Appeals court blocks IRS from sharing taxpayer info with ICE

A federal appeals court in Washington, D.C. upheld an order from a lower court preventing the Internal Revenue Service from sharing massive amounts of sensitive taxpayer data with the Department of Homeland Security's Immigration and Customs Enforcement unit.

In the case, the IRS was sued by the advocacy group Democracy Forward on behalf of the Center for Taxpayer Rights, Main Street Alliance, Communications Workers of America, and the National Federation of Federal Employees.

Last November, the groups won a stay from the lower court that prevented the IRS from sharing data on millions of taxpayers with ICE. In February, after the government appealed that decision, the proceedings revealed that the loose data-sharing process put in place by the Trump-Vance administration at the IRS led to the illegal disclosure of confidential taxpayer information to DHS. 

The ruling Tuesday by the U.S. Court of Appeals for the D.C. Circuit maintains the earlier prohibition on data sharing between the IRS and ICE in place as the case continues. 

The D.C. Circuit found the IRS's new data-sharing policy is a "far cry" from the previous policy, and that the new policy "indisputably contravenes" the law.  The court also said the Trump administration's objections that the preliminary injunction was burdensome is "weak sauce," and added that "the IRS is now on notice twice over regarding the legal inadequacies of its summer 2025 disclosures. The government and its personnel face steep civil and criminal consequences for willful disclosure of information."

The plaintiffs hailed the decision. "Today's order is a resounding victory for the protection of all taxpayers' right to the confidentiality of their tax information in the hands of the IRS," said Nina Olson, executive director of the Center for Taxpayer Rights and a former National Taxpayer Advocate at the IRS, in a statement. "It makes clear that the Treasury Department and the IRS cannot act in violation of the law just because they want to. Congress has set strict parameters around the sharing of taxpayer information for a reason — that trust in the tax system depends on protection of taxpayer information. By unlawfully sharing return information with ICE, the IRS violated that trust. The court's order today is a step toward restoring it."

Last year, the IRS adopted a new data-access policy allowing the widespread sharing of sensitive taxpayer data outside the agency. The IRS set up a new process to share taxpayer data with ICE, including taxpayers' last-known addresses, and the IRS processed ICE's mass request for the last-known addresses of 1.2 million taxpayers, sharing address information for approximately 47,000 individuals, according to a report from the Treasury Inspector General for Tax Administration. Shortly after the plaintiffs challenged the new policy, a federal district court issued an order stopping the unlawful data sharing, which the government appealed. That appeal failed with the appeals court ruling. 

"The Trump-Vance administration's dangerous data sharing policies have resulted in the violation of the privacy rights of millions of Americans and we are pleased the court has again acted to stop this unlawful behavior," said Skye Perryman, president and CEO of Democracy Forward, in a statement. "The privacy laws enacted in the post-Watergate era exist to prevent abuses of power just like this. The administration has already admitted to being careless and irresponsible with our sensitive, personal information, and now yet another court has held the administration in check." 

As the appeal was being considered, the IRS confirmed the Washington Post's reporting in a court filing in which Dottie Romo, the IRS chief risk and control officer, swore in a declaration that the IRS provided confidential taxpayer information, even when DHS officials could not provide sufficient data to positively identify a specific individual. Filings from the Department of Justice in another case litigated by Democracy Forward revealed that privacy protocols were violated at the Social Security Administration and that a Department of Government Efficiency team member at the SSA signed a "voter data agreement" with an organization involved in seeking to "overturn state election results."  

Another advocacy group, Public Citizen, filed a similar lawsuit last year, Centro de Trabajadores Unidos vs. Bessent. The group praised this week's ruling in the other case.

"The D.C. Circuit correctly recognized that noncitizens have the same privacy rights in their tax returns that federal law extends to all taxpayers," said Nandan Joshi, an attorney with Public Citizen Litigation Group, in a statement. "The Trump administration's desire to hoover up personal information to support its immigration enforcement agenda does not justify its failure to follow the law."  

Under federal law, the group noted, the IRS is forbidden from sharing taxpayer data with other agencies unless the IRS adheres to strict procedural requirements. In this week's decision, the D.C. Circuit found that the IRS's so-called Data-Exchange Procedure for sharing taxpayer information with ICE was in "direct violation" of those procedures because it permitted ICE to obtain taxpayer information even if ICE failed to furnish the IRS with the taxpayer's address, the criminal investigator responsible for the investigation, or the relevance of the information to the investigation, all of which are supposed to be required before the IRS is allowed to share taxpayer data.