A coalition of organizations challenging the intended disclosure of tax return information to immigration enforcement officials has expanded its lawsuit to include the Department of Homeland Security (DHS), Immigration and Customs Enforcement (ICE), and their top officials.
Centro de Trabajadores Unidos and Immigrant Solidarity DuPage, represented by Public Citizen Litigation Group, Alan Morrison, and Raise the Floor Alliance, initially filed the lawsuit against Treasury Secretary Scott Bessent, the Internal Revenue Service (IRS), and Acting IRS Commissioner Melanie Krauss.
The amendment follows reports that the IRS is nearing an agreement with ICE to provide access to taxpayer information, a move plaintiffs argue is unlawful. The agreement would require Immigration and Customs Enforcement (ICE) to submit names and addresses of people it suspects of living in the country unlawfully to the IRS, which the tax agency would then cross-reference and confirm, a person familiar with the matter told CNN.
Tax information has generally been closely held within the IRS, and laws prohibit improper disclosure of taxpayer information. The IRS has encouraged undocumented migrants to file taxes, a process that includes providing the agency with their addresses, employers and earnings. However, collaboration between ICE and the IRS could pose detrimental fiscal consequences, a new Axios report warns.
The lawsuit claims that DHS and ICE cannot legally inspect or use confidential taxpayer information for immigration enforcement. The plaintiffs, which now include Inclusive Action for the City and Somos Un Pueblo Unido, argue that the plan violates taxpayer privacy protections established by law. Attorneys for the plaintiffs contend that the effort circumvents congressional authority over how tax information is shared among agencies.
The lawsuit comes amid broader concerns that the Trump administration seeks to use tax data to facilitate deportations. Advocates warn that such actions could erode trust in the tax system and harm the economy.
Undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022, per the Institute on Taxation and Economic Police. While much of that came in the form of sales and other taxes over which they have little control, about $57 billion is made up of "taxes that are likely to be prone to noncompliance," Carl Davis, research director of ITEP told Axios.
If undocumented immigrants stop filing tax returns in fear that the IRS will pass on their information to immigration authorities, that could actually increase total tax revenues this year, as the government holds onto withheld money that would otherwise be returned as a tax refund.
However, over the medium term, undocumented immigrants in fear of the immigration authorities would be likely to move out of any job where their employer withholds taxes and reports their pay to the IRS— and work instead in more cash-based, informal sectors. Because those jobs are generally lower-paid, even gains like sales tax revenues would likely decrease.
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