IRS-DHS Data Sharing Execution Questioned by Appeals Court (1)

A federal appeals court appeared skeptical Tuesday of the government’s bid to lift a preliminary injunction blocking the IRS from sharing taxpayer data with immigration authorities after mistakenly disclosing thousands of immigrants’ records.

During oral arguments, judges on the US Court of Appeals for the District of Columbia Circuit probed whether the agreement between the IRS and the Department of Homeland Security complies with IRC Section 6103(i)(2), which generally bars disclosure of taxpayer information except in limited criminal investigations.

Referencing a February 2026 court filing by IRS Chief Risk and Control Officer Dottie Romo, Judge Patricia A. Millett asked why the Romo declaration doesn’t represent the IRS-DHS information sharing policy, which they established through a memorandum of understanding. The Romo declaration reported the IRS mistakenly shared some address information with US Immigration and Customs Enforcement.

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

The Romo declaration doesn’t change the outcome of the case because it reflects an error, not the policy itself, Christensen said, but he agreed that the way it was implemented didn’t comply with Section 6103.

‘Exhibit A’

Christensen said the lawsuit doesn’t challenge the actual implementation of the information sharing program, nor does the agreement violate the Administrative Procedure Act. He cited the DC Circuit’s decision in Centro de Trabajadores Unidos v. Bessent, which said the memorandum of understanding didn’t constitute final agency action.

Millett disagreed, calling the Romo declaration the “rubber meets the road document.”

“This is documentation of the very policy, this is exhibit A,” Millett said. “Don’t tell us this policy doesn’t exist, here it is.”

Center for Taxpayer Rights and other immigrant advocacy groups, sued the IRS to block taxpayer data from being shared with the Department of Government Efficiency. After the IRS and ICE began sharing information in August 2025, the groups sought a preliminary injunction blocking the agreement, arguing the arrangement violated Section 6103 and the APA.

Judge Colleen Kollar-Kotelly granted a preliminary injunction barring the agreement. The IRS appealed, arguing it 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.

Christensen said the court would have to speculate in order to confirm the information in the Romo declaration actually represented the information sharing policy.

“Counsel, counsel, counsel, your client produced this document,” Judge Robert L. Wilkins said. “Don’t come in here and tell us that you don’t really know what significance this document has. If it didn’t have any significance than your client wouldn’t have produced it.”

Standing

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.

The panel appeared sympathetic to the groups’ standing claim. To establish Article III standing, the plaintiffs must demonstrate a concrete, actual or imminent injury-in-fact that’s traceable to the agreement and likely to be corrected by the injunction.

Madeline Gitomer, the Democracy Forward attorney who argued for the plaintiffs, said irreparable harm exists because the center’s clients are fearful and their participation in the tax system has been chilled. She cited the Supreme Court’s decision in Department of Commerce v. New York, which said that irreparable harm existed because adding a citizenship question to the census risked depressing response rates in immigrant communities, causing a loss of accurate population data that could not later be remedied.

“Here we have an organization that is unable to provide its core services because of the impact of a policy on its core clients,” Gitomer said.

Millett compared the case to League of Women Voters of the United States v. Newby, in which the DC Circuit held the league had standing because Brian Newby, then executive director of the Election Assistance Commission, imposed a proof-of-citizenship requirement that forced the groups to divert resources to address new voter registration barriers.

“Is that the theory you have here, kind of driving away the client base?” Millett asked Gitomer.

Gitomer said the standing issues presented in the case are on point with Newby.

Judge Cornelia T.L. Pillard also sat on the panel.

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