The U.S. Court of Appeals for the D.C. Circuit ruled on September 8, 2026, to uphold the Internal Revenue Service's (IRS) new procedure for sharing taxpayer information with Immigration and Customs Enforcement (ICE). This decision affects thousands of undocumented individuals whose tax information may be disclosed without their consent. The ruling emphasizes the importance of taxpayer privacy and the legal requirements surrounding the sharing of sensitive information.
The case, Center for Taxpayer Rights v. IRS (Docket No. 26-5006), arose after the IRS implemented a new policy in 2025 that allowed the agency to share tax return information with ICE under certain conditions. The policy was challenged by several advocacy groups, including the Center for Taxpayer Rights, who argued that the IRS's new procedure violated federal law and threatened the privacy rights of taxpayers.
Background
The Center for Taxpayer Rights, along with other organizations, filed a lawsuit against the IRS after it was revealed that the agency had disclosed over 47,000 records to ICE using a new Data-Exchange Procedure. This procedure was developed in response to requests from ICE for information about undocumented individuals. The plaintiffs contended that the IRS's actions were unlawful and that the new policy did not comply with the stringent requirements set forth in 26 U.S.C. § 6103, which protects taxpayer information from being disclosed without proper authorization.
The IRS's new policy was created following a Memorandum of Understanding (MOU) with the Department of Homeland Security, which allowed ICE to request taxpayer information for immigration enforcement purposes. The plaintiffs argued that this policy undermined the confidentiality of taxpayer information and that the IRS had failed to ensure compliance with the legal standards required for such disclosures.
The Ruling
The D.C. Circuit Court upheld the lower court's decision to grant a preliminary injunction against the IRS, which had temporarily halted the implementation of the new policy. The court found that the plaintiffs were likely to succeed on the merits of their case and that the IRS's Data-Exchange Procedure did not comply with the requirements of § 6103. The ruling emphasized that the IRS had failed to ensure adequate safeguards were in place before disclosing sensitive taxpayer information.
The court stated, "the Data-Exchange Procedure marks the consummation of the agency’s decision-making process on how it discloses taxpayer information to ICE under the MOU."
Furthermore, the court highlighted that the IRS's process for verifying ICE's requests was inadequate, allowing for the potential disclosure of taxpayer information even when the requests did not meet statutory requirements. The ruling underscored the importance of maintaining taxpayer confidentiality and the legal obligations of the IRS in handling such sensitive information.
Impact
This ruling has significant implications for the privacy rights of undocumented individuals and the IRS's ability to share taxpayer information with other federal agencies. By affirming the lower court's decision, the D.C. Circuit Court has reinforced the legal protections surrounding taxpayer information and emphasized the need for compliance with federal law when disclosing such data.
The ruling may also set a precedent for future cases involving the sharing of taxpayer information with federal agencies, particularly in the context of immigration enforcement. It highlights the importance of ensuring that any disclosures are made in strict compliance with the legal requirements established by Congress to protect taxpayer privacy.
What's Next
The IRS may choose to appeal this decision to the Supreme Court, although details regarding any potential appeal were not available in the court filing. The outcome of this case could have far-reaching implications for how federal agencies handle taxpayer information in the future.