This building at 4041 N. Central Ave. is home to Arizona's biggest Federal lease cancellation, about 100,000 square feet of space for an IRS office. Mar 17, 2025.
Sacramento, California – A controversial new agreement between the Internal Revenue Service (IRS) and Immigration and Customs Enforcement (ICE) has triggered a wave of backlash from immigrant advocacy groups and Democratic lawmakers, who argue the policy threatens public trust and undermines decades of progress in building relationships between immigrant communities and the federal government.
On April 7, Treasury Secretary Scott Bessent signed a memorandum of understanding with the Department of Homeland Security that allows the IRS to share the personal tax information of undocumented immigrants who are under criminal investigation by ICE. The 15-page agreement—partially redacted—marks the first time the IRS has entered into such a deal under an immigration enforcement mandate.
Under the agreement, ICE can now request tax information on noncitizens under investigation for specific federal crimes, including remaining in the country after receiving a final order of removal. The Trump administration, which reinstated the policy after previously signaling interest, claims the measure targets only individuals accused of violating criminal statutes.
But immigrant rights organizations and elected officials say the move represents a fundamental breach of trust.
“This agreement is a complete betrayal of the federal government’s decades-long commitment to never weaponize taxpayer information for political purposes,” said Sen. Alex Padilla (D-Calif.), who, alongside Sen. Adam Schiff (D-Calif.), has called for an investigation into the legality of the deal. Schiff labeled the move “a total betrayal” that will damage immigrant communities and lead to substantial tax revenue losses.
California, home to approximately 1.8 million undocumented residents, many of whom contribute significantly to the workforce and tax base, could be especially impacted. According to the Institute on Taxation and Economic Policy, undocumented Californians paid an estimated $8.5 billion in state and local taxes in 2022—more than in any other state.
Immigrant-run economic development groups like Inclusive Action for the City are already seeing chilling effects. “If the ITIN is no longer a credible, safe sort of vehicle to pay taxes, then we anticipate that many immigrant entrepreneurs are not going to want to contribute,” said Rudy Espinoza, the group’s executive director.
Espinoza and others worry the deal will push undocumented workers out of the formal economy and reduce their access to financial services, further entrenching poverty and social exclusion.
Legal experts note the memorandum permits data sharing only in cases of criminal investigation, not simply for being undocumented—a civil violation. However, critics argue the line is blurry, and the precedent is alarming.
“This represents a broken promise,” said Josh Rosenthal of the Asian Law Caucus. “Attempting to transform the tax system into an immigration enforcement tool is not just illegal and immoral, it’s also destructive economic policy.”
Gov. Gavin Newsom’s office also criticized the administration’s stance. “Let me get this right—the Trump administration is finally admitting that undocumented people contribute to our economy and pay taxes?” said spokesperson Diana Crofts-Pelayo.
State Sen. Maria Elena Durazo has introduced legislation to limit how local governments share vendor and tax data with immigration officials. “They want to pay taxes and follow the rules,” she said. “But if doing that puts them at risk, we all pay the consequences.”
Advocates warn that the policy will erode civic engagement and trust, undoing years of work by local governments and nonprofits. “There is a very strong sense of betrayal and fear,” said Doug Smith of Inclusive Action. “And that fear is pushing people away from the economy—and from the community itself.”
