DC Circuit: IRS-ICE Data Sharing Unlawful, Violates Taxpayer Privacy

• A D.C. Circuit panel ruled that a data sharing agreement between the IRS and ICE, allowing mass requests for immigrant addresses, was illegal.
• The court upheld a federal judge's injunction, preventing further disclosures after over 47,000 records were unlawfully shared by the IRS.
• The ruling emphasized 26 U.S. Code 6103, which mandates strict confidentiality for taxpayer information, allowing disclosure only under stringent conditions for specific non-tax criminal investigations.
• The IRS-ICE procedure failed to require ICE to provide the taxpayer's address and did not ensure disclosures were limited to officials directly involved in relevant criminal proceedings.
• The district court found the IRS violated its code approximately 42,695 times by disclosing addresses based on insufficient ICE requests.

This significant ruling reinforces the stringent confidentiality requirements governing taxpayer data.

A federal appellate court in Washington D.C. has declared an agreement between the Internal Revenue Service (IRS) and U.S. Immigration and Customs Enforcement (ICE) for sharing taxpayer information to be unlawful. The D.C. Circuit panel affirmed a lower court's decision to halt the IRS from providing additional addresses to ICE, finding the existing data exchange procedure violated federal law. This significant ruling reinforces the stringent confidentiality requirements governing taxpayer data.

Prior to this intervention, the IRS had already disclosed over 47,000 records to ICE under the now-invalidated agreement. A federal district judge had previously determined that the tax agency unlawfully shared immigrants' last known addresses approximately 42,695 times. These disclosures occurred even when ICE's requests for information were deemed insufficient, highlighting a systemic failure in the IRS's adherence to its legal obligations regarding taxpayer information.

Central to the D.C. Circuit's decision is 26 U.S. Code 6103, a statute enacted by Congress to safeguard the privacy of tax return information. This law explicitly states that taxpayers' returns and related information are confidential, prohibiting federal employees from disclosing such data unless expressly authorized by the statute. U.S. Circuit Judge Cornelia Pillard, writing the court's 32-page opinion, underscored that Congress instituted these robust protections following the Watergate scandal, which exposed executive branch misuse of taxpayer data to target political adversaries.

Congress has narrowly defined the circumstances under which the IRS may share tax return information with other federal agencies. Such disclosures are permissible only for specific non-tax criminal investigations, and crucially, the requesting agency must provide detailed information about the individual under investigation. The court found that the IRS's procedure for sharing data with ICE failed to meet these stringent conditions, thereby undermining the fundamental principle of IRS taxpayer information confidentiality.

The court's examination revealed that the "Data-Exchange Procedure" between the IRS and ICE indisputably violated the requirements of 26 U.S. Code 6103. Most notably, the procedure failed to comply with section 6103(i)(2), which mandates that a requesting agency must provide the taxpayer's address when seeking information. Instead, the IRS's system was so lax that, as U.S. Senior District Judge Colleen Kollar-Kotelly noted in her November 2025 preliminary injunction, ICE could submit requests with generic or nonsensical entries like "Don't Care 12345" or "00000" and still receive a taxpayer's address, rendering ICE immigrant address requests illegal under the established framework.

Beyond the failure to require a taxpayer's address, the IRS unlawful data exchange procedure also neglected to ensure that disclosures were limited to officials directly involved in a criminal proceeding or investigation concerning the taxpayer. The IRS would approve requests if the ICE "point of contact" field was merely filled, even if the information provided was "Unknown" or "TBD." This deficiency had severe consequences, as evidenced by an instance in the summer of 2025 where ICE requested information on 1.28 million taxpayers, identifying the same individual as the point of contact for every single request—a finding the district court deemed "facially implausible."

The D.C. Circuit's ruling, delivered by a panel including Judges Pillard, Patricia Millett, and Robert Wilkins, all appointed by former President Barack Obama, serves as a powerful affirmation of tax return information privacy. By upholding the injunction and declaring the IRS-ICE data sharing unlawful, the court has significantly reinforced the strict confidentiality requirements of 26 U.S. Code 6103. This decision underscores the judiciary's commitment to protecting individual taxpayer data from unauthorized inter-agency sharing.

This outcome has broad implications for federal agency data sharing compliance, signaling that all government entities must meticulously adhere to statutory conditions for information disclosure. The ruling emphasizes that any procedure for sharing sensitive taxpayer information must be robust enough to prevent abuses and ensure that disclosures are made only under the specific, limited circumstances authorized by law, thereby strengthening the legal framework for data protection.

This ruling significantly reinforces the strict confidentiality requirements of 26 U.S. Code 6103 for taxpayer information. Lawyers should advise clients on the strengthened protection of their tax data from inter-agency sharing, while compliance officers in any federal agency must review their data exchange protocols to ensure strict adherence to statutory conditions for disclosure, especially regarding specific identifying information.

Source: Original reporting via CN