The acting commissioner of the Internal Revenue Service is resigning over a controversial agreement to share immigrants’ tax data with Immigration and Customs Enforcement (ICE) for the purpose of identifying and deporting individuals illegally residing in the United States. Melanie Krause, who took on the role of acting head in February, will step down following a data-sharing document signed on April 7, 2025, by Treasury Secretary Scott Bessent and Homeland Security Secretary Kristi Noem.
This new agreement allows ICE to submit names and addresses of undocumented immigrants to the IRS for cross-verification against tax records, raising significant concerns among advocates and privacy experts. According to two individuals familiar with the situation, who spoke on the condition of anonymity, Krause's resignation is directly linked to this decision.
The IRS has faced turmoil in recent months, particularly following the announcement of Douglas O’Donnell's retirement in February after 40 years of service, amid a backlash over access to taxpayer data by Elon Musk’s Department of Government Efficiency. O’Donnell was succeeded by Krause, who now finds herself stepping down under contentious circumstances. Furthermore, acting chief counsel William Paul was removed from his position last month and replaced by Andrew De Mello, an attorney considered supportive of the new direction.
Supporters of the agreement, including officials from the Treasury Department, argue that it aligns with President Donald Trump’s agenda to secure U.S. borders and is part of a broader immigration crackdown that has included increased deportations and workplace raids. Todd Lyons, acting ICE director, emphasized the necessity of the agreement during a recent press conference at the Border Security Expo in Phoenix, stating that it would assist in identifying individuals collecting benefits unlawfully. "This is about protecting social security for American people," Lyons claimed.
However, critics are voicing serious concerns regarding the implications of this information-sharing agreement. Advocates assert that it violates privacy laws and could deter undocumented immigrants from filing taxes, which in turn would undermine contributions to essential public programs. Tom Bowman, policy counsel for the Center for Democracy and Technology, warned that disclosing immigrant tax records for immigration enforcement purposes could lead to a chilling effect among immigrant communities. He stated that it would weaken their contributions to public services and increase burdens on both U.S. citizens and nonimmigrant taxpayers.
The IRS-DHS information-sharing agreement has been described as a potential breach of taxpayer privacy laws that have been respected by both political parties for decades. A memo from tax law experts at the NYU Tax Law Center indicated that the agreement "threatens to violate the rights that many more Americans have under longstanding laws that protect their tax information from wrongful disclosure or dissemination." They cautioned that IRS officials who authorize data sharing under these circumstances could risk criminal and civil sanctions.
Furthermore, the Internal Revenue Service is now legally permitted to share personal information of undocumented taxpayers with immigration authorities, as outlined in a recent court filing. The document states that "DHS can legally request return information relating to individuals under criminal investigation, and the IRS must provide it." This development is particularly significant given that undocumented immigrants contribute billions in tax revenue annually, and the IRS has previously kept their tax returns, which include home and work addresses, confidential.
While the agreement allows ICE to request tax records only in the context of a criminal investigation, it raises concerns about the potential for misuse. Border Czar Tom Homan has argued that the agreement is necessary for protecting social security, claiming that illegal immigrants frequently use the social security numbers of American citizens. He stated, "Illegal aliens use the social security numbers of American people every day." Homan suggests that the cooperation between IRS and ICE will help investigators combat such fraudulent activities.
On the other hand, critics like Pamela M. Dones, an immigration attorney, warn that the agreement could lead to more undocumented individuals avoiding tax compliance altogether. Dones expressed concern that while taxes are a necessary part of legal compliance, the fear of potential criminal investigations might deter individuals from filing, which could ultimately harm their standing in the immigration system. "The agreement could lead to people not filing taxes, and that could be a problem, because we’re all required by law to file taxes," Dones said.
As the IRS prepares to implement this agreement, experts are closely monitoring its effects. The memorandum outlines specific conditions under which ICE can request tax information, including the need to provide the name and address of the taxpayer, the federal criminal statute under which the individual is being investigated, and a justification for why the tax information is pertinent to the investigation.
Despite assurances of safeguards, many remain skeptical about the potential for abuse and the impact on immigrant communities. The American Immigration Council estimates that undocumented immigrants paid nearly $90 billion in taxes in 2023, with approximately $56 billion of that amount going to federal taxes. This significant contribution underscores the importance of maintaining trust among immigrant populations, which could be severely undermined by the new agreement.
The IRS and ICE have entered into this memorandum of understanding to establish a clear process for requests and access to information. However, the implications of this agreement are already reverberating through immigrant communities, prompting fears about privacy and the future of tax compliance among undocumented individuals.
As the situation unfolds, the balance between immigration enforcement and the protection of taxpayer privacy remains a contentious issue, with advocates on both sides arguing passionately for their respective positions.
