and their machine-computable solutions on demand. This gives users fine-grained control over task complexity and scope, allowing individual reasoning skills to be probed in isolation. Using this system, we construct the OpenExempt Benchmark, a diagnostic benchmark for legal reasoning with 9,765 samples across nine evaluation suites designed to carefully probe model capabilities. Experiments on 13 diverse language models reveal sharp performance cliffs that emerge only under longer reasoning paths and in the presence of obfuscating statements. We release the framework and benchmark publicly to support research aimed at understanding and improving the next generation of reasoning systems.

Large Language Models as Tax Attorneys: A Case Study in Legal Capabilities Emergence

Better understanding of Large Language Models' (LLMs) legal analysis abilities can contribute to improving the efficiency of legal services, governing artificial intelligence, and leveraging LLMs to identify inconsistencies in law. This paper explores LLM capabilities in applying tax law. We choose this area of law because it has a structure that allows us to set up automated validation pipelines across thousands of examples, requires logical reasoning and maths skills, and enables us to test LLM capabilities in a manner relevant to real-world economic lives of citizens and companies. Our experiments demonstrate emerging legal understanding capabilities, with improved performance in each subsequent OpenAI model release. We experiment with retrieving and utilising the relevant legal authority to assess the impact of providing additional legal context to LLMs. Few-shot prompting, presenting examples of question-answer pairs, is also found to significantly enhance the performance of the most advanced model, GPT-4. The findings indicate that LLMs, particularly when combined with prompting enhancements and the correct legal texts, can perform at high levels of accuracy but not yet at expert tax lawyer levels. As LLMs continue to advance, their ability to reason about law autonomously could have significant implications for the legal profession and AI governance.