Court Blocks IRS from Sharing Taxpayer Addresses with ICE Amid Privacy Concerns

Court Halts IRS Data Sharing with ICE, Citing Privacy Law Violations

A federal appeals court has upheld an injunction that stops the Internal Revenue Service (IRS) from sharing taxpayer addresses with Immigration and Customs Enforcement (ICE) for deportation purposes. The court determined that this practice likely violated federal tax privacy laws and the Administrative Procedure Act. This ruling keeps the data exchange halted while the underlying legal case continues.

The agreement, which began in July 2025, allowed ICE to request last-known addresses for individuals under criminal investigation for failing to comply with final removal orders. Before the injunction took effect, the IRS had already shared approximately 47,289 taxpayer address records with ICE.

Flawed Data Exchange Procedure

The IRS developed a “Data-Exchange Procedure” to handle ICE’s requests. However, this system had significant weaknesses. ICE was permitted to submit a five- or nine-digit number in an address field, even if it was not a valid ZIP code. The system also accepted entries like “Unknown Address,” “Failed to Provide,” and “NA NA.” A placeholder such as “Don’t Care 12345” was also accepted.

More than 90 percent of the disclosed records were obtained through a taxpayer identification number matching process, rather than a full name and address verification. This automated method allowed the government to compare records without a thorough review of each person’s identifying information. The court highlighted the gap between this automated matching and the legal requirements for disclosure. The panel stated that 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.”

Safeguarding Taxpayer Privacy

The court’s decision focused on Section 6103 of the Internal Revenue Code, which strictly limits the disclosure of taxpayer return information. The panel emphasized that post-Watergate privacy protections require agencies to meet specific legal conditions before the IRS can share sensitive records. The court found that the procedure did not require ICE to provide an actual address for a taxpayer, nor did it demand the specific explanation needed by statute before releasing return information for a qualifying investigation.

The judges concluded that this arrangement likely bypassed established disclosure safeguards. It also created a separate pathway for ICE that reduced privacy protections for noncitizens. While this finding is preliminary and the case has not been decided on its merits, the appeals court’s decision maintains the injunction against further data sharing under the challenged procedure. The court rejected the government’s argument that the process was merely an internal operational step and not subject to review.

Legal Challenge and Future Implications

The appeal originated from a lawsuit filed by taxpayer and business groups, including the Center for Taxpayer Rights and the Main Street Alliance. These organizations challenged the data exchange, arguing it was inconsistent with federal privacy requirements. The court’s reasoning places the responsibility on the government to meet statutory disclosure conditions before using tax records for immigration enforcement. An agency cannot replace the required legal review with an automated match.

The injunction does not invalidate the records that have already been shared. The case involves the approximately 47,289 addresses that the IRS provided to ICE before the process was halted. Roughly 43,000 taxpayers may need to be notified so they can pursue damages for unlawful disclosure. This ruling affects not only future data exchanges but also the handling of records that have already been released.

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