A federal appeals court on Tuesday upheld an injunction blocking the Internal Revenue Service from sharing personal information, including taxpayer addresses, with immigration authorities. The ruling found that the Trump administration’s data-sharing policy violated federal tax-confidentiality laws established after the Watergate scandal.
The U.S. Court of Appeals for the District of Columbia Circuit ruled against the IRS over its handling of a request from Immigration and Customs Enforcement for the last known addresses of 1.28 million suspected illegal migrants. Last year, the tax agency shared roughly 47,000 taxpayer addresses with ICE under a policy designed to support mass deportation efforts.
The litigation centers on a lawsuit filed by the Center for Taxpayer Rights alongside other organizations, including Main Street Alliance, the Communications Workers of America, and the National Federation of Federal Employees, represented by Democracy Forward. A lower-court judge previously sided with the plaintiffs and issued a preliminary injunction halting the practice, though the IRS had already transferred 47,289 taxpayer records to ICE by that point.
## Appeals Court Rejects Administration Arguments
In the decision from the three-judge panel, U.S. Circuit Judge Cornelia Pillard rejected the administration’s claims that the injunction severely hindered federal law enforcement.
“That’s a gripe with Congress, not the court,” Pillard wrote in the ruling.
The court found that the IRS procedures violated federal law in several ways, most notably by failing to require ICE to provide an actual taxpayer address as mandated by statute. Furthermore, the court noted that the IRS did not demand a “specific reason” demonstrating why requested return information was relevant to a qualifying investigation.
The panel also criticized the automation of the process. While ICE requested information on 1.28 million taxpayers during the summer of 2025, the agency listed the exact same person as the point of contact for every single request. The court noted 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.”
## Privacy Protections and Legal Standards
The appeals court emphasized that the data-exchange procedure infringed upon statutory privacy protections.
“The Data-Exchange Procedure reduces noncitizens’ privacy rights in their tax returns,” the court stated. “By providing a distinct, automated pathway for ICE to request noncitizens’ information, the Data-Exchange Procedure deprives noncitizens of the protections that section 6103 guarantees to all taxpayers.”
Addressing complaints from the administration that the district court’s advance notice requirements were unusual and harmful, the judges dismissed the argument as “weak sauce.” The court highlighted that the lower court had permitted the IRS to file notifications “under seal” to protect ongoing criminal investigative activities, thereby balancing government disclosure interests with taxpayer privacy.
The court also warned the administration regarding potential penalties for willful non-compliance. “The IRS is now on notice twice over regarding the legal inadequacies of its summer 2025 disclosures,” the panel wrote, adding that federal personnel face severe civil and criminal consequences for willful disclosures in violation of section 6103.
Nina Olson, executive director of the Center for Taxpayer Rights, called the decision “a resounding victory for the protection of all taxpayers’ right to the confidentiality of their tax information in the hands of the IRS.”
Skye Perryman, president and CEO of Democracy Forward, echoed those sentiments, stating that the post-Watergate privacy laws were enacted specifically to prevent abuses of power.
A spokesperson for the Department of Homeland Security told Reuters that the agency disagrees with the ruling and will continue utilizing every lawful tool available to locate and remove illegal aliens with final orders of removal.
