IRS Boss Quits After Secret Deal to Hand Immigrant Data to ICE

A quiet departure has begun inside one of the most powerful arms of the federal government. Melanie Krause, acting commissioner of the Internal Revenue Service, is stepping down after the agency entered into a data-sharing agreement that grants immigration officials access to taxpayer information. The decision arrives as unrest grows inside the IRS over expanding ties between tax enforcement and immigration policing.

Krause’s exit follows a memorandum signed by Treasury Secretary Scott Bessent and Homeland Security Secretary Kristi Noem, which allows ICE to submit names and addresses of undocumented immigrants for cross-verification against IRS records. Two sources familiar with her decision confirmed her resignation on the condition of anonymity.

Her departure is the latest in a series of internal shifts. In February, Douglas O’Donnell retired from the agency after four decades of service. Around the same time, William Paul, the acting chief counsel, was removed and replaced by Andrew De Mello, an internal legal adviser reportedly favored by administration figures overseeing aggressive enforcement measures.

The Treasury Department says the agreement supports enforcement goals and relies on powers granted long ago by Congress. Critics see something else.

Legal experts, civil rights groups, and immigration advocates warn the agreement risks violating privacy laws that are supposed to protect all taxpayers, not only citizens.

Immigration Enforcement and Data Access

Todd Lyons, the acting ICE director, confirmed that the IRS data will be used in part to find individuals committing fraud, including those collecting benefits under false identities. Speaking at a conference in Phoenix, he described the strategy as necessary to locate those “hiding in plain sight.”

Earlier this year, Secretary Noem submitted a formal request to Treasury to loan IRS criminal investigators to DHS as part of the broader immigration initiative. The effort gained traction after the IRS received a funding increase through the Inflation Reduction Act, though that funding was later reduced.

Supporters of the agreement claim it will help catch bad actors. Critics say it punishes lawful tax filers and sets a precedent that may harm innocent people. Krause’s departure, though quiet, adds weight to those concerns.

Her decision not to endorse the direction of the agency speaks volumes to those watching from inside. The IRS has long been a symbol of bureaucratic control. Now it sits at the center of a political and ethical dispute over the limits of that control—and the cost of crossing them.