A federal appeals court on Tuesday upheld a lower court decision that prevents the Internal Revenue Service from handing over taxpayer data to Immigration and Customs Enforcement, a setback for the Trump administration's push to use federal databases to locate undocumented immigrants.
The three-judge panel for the U.S. Court of Appeals for the D.C. Circuit ruled that ICE's request for the last known addresses of 1.28 million people who may be in the country unlawfully violated a post-Watergate law that restricts the IRS from sharing return information with other agencies unless strict conditions are met.
The ruling, written by Judge Cornelia Pillard, an appointee of President Barack Obama, affirmed a November injunction that barred the IRS from assisting with deportation efforts. The panel found that the plaintiffs—likely immigrants' rights groups—are likely to succeed on the merits and that the policy is subject to judicial review under the Administrative Procedures Act.
Under federal law, the IRS may share return information with other agencies to help prosecute certain crimes, but the requesting agency must provide a specific reason and designate a point of contact who is personally and directly engaged in the investigation.
Pillard wrote that the IRS failed to require ICE to provide a “specific reason” why the requested information was relevant to a qualifying proceeding or investigation. She also noted that ICE listed the same federal employee as the point of contact for every single request, which “entirely fails to ensure that ICE lists a federal employee, let alone one 'personally and directly engaged' in a qualifying investigation of a particular taxpayer.”
The panel also found that the data-sharing arrangement would violate privacy protections. “The Data-Exchange Procedure reduces noncitizens' privacy rights in their tax returns,” the judges wrote, adding that it creates an automated pathway for ICE that deprives noncitizens of the safeguards guaranteed to all taxpayers under Section 6103.
This ruling is the latest legal hurdle for the Trump administration as it seeks to link government databases to identify and deport undocumented immigrants. The administration has argued that such data sharing is necessary for national security and public safety, but critics contend it undermines trust in federal institutions and violates taxpayer privacy.
The decision could have broader implications for other data-sharing initiatives, including those involving the Census Bureau and other federal agencies. It also comes as the administration faces legal challenges on multiple fronts, including its efforts to restrict mail-in voting and its handling of abortion pill regulations.
ICE has not yet indicated whether it will appeal the decision to the Supreme Court. The case is likely to continue as the lower court considers the merits of the plaintiffs' claims.
