Court blocks IRS policy that shared taxpayer addresses with ICE
Center for Taxpayer Rights v. IRS, NO. 1:25-CV-00457. United States District Court For The District Of Columbia.
A federal court halted the IRS’s new data-sharing policy after finding that the agency likely violated §6103 and the APA when it disclosed about 47,000 taxpayer addresses to ICE.
Holding
The court held that the IRS’s Address-Sharing Policy is final agency action subject to APA review and that plaintiffs showed a substantial likelihood of success on their claims that the policy was arbitrary, capricious, and contrary to §6103(i)(2).
The court granted preliminary relief and partially denied the government’s motion to dismiss.
Why It Matters
The decision restricts IRS information-sharing with immigration authorities under §6103.
The ruling signals that changes to IRS confidentiality policy must be explicit and well-explained in the administrative record.
The court identified narrow circumstances where taxpayer address information can be shared only for criminal enforcement, not civil immigration actions.
Agencies must consider reliance interests when altering long-standing confidentiality practices.
Timeline
IRS adopts an internal “Data Policy” shifting toward broader inter-agency information sharing.
August 7, 2025: IRS discloses around 47,000 taxpayer addresses to ICE under §6103(i)(2).
Plaintiffs file suit seeking to block the policy and the disclosures.
September 5, 2025: Court holds a preliminary-injunction hearing and orders production of the administrative record.
October 29, 2025: IRS files the administrative record.
November 21, 2025: Court issues opinion granting partial preliminary relief.
Key Facts
Plaintiffs include the Center for Taxpayer Rights and membership organizations representing federal employees and immigrant communities.
Plaintiffs allege declining participation in taxpayer-assistance programs due to fear of IRS-ICE data sharing.
The disputed disclosure involved taxpayer address information protected by §6103.
ICE may only use §6103(i)(2) information for criminal investigations or proceedings.
Plaintiffs claimed members faced imminent risk of civil immigration enforcement based on IRS-shared data.
Statutory or Regulatory Framework
APA §704 and §706 allow review of final agency action and require courts to set aside actions that are arbitrary, capricious, or contrary to law.
§6103 governs confidentiality of return information and includes narrow exceptions for disclosures to law-enforcement agencies.
§6103(i)(2) permits IRS disclosures of taxpayer information only for criminal investigations or prosecutions, not civil immigration enforcement.
§6103(p)(4) requires ICE to maintain safeguards over any IRS-provided return information.
Arguments
Plaintiffs argued:
The IRS adopted a new Data Policy without acknowledging it was changing long-standing confidentiality practice.
The Address-Sharing Policy was arbitrary and capricious because the IRS failed to consider reliance interests and privacy impacts.
The August 7 disclosure violated §6103(i)(2) because it enabled civil enforcement risk.
Members faced imminent irreparable harm from possible misuse of the data.
Government argued:
The Data Policy was not final agency action.
Civil and criminal remedies in the Internal Revenue Code provide an adequate alternative to APA review.
ICE safeguards and the presumption of regularity prevent any reasonable expectation of improper civil use.
Plaintiffs lacked standing and had not shown imminent harm.
Court’s Reasoning
The IRS’s Address-Sharing Policy, together with the August 7 disclosure, completed a decision-making process and carried legal consequences, making it final agency action.
No alternative statutory remedy under the Internal Revenue Code provided the injunctive relief needed, so APA review was available.
The IRS failed to acknowledge a major policy shift away from strict confidentiality and did not adequately address reliance interests.
The record showed a substantial likelihood that the August 7 disclosure violated §6103(i)(2).
Plaintiffs demonstrated organizational and associational standing based on reduced engagement, resource diversion, and harm to members’ ability to safely participate in the tax system.
Evidence overcame the presumption that ICE would use the information only for criminal purposes.
The balance of equities and public interest favored preliminarily halting the Address-Sharing Policy.
Forward-Looking Implications
Additional IRS information-sharing agreements may face heightened scrutiny for compliance with §6103.
Agencies may need to revise MOU frameworks to ensure criminal-use limitations are explicit and documented.
Courts may require detailed administrative records when agencies alter long-standing confidentiality approaches.
Taxpayer-assistance organizations may cite this ruling when assessing exposure to future inter-agency data programs.
Result
The court granted plaintiffs’ motion for preliminary relief in part, stayed the IRS’s Address-Sharing Policy, and partially denied the government’s motion to dismiss.
The Takeaway
The court made clear that IRS data-sharing with other agencies must stay within the strict limits of §6103 and must be supported by a reasoned, transparent explanation. Major changes in confidentiality policy cannot happen quietly or without a clear administrative record.
List of Citations
5 U.S.C. §704: Governs judicial review of final agency action.
5 U.S.C. §706: Provides for setting aside arbitrary or unlawful agency action.
§6103(i)(2): Limits IRS disclosures to criminal investigations.
§6103(p)(4): Requires safeguards for handling IRS-provided return information.