A federal judge has halted the Internal Revenue Service’s practice of sharing confidential taxpayer address information with Immigration and Customs Enforcement, ruling that the data-sharing policy violates federal privacy laws and was implemented unlawfully.

U.S. District Judge Colleen Kollar-Kotelly issued a on November 21, granting an injunction in the case Center for Taxpayer Rights v. Internal Revenue Service, finding that plaintiffs demonstrated a substantial likelihood that the IRS acted illegally under the Administrative Procedure Act.

In April 2025, the IRS and ICE entered into a memorandum of understanding that allowed immigration enforcement officials to request taxpayer address information under an exception in Section 6103(i)(2) of the Internal Revenue Code, which permits disclosure of tax data for use in federal criminal investigations.​​

On August 7, 2025, the IRS disclosed the last known addresses of approximately 47,000 taxpayers to ICE in response to a request that originally sought information on 1.28 million individuals. The IRS approved the disclosure based on ICE’s representation that a single Assistant Director was “personally and directly engaged” in more than one million criminal investigations or proceedings related to immigration violations.

Judge Kollar-Kotelly determined the IRS violated federal law on multiple grounds:​

Violation of Internal Revenue Code: The court found that the IRS’s disclosure violated Section 6103(i)(2) requirements. The statute mandates that taxpayer information may only be disclosed to agency officers “personally and directly engaged” in specific criminal investigations, and that the information be used “solely” for those investigations. The court ruled it was legally implausible that one individual could be personally and directly engaged in hundreds of thousands of separate criminal matters.​

Arbitrary and Capricious Agency Action: The ruling found that the IRS failed to acknowledge its departure from decades of strict taxpayer confidentiality policy, failed to consider reliance interests that taxpayers had developed based on privacy protections, and failed to provide a reasoned explanation for the new “Address-Sharing Policy.”​​

Risk of Misuse for Civil Immigration Enforcement: The court concluded that 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,” including deportations. Federal law only permits disclosure for criminal investigations, not civil proceedings.

​​The ruling cites that Congress enacted strict taxpayer privacy protections in 1976 through the Tax Reform Act, passed “in the wake of Watergate and White House efforts to harass those on its ‘enemies list’.” The law established that taxpayer information should receive “essentially the same degree of privacy as those private papers maintained in [the] home.”​​

The IRS has historically maintained that taxpayer information disclosure “must be subjected to strict scrutiny” because each exception “whittles away at the core promise of the voluntary tax system.”

Court documents revealed significant internal opposition to the data-sharing policy within the IRS and Treasury Department. Multiple senior officials—including acting IRS commissioners, the Chief Risk Officer, Chief Privacy Officer, Chief Financial Officer, and Chief Information Officer—were excluded from decision-making processes after opposing aspects of the policy.​​

In July 2025, the IRS acting general counsel initially refused to approve ICE’s request for 7.3 million taxpayer addresses, citing multiple legal “deficiencies”. Two days later, De Mello was forced out of his position.

The injunction stays the “Address-Sharing Policy” and provisionally bars the IRS, Treasury Department, and Treasury Secretary from disclosing tax return data to the Department of Homeland Security or its components for immigration enforcement purposes. The court also ordered that the IRS must provide advance notification to the court and plaintiffs of any future transfers it believes are lawful and consistent with applicable statutes.​​

The court granted in part and denied in part the defendants’ motion to dismiss, allowing the case to proceed on the Administrative Procedure Act claims while dismissing the plaintiffs’ ultra vires claim.

The case remains ongoing, with the preliminary injunction in effect while the underlying legal challenges proceed.