The acting chief of the Internal Revenue Service is resigning from the role after Donald Trump’s administration struck up a deal for the agency to share undocumented immigrants’ taxpayer data with the Department of Homeland Security.
A deal from Treasury Secretary Scott Bessent allows Homeland Security Secretary Kristi Noem to collect confidential IRS data for immigration enforcement as part of Trump’s deportation blitz.
The administration filed a redacted version of the agreement in court filings.
Melanie Krause — who is the third acting IRS commissioner under Trump — reportedly had only learned of the deal after hearing about it on Fox News.
“As we focus on IT modernization and re-organize the agency to better serve the taxpayer, we are also in the midst of breaking down data silos that for too long have stood in the way of identifying waste, fraud, and abuse and bringing criminals to justice,” a Treasury spokesperson told The Independent. “We believe these goals are critical to a more efficient government and safer country. We wish Melanie well on her next endeavor.”
The deal, which prompted several resignations at that tax agency, allows Immigration and Customs Enforcement agents to ask for information about immigrants under investigation or facing removal orders. A redacted memorandum in court filings states ICE agents will be able to “interview, consult, depose, or interrogate or otherwise obtain relevant information from” taxpayers.
Krause’s planned departure follows a chaotic few months at the tax agency. She was in the role for a little over a month after her predecessor Doug O’Donnell retired in the face of Elon Musk’s so-called Department of Government Efficiency operations at the agency, with looming pressure from immigration enforcement officials seeking broad access to taxpayer data.
O’Donnell had replaced Danny Werfel, who was appointed by Joe Biden and stayed on as IRS commissioner at the beginning of Trump’s term. Trump then announced plans to fire him and install former Republican congressman Billy Long, whose nomination is awaiting Senate confirmation.
Krause will remain as acting commissioner until at least May 15, according to a Treasury spokesperson.
“The resignation of acting Commissioner Krause as a result of a decision to share information with immigration enforcement officials highlights concerns about the ethics and legality of the deal,” according to Lisa Gilbert, co-president of Public Citizen, which sued the administration on behalf of a group of immigrants’ advocacy groups to block IRS data from getting into the hands of immigration officers.
“Our laws were intended to keep taxpayer data confidential,” she said. “This backroom deal by Secretary Bessent and Secretary Noem … violates those laws. The Trump administration’s political efforts to use immigrants’ tax data against them should send chills down the spine of every U.S. taxpayer who disagrees with this administration.”
Undocumented immigrants paid $66 billion in federal taxes in 2023, with roughly $22 billion in individual income taxes and $43 billion in payroll taxes that fund services like Social Security and Medicare, according to Yale Budget Lab, the university’s non-partisan policy research center.
Undocumented immigrants make up nearly 5 percent of the workforce, despite making up only 3.4 percent of the total population. For every 1 million undocumented immigrants who paid taxes, public services received more than $8 billion in additional tax revenue, according to the Institute on Taxation and Economic Policy. But those immigrants, despite paying into government benefits and services like healthcare and retirement, are not eligible to receive them.
To complete a tax return, undocumented workers are allowed to submit their returns using a nine-digit code called an individual taxpayer identification number rather than a Social Security number.
The impacts of the Trump administration’s agreement between ICE and the IRS — and how many undocumented people will be caught up in the ordeal — are unclear.
If undocumented immigrants become less likely to file taxes, or end up moving to jobs or pay arrangements to avoid them, the Trump administration’s data-sharing agreement could lead to a .5 percent loss in federal income and payroll tax revenue on average, or $25 billion in 2026 and $313 billion over the next 10 years, the center found.
Meanwhile, Musk’s DOGE has been trying to obtain sensitive taxpayer data to cross-reference personal information with other agencies that provide public benefits. A recent appeals court ruling cleared a path for DOGE to begin tapping into troves of sensitive personal data at three federal agencies, including the Treasury Department.
DOGE is reportedly planning to stage a “hackathon” in Washington, D.C., in the coming days to build a tool that lets separate systems share information with one another in an effort to collect IRS data, according to WIRED.
The agency is expected to partner with a third-party vendor to manage construction of a “mega API” that would serve as a bridge between those systems, the outlet reported. Palantir, the surveillance software company cofounded by Musk associate Peter Thiel, is a potential candidate, according to WIRED.
