Judge halts IRS sharing of taxpayer info for immigration crackdown

A federal judge on Friday barred the IRS from sharing tax return information that immigration officials aimed to use to deport undocumented immigrants, saying the practice violated a taxpayer confidentiality law.

U.S. District Judge Colleen Kollar-Kotelly, a Washington-based Clinton appointee, ordered the tax agency not to disclose the confidential address information of tens of thousands of undocumented taxpayers to Immigration and Customs Enforcement until the court can review the case further.

Kollar-Kotelly also blocked Treasury Secretary Scott Bessent, who also serves as the IRS’s acting commissioner, from disclosing any taxpayer information to the Department of Homeland Security unless the person receiving it is working on a relevant non-tax criminal investigation.

On August 7, under a controversial agreement between Bessent and Homeland Security Secretary Kristi Noem, the IRS disclosed confidential address information for about 47,000 taxpayers to ICE to aid in the Trump administration’s deportation agenda. The Center for Taxpayer Rights, joined by several other groups, has sued to halt the exchange of information, saying it violated a federal law that heavily limits taxpayer data sharing except when it’s necessary for a non-tax federal criminal investigation or proceeding in which a federal agency has obtained approval from a court or agency head.

Court filings showed the IRS and ICE worked for months to get around these restrictions, partly by slapping a federal criminal penalty for failure to leave the country on the undocumented immigrants whose information ICE requested. Bessent and Noem signed off on the effort.

In her opinion, Kollar-Kotelly wrote that the Center for Taxpayer Rights and the other plaintiffs had shown that the IRS’s sharing of the addresses with ICE was illegal because it didn’t comply with some requirements in the taxpayer confidentiality law.

She also said the plaintiffs have “plausibly alleged” that the agreement violated federal administrative procedure rules.

“The IRS’s unlawful conduct has created a substantial likelihood that Plaintiffs and their members will suffer irreparable harm. The Center for Taxpayer Rights is experiencing a significant decline in interest and engagement with its core activities of providing pro bono services to low-income taxpayers, including immigrant taxpayers — potentially jeopardizing its federal funding,” wrote Kollar-Kotelly.

“Meanwhile,” she added, “Plaintiffs’ members face an imminent risk that the confidential address information they have provided to the IRS will be impermissibly used by ICE for civil immigration enforcement.”

The order keeps the agencies on a tight leash. Kollar-Kotelly required Homeland Security to notify the court and Center for Taxpayer Rights of any further requests from the agency. And if the IRS determines that disclosure to DHS or its subagencies is lawful, she will also require the IRS to give the court at least a 72-hour notice, along with information ensuring the agencies are complying with the confidentiality law before handing off the data.

The order also requires Bessent to notify Noem and ICE Director Todd Lyons by Monday that the immigration enforcement agency should limit access to the return data disclosed on Aug. 7 to staffers who are “personally and directly engaged” in a non-tax investigation.

The Trump administration did not immediately respond to a request for comment.

Skye Perryman, who heads Democracy Forward, a group that represents the plaintiffs, said: “The privacy laws enacted in the post-Watergate era exist to prevent abuses of power like this and yet leaders in the IRS and ICE launched this effort. Paying your taxes does not forfeit your right to privacy.”