Judge refuses to block IRS from sharing tax data to identify people illegally in U.S.

A federal judge on Monday refused to block the Internal Revenue Service from sharing immigrants’ tax data with Immigration and Customs Enforcement for the purpose of identifying and deporting people illegally in the U.S.

In a win for the Trump administration, U.S. District Judge Dabney Friedrich denied a preliminary injunction in a lawsuit filed by nonprofit groups. They argued that undocumented immigrants who pay taxes are entitled to the same privacy protections as U.S. citizens and immigrants who are legally in the country.

Friedrich, who was appointed by President Donald Trump, had previously refused to grant a temporary order in the case.

The decision comes less than a month after former acting IRS commissioner Melanie Krause resigned over the deal allowing ICE to submit names and addresses of immigrants inside the U.S. illegally to the IRS for cross-verification against tax records.

“The plaintiffs are disappointed in the Court’s denial of our preliminary injunction, but the case is far from over. We are considering our options,” Alan Butler Morrison, the attorney representing the nonprofit groups, wrote in an email. He noted that the judge’s ruling made it clear that the Department of Homeland Security and the IRS can’t venture beyond the strict limitations spelled out in the case.

“So far, DHS has not made formal requests for taxpayer data and plaintiffs will be keeping a close watch to be sure that the defendants carry out their promises to follow the law and not use the exception for unlawful purposes,” Morrison said.

The IRS has been in upheaval over Trump administration decisions to share taxpayer data. A previous acting commissioner announced his retirement earlier amid a furor over Elon Musk’s Department of Government Efficiency gaining access to IRS taxpayer data.

The Treasury Department says the agreement with ICE will help carry out President Donald Trump’s agenda to secure U.S. borders and is part of his larger nationwide immigration crackdown, which has resulted in deportations, workplace raids and the use of an 18th century wartime law to deport Venezuelan migrants.

The acting ICE director has said working with Treasury and other departments is “strictly for the major criminal cases.”

Advocates, however, say the IRS-DHS information-sharing agreement violates privacy laws and diminishes the privacy of all Americans.

In her ruling, Friedrich said the agreement doesn’t violate the Internal Revenue Code, so the IRS hasn’t substantially changed the way it handles taxpayer information. Instead, the Trump administration has decided to use already existing “statutorily authorized tools” to help with criminal investigations, Friedrich wrote.

Federal law allows the IRS to release some taxpayer information to other agencies if the information may assist in criminal enforcement proceedings, and the requesting agency meets certain criteria, the judge said.

Still, that doesn’t mean that all the information the IRS holds can be turned over, Friedrich said.

First, the investigating agency has to already have the name and address of the person whose information is being sought. Then the agency has to provide that information to the IRS, along with the time span for which the information relates, the law that allows the information to be released and the reason why any IRS-disclosed information would be relevant to the investigation.

“In other words, the IRS can disclose information it obtains itself (such as through audits), but not information it obtains exclusively from the taxpayer (such as a tax return filed by the taxpayer),” Friedrich wrote. She noted the law contains a significant exception — a taxpayer’s identity, including the individual’s name, address or taxpayer identifying number, isn’t considered part of the protected tax return information.