IRS-ICE Data Sharing Blocked
Federal appeals court upholds injunction blocking IRS and ICE taxpayer data sharing.
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Key Points
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The appeals court held that the policy was reviewable under the Administrative Procedure Act and agreed that the plaintiffs were likely to prevail on the merits, providing the legal basis for keeping the preliminary injunction in place.
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Judge Cornelia Pillard said ICE used the same person as the point of contact for every one of its requests involving the 1.28 million taxpayers, despite the statutory requirement that a designated federal employee be personally and directly involved in a qualifying investigation.
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In more than 90% of the cases, the IRS reportedly matched taxpayer-identification numbers without verifying the target’s name and address, contrary to IRS privacy procedures requiring valid identifying information.
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The court characterized the IRS procedure as converting a system intended for individualized disclosures tied to specific criminal investigations into a mass data-sharing operation, and Judge Pillard warned that the IRS was “now on notice” to avoid additional unlawful disclosures.
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The IRS’s system accepted five- or nine-digit numbers in an address field—even when the number was not an actual ZIP code—allowing ICE requests to proceed without a conventional, verified address.
A federal appeals court upheld a ban on sharing taxpayer data between the IRS and Immigration and Customs Enforcement, ruling the Trump administration's policy violated a Watergate-era privacy law. CPA Practice Advisor reported that the court blocked an arrangement where ICE sought addresses for up to 1.28 million people suspected of being in the country illegally, with the IRS having already shared records for about 47,000 taxpayers before the policy was halted.
The appeals court found the IRS failed basic security checks — matching taxpayer numbers without verifying names and addresses in over 90% of cases. Knewz noted that Judge Cornelia Pillard warned the IRS is "now on notice" to stop unlawful disclosures, as the agency had converted a targeted system into mass data-sharing.
How the IRS Broke Privacy Rules
Section 6103 of the Internal Revenue Code, created after Watergate, sharply limits tax record disclosure and generally allows sharing only for specific criminal investigations. BarristerNG reported that ICE used one person as a contact for all 1.28 million requests, violating the requirement that a designated federal employee be directly involved in each investigation.
The IRS accepted five- or nine-digit numbers in address fields — even when they were not actual ZIP codes — allowing ICE to proceed without verified addresses. WFMD explained that this systematic failure to verify identifying information turned the system into a mass-disclosure operation rather than case-by-case criminal support.
A Massive Data Transfer Before the Ban
The IRS shared personal information on approximately 47,000 taxpayers with ICE before courts halted the program. Yahoo reported that ICE had originally requested addresses for as many as 1.28 million people, making this one of the largest privacy breaches under the tax-sharing rules in recent history.
Court Signals Stricter Enforcement Ahead
Judge Pillard's warning that the IRS is "now on notice" signals the administration must follow privacy laws precisely or face further court action. CPA Practice Advisor noted the court found the policy reviewable under the Administrative Procedure Act and agreed plaintiffs were likely to win on the merits, providing solid legal ground for the preliminary injunction.
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