A federal appeals court upheld an order stopping an IRS procedure that supplied ICE with tens of thousands of taxpayer addresses, finding the system likely violated strict federal confidentiality requirements governing tax information.
By yourNEWS Media Newsroom.
A federal appeals court on Tuesday upheld an order blocking the IRS from using a large-scale data-sharing procedure that supplied Immigration and Customs Enforcement with last-known taxpayer addresses as part of the Trump administration’s immigration enforcement efforts.
The unanimous three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit affirmed the lower-court order, concluding that challengers were likely to succeed in showing that the IRS’s Data-Exchange Procedure violated federal law. The panel consisted of Circuit Judges Patricia Millett, Cornelia Pillard and Robert Wilkins, all of whom were appointed by former President Barack Obama.
The dispute centers on an April 2025 agreement between the Department of Homeland Security and the IRS allowing ICE to request taxpayer address information for use in certain criminal immigration investigations.
In June 2025, acting ICE Director Todd Lyons requested the last-known addresses of approximately 1.28 million people whom ICE identified in connection with 8 U.S.C. § 1253(a)(1), which criminalizes certain willful failures to leave the United States after a final removal order and the expiration of a 90-day removal period.
The IRS ultimately provided 47,289 address records to ICE.
More than 90% of those disclosures resulted from matching a taxpayer identification number rather than confirming that ICE had supplied a complete address corresponding to the taxpayer, according to the appeals court. The IRS procedure required only five or nine digits to appear in the address field, and those digits did not have to constitute an actual ZIP code.
That process became central to the court’s conclusion that the system likely violated Section 6103 of the Internal Revenue Code, which generally requires federal tax-return information to remain confidential except under specifically authorized circumstances.
Section 6103 permits the IRS to disclose certain return information to federal agencies for qualifying nontax criminal investigations, but Congress imposed detailed prerequisites. Among them, the requesting agency must identify the taxpayer by name and address, specify the taxable period and statutory authority involved, and provide specific reasons explaining why the information may be relevant to the investigation. Information may then be disclosed only to agency personnel personally and directly engaged in the qualifying criminal matter.
The court found the IRS procedure failed to ensure that those conditions were satisfied before taxpayer information was released.
Judge Pillard, writing for the panel, said the procedure “automates the review of millions of records without any individual review or any other means of ensuring compliance with the legal prerequisites to releasing each individual taxpayer’s information.”
The court also questioned the assertion that a single ICE assistant director could satisfy the statutory requirement that information be disclosed to personnel “personally and directly engaged” in the relevant investigations when ICE was seeking information involving more than 1 million people.
The underlying litigation was brought by the Center for Taxpayer Rights, Main Street Alliance, Communications Workers of America and the National Federation of Federal Employees. A federal district judge previously stayed the Data-Exchange Procedure and prohibited additional disclosures unless the IRS strictly complied with Section 6103 and notified the court before responding to future DHS requests.
The administration appealed, arguing in part that the restrictions impeded and delayed legitimate federal law enforcement.
The D.C. Circuit rejected that argument, finding that the government had no legitimate interest in conducting investigations through disclosures that did not comply with the statute. The panel also rejected the IRS’s objection to the requirement that it notify the district court before making further disclosures.
“The IRS also asserts that the preliminary injunction is ‘highly unusual and harmful’ because it requires the IRS to provide the district court with ‘prior notice of criminal investigatory activity.’ That argument is weak sauce where the district court has permitted the IRS to file any necessary notifications ‘under seal’…” Pillard wrote.
The appeals court said sealed notifications would protect sensitive investigative information while allowing the district court to guard against additional disclosures that could be difficult or impossible to reverse once taxpayer information had been transferred.
The controversy dates to the administration’s effort in early 2025 to expand cooperation among federal agencies on immigration enforcement. Treasury and DHS finalized their information-sharing agreement in April, permitting ICE to seek IRS information when statutory requirements for criminal investigations were satisfied.
The agreement prompted significant internal opposition at the IRS. Acting Commissioner Melanie Krause resigned following the deal, along with several other senior agency officials. Reuters reported at the time that Krause and the agency’s chief privacy officer left in part because of concerns about the legality of sharing taxpayer information with immigration authorities.
The administration maintained that the arrangement could lawfully assist federal authorities investigating people who remained in the country in violation of criminal immigration statutes.
The legal challenge did not establish that the IRS can never provide information to ICE. Instead, the D.C. Circuit emphasized that Congress created a limited pathway for sharing certain tax information in qualifying criminal investigations and required agencies to follow its conditions.
The panel found that the mass Data-Exchange Procedure did not reliably do so.
The court noted that the IRS had already disclosed more than 47,000 records before the district court intervened and warned that federal employees can face civil and criminal consequences for willful disclosures of taxpayer information that violate Section 6103.
Tuesday’s ruling leaves the preliminary restrictions in effect while litigation over the policy continues, preventing the IRS from resuming the challenged mass-sharing procedure without complying with the statutory requirements and the district court’s order.
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