Acting IRS chief set to leave following Treasury deal to share taxpayer data with ICE

The Internal Revenue Service’s acting commissioner is set to leave the tax agency, according to a source familiar with the situation, a move that comes after the Treasury Department signed an agreement to share taxpayers’ information with the Department of Homeland Security.

Melanie Krause, who joined the IRS in October 2021 as the agency’s chief data and analytics officer, is taking the federal government’s deferred resignation offer and was not pushed to resign, according to the source. A Government Accountability Office and Department of Veterans Affairs Office of Inspector General alum, Krause was elevated to acting commissioner from chief operating officer in late February, taking over for Doug O’Donnell, who retired after manning the interim post following Danny Werfel’s January departure. 

According to the Washington Post, Krause decided to resign after Treasury officials struck a deal with Immigration and Customs Enforcement over the accessing of taxpayer information. Krause was largely excluded from those conversations, per the Post. A Treasury spokesperson said in a statement to FedScoop that she will continue to serve as acting commissioner “until at least May 15th.”

“Melanie Krause has been leading the IRS through a time of extraordinary change,” the Treasury spokesperson said. “As we focus on IT modernization and re-organize the agency to better serve the taxpayer, we are also in the midst of breaking down data silos that for too long have stood in the way of identifying waste, fraud, and abuse and bringing criminals to justice. We believe these goals are critical to a more efficient government and safer country. We wish Melanie well on her next endeavor.” 

Details of the taxpayer information-sharing deal with ICE were revealed in a court filing Monday as part of a lawsuit filed against Treasury Secretary Scott Bessent by the immigrant rights workers’ groups Centro de Trabajadores Unidos, Immigrant Solidarity Dupage, Inclusive Action for the City and Somos Un Pueblo Unido.

The court filing reveals a partially redacted memorandum of understanding between Treasury and DHS that authorizes “the disclosure of return information other than taxpayer return information for purposes of the enforcement of a specified nontax Federal criminal statute.”

Those powers are granted to the IRS by “delegating” the “authority to administer” Section 6103 of the Internal Revenue Code, the MOU stated. IRS laws under that IRC code serve to protect taxpayers’ return information “from disclosure to other parties” and “prohibits the release of tax information by an IRS employee.” Undocumented immigrants have long been encouraged to file federal taxes. 

President Donald Trump’s executive order on “Protecting the United States from Foreign Terrorists and Other National Security and Public Safety Threats” is cited as the reason for the data-sharing pact, with the MOU noting that the attorney general, director of national intelligence and the State and DHS secretaries are directed in the EO “to take immediate steps to identify, exclude, or remove aliens illegally present in the United States.”

“Generally, this MOU covers secure electronic transmission of Federal tax returns and return information to ICE, provided ICE computer systems are compliant with National Institute of Standards and Technology (NIST) Special Publication 800-53 standards and guidance for security of data at the moderate impact level,” the document states. “ICE’s SSR must fully describe the computer system and security controls implemented for the receipt, processing, storage, and transmission of electronic Federal tax returns and return information. Required security controls for systems that receive, process, store, and transmit electronic Federal tax returns and return information are specified in Publication 1075.” 

The Monday court filing that unearthed the Treasury-DHS MOU was signed by Kathleen Walters, IRS’s chief privacy officer. According to Bloomberg Tax, Walters also planned to resign. 

Lisa Gilbert, co-president of Public Citizen, whose litigation group represents the plaintiffs, said in a statement that Krause’s resignation “as a result of a decision to share information with immigration enforcement officials highlights concerns about the ethics and legality of the deal.” 

“Our laws were intended to keep taxpayer data confidential,” Gilbert continued. “This backroom deal by Secretary Bessent and [DHS] Secretary [Kristi] Noem, partly disclosed in a court filing, violates those laws. The Trump administration’s political efforts to use immigrants’ tax data against them should send chills down the spine of every U.S. taxpayer who disagrees with this administration. Undermining the legal protections for sensitive taxpayer information is dangerous, and Krause’s resignation signals the severity of this unconscionable move by the Trump administration.”

The Treasury-DHS information-sharing agreement is just the latest Trump administration move targeting the data of immigrants. FedScoop reported last week that Elon Musk’s Department of Government Efficiency had been granted access to technical systems maintained by United States Citizenship and Immigration Services.