The acting head of the Internal Revenue Service, Melanie Krause, plans to resign following her opposition to a new agreement allowing the IRS to share taxpayer information on illegal immigrants with federal immigration officials. Krause will be the third IRS leader to step down this year amid ongoing internal conflicts and political pressures within the agency. The IRS and the Department of Homeland Security recently finalized a data-sharing pact intended to help locate unauthorized immigrants, despite concerns from IRS attorneys that it may violate federal privacy laws. Treasury Department officials reportedly sidelined Krause during negotiations, anticipating her rejection of the plan. Treasury Secretary Scott Bessent and Homeland Security Secretary Kristi Noem approved the deal regardless. A Treasury official praised Krause for her leadership during “extraordinary change” but did not directly address the data-sharing issue. Krause’s predecessor, Doug O’Donnell, also resigned earlier this year after refusing to sign a similar agreement.

The IRS recently began implementing significant workforce reductions, including the closure of its civil rights office and potential layoffs affecting up to 25% of employees. This is part of a broader federal workforce reform effort led by billionaire Elon Musk’s Department of Government Efficiency (DOGE). Musk has raised concerns about so-called “magic money computers” within government agencies that generate payments without proper documentation, potentially masking trillions in unauthorized spending. Musk told Senator Ted Cruz these systems, mostly at the Treasury Department, compromise Congress’s ability to accurately track federal expenditures.