New Partnership Sparks Leadership Crisis at IRS

IRS and DHS form new data-sharing alliance to track down illegal immigrants, sparking immediate backlash from privacy advocates and causing the acting IRS chief to resign in protest.

Key Insights

A new memorandum of understanding between the IRS and DHS allows ICE access to tax information of illegal immigrants under criminal investigation.
The agreement specifically targets individuals who have overstayed 90 days after a judge’s final removal order.
Acting IRS Commissioner Melanie Krause resigned in protest after being bypassed in the process.
A federal judge has rejected an emergency injunction sought by immigrant rights groups challenging the data-sharing agreement.
As of the latest reports, the IRS has not received any actual requests for taxpayer information from DHS or ICE.

Historic Data-Sharing Agreement Established

The Department of Homeland Security and the Internal Revenue Service have entered into a potentially game-changing agreement that allows Immigration and Customs Enforcement to access taxpayer information for locating illegal immigrants subject to deportation. The memorandum of understanding (MOU), filed under the Trump administration, establishes a process for ICE to request specific tax information from the IRS for individuals who are currently under criminal investigation and have received final removal orders from immigration judges.

“The Internal Revenue Service and the Immigration and Customs Enforcement have entered into a memorandum of understanding to establish a clear and secure process to support law enforcement’s efforts to combat illegal immigration,” explained a Treasury Department spokesperson. This agreement specifically targets individuals who have remained in the country for more than 90 days after receiving a judge’s final removal order, creating a mechanism for enforcement agencies to confirm addresses through tax records.

The IRS has agreed to share immigrants’ tax information with ICE to facilitate deportations. pic.twitter.com/Vn91M7RxEw

— Pop Base (@PopBase) April 8, 2025

Leadership Turmoil and Legal Concerns

The implementation of this agreement has not been without significant internal conflict. Melanie Krause, the acting head of the IRS, has announced her resignation following the deal’s finalization. According to reports, her departure comes as a direct protest against the administration’s actions, as the agreement was signed by Treasury Secretary Scott Bessent and Homeland Security Secretary Kristi Noem, effectively bypassing her authority as the agency’s leader.

Behind the scenes, concerns have emerged from IRS legal counsel who believe the data-sharing arrangement may violate established privacy laws. These internal challenges come at a time when the IRS has already begun significant job cuts, with plans to reduce its workforce by approximately 25%. Such structural changes add another layer of complexity to an already contentious policy shift.

Legal Challenges and Implementation Status

Immigrant rights groups and Public Citizen have filed a lawsuit seeking to prevent the IRS from sharing taxpayer information with ICE. However, US District Court Judge Dabney L. Friedrich declined to issue an emergency injunction, ruling that the plaintiffs “have not established a likelihood of success on the merits.” This initial legal hurdle allows the agreement to proceed while the broader case continues through the court system.

Despite the controversy, it’s notable that as of the latest reports, the IRS has not yet received any actual requests for taxpayer information from DHS or ICE under this new agreement. The memorandum requires that “DHS and ICE must safeguard any return information disclosed by the IRS” in compliance with federal law, establishing strict confidentiality protocols. Meanwhile, Democratic senators have requested detailed information about DHS’s planned activities in IRS systems, expressing concerns about potential misuse.

Historical Context and Future Implications

The IRS has previously allowed illegal immigrants to file tax returns using Individual Taxpayer Identification Numbers (ITINs), which has enabled many undocumented workers to comply with tax obligations despite their immigration status. This system has contributed significantly to Social Security taxes, creating a complex relationship between immigration enforcement and tax collection that the new agreement now threatens to disrupt.

Some IRS officials have raised concerns that the policy could ultimately hinder tax collection from illegal immigrants who may stop filing returns altogether out of fear. These officials argue that the exception allowing information sharing was originally intended for traditional criminal investigations, not immigration enforcement actions. The debate continues over whether this represents proper interagency cooperation or an inappropriate expansion of enforcement powers.