Trump Lawsuit Against DOJ: $10B IRS Suit and Voided Settlement

The Trump lawsuit against the IRS was a $10 billion case filed in January 2026 over the leak of the Trump family’s tax records by an IRS contractor, and it ended less than four months later when the president voluntarily dismissed it alongside a separately announced settlement that created a $1.776 billion government fund and granted the Trump family sweeping immunity from tax audits. The dismissal did not end the controversy. A federal judge is now investigating whether the whole proceeding was a fraud on the court, another federal judge has indefinitely blocked the fund, and Congress has revolted on a bipartisan basis.¹²

Why Trump Sued the IRS

The lawsuit grew out of one of the largest breaches of taxpayer data in IRS history. Charles “Chaz” Littlejohn, an IRS contractor in Washington, D.C., used his access between roughly 2018 and 2020 to steal the tax records of thousands of wealthy individuals, including Donald Trump. Prosecutors said Littlejohn had returned to the IRS in 2017 specifically to obtain Trump’s returns.³

Littlejohn gave the data to two news organizations. The New York Times used Trump’s returns for a 2020 investigation showing he had paid $750 in federal income tax the year he entered the White House and nothing at all in several other years. ProPublica used the broader dataset for its “Secret IRS Files” series.⁴ Littlejohn pleaded guilty to one felony count of unauthorized disclosure of tax return information and, on January 29, 2024, received the maximum sentence of five years in prison.⁵

What the $10 Billion Complaint Alleged

Trump filed suit exactly two years after Littlejohn’s sentencing, on January 29, 2026, in the U.S. District Court for the Southern District of Florida. The case was styled Trump v. Internal Revenue Service (No. 1:26-cv-20609) and had four plaintiffs: Donald Trump, Donald Trump Jr., Eric Trump, and the Trump Organization, LLC. The defendants were the IRS and the Treasury Department.⁶

The complaint alleged the government had a duty under Section 6103 of the Internal Revenue Code and the Privacy Act to safeguard taxpayer data and had failed at every level: no proper screening of Littlejohn, no detection of his activity for three years, personal devices and private websites permitted on IRS computers, no encryption of sensitive data, no monitoring for mass downloads.⁷

The $10 billion figure rested on an aggressive reading of Internal Revenue Code Section 7431, which allows $1,000 per unauthorized disclosure. The plaintiffs argued every person who viewed the leaked data through news coverage counted as a separate disclosure.⁸ The complaint also sought punitive damages, attorneys’ fees, and costs, and described Littlejohn’s actions as an effort to “weaponize” his access to influence the 2020 election.⁷

The Case’s Legal Weaknesses

Legal observers flagged a structural problem: Trump was suing an agency he controlled. On April 24, 2026, U.S. District Judge Kathleen Williams issued an order questioning whether the case satisfied Article III’s requirement of a genuine dispute between adverse parties. She asked whether the president’s control over the IRS meant real adversity was missing and whether the lawsuit was “friendly, feigned, or collusive.” The court invited outside legal experts to file as friends of the court, and set a May 20 deadline for both sides to argue the constitutional question.⁹¹⁰

Tax practitioners raised a simpler problem too. The two-year statute of limitations for civil suits over unauthorized disclosure of tax returns had likely already expired by the time the complaint was filed.¹¹

How the Case Ended

Two days before Judge Williams’s May 20 deadline, on May 18, 2026, the plaintiffs filed a notice voluntarily dismissing the lawsuit with prejudice. The notice did not mention any settlement, and Judge Williams noted the absence of a formal settlement agreement on the record.¹²

The same day, the Department of Justice publicly announced a deal. Acting Attorney General Todd Blanche described three main components:

A formal government apology to Trump and the other plaintiffs. The plaintiffs received no monetary damages from the suit itself.¹
A new Anti-Weaponization Fund. Treasury was directed to move $1.776 billion from the Judgment Fund into a compensation pool for people claiming they had suffered “weaponization and lawfare” by the government. A five-member commission appointed by the attorney general would oversee it, with the president holding removal authority.¹
Withdrawal of other claims. In exchange, Trump agreed to drop the IRS lawsuit with prejudice and withdraw separate pending administrative tort claims — reportedly totaling roughly $230 million — related to the FBI’s 2022 search of Mar-a-Lago and the Russia-collusion investigations.¹¹³

The Audit Immunity Addendum

The following day, May 19, Blanche signed a one-page addendum that went further. It stated the United States is “FOREVER BARRED and PRECLUDED” from prosecuting, pursuing, or auditing any tax matters currently pending against Trump, his family, and his businesses for returns filed before the settlement date.¹⁴ Critics warned that a “lawfare” clause in the addendum could be read to preclude future audits as well.¹¹

The addendum was signed by Blanche and IRS CEO Frank Bisignano. That drew scrutiny because Bisignano had told the Senate Finance Committee on April 15, 2026, that he was “not involved in the matter” and that the lawsuit was being handled by DOJ, not the IRS.¹⁵ Senator Michael Bennet later noted that only Blanche signed the immunity addendum itself, and that it was unclear whether the IRS had ever made the formal referral to DOJ required under the tax code for the attorney general to compromise a tax dispute.¹⁶

The Backlash

Tax and constitutional law experts were sharply critical. Brandon DeBot of NYU’s Tax Law Center argued the DOJ lacked authority to drop IRS audits as part of a civil litigation settlement, calling the arrangement a “breathtaking abuse of the tax and legal system.” Northwestern Law professor Ajay Mehrotra said there was “no historical precedent for this kind of presidential immunity from the IRS.” Public Citizen called the deal “self-dealing,” and Common Cause argued it could violate the Constitution’s emoluments clause because discharging outstanding audits is a direct financial benefit to the president.¹⁷

Critics also flagged Section 7217 of the Internal Revenue Code, which prohibits the president from requesting the termination of a tax audit. The DOJ said the deal was lawful because the addendum was signed by the acting attorney general rather than the president.¹⁸

Congressional reaction was bipartisan and hot. In a private meeting on May 21, Republican senators confronted Blanche directly. Senator Ted Cruz said the arrangement felt like “self-dealing.” Senator Mitch McConnell called the fund a “slush fund” and labeled it “utterly stupid” and “morally wrong,” noting that people convicted of assaulting police officers on January 6 could seek compensation. Senators Katie Britt, Thom Tillis, and Bill Cassidy expressed similar opposition.¹⁹ Senate Majority Leader John Thune publicly urged the administration to “shut it down.”²⁰

On May 21, Representatives Brian Fitzpatrick (R-Pa.) and Tom Suozzi (D-N.Y.) introduced the Bipartisan Transparency for American Taxpayers Act to bar federal funds from paying any claims submitted to the fund.²¹ On May 18, House Democrats’ Litigation Task Force filed an amicus brief signed by 93 members of Congress urging Judge Williams to dismiss the underlying lawsuit and block the settlement.²²

Court Challenges to the Fund

On May 20, 2026, former Capitol Police Officer Harry Dunn and Metropolitan Police Department Officer Daniel Hodges, both of whom defended the Capitol on January 6, 2021, sued in the U.S. District Court for the District of Columbia (Dunn v. Trump, No. 1:26-cv-01719). They argued the fund violated the Fourteenth Amendment’s prohibition on using federal money to pay debts incurred in aid of insurrection and that no statute authorized its creation.²³

A broader challenge came from a coalition that included the City of New Haven, former federal prosecutor Andrew Floyd, Common Cause, and the National Abortion Federation, in Floyd v. U.S. Department of Justice (No. 1:26-cv-01399), filed in the Eastern District of Virginia. They called the fund an “unconstitutional and unlawful political compensation scheme.”²⁴

On May 29, U.S. District Judge Leonie Brinkema issued a temporary injunction prohibiting the government from transferring money into the fund, considering claims, or making disbursements. On June 12, she converted that into a preliminary injunction blocking the fund indefinitely and ordered the government to produce a sworn declaration from Blanche and Treasury Secretary Scott Bessent confirming the fund was permanently terminated, saying she was not satisfied with verbal assurances alone.²

The Fraud-on-the-Court Investigation

On May 27, 2026, a group of 35 former federal judges, including conservative jurist J. Michael Luttig, filed a motion under Federal Rule of Civil Procedure 60 asking Judge Williams to set aside the dismissal and reopen the case. They alleged the parties had committed fraud on the court by filing a dismissal notice that made no mention of the settlement the DOJ simultaneously announced, and that the maneuver was designed to avoid judicial scrutiny of whether a genuine legal dispute had ever existed.²⁵

On May 29, Judge Williams agreed to investigate, stating the court was “empowered to investigate serious misconduct,” and ordered Trump’s attorneys to respond to the allegations. She was reported to be examining whether the settlement was used to obtain “unlawful private benefits” and whether the DOJ under Blanche, who had previously served as Trump’s personal defense attorney, was positioned to independently defend the lawsuit at all.²⁶²⁷

Where Things Stand

As of early June 2026, the outcome is unsettled on several tracks at once. Blanche testified before a House Appropriations subcommittee on June 2 that DOJ was “not moving forward with the fund, period.”²⁸ But he refused to put that in writing and confirmed DOJ was not rescinding the underlying settlement or the audit immunity addendum.²⁹ Judge Brinkema’s indefinite injunction against the fund remains in force.³⁰

In the Southern District of Florida, Judge Williams’s investigation into the fraud-on-the-court allegations is active. The immunity addendum barring pending tax matters against the Trump family has not been formally withdrawn, and congressional demands for answers from Bisignano and Bessent are outstanding.³¹

1
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2
NBC News. Judge Indefinitely Blocks Trumps Anti-Weaponization Fund
3
NPR. Ex-IRS Contractor Sentenced to 5 Years in Prison for Leaking Trumps Tax Records
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New York Times. Ex-IRS Contractor Sentenced to Five Years for Leaking Trumps Tax Records
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15
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17
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19
The Hill. Republicans Lash Out at Anti-Weaponization Fund
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BBC News. Trump Anti-Weaponization Fund Congressional Response
21
Rep. Brian Fitzpatrick. Fitzpatrick-Suozzi Introduce Bipartisan Bill
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Politico. Trump Weaponization Fund Lawsuit Jan 6
24
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CNBC. Trump IRS Case Judge Fraud DOJ Fund
26
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ABC News. Acting AG Blanche Trump Administration Nixing Anti-Weaponization
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WTTW News. Judge Extends Block on Trumps Anti-Weaponization Fund
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Center for American Progress. How Trumps Potential Settlement Could Shield His Family and Businesses From Investigation