In April 2025, the IRS and the Department of Homeland Security (DHS) signed an agreement that let Immigration and Customs Enforcement (ICE) ask the tax agency for the addresses of people it believed were in the country unlawfully. On September 8, 2026, a federal appeals court ruled that the way the IRS carried out that agreement broke federal law. The decision has consequences for the agency, for the officials who took part, and for the millions of immigrants who file tax returns every year.
Background
Tax returns are among the most private records the government holds. After Watergate, Congress wrote strict confidentiality rules into Section 6103 of the Internal Revenue Code. Those rules bar the IRS from handing taxpayer information to other agencies except in narrow circumstances, and one of those circumstances is an active non-tax criminal investigation.
That exception is what DHS leaned on. Its memorandum of understanding with the IRS was built on the theory that anyone who stays in the U.S. more than 90 days after a final order of removal can be treated as the subject of a criminal investigation. The deal was controversial from the start. Acting IRS Commissioner Melanie Krause resigned in protest shortly after it was signed, and advocacy groups sued. A federal judge in Washington declined to halt the agreement in May 2025, so it went forward.
In late June 2025, ICE requested the last known addresses of 1.28 million people. The IRS began processing those requests in July. By the time a district court blocked the practice, the IRS had already released 47,289 addresses.
What the Appeals Court Found
A three-judge panel of the D.C. Circuit unanimously upheld that injunction in Center for Taxpayer Rights v. IRS. Judge Cornelia Pillard, writing for the court, found the IRS procedure broke the law in several ways.
The statute requires the requesting agency to supply the taxpayer’s name and address. In more than 90 percent of the disclosures, though, the IRS just matched a name to a taxpayer identification number and returned whatever address it had on file. Nobody checked whether the address ICE submitted was real. According to the court, a request with “00000” typed into the address field could have gone through. ICE also listed its then-director, Todd Lyons, as the contact person for all 1.28 million requests, which the judges called “facially impossible.” What was supposed to be a careful, case-by-case review had turned into a bulk, automated one.
Possible Consequences
The panel warned that the government and its personnel face steep civil and criminal consequences for willful disclosure. The Internal Revenue Code lets taxpayers sue over unauthorized disclosures, and willful unauthorized disclosure is a federal crime. Whether anyone will actually be held accountable is a separate question. Much will depend on congressional oversight. People who were detained or removed after their information was shared may have claims of their own, although those already outside the U.S. will have a harder time pursuing them.
The administration can still ask the full D.C. Circuit to rehear the case or take it to the Supreme Court. For now, the injunction stands. In a separate case, a federal judge in Massachusetts barred DHS and ICE in February 2026 from using or viewing IRS information obtained under the agreement.
Why This Matters for Tax Compliance
The IRS depends on people filing voluntarily. For decades it encouraged immigrants to file regardless of status, many of them using an Individual Taxpayer Identification Number (ITIN), with the understanding that their information would stay with the IRS. Undocumented workers pay an estimated $90 billion a year in federal, state, and local taxes. If fear of enforcement pushes some of them to stop filing, public revenue takes a hit. As Slate points out, even a one-point drop in overall tax compliance could cost the federal government around $40 billion.
What Immigrant Taxpayers Should Keep in Mind
Your obligation to file taxes doesn’t depend on your immigration status. Skipping a return can create problems of its own, including in later immigration applications where tax history is reviewed. If you’re worried about how your tax records could affect your case, talk with an immigration attorney before the next filing season opens.
As always, ILBSG actively monitors ongoing U.S. immigration news. If you have questions about any U.S. immigration related issue, contact us. Working with an experienced attorney ensures you get the right advice based on the most recent laws. In an ever-evolving immigration policy landscape, it’s particularly critical you get the right advice.