Federal Appeals Court Blocks IRS from Sharing Taxpayer Information with Immigration Authorities

A federal appeals court recently upheld a ruling that prohibits the Internal Revenue Service (IRS) from sharing sensitive taxpayer information, including addresses, with immigration authorities. The court determined that the previous policy instituted during the Trump administration was unlawful.

The U.S. Court of Appeals for the District of Columbia Circuit found that the IRS had improperly released taxpayer information after Immigration and Customs Enforcement (ICE) sought the last known addresses of approximately 1.28 million individuals suspected of being undocumented. The court stated that the IRS did not adhere to the “stringent conditions” set forth by federal tax-confidentiality laws, which were put in place after the Watergate scandal. Generally, these laws restrict the IRS from sharing tax return information with other federal agencies.

In the previous year, the IRS shared around 47,000 taxpayer addresses with ICE as part of a policy aimed at supporting then-President Donald Trump’s mass deportation efforts. This policy sparked lawsuits claiming the IRS’s actions were illegal.

A lower court had previously sided with the plaintiffs and halted the policy. However, by that point, the IRS had already shared a total of 47,289 taxpayer records with ICE.

The Trump administration contested the decision, asserting that it hindered federal law enforcement efforts. But U.S. Circuit Judge Cornelia Pillard, in the ruling, noted that those concerns should be directed at Congress, not the court.

Pillard indicated that the IRS’s procedures violated multiple aspects of federal law, most notably by failing to require ICE to present a specific taxpayer address, as mandated. She articulated that “the IRS failed to ensure ICE provides a ‘specific reason’ for why the requested return information is relevant to any investigation or proceeding, as the statute requires.”

She elaborated on how the system did not necessitate that ICE identify a federal employee involved in the investigation of a specific taxpayer. “This oversight has serious implications,” Pillard mentioned, highlighting that when ICE sought information for 1.28 million taxpayers, the same individual was listed as the contact for every request.

“The method used automates the review of vast numbers of records without individualized scrutiny or checks to confirm compliance with legal requirements for releasing each taxpayer’s data,” she added.

The three-judge panel also affirmed that such information sharing would breach privacy laws. They noted that this “Data-Exchange Procedure” effectively diminished the privacy rights of noncitizens in relation to their tax returns. By allowing a streamlined and automated way for ICE to request noncitizens’ data, it undermined the protections intended for all taxpayers under section 6103.

A spokesperson from the Department of Homeland Security stated that they disagree with the ruling and will continue to utilize all lawful means available to locate and remove individuals identified as illegal aliens.