This case arose from news reports that Immigration and Customs Enforcement (ICE) was seeking taxpayer address information from the IRS to locate undocumented immigrants. In response, the IRS and DHS entered into a Memorandum of Understanding (MOU) outlining procedures for ICE to request addresses under 26 U.S.C. § 6103(i)(2). Appellants, including Centro de Trabajadores Unidos and Somos Un Pueblo Unido, sued in the District Court, arguing that the IRS policy violated the Internal Revenue Code and constituted arbitrary and capricious agency action. They sought a preliminary injunction to stop the IRS from sharing addresses. The District Court denied the injunction, finding that the statute allowed the disclosure and that the MOU was not a final agency action. The Appellants appealed, challenging the statutory interpretation and the standing of the plaintiff organizations.
The D.C. Circuit, in an opinion by Senior Circuit Judge Edwards, affirmed the District Court's denial of the preliminary injunction. First, the court addressed standing, holding that the organization Somos Un Pueblo Unido likely had associational standing because its members faced an imminent risk of deportation if their tax addresses were shared with ICE. The court rejected the government's argument that the plaintiffs lacked standing, noting that at the preliminary injunction stage, the plaintiffs need only show a likelihood of demonstrating standing at the summary judgment stage. On the merits, the court addressed two primary claims. First, regarding the 'contrary-to-law' claim, the court analyzed the text of 26 U.S.C. § 6103(i)(2). The statute permits the disclosure of 'return information other than taxpayer return information' for use in nontax criminal investigations. The court clarified that while 'taxpayer return information' is generally protected, § 6103(i)(2)(C) explicitly states that 'a taxpayer's identity shall not be treated as taxpayer return information.' Since a taxpayer's identity includes their mailing address, the court concluded that addresses are not protected under this provision and can be disclosed if a valid request is made. The court rejected arguments that the statute required a court order or that the requestor must already possess the address, emphasizing that the plain text of the statute controls. Second, regarding the 'arbitrary-and-capricious' claim, the court held that the MOU was a nonbinding policy statement without legal effect, and thus not a 'final agency action' reviewable under the Administrative Procedure Act. Furthermore, the court applied the Supreme Court's decision in Loper Bright Enterprises v. Raimondo, which eliminated Chevron deference. The court reasoned that because the statute unambiguously authorizes the disclosure, the agency's change in interpretation or lack of explanation for that change is irrelevant. As the court stated, 'if we find, as we do, that the best reading of the statute does not support Appellants' position, then no agency action may countermand the court's judgment.' Consequently, the court found that the Appellants were unlikely to succeed on either claim.
The decision affirms the District Court's denial of the preliminary injunction, meaning the IRS is not currently enjoined from sharing taxpayer addresses with ICE under the terms of the MOU. The ruling clarifies that § 6103(i)(2) permits the disclosure of addresses for nontax criminal investigations without a court order. However, the court noted it is not opining on the legality of actions taken after the MOU was finalized, only on the facial challenge to the agreement. The decision leaves open the possibility for future litigation regarding the actual implementation of the information-sharing agreements, as other cases challenging the specific application of the MOU remain pending.
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