Watchdog Group Challenges IRS–ICE Data Sharing Agreement

A coalition of watchdog and labor groups, including Public Citizen, has asked the U.S. Court of Appeals for the D.C. Circuit to block a data-sharing agreement between the Internal Revenue Service (IRS) and Immigration and Customs Enforcement (ICE).

The agreement allows the IRS to provide ICE with taxpayer information about certain noncitizens who have outstanding deportation orders. The coalition argues that this arrangement violates federal tax privacy laws, which tightly restrict how the IRS can share taxpayer data. They also contend that the agreement could deter noncitizens from filing taxes or reporting income out of fear that their personal data may be used against them.

Why It Matters

For tax professionals, this case could reshape the boundaries of taxpayer confidentiality. IRS data is protected under Section 6103 of the Internal Revenue Code, which generally prohibits disclosure except in limited circumstances. If the court sides with ICE, it could broaden government access to taxpayer information beyond traditional tax enforcement contexts.

For CPAs and tax attorneys, this means:

• Increased compliance uncertainty around what information can legally be shared with other agencies.

• Greater risk exposure for clients who may be affected by new data-sharing practices.

• Potential changes in taxpayer behavior, particularly among foreign nationals or individuals with uncertain immigration status, which could affect filing rates and withholding compliance.

Businesses employing noncitizen workers should also take note. Heightened scrutiny could mean stricter enforcement of worker verification and reporting obligations. Employers may want to review payroll documentation and ensure accurate filing of Forms W-2 and 1099 to avoid compliance pitfalls.

What’s Next

The D.C. Circuit will determine whether the IRS’s agreement with ICE violates taxpayer privacy protections. A ruling in favor of the watchdog groups could reaffirm the long-standing confidentiality rules that limit IRS information sharing. A ruling in favor of the government could set a new precedent expanding how taxpayer data can be used across federal agencies.

Tax professionals should stay alert for any new IRS guidance or policy adjustments following the court’s decision. Maintaining accurate, secure records and educating clients about their rights and obligations will be key.

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