A United States federal appeals court has upheld an injunction blocking an Internal Revenue Service policy that allowed taxpayer address information to be shared with immigration authorities, finding that the procedure adopted under President Donald Trump’s administration failed to comply with federal taxpayer-privacy requirements.
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A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit on Tuesday affirmed a lower court’s preliminary order stopping the IRS from using its data-exchange procedure to disclose taxpayer information to U.S. Immigration and Customs Enforcement, except in strict compliance with federal law. The appellate court said the plaintiffs were likely to succeed in showing that the procedure was unlawful.
The dispute arose from an agreement between the IRS and ICE under which immigration authorities sought taxpayers’ last-known addresses as part of criminal investigations involving people subject to final removal orders.
In June 2025, ICE requested address information concerning about 1.28 million people, and the IRS subsequently developed a specialised data-exchange procedure for processing the requests. By the time a federal district court intervened, the IRS had disclosed 47,289 taxpayer records to ICE.
The appeals court found serious defects in the procedure used to process those requests.
Federal law, specifically Section 6103 of the Internal Revenue Code, generally treats tax returns and return information as confidential and permits disclosure to other federal agencies only under narrowly prescribed conditions.
For certain non-tax criminal investigations, an agency seeking taxpayer information must provide, among other things, the taxpayer’s name and address, the relevant taxable period, the statutory basis for the investigation and the reason the information is relevant.
But the court found that the IRS procedure did not ensure that ICE actually supplied a taxpayer’s address before obtaining information.
Instead, the system could treat any five- or nine-digit number placed in the address field as sufficient to process a request — even where the number was not an actual ZIP code and no street, city or state information was supplied.
“The Data-Exchange Procedure indisputably contravenes the requirements of section 6103,” Circuit Judge Cornelia Pillard wrote for the court.
The court said one of the most serious deficiencies was that federal law expressly required ICE to supply the taxpayer’s address, whereas the IRS procedure required only a five- or nine-digit entry in the relevant field.
More than 90 per cent of the 47,289 records disclosed were produced through a taxpayer-identification-number matching process. According to the court, that meant the IRS did not verify in those cases whether ICE had supplied information plausibly amounting to the taxpayer’s name and address as required by law.
The litigation was brought by the Center for Taxpayer Rights, Main Street Alliance and two labour unions, which argued that the IRS had unlawfully adopted a new policy for releasing confidential taxpayer information to ICE.
A federal district court agreed that the challengers were likely to succeed and stayed the policy while preliminarily prohibiting further disclosures that failed to comply strictly with Section 6103. The IRS appealed, arguing, among other things, that the order interfered with federal law-enforcement efforts.
The D.C. Circuit rejected that argument.
“But that’s a gripe with Congress, not the court,” Pillard wrote, adding that the government had no legitimate interest in conducting criminal investigations in violation of the statutory requirements governing taxpayer information.
The ruling traced the strict confidentiality protections surrounding tax information to reforms enacted after the Watergate scandal, when concerns arose over executive-branch misuse of taxpayer records. Congress subsequently imposed stringent restrictions on when IRS information may be shared with other government agencies.
The court also noted that taxpayer confidentiality is central to a tax system that relies heavily on individuals voluntarily providing sensitive financial and personal information to the government.
The Department of Homeland Security, which oversees ICE, said it disagreed with the decision and maintained that it would continue using lawful tools to locate and remove people subject to final removal orders.
Skye Perryman of Democracy Forward, which represented the challengers, welcomed the decision, saying the post-Watergate privacy protections were designed to prevent government misuse of sensitive taxpayer information.
The appeals court ultimately affirmed the preliminary injunction, leaving the IRS barred from using the challenged data-exchange procedure and from making further disclosures outside the statutory requirements while the underlying litigation continues. The decision therefore preserves the lower court’s restrictions at this stage rather than constituting a final judgment resolving every issue in the case.
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