Court challenge stems from one of Trump’s Inauguration Day executive orders
An agreement between the IRS and U.S. Immigration and Customs Enforcement (ICE) allows immigration officers to access certain taxpayer return information during criminal investigations. The move may raise concerns for taxpayers involved in immigration proceedings or worried about the privacy of their tax records.
The IRS signed a Memorandum of Understanding (MOU) with ICE authorizing the disclosure of tax return information in accordance with Internal Revenue Code Section 6103(i)(2).
The MOU came to light after immigrant rights groups filed a federal lawsuit, Centro de Trabajadores Unidos v. Bessent, under the Freedom of Information Act. The plaintiffs sought records of any information-sharing agreements between the IRS and immigration authorities.
A redacted copy of the MOU was submitted to the U.S. District Court for the District of Columbia. It cites Executive Order No. 14161, issued on Inauguration Day of President Trump’s second term. The order directs federal agencies to coordinate efforts to identify and remove individuals unlawfully present in the country.
After the government disclosed the MOU, the suit shifted course. The plaintiffs are now asking the court to block the agreement, arguing it violates federal tax law and threatens the integrity of the voluntary tax system.
How the Agreement Works and Why It’s Drawing Fire
Under the agreement, ICE can request tax return information for nontax criminal investigations by submitting specific details to the IRS.
Each request must include:
- Name and address of the taxpayer.
- Taxable period(s) for which the agency seeks return information.
- The nontax federal criminal statute under which ICE has opened an investigation or proceeding for the named taxpayer.
- The reasons the tax return information is relevant to the criminal investigation or proceeding.
The MOU also permits ICE to share the tax information with other federal personnel when necessary. This may include agency employees, individuals with technical expertise, court reporters, and others involved in interviews, negotiations, or legal proceedings related to the case.
In a sharply worded amicus brief filed on April 30, more than 100 members of Congress urged the court to block the agreement, arguing that it undermines longstanding protections for taxpayer privacy. “For decades, Congress has intentionally refused to grant ICE the power to obtain tax return information for civil immigration enforcement or related criminal prosecutions," the brief says.
The release of the redacted MOU was followed by the announced departures of acting IRS Commissioner Melanie Krause and Chief Privacy Officer Kathleen Walters.
Practical Considerations for Employers and Taxpayers
While the MOU focuses on criminal immigration investigations, it remains unclear how broadly ICE will interpret its authority under the agreement. Payments made to unauthorized workers are subject to the same tax withholding and reporting obligations that apply to other classes of foreign nationals. Employers who knowingly or unknowingly employ undocumented workers may face fines, penalties, and sanctions that can be imposed by the U.S. Department of Homeland Security.
Employers may want to monitor the litigation and stay informed about the potential chilling effect on tax compliance among immigrant workers, as well as any risks related to employment eligibility verification practices or potential I-9 audits or raids. Coordinating with employment, immigration and tax counsel may be needed to reduce legal exposure and maintain workplace stability.
Taxpayers who file using an ITIN, or who are concerned about the immigration implications of past or future tax filings, should consult legal counsel before responding to any contact from ICE or the IRS related to this agreement. Maintaining accurate tax records and ensuring timely filings may help mitigate risk, but proactive legal advice is key.
[View source.]
