A federal appeals court on Tuesday upheld an injunction blocking the Internal Revenue Service from sharing personal information such as the addresses of taxpayers with immigration authorities, ruling the Trump administration's policy was unlawful.

The U.S. Court of Appeals for the District of Columbia Circuit found that the IRS unlawfully disclosed taxpayer information in response to Immigration and Customs Enforcement's request for the last known addresses of 1.28 million suspected illegal migrants. The court said the IRS failed to ensure that ICE's requests met the "stringent conditions" required under a federal tax-confidentiality law adopted in the aftermath of the Watergate scandal, which generally bars the IRS from sharing tax-return information with other federal agencies.

Last year, the IRS shared roughly 47,000 taxpayer addresses with ICE under a policy that aims to assist President Donald Trump's mass deportation agenda. The IRS had adopted a policy that allowed ICE to collect taxpayer information, sparking lawsuits over allegations that the practice was unlawful.

A lower-court judge sided with the plaintiffs and blocked the policy, although by that time the IRS had already shared 47,289 taxpayer records with ICE.

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The administration appealed, arguing the ruling hindered federal law enforcement.

"But that's a gripe with Congress, not the court," U.S. Circuit Judge Cornelia Pillard said in the appeals court's ruling on Tuesday.

Pillard said the IRS procedures violated federal law in several ways, including "most egregiously" by not requiring ICE to provide an actual taxpayer address, as the law requires.

"The IRS failed to require ICE to provide a 'specific reason' why the requested return information 'is or may be relevant to [a qualifying] proceeding or investigation,' as the statute demands," Pillard wrote.

"It entirely fails to ensure that ICE lists a federal employee, let alone one ‘personally and directly engaged’ in a qualifying investigation of a particular taxpayer," Pillard continued. "That failure has serious consequences. When ICE requested information on 1.28 million taxpayers in the summer of 2025, ICE identified the same person as the point of contact for every single request."

The practice "automates the review of millions of records without any individual review or any other means of ensuring compliance with the legal prerequisites to releasing each individual taxpayer's information," the judge added.

The three-judge panel also ruled that information sharing would violate privacy laws.

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"The Data-Exchange Procedure reduces noncitizens’ privacy rights in their tax returns. By providing a distinct, automated pathway for ICE to request noncitizens’ information, the Data-Exchange Procedure deprives noncitizens of the protections that section 6103 guarantees to all taxpayers," the court found.

A spokesperson for the Department of Homeland Security said in a statement to Reuters that it disagrees with the ruling and "will continue using every lawful tool available to locate and remove illegal aliens with final orders of removal."

Reuters contributed to this report.