IRS-DHS Data Sharing Implementation Questioned by Appeals Court

A federal appeals court appeared skeptical of the government’s efforts to overturn a preliminary injunction banning the sharing of taxpayer data with immigration authorities, after the IRS mistakenly disclosed thousands of immigrants’ information to the Department of Homeland Security through an agreement between the two agencies.

During oral arguments Tuesday, judges on the US Court of Appeals for the District of Columbia Circuit questioned whether the agreement between the IRS and US Immigration and Customs Enforcement that shares taxpayer data for immigration investigations satisfies IRC Section 6103(i)(2), which requires tax return information remain confidential unless explicitly authorized. The statute permits disclosure only for qualifying non-tax criminal investigations and only when the requesting agency provides sufficiently specific identifying information.

The three-judge panel also grilled the government on its implementation of the controversial program. The judges referenced a February 2026 court filing submitted by IRS Chief Risk and Control Officer Dottie Romo that reported that the IRS mistakenly shared some address information. They cast doubt on the government’s claims that the document isn’t representative of it’s policy, but rather a mere error in implementing the policy.

“The Romo declaration essentially described the DHS-ICE data exchange program,” Judge Patricia A. Millett told Jacob Christensen, a Department of Justice attorney who argued for the IRS. “And that tells us you are not complying with the law, you are not complying with the requirements of the statute.”

Center for Taxpayer Rights, alongside other immigrant advocacy and labor groups, sued the IRS in February 2025 to block taxpayer data from being shared with the Department of Government Efficiency. The IRS and ICE agreed to share information in April 2025, and after they began sharing information in August 2025, the advocacy and labor groups sought a preliminary injunction to block the data sharing. In its amended complaint the groups said the arrangement violated Section 6103 and violated the Administrative Procedure Act because the IRS abandoned longstanding confidentiality practices without adequate explanation.

The government argued the disclosures were lawful because Section 6103(i)(2) allows disclosure to federal agencies for criminal investigations, including for noncitizens with final removal orders.

In November 2025, Judge Colleen Kollar-Kotelly granted a preliminary injunction barring the IRS from sharing taxpayer information under the agreement. After granting the injunction and following the Romo declaration, in a February 2026 order she said many ICE submissions lacked valid taxpayer addresses and instead included placeholders, detention facilities, or incomplete data. The IRS likely violated Section 6103 about 42,695 times, she added.

The IRS appealed the November 2025 decision in January, arguing the injunction improperly restrains lawful interagency cooperation, the Center failed to prove they have standing, and that no final agency policy exists for purposes of an APA challenge.

The IRS unlawfully transformed taxpayer databases into immigration enforcement tools, the Center for Taxpayer Rights said in its brief ahead of oral arguments. The group said it has standing to challenge the agreement because the policy directly causes injuries to the organization’s mission, which focuses on advancing taxpayer rights and ensuring due process in tax systems.

Madeline Gitomer, an attorney from Democracy Forward, argued for the plaintiffs.

Judges Cornelia T.L. Pillard and Robert L. Wilkins joined the panel.

The case is Center for Taxpayer Rights v. IRS, D.C. Cir., No. 26-05006, oral arguments held 5/12/26.