IRS deal for data on immigrants is worrisome

Taxpayer privacy is the cornerstone of the Internal Revenue Service.

Now that foundational premise is starting to crack. 

Anyone earning money in the United States is required to pay federal income taxes regardless of their residency status. Those IRS filings contain significant personal data — a pretty good snapshot of who you are, where you are, and what you do. 

In return for compelling that information, the IRS has diligently kept the data confidential for the past five decades. It's a crime to disclose any taxpayer information, a post-Watergate reform by Congress after Richard Nixon sought tax information for use against his political enemies. The uproar over Nixon's efforts to find dirt or impose unwarranted audits was so strong that it became an article of impeachment against him. The Tax Reform Act of 1976 stripped the president of any authority over the release of tax information and gave that power to Congress. Every president since has honored the legal boundaries around the IRS.

Until now. The Department of Homeland Security last month asked the IRS for the names, home and email addresses, and telephone numbers of 700,000 people it suspects are living here without legal status, The Washington Post first reported. DHS also wanted to use IRS auditors and criminal investigators to identify businesses that hired immigrants who didn't have proper work authorizations. Criticism of the clearly illegal request was swift; the acting head of the IRS, Doug O’Donnell, a President Donald Trump appointee who was appalled by the intrusion, resigned and DHS, which oversees the Immigration and Customs Enforcement agency, appeared in retreat.

STRETCHING THE LAW

Last week, however, another attempt at getting taxpayer data to aid in the deportation crackdown was quietly launched. An unprecedented agreement with the Treasury Department to share taxpayer information with ICE was revealed in a heavily redacted document filed in a pending D.C. court case against the IRS. The deal is premised on a very narrow exception in the 1976 law, one that allows the sharing of tax information for federal criminal investigations, typically international money laundering and drug trafficking schemes. Even then, prosecutors must obtain a judicial order justifying that the information is needed for the probe.

That exception is now being used to allow ICE to send the names and addresses of those it suspects of living or working here without legal status to the IRS to find matches and get more personal information. However, being undocumented is usually a civil, not a criminal violation. That's a pretty big stretch from the exception Congress carved out for criminal probes, and it has privacy advocates worried that it opens the doors to such abuses as targeting citizens and other legal residents.

ICE is getting a foot in the door at the IRS at the same time Treasury has given the Department of Government Efficiency access to IRS data so it can be centralized. But that also makes it easier for third parties to gain access. Responding to the resignation of Melanie Krause, the latest acting head of the IRS to leave, the Treasury Department provided its big-picture plan. "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," the statement read.

IRS EXODUS

The IRS has had three commissioners leave in protest in the first three months of the Trump administration; they were joined by the IRS's top lawyers and several other officials. In 2017, when the first Trump administration sought IRS data, the agency replied, "There is no authorization under this provision to share tax data with ICE" and the matter was closed. What changed?

Aside from the fears of expanding the criminal investigation loophole, the notion that a good way to deal with our illegal immigration problem is by prioritizing the deportation of migrants working jobs and paying taxes is foolish. On Thursday, Trump even said that he would give farm and hospitality workers who are undocumented some kind of pass so those industries aren't financially impacted. Those very well could be the same immigrants his administration is seeking to root out by using IRS data.

For decades, the IRS told those without legal status to pay their income taxes with the promise that the information would remain confidential. The Yale Budget Lab, a nonpartisan research institute at the university, estimates that about half of the 11 million undocumented migrants pay federal taxes — $66 billion in 2023 alone, most of that from payroll withholding. It notes the new agreement with ICE could make many workers and businesses enter "under the table" agreements to avoid tax payments altogether. These are workers essential to our economy who believed paying taxes would put them on a path to a legal status.

A federal judge is being asked to stop the IRS from sharing tax data with ICE. If the courts and Congress can't stop this breach of the privacy wall, what's to stop the Trump administration from expanding it further?

This slippery slope can get icy very fast.