Immigration Enforcement and Tax Data Sharing

Case Overview

Reason for a lawsuit

The civil immigration enforcement appellate case of Centro de Trabajadores Unidos v. Scott Bessent represents a watershed moment in U.S. immigration law, interagency cooperation, and administrative jurisprudence. A recent ruling by the United States Court of Appeals for the District of Columbia Circuit addresses the volatile intersection of strict taxpayer confidentiality laws and the executive branch’s aggressive expansion of interior immigration enforcement. The litigation, which focuses on Immigration Enforcement and Tax Data Sharing, was initiated by a coalition of immigrant advocacy organizations seeking to permanently enjoin the Internal Revenue Service (IRS) from executing a highly controversial Memorandum of Understanding (MOU) with the Department of Homeland Security (DHS).

This interagency agreement fundamentally dismantled decades of established tax privacy policy by authorizing the IRS to cross-reference and disclose the last-known residential addresses of foreign nationals to U.S. Immigration and Customs Enforcement (ICE). ICE sought this data under the premise that undocumented immigrants with outstanding final orders of removal are subject to federal criminal prosecution for willful failure to depart the United States under 8 U.S.C. § 1253(a)(1).   

Decision Overview

In a unanimous decision authored by Senior Circuit Judge Harry T. Edwards, the D.C. Circuit affirmed the District Court’s denial of the plaintiffs’ motion for a preliminary injunction. The appellate court determined that the plain, unambiguous text of 26 U.S.C. § 6103(i)(2)—a statutory carve-out for non-tax criminal investigations—expressly permits the IRS to disclose a taxpayer’s identity and mailing address to federal law enforcement officers without requiring a judicial warrant or court order. Furthermore, the court decisively rejected the plaintiffs’ claims under the Administrative Procedure Act (APA).

Relying extensively on the Supreme Court’s landmark 2024 ruling in Loper Bright Enters. v. Raimondo, which abolished Chevron deference, the D.C. Circuit concluded that the IRS’s abrupt reversal of its historical confidentiality policies was legally unassailable because the agency had simply adopted the judicially determined “best reading” of the statute. This definitive immigration case brief outlines the profound legal reasoning of the court and the sweeping compliance implications for foreign nationals, tax professionals, and U.S. employers navigating this new enforcement landscape

Key Facts

The factual matrix underpinning this litigation involves a profound shift in executive branch policy regarding the compartmentalization of federal data. Historically, the U.S. government has maintained a strict firewall between tax administration and civil immigration enforcement to encourage voluntary tax compliance among all earners, regardless of their immigration status.

Background and Parties

The Appellants in this action comprise a coalition of non-profit immigrant worker centers and advocacy groups, including Centro de Trabajadores Unidos, Immigrant Solidarity DuPage, Somos Un Pueblo Unido, and Inclusive Action for the City. These organizations serve working-class immigrant communities, providing educational, legal, and economic support. Crucially, their membership includes foreign nationals who lack lawful immigration status but actively participate in the U.S. economy and comply with federal tax obligations.   

The Appellees represent the highest echelons of the federal government’s financial and homeland security apparatus. They include Scott Bessent, sued in his official capacity as the Secretary of the Treasury, alongside the Internal Revenue Service (IRS) and the Department of Homeland Security (DHS). The litigation also attracted significant attention from external stakeholders, resulting in amicus curiae briefs filed by the Electronic Frontier Foundation, ninety-three Members of Congress supporting the Appellants, and the Federation for American Immigration Reform supporting the Appellees.

Immigration History and the ITIN System

To understand the gravity of the IRS-ICE data-sharing agreement, it is necessary to examine the mechanisms by which undocumented immigrants interact with the U.S. tax system. Foreign nationals who earn income in the United States but are ineligible for a Social Security Number (SSN) are required by law to file taxes using an Individual Taxpayer Identification Number (ITIN). For decades, the IRS actively encouraged undocumented workers to utilize the ITIN system, assuring them through policy statements and agency guidelines that their personal data would remain strictly confidential and would not be weaponized for civil deportation purposes.   

This firewall was rooted in the Tax Reform Act of 1976, enacted in the aftermath of the Watergate scandal to prevent the executive branch from utilizing sensitive tax data for political or retributive law enforcement purposes. Prior to 2025, the IRS interpreted 26 U.S.C. § 6103—the statute governing the confidentiality of tax returns—to strictly prohibit the disclosure of a taxpayer’s address to immigration authorities when no other substantive tax information was requested. The Internal Revenue Manual and IRS Publication 4639 explicitly stated that requests from law enforcement seeking solely taxpayer addresses were “invalid” under the law.

The April 2025 Memorandum of Understanding

This historical paradigm shifted dramatically in early 2025 following executive directives aimed at escalating interior immigration enforcement. DHS identified a strategic bottleneck in its deportation operations: locating foreign nationals who had already been issued final administrative or judicial orders of removal but who had successfully evaded apprehension. To overcome this hurdle, ICE sought access to the IRS’s vast, continuously updated database of taxpayer residential addresses.   

To circumvent the general rule of tax privacy, ICE invoked 8 U.S.C. § 1253(a)(1), a provision of the Immigration and Nationality Act that classifies the willful failure to depart the United States within 90 days of a final removal order as a federal criminal offense punishable by up to four years in prison (or ten years in certain cases). By framing the location of these individuals not as a civil immigration matter, but as an active investigation into a “non-tax federal crime,” ICE asserted it had the legal authority to request IRS data under the exception codified at 26 U.S.C. § 6103(i)(2).   

On April 7, 2025, the IRS and DHS formalized this arrangement by executing a Memorandum of Understanding (MOU). Under the terms of the MOU, ICE agreed to submit written requests containing the name and address of the targeted individual, the relevant taxable periods, the specific criminal statute under investigation (8 U.S.C. § 1253(a)(1)), and the date of the final order of removal. In return, the IRS agreed to review these requests for completeness, execute a search through its databases (utilizing ITIN or address matching protocols), and disclose the taxpayer’s “last known address” to ICE.

Chronology of Material Events

The rapid development and subsequent legal challenges to the MOU are detailed in the following chronology:

Procedural History

The procedural posture of this litigation is highly complex, involving rapid emergency motions, parallel lawsuits in the same federal district, and shifting evidentiary records regarding the government's actual execution of the data-sharing agreement.

Filings, Adjudications, Denials, Approvals

The Appellants initiated this lawsuit on March 7, 2025, acting primarily on the basis of investigative journalism detailing the impending policy shift. Recognizing the imminent threat to their members, the Appellants filed a motion for a Temporary Restraining Order (TRO) on March 14, 2025, seeking to bar the IRS from transmitting any address data to DHS. The District Court denied the TRO, noting that emergency relief was premature given the government's assurances that any data sharing would strictly comply with federal law.   

Following the denial of the TRO, the Appellants amended their complaint on March 26, 2025, and moved for a preliminary injunction. It was during the briefing schedule for this motion that the government formally disclosed the existence of the April 7, 2025 MOU, effectively confirming the Appellants' allegations regarding the new interagency architecture.   

On May 12, 2025, the District Court issued its memorandum opinion (Centro de Trabajadores Unidos v. Bessent, 2025 WL 1380420) denying the preliminary injunction. The District Court ruled that while the Appellants possessed the requisite Article III standing to sue, they had failed to demonstrate a likelihood of success on the merits. The court found that the plain language of 26 U.S.C. § 6103(i)(2) mandated the IRS to share a taxpayer's name and address upon receiving a complete and valid request from another agency. Furthermore, the court dismissed the APA claims, holding that the IRS's internal manuals did not have the force of law and that the agency was merely utilizing a statutorily authorized tool.   

Appeals, Motions, or Remands

Dissatisfied with the District Court's ruling, the Appellants filed an interlocutory appeal to the United States Court of Appeals for the District of Columbia Circuit, seeking an emergency reversal of the preliminary injunction denial. The appellate court reviewed the lower court's ultimate decision for an abuse of discretion, while analyzing all underlying legal conclusions and statutory interpretations de novo.   

Jurisdictional Posture and Parallel Litigation

A critical element of the procedural history is the existence of a parallel lawsuit, Center for Taxpayer Rights v. Internal Revenue Service (Case No. 25-0457), proceeding concurrently in the U.S. District Court for the District of Columbia before Judge Colleen Kollar-Kotelly.   

The D.C. Circuit was careful to explicitly differentiate its jurisdictional scope in Centro de Trabajadores from the proceedings in Center for Taxpayer Rights. The Appellants in Centro brought a facial challenge against the MOU, arguing that the text of the agreement inherently violated the Internal Revenue Code and the APA. In contrast, the plaintiffs in Center for Taxpayer Rights brought an as-applied challenge, focusing on how the IRS was actively executing the MOU.   

This distinction proved vital. In November 2025, Judge Kollar-Kotelly granted a preliminary injunction in Center for Taxpayer Rights, halting the data sharing. Furthermore, in February 2026, the IRS submitted a sworn declaration from its Chief Risk and Control Officer, Dottie A. Romo, admitting that the agency had improperly supplied ICE with taxpayer addresses based on "incomplete or insufficiently populated" data fields (such as ZIP codes reading "Unknown Address") due to flaws in the agency's automated "TIN Matching" script.   

Despite these alarming factual admissions regarding the government's botched implementation of the policy, the D.C. Circuit ruled that because Centro de Trabajadores was strictly a facial challenge, the factual compliance issues and government errors uncovered in the Taxpayer Rights litigation were outside its appellate jurisdiction. The court confined its analysis solely to the statutory text and the face of the MOU.

Legal Issues Presented

The D.C. Circuit was tasked with resolving three highly technical legal questions spanning constitutional standing, statutory interpretation, and the limits of administrative law in a post-Chevron landscape.

1. Article III Standing: Did the appellant organizations possess associational standing to seek injunctive relief on behalf of their members, despite the fact that they did not publicly identify specific individual taxpayers who were imminently threatened by the IRS-DHS data-sharing agreement?    

2. Statutory Interpretation (The "Contrary to Law" Claim): Does 26 U.S.C. § 6103(i)(2) prohibit the IRS from disclosing a taxpayer's residential address to a federal law enforcement agency when the request seeks the address as a standalone piece of information, unattached to broader financial tax return data, for the purpose of investigating a non-tax federal crime?    

3. Administrative Procedure Act (The "Arbitrary and Capricious" Claim): Does the April 7, 2025 MOU constitute a reviewable "final agency action" under the APA? Furthermore, did the IRS act arbitrarily and capriciously by abandoning its decades-old interpretation of § 6103(i)(2)—which previously barred address-only disclosures—without providing a reasoned, public explanation for its sudden policy reversal?

Decision Summary

Outcome: The United States Court of Appeals for the District of Columbia Circuit affirmed the District Court's judgment in its entirety, ruling decisively in favor of the government Appellees. The Appellants' motion for a preliminary injunction was denied.   

Holding: The court established three primary holdings:

1. Standing is Satisfied: The Appellants successfully demonstrated associational standing. The sworn declarations indicating that organizational members were undocumented, filed taxes via ITINs, and possessed final orders of removal were sufficient to establish a substantial and imminent risk of injury-in-fact traceable to the IRS policy.   
2. Disclosure is Statutorily Authorized: The plain, unambiguous text of 26 U.S.C. § 6103(i)(2) authorizes the IRS to disclose taxpayer address information to ICE for the purpose of investigating non-tax criminal offenses. Because the statute explicitly removes "taxpayer identity" (which includes addresses) from the highly protected category of "taxpayer return information," addresses may be shared as standalone data points upon receipt of a procedurally valid request.   
3. No APA Violation Occurred: The MOU represents a nonbinding policy statement that merely clarifies existing statutory duties; thus, it is not a reviewable "final agency action". Furthermore, applying the Supreme Court's elimination of Chevron deference in Loper Bright, the court held that because its independent judgment yielded the conclusion that the statute mandates disclosure, demanding a reasoned explanation from the IRS regarding its change in policy would be a "useless formality".   

The court affirmed the judgment of the District Court. Because the Appellants failed to demonstrate a likelihood of success on the merits of their claims, the court declined to issue any injunctive relief, allowing the facial validity of the IRS-ICE data-sharing agreement to stand.

Legal Reasoning and Analysis

The appellate opinion, delivered by Senior Circuit Judge Edwards, represents a masterful, albeit rigid, exercise in textualist statutory interpretation combined with a profound application of the new paradigms of administrative law. The court's step-by-step reasoning systematically dismantled the Appellants' reliance on historical agency practice and legislative intent.

Interpretation of Law and Policy: The Plain Text of § 6103

Appellants' argument

The Appellants argued that the Tax Reform Act of 1976 explicitly aimed to prevent law enforcement from weaponizing IRS data. They argued that 26 U.S.C. § 6103(i)(2) does not permit the IRS to operate as a glorified address book for ICE; rather, addresses should only be disclosed as incidental identifying markers attached to broader, substantive financial investigations.   

The court rejected this argument in favor of a strict textualist breakdown of the statute. The court noted its obligation to independently determine the "best reading" of the law. The step-by-step statutory logic progressed as follows:   

1. The Baseline: Section 6103(a) dictates that tax returns are strictly confidential.   
2. The Exception: Section 6103(i)(2) creates an exception, commanding that the IRS "shall" disclose "return information (other than taxpayer return information)" for use in non-tax criminal investigations.   
3. The Definitional Carve-Out: Section 6103(b)(6) defines "taxpayer identity" to explicitly include a taxpayer's mailing address. Crucially, Section 6103(i)(2)(C) states: "For purposes of this paragraph, a taxpayer's identity shall not be treated as taxpayer return information".   

By synthesizing these clauses, the court concluded that the math of the statute is undeniable: an address is a taxpayer identity; a taxpayer identity is legally stripped of its status as "taxpayer return information" for the purposes of criminal investigations; therefore, an address is standard "return information" that the IRS is mandated to disclose upon receiving a valid written request.

Appellants' counterarguments

The court systematically addressed and dismissed the Appellants' counterarguments regarding the statutory text:

• The "Current" Address Argument: Appellants pointed out that the statute requires the requesting agency to provide "the name and address of the taxpayer" when making the request. They argued this meant ICE had to already possess the current address, making the IRS search redundant. The court refused to "read into statutes words that aren't there," noting Congress simply wrote "address," not "current address." It is perfectly logical, the court reasoned, for ICE to submit an old address to obtain a new, updated one.   
• The Court Order Argument: Appellants argued that allowing the IRS to hand over location data without judicial oversight circumvents the Fourth Amendment and congressional intent. The court utilized the canon of expressio unius est exclusio alterius. It observed that neighboring provisions of the tax code—such as § 6103(i)(1) (broad criminal investigations) and § 6103(i)(5) (locating fugitives)—explicitly require an ex parte court order from a federal judge. Because Congress knew how to mandate a court order and explicitly included it in other subsections but omitted it from § 6103(i)(2), the court concluded the omission was deliberate.   
• Legislative History: Appellants presented House and Senate conference reports from 1978 and 1982 suggesting Congress only intended addresses to be shared alongside financial data. The court declared that where statutory text is clear, resorting to legislative history to "cloud" the meaning is inappropriate. Furthermore, the court noted the government unearthed a 1981 Senate report indicating Congress believed § 6103(i)(2) authorized the acquisition of current addresses to locate individuals violating the Military Selective Service Act, rendering the historical record "inconclusive" at best.   

Use of Precedent: The APA and the Ghost of Chevron

The Appellants' secondary line of attack relied on the Administrative Procedure Act (APA). For decades, the IRS's own Internal Revenue Manual and internal memoranda explicitly dictated that "Requests for addresses only are invalid". The Appellants argued that the April 2025 MOU represented a massive, unexplained reversal of agency policy. Under traditional administrative law, an agency changing its position without providing a reasoned analysis for the reversal acts arbitrarily and capriciously.   

The D.C. Circuit eviscerated this argument utilizing two distinct legal principles, deeply influenced by the Supreme Court's monumental 2024 decision in Loper Bright Enters. v. Raimondo, which overturned the Chevron deference doctrine.

Not a "final agency action" subject

First, the court held that the MOU was not a "final agency action" subject to judicial review under 5 U.S.C. § 704. Applying the Bennett v. Spear test, the court determined that the MOU was merely a nonbinding policy statement. The agency did not promulgate it through notice-and-comment rulemaking, and it did not alter legal rights or obligations. Instead, the MOU simply reiterated the existing statutory requirements of § 6103(i)(2) and outlined internal procedures for how the IRS and ICE would process the paperwork. An agency action that "merely clarifies existing duties" under a statute does not trigger APA review. The court also noted that the IRS's Internal Revenue Manual is "directory rather than mandatory" and lacks the force of law, meaning the agency is not legally bound by its past internal guidance.

Independent judgment to find the single "best reading"

Second, and more profoundly, the court explained how Loper Bright fundamentally "upended" the legal foundation for change-of-position challenges. Under the defunct Chevron regime, if a statute was ambiguous, courts deferred to any reasonable agency interpretation. If the agency later changed its mind, it had to provide an explanation of its new policy rationale to satisfy the APA.

However, Loper Bright declared that "agencies have no special competence in resolving statutory ambiguities" and that courts must utilize independent judgment to find the single "best reading" of a statute. The D.C. Circuit reasoned that because it had independently determined that the "best reading" of § 6103(i)(2) requires the disclosure of addresses, the IRS's past historical reluctance to share the data was essentially a long-standing legal error. Because the agency was now acting in accordance with the court's interpretation of the law, remanding the case to force the IRS to explain its change of heart would be a "useless formality". No explanation from the executive branch could alter the judiciary's definitive conclusion regarding the statute's mandate.

Practical Implications

The D.C. Circuit’s ruling in Centro de Trabajadores Unidos v. Scott Bessent represents a seismic disruption in the operational realities of immigration enforcement, tax administration, and corporate compliance. By legally validating the pipeline between the IRS database and ICE deportation officers, the decision generates profound second and third-order effects across multiple sectors.

Impact on Applicants, Petitioners, and Foreign Nationals

The immediate implication for foreign nationals is the obliteration of the historical sanctuary provided by the U.S. tax system. The government relies heavily on the willingness of undocumented immigrants to participate in the tax base. Millions of individuals lacking lawful status apply for Individual Taxpayer Identification Numbers (ITINs) to pay income taxes, often to establish a record of "good moral character" essential for future immigration relief, such as Cancellation of Removal or adjustment of status.   

By affirming that ICE can legally access the "last known address" of these taxpayers by framing their failure to depart as a criminal violation of 8 U.S.C. § 1253(a)(1), the court has effectively transformed the IRS into a geospatial tracking arm of homeland security. This will undoubtedly trigger a massive chilling effect. Undocumented individuals, fearing that filing a W-2 or a 1040 will result in a targeted raid on their residence, are highly likely to abandon voluntary tax compliance. This dynamic forces immigrants into a desperate calculus: comply with federal tax law and risk detention, or violate tax law to maintain physical security.   

Furthermore, this ruling highlights a broader tactical shift by DHS: the aggressive blurring of civil immigration enforcement and criminal law. ICE is leveraging a historically narrow criminal statute (§ 1253(a)(1)) as a skeleton key to unlock civil data silos. Because the MOU allows ICE to request data for anyone they claim is "under criminal investigation," the threshold for accessing IRS records is alarmingly low, requiring no formal indictment or grand jury subpoena.   

Documentation and Employer Compliance Considerations

The ripple effects of this data sharing extend aggressively into the corporate sector. When the IRS provides ICE with a taxpayer’s last known residential address, that data is inherently linked to the individual's employment records, W-2s, 1099s, and payroll tax submissions. While the MOU ostensibly limits the shared data to the individual's address, the resulting apprehensions provide ICE with direct intelligence regarding the specific companies employing undocumented labor.   

Employers face an immediate escalation in worksite enforcement risks. If ICE apprehends an individual at the address provided by the IRS and determines they were employed without authorization, ICE will inevitably initiate an investigation into the employer's hiring practices. This exposes the employer to severe liability regarding Form I-9 compliance.   

A common critical error occurs when employers unknowingly accept an ITIN in place of a valid Social Security Number (SSN) during the Form I-9 verification process, as both numbers contain nine digits. If an employer issues a W-2 using an ITIN, and that ITIN is subsequently flagged by the IRS-ICE data exchange, the employer is at high risk for civil fines, ICE subpoenas, and potential criminal payroll tax investigations for harboring or employing unauthorized aliens.   

Risk Mitigation Guidance

In light of this appellate ruling, U.S. employers, HR departments, and immigration practitioners must adopt aggressive, proactive compliance postures:

1. Immediate Form I-9 Audits: Employers must conduct rigorous, independent audits of their Form I-9 records and payroll databases. It is imperative to identify and rectify instances where ITINs have been improperly accepted as proof of work authorization. Audits must be conducted uniformly and without discrimination to avoid violating the anti-discrimination provisions of the INA.   
2. Strict Protocols for SSA No-Match Letters: Employers should anticipate a surge in "no-match" letters from the Social Security Administration (SSA), which indicate that the name or SSN reported for an employee does not match government records. Companies must establish standardized, written protocols for responding to these letters. While a no-match letter is not direct evidence of unauthorized immigration status, failing to follow up with the employee to resolve the discrepancy can establish "constructive knowledge" of unauthorized employment, leading to severe penalties during an ICE audit.   
3. Monitoring As-Applied Litigation Vulnerabilities: While the D.C. Circuit validated the facial legality of the statute, employers and defense attorneys must recognize the ongoing vulnerabilities in how the government applies this law. As revealed in the companion Center for Taxpayer Rights litigation, the IRS admitted to improperly disclosing nearly 47,000 addresses due to flawed "TIN Matching" scripts and incomplete data fields submitted by ICE. Consequently, in the event of an enforcement action derived from IRS data, defense counsel must aggressively demand the administrative record of the § 6103(i)(2) request to ensure the government strictly complied with the mandatory procedural requirements. If ICE submitted "dummy data" to execute a fishing expedition, the resulting evidence may be subject to suppression.   

How can an immigration lawyer from the Immigration Professional Association help?

Navigating the rapidly escalating complexities of federal immigration enforcement requires highly sophisticated, multi-disciplinary legal strategy. At the Immigration Professional Association, our attorneys possess the vital expertise necessary to defend both foreign nationals and U.S. employers against aggressive interagency data-sharing initiatives. We provide comprehensive Form I-9 audits, internal corporate compliance training, and direct legal representation during ICE worksite investigations to shield your business from civil fines and criminal payroll liabilities. For individuals facing outstanding removal orders under threat of 8 U.S.C. § 1253(a)(1) prosecution, we aggressively pursue motions to reopen, stays of removal, and alternative forms of equitable relief.

By proactively identifying vulnerabilities in your employment records or immigration history, we neutralize the underlying threats before they result in apprehension. Contact us immediately to ensure your workforce and your family remain protected from the severe implications of IRS-ICE enforcement protocols.