A federal court has stepped in to temporarily stop the Internal Revenue Service (IRS) from sharing certain taxpayer information with Immigration and Customs Enforcement (ICE). The court’s decision, issued on November 21, 2025, comes after a lawsuit brought by a coalition of groups, including a nonprofit providing tax advice, a small business association, and two labor unions. These groups argued that the IRS’s new policy, which allows for the sharing of taxpayer data with ICE, violates privacy protections and potentially harms their members.
The court sided with the plaintiffs, finding that the IRS’s actions were likely unlawful and could cause irreparable harm. The ruling focuses on the IRS’s policy of sharing taxpayer address information with ICE, specifically under a provision of the Internal Revenue Code that allows such sharing in connection with criminal investigations. The court has issued a stay, meaning the policy is temporarily suspended, and ordered other appropriate interim relief as the case proceeds.
Background of the Case
The heart of the matter lies in the IRS’s handling of sensitive taxpayer information. For years, the IRS has maintained a policy of strict confidentiality, stemming from the Tax Reform Act of 1976. This act aimed to protect taxpayer privacy, especially in the wake of concerns about government overreach. The IRS has historically been cautious about sharing taxpayer data, emphasizing the importance of trust in the tax system.
However, the plaintiffs alleged that the IRS had shifted its approach, adopting a new “Data Policy” that prioritized sharing information with other agencies, including ICE. Under this policy, the IRS entered into an agreement with ICE in April 2025 to share taxpayer address information. In August 2025, the IRS disclosed the addresses of approximately 47,000 taxpayers to ICE.
The IRS justified its actions by citing a provision in the Internal Revenue Code (Section 6103(i)(2)) that allows the sharing of certain information with other federal agencies if the information is relevant to a criminal investigation. The IRS relied on a representation from ICE that a single individual at ICE was “personally and directly engaged” in over one million criminal investigations or proceedings.
The plaintiffs, however, challenged the legality of this data sharing, arguing that it violated taxpayer privacy and the specific requirements of Section 6103(i)(2). They also argued that the IRS’s new policy was arbitrary and capricious, meaning it was not based on a reasonable assessment of the relevant issues.
The Court’s Findings
The court’s decision centered on several key points:
* Final Agency Action: The court found that the IRS’s policy of sharing address information with ICE constituted a “final agency action” subject to judicial review. This means the policy was not just a preliminary step, but a completed decision that had legal consequences.
* Unlawful Under the Internal Revenue Code: The court concluded that the IRS’s actions likely violated Section 6103(i)(2) of the Internal Revenue Code. Specifically, the court found that the IRS may have failed to properly ensure that ICE’s requests for information met the statutory requirements, including that the information be used solely for a criminal investigation and that it involve individuals “personally and directly engaged” in the relevant criminal matter. The court also found fault with the IRS’s reliance on the claim that one individual was “personally and directly engaged” in over a million investigations.
* Arbitrary and Capricious: The court also determined that the IRS’s implementation of the Address-Sharing Policy was likely “arbitrary and capricious.” This means the IRS failed to provide a reasoned explanation for its policy change, failed to consider the reliance interests of taxpayers who had trusted the IRS to keep their information confidential, and failed to consider the potential impact of the policy on those taxpayers.
* Irreparable Harm: The court found that the plaintiffs had shown a strong likelihood of irreparable harm. For the Center for Taxpayer Rights, the court found that the IRS’s policy threatened the organization’s ability to provide counseling and education. For the plaintiff’s members, the court found that their address information was at risk of being used for civil immigration enforcement.
The Court’s Order
Based on these findings, the court granted the plaintiffs’ motion for a stay of the Address-Sharing Policy and other appropriate injunctive relief. The court’s order includes the following:
* A stay of the IRS’s Address-Sharing Policy.
* An order for the IRS to notify the court of any planned future data transfers to ICE.
* An order for the Secretary of the Treasury to convey to ICE the expectation that ICE will handle the information consistent with the court’s findings and the safeguards contained in the Internal Revenue Code.
The court denied the defendants’ motion to dismiss the APA claim regarding the broader Data Sharing policy. However, the court granted the defendants’ motion to dismiss the ultra vires claim.
The case will now proceed, and the court will consider the plaintiffs’ broader claims about the IRS’s Data Policy. The court’s decision underscores the importance of protecting taxpayer privacy and the need for government agencies to adhere to legal requirements when sharing sensitive information.