A Significant Win for Taxpayer Rights & Confidentiality of Return Information
Dear Friends,
At the Center for Taxpayer Rights, we try not to clutter your inbox unless we have something really important to share. Today, we have two important items – one really newsworthy, and the other, an ask.
The “ask” first: if you value the work the Center does – our International Conference on Taxpayer Rights (ICTR), our work as a Low Income Taxpayer Clinic and our promotion of Tax Clinics around the world, and our efforts to advance taxpayer rights in the US and internationally – please consider making a donation here. As you will learn in the rest of this email, our work has a profound impact for the protection of the rights of taxpayers.
Now the update. Last Friday, 21 November 2025, the Judge Kollar-Kotelly of the Federal District Court for the District of Columbia issued an opinion and an order in the case Center for Taxpayer Rights v Internal Revenue Service. The underlying case challenges the IRS’s change in policy regarding the sharing of tax return and tax return information outside of the agency, in contravention of the confidentiality provisions in the US Internal Revenue Code (IRC). You can read the Order here and the Opinion here. If you are interested in the entire history of the case, please check out all the filings on Court Listener here.
If you have attended past ICTRs, you know that the topic of confidentiality of tax return information and the disclosure to and use of that information by non-tax agencies is of great concern from a taxpayer rights perspective. These concerns are heightened with the advent of artificial intelligence and data mining. The pressure on tax agencies to share this information with other federal or state agencies is great. From a US taxpayer’s perspective, willingness to share one’s information with the tax agency is premised on the understanding that it will be held confidential, unless Congress has created a statutory exception.
This case was filed in February 2025 when news coverage indicated the Trump Administration wanted to (1) use tax return information to locate undocumented persons who had lawfully filed federal income tax returns in order to deport them for overstaying their deportation orders; and (2) build a massive platform through which any federal agency could make mass requests for tax return information and the IRS could mass transfer this information.
These two developments are in stark violation of the very strict rules regarding confidentiality of tax returns and return information under 26 US Code 6103, enacted in 1976 following the Nixon Administration’s attempts to use tax return information and tax audits against its “enemies,” as well as attempts by the Agriculture Department to access the tax returns of all the farmers of America (an astoundingly overbroad and anti-mom-and-apple-pie effort).
In 1976 Congress wrested control of tax return and return information from the Executive Branch and enacted IRC § 6103, which provides: “Returns and return information shall be confidential, and except as authorized by this title . . . .” Over the years Congress enacted many exceptions, each carefully and narrowly crafted for specific purposes and usually vigorously debated as to whether the need for that information for another purpose overrode the importance of confidentiality to continuing willingness of taxpayers to comply truthfully and accurately with their filing obligations.
The specific provision by which the Immigration and Customs Enforcement (ICE) agency sought return info — specifically, last known addresses — is IRC 6103(i)(2) which allows federal agency heads and inspectors general to request limited information for purposes of non-tax criminal investigations and proceedings. The information obtained under this provision is very limited but includes address information — if the agency wants more, they have to get an order from a federal judge or magistrate with respect to a specific proceeding or investigation. The information may only be received and used by agency officers and employees who are “personally and directly engaged in” the investigations and must be used “solely” for the purposes of that investigation, proceeding, etc.
In February 2025, U.S. Immigration and Customs Enforcement (ICE) first asked for massive amounts of data on about 700,000 persons characterized as “illegal aliens who ha[d] standing deportation orders,” which the IRS denied for not meeting the statutory requirements. Several senior IRS officials, including the acting Commissioner, resigned because of this request and pressure to accede to it. In April, the Treasury Secretary signed a “Memorandum of Understanding” with ICE laying out the terms of an information sharing agreement particularly “for the submission of requests for addresses.” In June, ICE came in with a request for address information for over 7 million persons, basically the “full alien population,” which again the IRS denied as unlawful. Finally, ICE submitted a request in late June for information on 1.2 million taxpayers. After a lot of back and forth and further firings and resignations of IRS officials and a clear Treasury Department directive, in August 2025 IRS sent over “last known address” information on 47,000 taxpayers. In summary, the IRS was only able to “confirm” the identity of 3% of the requested taxpayers – clearly demonstrating the inadequacy of ICE’s request.
In February 2025 Democracy Forward, on behalf of the Center and three other plaintiffs (two unions and one small business membership organization) filed suit in DC federal district court when reports and White House/DOGE/Treasury statements regarding the broader policy of using tax return information government-wide started showing up in the press. The filings went back and forth throughout the summer — the Department of Justice filed motions to dismiss challenging the plaintiffs standing to sue and the basis for our claims. When news broke of the 1.2 million request this summer and the confirmed IRS release of tax return information to ICE in early August, we filed a motion to stay such releases under the Administrative Procedure Act.
Following a hearing and court-ordered disclosure of the administrative record leading up to the IRS policy change relating to information sharing under § 6103(i)(2), on Friday the court found the IRS had unlawfully shared with ICE tax return information on 47,000 taxpayers.
The Court further concludes that the Plaintiffs have shown a substantial likelihood that the IRS’s adoption of the Address-Sharing Policy and the IRS’s subsequent sharing of taxpayer information with ICE were unlawful under the Administrative Procedure Act (“APA”). Plaintiffs have shown that the IRS’s implementation of the Address-Sharing Policy was arbitrary and capricious because the IRS failed to acknowledge and explain its departure from its prior policy of strict confidentiality, failed to consider the reliance interests that were engendered by its prior policy of strict confidentiality, and failed to provide a reasoned explanation for implementing the new Address-Sharing Policy. Furthermore, Plaintiffs have shown that the IRS’s disclosure of confidential taxpayer address information to ICE was contrary to law because it did not comply with certain requirements in Internal Revenue Code Section 6103(i)(2). For similar reasons, the Court concludes that Plaintiffs have plausibly alleged that the broader Data Policy is unlawful under the APA.
The court found the DHS justification for receiving this information was a “pretext” for using the information in civil deportation proceedings, not criminal proceedings as required under § 6103(i)(2). The court further found “It is unreasonable to think that, in one month, the same Assistant Director could be ‘personally and directly engaged’ in 7.6 million criminal matters under one statute and 1.2 million criminal matters under another. Accordingly, this raises an inference that ICE’s representation that it is conducting criminal investigations under 8 U.S.C. §1253(a)(1) was pretext.” (Opinion at 83.) “This is not a formalistic violation [of 6103(i)(2)]. Rather, this violation suggests that ICE was not really conducting the criminal investigations or proceedings that formed the basis of the IRS’s disclosure of confidential taxpayer information to ICE.” (Opinion at 77. It is worth reading the court’s full analysis of this issue beginning on page 76 of the Opinion.)
The court found that the IRS did not met the conditions of the statute when releasing the data because the law requires the requesting agency to provide the IRS with the taxpayer’s address, which ICE had not done so in 39,000 of the 47,000 taxpayers for which information was shared. This means certain IRS and ICE officials (and other persons) may be subject to criminal liability, including fines and up to 5 years imprisonment. As well, under IRC § 7431 the taxpayers can sue for damages, including punitive damages.
And importantly, the court found that we had “plausibly alleged that the IRS’s broader Data Policy is unlawful under the APA” so that our broader complaint about the IRS sharing data government-wide is kept alive — the court denied the government’s motion to dismiss that part of our claim.
The judge’s opinion is sweeping — 94 pages in which she analyses the Center’s s and other plaintiffs’ standing for bringing this suit. She quotes extensively from my declaration filed as part of our pleadings as well as from the declaration of former Commissioner John Koskinen regarding the historical (as of January 2025) approach to releasing return information and the importance of a strict interpretation of § 6103 to taxpayers’ trust in the tax system and their willingness to voluntarily comply with the tax laws.
The judge ordered a stay on this new “data policy” of sharing with ICE/DHS; she enjoined the IRS from sharing any tax return data with DHS/ICE except in strict compliance with the law as outlined in her opinion; and she ordered the IRS to notify the court and plaintiffs in the case of any future requests for information from DHS/ICE within 48 hours of receiving that request.
As I said, this is an incredibly important decision; it is certain to be immediately appealed to the DC Circuit Court of Appeals and even to the US Supreme Court. But for now, we are doing a happy dance until the next stage of the battle.
We have extraordinary counsel from Democracy Forward in this case. I am in awe of their dedication and advocacy and have learned a great deal from them. If you don’t know about their work, please check out their website here and consider supporting them.
And of course, please consider supporting the work of the Center for Taxpayer Rights here.
All the best, and for folks in the United States, have a good Thanksgiving!
Nina
Nina E. Olson
Executive Director
Center for Taxpayer Rights