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Representatives from the Internal Revenue Service have resigned from a contract to share immigrant tax data with immigration and customs enforcement agencies with the aim of illegally identifying and deporting people in the United States, according to two people familiar with the decision.
Melanie Kraus, who has been acting director since February, will step down from a new data sharing document signed Monday by Treasury Secretary Scott Bescent and Homeland Security Secretary Christie Noem. Under this agreement, ICE allows ICE to illegally submit names and addresses of immigrants within the United States to the IRS for mutual evaluation of their tax records.
The two, familiar with the situation, confirmed that Klaus had resigned, spoke to the Associated Press on condition of anonymity, and were not permitted to publicly discuss the matter.
The IRS is in a tumultuous state over the Trump administration’s decision to share taxpayer data. Deputy Chair Douglas O’Donnell announced his retirement from agency after nearly 40 years of service in February, as Elon Musk expanded into government efficiency. Klaus replaced him.
Acting Advisor William Paul was removed from his role at the agency last month and replaced by Andrew De Mello, a lawyer at the Chief Counsels office, who is deemed to support Doge, according to two other people familiar with plans that are not permitted to speak publicly.
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The Treasury said the agreement would help implement President Donald Trump’s agenda to secure US borders, part of his massive nationwide immigration crackdown, which resulted in deportation, workplace raids and the use of 18th-century wartime laws being able to deport Venezuelan immigrants.
However, supporters say the IRS-DHS information sharing agreement violates privacy laws and reduces privacy for all Americans.
The contract was based on “it helps protect the privacy of law-abiding Americans, while streamlining the ability of long-standing authorities to pursue criminals.”
Tom Bowman, policy adviser at the Center for Democracy Technology, said he would disclose immigration tax records to DHS for immigration enforcement.
Ice Director’s representative Todd Lyons told reporters at the Phoenix Border Patrol Expo on Tuesday the agreement would help people use someone else’s identity to find people who have no rights and are gathering “something hidden in the eyes” benefits.
Working with the Treasury Department and other departments is “strictly because of a major criminal case,” Lions said.
The IRS was already being called on earlier this year to help immigration enforcement.
According to a letter obtained by the Associated Press, the NOEM in February sent a request to BESSENT to help repress immigrants in order to rent IRS criminal investigator workers. It cites the increased IRS funding as it has already been acquired by federal tax collectors received under the Democrats’ Inflation Reduction Act, but the $80 billion injection of funds has already been curbed.
A collection of tax law experts at the NYU Tax Law Center wrote Monday that the IRS-DHS contract “threatens to violate the rights that more Americans have under long-standing laws that protect tax information from unlawful disclosure or spreading.”
“In fact, it’s difficult to see how the IRS can publish information to DHS while adhering to taxpayer privacy laws,” they said. “IRS officials who approve data sharing under these circumstances are at risk of breaking the law, which could result in criminal and civil sanctions.”
The memo states that the IRS and ICE “will perform their duties in a way that recognizes and strengthens individuals’ rights to privacy, ensuring that their activities are consistent with laws, regulations and good management practices.”
Associated Press writer Elliot Spagut contributed to the report from Phoenix.
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