First Circuit: ICE IRS Data Sharing Appeal Heard

• A federal appeals court is reviewing a Trump-era agreement for the IRS to share noncitizen taxpayer addresses with ICE for mass deportations.
• A federal judge previously blocked the data-sharing, citing likely violations of privacy rights and a potential chilling effect on immigrant tax filing.
• First Circuit judges questioned how a final order of removal alone could satisfy the 'criminal investigation' exception for accessing taxpayer data.
• ICE initially sought data for 1.28 million people, but ultimately obtained addresses for 47,000 noncitizens who had passed a 90-day departure grace period.
• The Community Economic Development Center, a plaintiff, reported a decrease in membership due to noncitizens' fears of data sharing with immigration enforcement.

She emphasized the need for "some other fact that indicates that actually there’s been crime" beyond merely meeting one condition when multiple are required for a criminal act.

A federal appellate court recently heard arguments concerning a contentious data-sharing agreement between the Internal Revenue Service (IRS) and the Department of Homeland Security (DHS). The dispute centers on the Trump administration's efforts to obtain the addresses of noncitizen taxpayers from the IRS for the purpose of carrying out mass deportations. This initiative was outlined in a Memorandum of Understanding (MOU) where the administration declared its intent to "take immediate steps to identify, exclude, or remove aliens illegally present in the United States."

This First Circuit ICE IRS data sharing arrangement faced a legal challenge led by the Community Economic Development Center of Southeastern Massachusetts, an organization dedicated to assisting residents and businesses. In February 2026, a federal judge intervened, blocking the agreement. The judge concluded that the data sharing likely infringed upon taxpayers' privacy rights and could create a significant chilling effect on immigrants' willingness to file their taxes and participate in community activities.

DHS has appealed this injunction, contending that the federal judge overstepped her authority by enjoining the MOU. The core of the appeal and the subsequent judicial review revolves around the interpretation and application of federal laws designed to protect IRS taxpayer data, particularly the scope of exceptions that permit its disclosure to other government agencies.

Federal law generally safeguards taxpayer data collected by the IRS, including information pertaining to immigrants. However, a key exception allows for disclosure when a taxpayer is under criminal investigation. During the First Circuit hearing, judges pressed Justice Department attorney Jacob Christensen on the precise definition of this exception, particularly as ICE had utilized it to acquire the addresses of 47,000 noncitizen taxpayers from the IRS in the preceding year.

Christensen asserted that each of the 47,000 individuals whose addresses were shared was subject to a final order of removal. U.S. Circuit Judge Seth Aframe, a Biden appointee, questioned whether a final removal order alone sufficed to establish a criminal investigation, drawing an analogy to auto insurance requirements for drivers. Similarly, Chief U.S. Circuit Judge David Barron, an appointee of Barack Obama, voiced concerns about the legality of simply labeling individuals as "under investigation" to justify data access. U.S. Circuit Judge Julie Rikelman, also a Biden appointee, highlighted that ICE initially sought data for 1.28 million people, a group that included individuals who had not yet passed the 90-day grace period to depart the country following a removal order. She emphasized the need for "some other fact that indicates that actually there’s been crime" beyond merely meeting one condition when multiple are required for a criminal act.

While Christensen confirmed that the 47,000 individuals whose data was ultimately shared had indeed passed the 90-day mark, he was unable to specify whether this decision was linked to any particular criminal statute. He admitted, "I don't know what led IRS to do that," underscoring the ambiguity surrounding the application of the criminal investigation exception in this context. This lack of clarity is central to the IRS taxpayer data privacy lawsuit.

The legal challenge extends beyond the 47,000 individuals whose data was shared, touching upon the broader implications of immigration enforcement data sharing. Joshua Rosenthal, an attorney with the Asian Law Caucus representing the Community Economic Development Center, argued that the controlling statute protecting taxpayer data applies to the entire government, not just the IRS, and necessitates a "meaningful" investigation. He contended that for an investigation to be genuine under the statute, the number of individuals involved "has to be far fewer than 1.2 million," referencing ICE's initial, much larger data request.

The Community Economic Development Center lawsuit highlights the real-world impact of such policies. The organization reported a noticeable decrease in both membership and attendance, directly attributing this decline to noncitizens' fears of exposing their personal data to immigration enforcement. This concern about potential data sharing with DHS mass deportations IRS data created a significant noncitizen tax filing chilling effect, deterring individuals from engaging with community services and potentially from fulfilling their tax obligations.

When questioned by judges about extending relief beyond the plaintiff groups, Rosenthal argued that complete relief was essential to avoid unjustified disclosure of organizational membership lists, in a context he described as "this entire case is about k." This underscores the profound privacy concerns and the potential for widespread negative consequences if the scope of the criminal investigation exception for taxpayer data is not clearly defined and strictly adhered to.

Lawyers advising non-citizen clients or those dealing with immigration enforcement should monitor this First Circuit case. It challenges the scope of the 'criminal investigation' exception for IRS taxpayer data sharing, which could impact client privacy rights, tax compliance advice, and strategies in deportation proceedings.

Source: Original reporting via Courthouse News Service