President Donald Trump addresses reporters outside the Oval Office at the White House on Monday, April 13, 2026, in Washington (AP Photo/Alex Brandon).
A federal appeals court ruled Tuesday that the Trump administration violated IRS rules when it turned over confidential taxpayer information to Immigration and Customs Enforcement (ICE).
The case began in February 2025, when the nonprofit Center for Taxpayer Rights and two unions filed suit during the Department of Government Efficiency’s (DOGE) push “to access highly sensitive information systems and dismantle and restructure multiple federal agencies.”
Although the administration has since largely moved away from embedding DOGE personnel inside federal agencies, legal fights over the sweeping changes made during that period have continued to move through the courts.
In the current lawsuit, the government had already suffered setbacks in the trial court, where U.S. District Judge Colleen Kollar-Kotelly, appointed by former President Bill Clinton, repeatedly criticized its handling of the matter. In late November 2025, the district court temporarily blocked the broader data-sharing arrangement involving ICE and DOGE, including access connected to the IRS.
Looking for a victory at the appellate level, the litigation moved on parallel tracks as the Trump administration went to the U.S. Court of Appeals for the District of Columbia Circuit asking to overturn a preliminary injunction. Meanwhile, the lower court is still dealing with the underlying merits.
Now, a three-judge panel has emphatically affirmed the lower court.
The 32-page opinion references “the Watergate scandal” in its very first line — offering context for what the appeals court terms “executive branch abuses of U.S. taxpayers’ information to harass the Administration’s enemies.”
The panel led by Circuit Judge Cornelia Pillard, and joined by Circuit Judges Patricia Millett and Robert Wilkins, all of whom were appointed by Barack Obama, seems to be reaching for rhetorical emphasis with the reference.
But the invocation of Watergate is also used to introduce the operative law the court used to analyze the dispute.
To hear the panel tell it, the statute in question prohibits the IRS from “sharing tax return information with any other federal agency unless the requesting agency meets stringent conditions.”
The IRS did not meet those conditions, the D.C. Circuit determined.
“The procedure failed to ensure that ICE’s requests complied with statutory requirements,” the opinion reads. “The IRS nonetheless began using the procedure to disclose tens of thousands of records.”
Through over 47,000 such requests, ICE failed to meet the requirements the overwhelming majority of the time, the court noted. Instead, ICE used taxpayer identification numbers (TIN) along with names. Still, the IRS sent the requested data along anyway.
The IRS itself says immigration enforcement is not one of the purposes that allows the agency to release tax return information — and there are laws that specifically punish violations.
“Underscoring the importance of confidentiality, Congress has imposed civil and criminal penalties on federal employees who ‘willfully … disclose’ return information in violation of [the statute],” the opinion goes on. “As the IRS has explained, ‘[t]here is no provision in the United States Code that authorizes the disclosure or redisclosure of returns or return information for enforcement of immigration laws.'”
The court then spends considerable time going through what the Trump administration refers to as the “Data-Exchange Procedure” developed by the IRS in response to “ICE’s interest in return information regarding more than a million individuals.”
The panel explains how the procedure actually works when used by ICE — and finds its protections wanting in the extreme.
“[T]he Data-Exchange Procedure merely checks whether ICE supplied five or nine digits—any random five or nine digits—in the address field within its request,” the opinion goes on. “To trigger IRS disclosure of tax return information under the Data-Exchange Procedure, the five- or nine-digit number need not even be an actual zip code, nor does ICE need to have provided any other information, such as a street name, unit number, city, or state.”
To date, the court notes, the IRS has “identified and disclosed 47,289 records to ICE” using the above-described procedure, “meaning that the IRS never confirmed whether the ICE request contained information plausibly reflecting ‘the name and address of the taxpayer.'”
The court terms arguments in defense of the procedure “a nonstarter.”
“The Procedure thus likely caused IRS to violate [the statute] and systematically will cause IRS to continue to ignore that statutory requirement,” the D.C. Circuit’s opinion continues.
The court moves on to arguments over the district court’s order.
The Trump administration, for its part, claims the lower court’s order is impeding its ability to use information “in criminal investigations.”
The panel was not moved.
“[T]hat’s a gripe with Congress, not the court,” the opinion goes on. “As we have explained, the Data-Exchange Procedure is likely contrary to law. The government has no legitimate interest in conducting criminal investigations in violation of the statute.”
The IRS also complained about how Kollar-Kotelly fashioned the preliminary injunction in the case.
“That argument is weak sauce,” the appeals court ruled, noting the district court permits the IRS to file under seal, “thereby shielding any criminal investigative activity from disclosure.”
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