Appeals court gives OK to IRS to keep sharing information with ICE

A federal appeals court this week denied a request from immigrants’ rights groups to bar the IRS from continuing to share taxpayer names and addresses with ICE.

The three-judge D.C. Circuit Court of Appeals panel said in an opinion issued Tuesday that Centro de Trabajadores Unidos, Immigrant Solidarity DuPage, Somos Un Pueblo Unido, and Inclusive Action for the City were “unlikely to succeed on the merits” of two claims made in their case against Treasury Secretary Scott Bessent and the IRS.

Per the ruling, the appellants’ attempt to halt the tax agency’s data-sharing agreement with the Department of Homeland Security component didn’t meet the “heavy burden” of showing why preliminary injunctive relief was needed. 

The appellants had argued that the IRS’s sharing of information with ICE violated Section 6103 of the federal tax code, which guarantees taxpayer privacy. The judges, however, said the immigrants’ rights groups were unlikely to succeed on that “contrary-to-law claim” because 6103 “straightforwardly says that addresses can be disclosed if they are not ‘taxpayer return information.’” 

The information shared as part of this memorandum of understanding, the judges noted, are names and addresses — “not ‘taxpayer return information,’ so they do not receive any special protection from disclosure.”

“The simple and dispositive point here is that § 6103(i)(2) authorizes IRS to disclose address information, to specific government officials, for use in nontax criminal investigations, and only in response to a valid request,” the judges wrote.

The court also shut down appellants’ “arbitrary-and-capricious claim” that the MOU skirted Administrative Procedure Act requirements. The judges ruled that the agreement was “a nonbinding policy statement without legal effect.”

“It is thus not a final agency action reviewable under the” APA, they continued. “Furthermore, if we find, as we do, that the ‘best reading’ of the statute does not support Appellants’ position, then no agency action may countermand the court’s judgment.” 

The judges noted that they would “not opine” on the legality of the IRS-ICE agreement that locked in the information-sharing parameters between the agencies. The deal led to the resignation of the then-acting IRS commissioner and spawned multiple legal challenges. Earlier this month, the IRS’s chief risk and control officer said in a court filing that the tax agency improperly shared some data with ICE as part of a request for nearly 1.3 million taxpayer records.

Tuesday’s decision likely won’t be the final appellate court ruling on IRS-ICE data exchanges. A federal judge in Massachusetts earlier this month blocked ICE from using IRS data in enforcement efforts, while a different federal judge last November sided with nonprofits and labor groups who said the agreement could lead to ICE “impermissibly” using the information.