Federal courts have spent much of the past year weighing how far the government can go in using taxpayer information for immigration enforcement. That debate sharpened on September 8, 2026, when the U.S. Court of Appeals for the D.C. Circuit ruled against the IRS in a challenge to its data-sharing arrangement with Immigration and Customs Enforcement, while also drawing attention for unusually blunt language in the opinion.
Appeals court faulted IRS defense in data-sharing case
The D.C. Circuit said the IRS’ data-sharing procedure with ICE likely violated Section 6103 of the Internal Revenue Code, the federal law that generally protects tax return information, according to the court’s opinion and reporting from Courthouse News. Writing for the panel, Judge Cornelia Pillard rejected a government defense as a “nonstarter,” and the phrase “weak sauce” appeared in discussion of the administration’s argument that the injunction improperly required notice to the district court before some disclosures could proceed, according to coverage of the ruling. The panel included Judges Patricia Millett and Robert Wilkins and left in place a preliminary injunction barring further sharing under the challenged procedure.
The case grew out of ICE requests submitted in 2025 for information tied to roughly 1.28 million people, court records show. A separate February 2026 ruling from U.S. District Judge Colleen Kollar-Kotelly found the IRS violated the law about 42,695 times when it disclosed last-known taxpayer addresses to ICE after relying on a matching process that did not adequately satisfy statutory requirements, according to the Associated Press and Courthouse News. In a related Massachusetts case, a federal judge also found legal defects in the arrangement, including concerns over whether one identified ICE official could lawfully serve as the recipient for information tied to such a large volume of cases, according to court filings.
The government had argued that the lower-court order interfered with criminal investigative activity. But the appeals panel said the challenged process did not require ICE to provide the taxpayer’s address in the way the statute contemplates and did not reliably limit disclosures to officials personally and directly involved in an investigation, according to the opinion summarized by Courthouse News.
The litigation is centered in Washington, D.C., where the appeals court and one of the district court cases are based, and the immediate practical effect is that the federal injunction remains in place there. What is confirmed is that the court blocked the IRS from continuing disclosures under the same procedure while the case proceeds, and the judges warned that federal personnel could face serious consequences for willful violations of tax-confidentiality law, according to the appellate ruling summarized by Courthouse News.
What is not yet known is whether the Treasury Department or Justice Department will seek further review, including a rehearing or a Supreme Court appeal. Federal agencies also have not publicly laid out any replacement system that would satisfy the courts while still allowing information-sharing requests to proceed at scale. The government’s next procedural steps were not detailed in the ruling itself.
Because the issue involves a federal tax-privacy statute and a federal immigration-enforcement program, the effects are national rather than limited to one city or state. Still, the records cited in court show the scope was substantial: ICE made requests involving more than 1 million individuals, and the IRS ultimately provided information in tens of thousands of cases before courts stepped in, according to the Associated Press, Courthouse News, and court filings.
The legal fight stems from a 2025 agreement signed by Treasury Secretary Scott Bessent and Homeland Security Secretary Kristi Noem that allowed ICE to submit names and addresses for cross-verification against IRS records, according to the Associated Press. The arrangement immediately drew challenges from taxpayer advocates, immigrant-rights groups, and labor-backed organizations, which argued the disclosures would undermine long-standing privacy protections that are meant to keep tax filing separate from most law-enforcement uses.
Court records later added factual weight to those objections. In the D.C. litigation, Judge Kollar-Kotelly relied in part on a declaration from IRS Chief Risk and Control Officer Dottie Romo showing the IRS had provided DHS information on about 47,000 of the 1.28 million people ICE asked about, with many disclosures including last-known address information the court found was improperly released, according to the Associated Press. In Massachusetts, another judge concluded the agency’s policy shift was inadequately explained and likely unlawful under both the tax code and administrative law, according to court filings.
For residents and taxpayers, the immediate takeaway is narrow but concrete: the courts have not ended all possible cooperation between tax and immigration authorities, but they have said this specific process likely broke federal law. Unless a higher court changes the result, the existing injunctions continue to restrict use of the challenged IRS-to-ICE disclosure system while the cases move forward, leaving the next step to further court review or a revised federal policy.