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Tax Information Exchange Agreement Debate: Balancing Privacy Concerns and Police Surveillance

Sharing of information between the Treasury Department and the Department of Homeland Security may affect immigrants' privacy and status.

Tax Information Collision with Law Enforcement: The Treasury's Arrangement for Tax Data Swap
Tax Information Collision with Law Enforcement: The Treasury's Arrangement for Tax Data Swap

Tax Information Exchange Agreement Debate: Balancing Privacy Concerns and Police Surveillance

In a move that has sparked controversy and raised privacy concerns, the Internal Revenue Service (IRS) has entered into an agreement with the Department of Homeland Security (DHS) to share taxpayer information, including addresses, with immigration enforcement agencies like Immigration and Customs Enforcement (ICE).

This agreement is part of a broader federal government effort to share information across agencies to identify and remove undocumented immigrants more effectively, including those without criminal records or who have overstayed visas. Critics worry that this could lead to misuse of personal tax data, essentially turning confidential financial information into a tool for immigration enforcement.

One of the major concerns regarding this arrangement relates to the breach of privacy and the confidentiality of tax data. Taxpayer information, which is normally protected and used for tax administration purposes, is being shared with immigration enforcement agencies like ICE. This raises significant privacy issues because sensitive data collected for tax purposes is now accessible to enforcement bodies, potentially putting undocumented immigrants and even family members (some of whom may have legal status) at risk of deportation or housing eviction.

The use of advanced surveillance platforms operated by private contractors such as Palantir amplifies these concerns. Palantir’s system consolidates information from multiple government agencies to provide "near real-time visibility" on immigrants, which could lead to increased surveillance and tracking that affects not only undocumented immigrants but others connected to them.

The IRS's potential sharing of tax data could deter immigrants from filing their taxes, particularly those living in mixed-status households. Two immigrant rights advocacy groups filed litigation to challenge the disclosure of immigrant taxpayer data in March, with a notice of appeal filed on May 21 with the D.C. circuit.

Despite these concerns, Treasury Secretary Scott Bessent signed a memorandum of understanding on April 7, establishing a mechanism for the IRS to share information with the Department of Homeland Security under Internal Revenue Code section 6103(i)(2). However, critics argue that this section is meant for criminal investigations, not for civil immigration enforcement as outlined in the MOU.

The IRS's historical policy is not to share the personal information of undocumented immigrants with other agencies, like the Department of Homeland Security. The Institute on Taxation and Economic Policy reported that undocumented immigrants paid nearly $100 billion in federal, state, and local taxes in 2022. Yet, the increased uncertainty over the privacy of tax data could have significant implications for these contributions in the future.

As the debate continues, undocumented immigrants find themselves in a difficult position. A factory worker from Colombia who fled threats from a crime group paid his taxes this year despite potential consequences, while others, like a woman from Guatemala who is self-employed, have filed for extensions out of fear of separation from their U.S. citizen children.

Former IRS commissioner Danny Werfel has expressed concern that the IRS sharing tax data without explicit statutory authority from Congress could impact tax receipts significantly. The executive director of the Center for Taxpayer Rights, Nina Olson, argues that the MOU is flawed for the same reason.

Listeners can reach out to Tax Notes with tips or to speak with reporters via email at [email protected] or securely via the Signal app at taxnotesnews.08. As the situation unfolds, it is clear that the privacy and financial security of undocumented immigrants are at stake.

The Treasury Department's agreement with the Department of Homeland Security to share taxpayer information, including addresses, with immigration enforcement agencies like ICE is causing a stir in the realm of politics and general-news, as critics argue this could lead to misuse of personal tax data, potentially putting undocumented immigrants and their family members at risk.

Amid these concerns, former IRS commissioner Danny Werfel and the executive director of the Center for Taxpayer Rights, Nina Olson, have voiced their opinions on the flawed memorandum of understanding between the two departments, suggesting it could significantly impact tax receipts and erode the financial security of undocumented immigrants.

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