10
Loading video...
By Dan Gooding
Associate News Editor
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
The Trump administration suffered another legal setback Tuesday when a federal appeals court blocked an Internal Revenue Service (IRS) program used to share taxpayer information with Immigration and Customs Enforcement (ICE), marking the second major court ruling in recent days involving administration efforts to use federal data systems in immigration and election-related enforcement.
In a unanimous ruling, the U.S. Court of Appeals for the District of Columbia Circuit upheld a lower-court order preventing the IRS from continuing a data-sharing arrangement with ICE that had already resulted in more than 47,000 taxpayer records being disclosed to immigration authorities. The court found that challengers were likely to succeed in arguing that the program violated federal tax confidentiality laws.
In a statement to Newsweek, the Center for Taxpayer Rights (CTR), which brought the case, said the court upheld the "fundamental right to the confidentiality of taxpayer return information."
Read More on Politics
"It made clear that Treasury and the IRS can’t do end runs around carefully crafted statutory exceptions to confidentiality just because it wants to or thinks it knows better," a spokesperson said. "All US taxpayers should be relieved by the court’s order today."
...
The decision comes days after the same appeals court declined to pause a separate ruling against the administration's expanded SAVE citizenship-verification system, which is at the center of a broader legal battle over voter-roll maintenance and citizenship checks ahead of this year's midterm elections.
The practical impact of the two court cases may be felt most acutely in states that hoped to use expanded federal databases to verify voter citizenship before November's elections.
“DHS strongly disagrees with this ruling," a DHS spokesperson told Newsweek Tuesday. "We will continue using every lawful tool available to locate and remove illegal aliens with final orders of removal, and this ruling in no way prevents us from doing so.”
Newsweek also reached out to the White House, the IRS, and the League of Women Voters for comment Tuesday afternoon.
Related Story
DHS Voter Fraud Push: Map of States Requiring Proof of ID or Citizenship
Court Says IRS-ICE Policy Likely Violated Federal Law
The IRS case stems from a 2025 agreement between the tax agency and ICE under which immigration officials sought address information on people they said were under criminal investigation for failing to comply with final deportation orders.
According to court filings, ICE requested information on roughly 1.28 million people. The IRS subsequently developed what it called a "Data-Exchange Procedure" for processing those requests.
The appeals court found that the process likely conflicted with Section 6103 of the Internal Revenue Code, a post-Watergate taxpayer privacy law that tightly restricts when tax information can be shared with other federal agencies.
Among other findings, the court said that the IRS disclosed taxpayer information even when ICE requests lacked information required by statute. Judges noted that the system accepted requests where address fields contained entries such as "Unknown Address," "Failed to Provide" or "NA NA," despite federal law requiring agencies to provide the taxpayer's name and address before obtaining return information.
The court also found that more than 90 percent of the records disclosed to ICE were generated through a TIN-matching process that did not verify whether a valid address had been supplied.
"The Data-Exchange Procedure indisputably contravenes the requirements of section 6103," Judge Cornelia Pillard wrote for the panel.
The judges further noted that government attorneys acknowledged during oral arguments that some disclosures occurred "not in compliance with the statute."
Why the Case Matters
The ruling is significant because it limits one of the administration's efforts to use existing government databases to aid immigration enforcement. The panel emphasized that taxpayer privacy protections were strengthened after Watergate amid concerns about executive branch misuse of sensitive information.
The court also rejected government arguments that the IRS procedure was merely an internal operational process and therefore shielded from judicial review, holding instead that it constituted reviewable "final agency action" under the Administrative Procedure Act.
For immigration advocates and taxpayer-rights groups, the decision represents a major victory. The court found that organizations challenging the policy had presented evidence that immigrant taxpayers became less willing to engage with tax assistance programs because of fears their information could be shared with immigration authorities.
"As far as going forward, we will need to see if the government appeals the ruling," the CTR said. "We will also need to see what, if any, changes to procedures they may make in light of this ruling. And of course, there are about 43,000 taxpayers whose return information has been found to be unlawfully shared with ICE by two courts [the district court and the court of appeals]—these taxpayers must be notified so that they may seek damages against the government for this unlawful disclosure."
Separate Fight Over Citizenship Verification
The IRS ruling follows another high-profile legal battle involving the administration's efforts to leverage federal databases, this time in the election arena.
Last week, the D.C. Circuit denied the administration's request to stay a lower court ruling that blocked implementation of an expanded version of DHS' Systematic Alien Verification for Entitlements program, known as SAVE.
Historically, SAVE was used primarily to verify immigration status for eligibility determinations involving certain government programs. Under changes implemented in 2025 following a Trump executive order, the system was expanded to allow searches using Social Security numbers, access to additional Social Security Administration records and bulk queries covering large numbers of people.
The administration argued that the changes would help states verify citizenship and maintain accurate voter rolls. According to court records, the modified system allowed state and local agencies to submit bulk requests and verify citizenship using Social Security records in ways that were not previously available.
A coalition that included the League of Women Voters challenged the system, arguing that it violated federal privacy and Social Security laws. In June, a district judge sided with the challengers, concluding that DHS lacked statutory authority for portions of the expanded system and that it violated multiple federal statutes.
When the administration sought emergency relief, the appeals court refused. The panel said the government had failed to make the "strong showing" needed to justify a stay and noted that many of its central legal arguments were raised only after the district court had already ruled.
The court also pointed to evidence that some U.S. citizens were incorrectly flagged because Social Security records had not been updated after naturalization, potentially requiring them to provide additional proof of citizenship or risk removal from voter rolls.
Potential Supreme Court Battle
Both cases could ultimately reach the Supreme Court.
The IRS decision only concerns a preliminary injunction, not the final merits of the lawsuit. However, the D.C. Circuit repeatedly stated that challengers are likely to succeed in showing the IRS program violated federal law.
The SAVE litigation is also ongoing, with the government on Tuesday asking the Supreme Court to take up the case. The appeals court's recent order addressed only whether the administration was entitled to emergency relief while the appeal proceeds. The underlying questions about the legality of the modified system remain before the court.
Taken together, the cases underscore a growing legal battle over how far the federal government can go in using taxpayer, immigration and Social Security data to advance immigration enforcement and election-integrity initiatives, issues likely to remain politically charged as the 2026 midterm campaign enters its final weeks.
Contact Newsweek editors on this story: Samantha Beech and Dave Siminoff.
View 0 Comments
Submit Correction
View Editorial & AI Guidelines