The IRS will turn over immigrant tax records to ICE, raising legal questions and concern in Washington
As federal efforts to ramp up mass deportations grow, the Internal Revenue Service has agreed to share immigrants’ tax information to Immigration and Customs Enforcement to help identify and deport those who are undocumented.
Some local leaders and tax experts point to potential losses of billions in federal revenue, damaging trust between immigrant communities and government agencies, and possible legal challenges about sharing confidential information to ICE agents under IRS rules.
“This is tapping into the hypocrisy that immigrants don’t pay taxes,” said Jennyfer Mesa, executive director of Latinos en Spokane.
Mesa’s comment pushes back on a long-standing argument made by President Donald Trump that undocumented immigrants cost the United States billions each year all while not paying taxes.
“Illegal immigration costs the United States more than 200 Billion Dollars a year. How was this allowed to happen?” he wrote on X, then Twitter, in 2018.
He reiterated that same claim during his 2019 State of the Union address.
“Working-class Americans are left to pay the price for mass illegal immigration,” Trump said.
But according to Carl Davis, research director at the Institute on Taxation and Economic Policy, the data tells a different story. He said undocumented immigrants add significantly to the economy through taxes and labor.
Davis said undocumented immigrants nationwide contribute close to $26 billion in revenue into the Social Security trust fund, $6 billion a year toward funding Medicare and close to $2 billion into the unemployment insurance system – none of which they are eligible for.
State and local tax contribution by the undocumented immigrant population in Washington in 2022 was an estimated $997,300,000.
“I think a lot of people don’t fully appreciate how significant the tax payments made by undocumented families are to the federal government and state and local governments,” Davis said. “Nationwide, undocumented immigrants are paying around $100 billion a year in federal, state and local taxes.
“In the state of Washington, they’re paying about a billion dollars alone just in state and local taxes. These tax payments happen in a variety of different ways. Sometimes it’s immigrant families paying sales tax on the things they buy every day, just like everyone else who lives in Washington.”
Hector Quiroga, attorney at Quiroga Law Office, pointed to IRS Code Section 6103, saying this section says tax data of individuals is generally confidential.
With the IRS allowing the sharing of this information, he said it raises a fundamental question at the heart of American politics and constitutional law: Is immigration a criminal issue or a civil issue?
According to a memorandum of understanding filed on Monday, ICE requests to the IRS must ask for the name and address of the person whose information the agency wants. They must also state the federal criminal statute under which the person is being investigated or relating to any nontax criminal proceeding, and the reasons disclosing the information might be relevant to the nontax-related criminal case.
But with much of the court document redacted, it’s hard to know what the agreement includes.
“This is important, because in this administration, it’s become a lot about criminals and deporting criminals and criminals, criminals, criminals,” Quiroga said. “If we are talking about crimes, sure they can, they can definitely access the IRS. If they are not crimes, then we are now looking at how the government is going to get past this very well-stated confidentiality requirement within the IRS Code, and that’s what is being challenged right now.”
The IRS Code Section was enacted as part of the Tax Reform Act of 1976. This section strictly limits the disclosure of tax return information to ensure taxpayer privacy.
If wrongfully disclosed by IRS employees and government agencies, the taxpayer has the right to file a lawsuit. Illegally disclosing the taxpayer’s information could cause an individual a fine of up to $5,000, maximum of five years in prison or both.
“We’ve been told by the code, by the law, as is stated in that section, that this is confidential and it’s been like that for many, many years, for decades … so it creates this trust in government institutions,” Quiroga said. “We have a right to challenge our accusers. We have a right under constitutional law.”
In 2023, the IRS stated any disclosure of taxpayer information is unacceptable and even tightened its security after Trump’s tax return information from 2018 to 2020 was leaked by former IRS contractor Charles Edward Littlejohn.
According to the Associated Press, then-Attorney General Merrick Garland said in a statement that Littlejohn “broke federal law and betrayed the public’s trust.”
Littlejohn pleaded guilty to a single count of unauthorized disclosure of tax returns and return information. Trump’s attorney, Alina Habba, objected to the plea deal and called for a long sentence.
But with mass deportation a priority for the Trump administration, NBC News reported Department of Homeland Security Assistant Secretary Tricia McLaughlin said Trump is doing what should have been done all along – information sharing across the government “to solve problems.”
“Information sharing across agencies is essential to identify who is in our country, including violent criminals, determine what public safety and terror threats may exist so we can neutralize them, scrub these individuals from voter rolls, as well as identify what public benefits these aliens are using at the American taxpayer expense,” McLaughlin stated.
In an interview with Axios, border czar Tom Homan argued that this deal is about Social Security.
“This is about protecting Social Security for American people,” Homan told Axios. “Illegal aliens use the Social Security numbers of American people everyday.”
Davis said one of the biggest reasons that immigrants file tax returns is to demonstrate a track record of showing they are contributing to society, as part of immigration reform proposals.
These tax records are supported evidence of length of time in the U.S. and economic contributions.
“Doing that has made it more likely that those individuals could gain citizenship or some kind of legal status if they’ve been able to show they’ve been playing by the rules while they were here. That filing is a hopeful act. And now, not only does that appear exceptionally unlikely under this administration, but that hopeful act is actually being turned around and used against them to achieve exactly the opposite outcome and to remove them from the country entirely,” Davis said.
Mesa said their organization helps community members file their taxes yearly and for no charge. Even before Trump took office, she said they were receiving frequent questions from families, individuals and small business owners – many of whom are Individual Taxpayer Identification Number holders – about whether the IRS might share their information with immigration authorities.
ITINS are typically used by people who don’t have a Social Security number, such as foreign investors, international students or undocumented immigrants. The number allows them to file federal income taxes and pay what they owe.
“We’ve had less people show up to file their taxes,” Mesa said. “And what’s going to end up happening is immigrants are going to get less of the benefits, even though they don’t obtain a lot of benefits that we as residents or citizens get. That’s less funds going into communities, and then the billions that the federal government has relied on, that’s going to go away.
“I mean, if the trust is breached, why would a person go in to file their taxes and expose themselves?”
Through Davis’ research, tallying just those taxes paid on the incomes they earn and the purchases they make, they expect that public services would lose at least $7.9 billion for every 1 million undocumented immigrants who are deported.
“What we’re seeing pursued at the federal level now is the IRS’ mission being pushed to the back burner, and the tax law being pushed aside in favor of prioritizing immigration enforcement and mass deportation of immigrant families,” Davis said.
Mesa said that while they’re still navigating the new agreement and its potential long-term impact, this latest attack is devastating to the immigrant community, locally and across the state.
“I just want to highlight that the funds that people pay into their taxes, that impacts the local economy,” Mesa said. “It’s not just the taxpayer; it’s the small business. They have staff. They have employees. They’re contributing in so many other different ways to our country, at a federal level, at the state level and at the community level.”