Trump’s $10B IRS Lawsuit and Settlement Fund: Rulings and Objections

In January 2026, President Donald Trump sued the IRS and Treasury for $10 billion over the leak of his tax returns, then dropped the case four months later in exchange for a $1.776 billion taxpayer-funded “Anti-Weaponization Fund” and a permanent bar on IRS audits of his family and businesses. Federal courts have since blocked the fund and the administration has said publicly it will not pursue it, but the audit release remains in place and litigation over whether the whole arrangement was a fraud on the court is still open. Here is what the Trump IRS lawsuit and settlement fund actually did, and where each piece of it stands.

What Trump Sued the IRS For

On January 29, 2026, Trump, his sons Donald Jr. and Eric, and The Trump Organization LLC filed suit in the U.S. District Court for the Southern District of Florida. The complaint alleged that Treasury and the IRS had failed to protect the family’s confidential tax data from unauthorized disclosures by a former IRS contractor, causing “reputational and financial harm, public embarrassment,” and damage to their business reputations.¹ The plaintiffs sought at least $10 billion under Internal Revenue Code section 7431, which creates a cause of action for unauthorized disclosures, plus punitive damages and attorney fees.

The underlying leak was the work of Charles Edward Littlejohn, a contractor employed at the IRS through Booz Allen Hamilton. Littlejohn extracted Trump’s tax records between 2018 and 2020 and passed them to The New York Times; he separately leaked tax data on thousands of wealthy taxpayers to ProPublica. The IRS told the House Judiciary Committee in February 2025 that 405,427 taxpayers had been affected.² Littlejohn pleaded guilty in October 2023 and was sentenced on January 29, 2024, to the statutory maximum of five years in prison.³

The disclosures had shown that Trump paid no federal income tax for 10 out of the 15 years before 2019.⁴ The complaint cited at least eight New York Times articles and about 50 ProPublica pieces as evidence of harm.¹

The case had problems from the start. A panel of court-appointed legal experts and 93 House members filed briefs warning of “significant Article III subject matter jurisdiction concerns,” arguing that a sitting president suing agencies he controls lacks the adversarial character the Constitution requires.⁵ The two-year filing window under section 7431 may also have already expired.⁶ IRS lawyers prepared a 25-page memo laying out the case’s weaknesses and recommended a motion to dismiss. That memo went to Treasury in April 2026. No Justice Department attorney ever appeared in court to answer Trump’s claims.⁷

How the Case Ended

On May 18, 2026, Trump filed a notice of voluntary dismissal under Federal Rule of Civil Procedure 41(a)(1)(A)(i), which lets a plaintiff drop a case unilaterally before the defendant files a responsive pleading. Because no such pleading had been filed, no judge had to approve the dismissal. It was with prejudice, and each side bore its own costs.⁵

The same day, Acting Attorney General Todd Blanche ordered Treasury to transfer $1,776,000,000 to a new Anti-Weaponization Fund. The settlement agreement expressly said the Trump plaintiffs “will not receive any monetary payment or damages of any kind.” The money was designated instead for “future claimants” alleging harm by government conduct.⁸

How the Fund Was Structured

The $1.776 billion came from the Judgment Fund, a permanent indefinite appropriation Congress created in 1956 for paying court judgments and settlements against the federal government.⁹ A five-member commission appointed by the Attorney General, with one member chosen after consulting congressional leadership, would run it. Members could be removed by the President. The commission could issue monetary awards and formal apologies, would stop taking claims by December 2028, and any leftover money would revert to the government.¹⁰

Blanche said participation was voluntary and open to anyone, including people charged in the January 6, 2021, attack on the U.S. Capitol.¹¹ As precedent he cited Keepseagle v. Vilsack, the Obama-era $760 million settlement for Native American farmers who had faced USDA discrimination.¹⁰

The Permanent Audit Bar

A three-paragraph addendum Blanche signed the following day went beyond the fund. It purported to “forever bar and preclude” the IRS from pursuing audits or claims tied to Trump’s prior tax returns and extended broad releases to Trump, his sons, the Trump Organization, and affiliated entities and trusts.¹² The immunity language reached potential actions by DOJ, FBI, SEC, FinCEN, and IRS, covering any matter the executive branch labeled “Lawfare” or “Weaponization” under definitions kept in the non-public settlement agreement.¹³

Why the Deal Drew Legal Objections

Todd Blanche, who authorized the transfer, had served as Trump’s personal criminal defense attorney in 2023 and 2024, representing him in the Manhattan hush-money trial that ended in a 34-count felony conviction.¹⁴ In March 2025, less than two weeks after becoming Deputy Attorney General, Blanche was formally advised by DOJ’s top career ethics lawyer to recuse from cases involving Trump personally. He had testified at his confirmation hearing that he would “follow the rules as told to me by the experts” and had signed an ethics pledge barring participation in matters involving former clients. Senators Adam Schiff, Dick Durbin, and Richard Blumenthal opened a formal inquiry on May 19, 2026, asking whether Blanche had ignored that guidance.¹⁵

Beyond the ethics question, legal scholars challenged the DOJ’s authority to spend $1.776 billion from the Judgment Fund at all. The Judgment Fund pays real judgments and legitimate settlement obligations. If Trump’s lawsuit had serious jurisdictional problems and the government never contested it, critics argued, there was no genuine legal dispute to settle, which would make the payment an unauthorized expenditure in violation of the Anti-Deficiency Act.¹⁶

The Keepseagle comparison drew rebuttal. That case involved years of contested litigation over documented discrimination, was supervised by a federal judge, and produced a negotiated class-action resolution with independent oversight. The Anti-Weaponization Fund was created by executive order, run by a commission the President could dismiss, and had no judicial supervision.¹⁷

On the audit release, the Tax Law Center at NYU Law argued that proper IRS officials would have to sign formal closing agreements for a release of tax claims to have legal effect, and such agreements can later be voided on a showing of “fraud, malfeasance, or misrepresentation of a material fact.”⁸ Senator Ron Wyden called Blanche’s order a “violation of the law that prohibits interference by executive branch officials in IRS audits.”¹⁸ One legal commentator described the arrangement as a novel “third mechanism” of federal immunity, distinct from a presidential pardon or a judicial settlement, that a future administration could challenge as exceeding executive authority.¹³

The Court Cases That Blocked It

At least four federal lawsuits challenged the fund. Three produced meaningful action.

Judge Williams Reopens the Case in Florida

On May 29, 2026, U.S. District Judge Kathleen Williams reopened the underlying Florida case after a group of 35 former federal judges, including Nancy Gertner and Michael Luttig, filed an amicus brief urging her to investigate whether the settlement was “a product of collusion and is itself a fraud on the court.”¹⁹ Williams ordered Trump’s attorneys to respond by June 12, 2026, and criticized DOJ for filing nothing to ensure the settlement was appropriate, noting the department’s “independent obligation to uphold the public’s strong interest in knowing about the conduct of its Government.”²⁰

The Virginia Injunction

Democracy Forward filed Andrew Floyd et al. v. U.S. Department of Justice in the Eastern District of Virginia on behalf of a former January 6 prosecutor, a college professor, the City of New Haven, the National Abortion Federation, and Common Cause. The complaint alleged violations of the First Amendment, equal protection, separation of powers, the Administrative Procedure Act, and constitutional limits on federal spending.²¹

U.S. District Judge Leonie Brinkema issued a temporary block in late May and then, on June 12, 2026, converted it into an indefinite preliminary injunction. She rejected DOJ’s mootness argument, citing Trump’s own public statements calling the fund “a great idea” and expressing disappointment that it might not proceed. She ordered Blanche and Treasury Secretary Scott Bessent to file sworn declarations, under penalty of perjury, confirming the fund’s termination. If the government did not comply within a week, plaintiffs could take discovery into the program’s origins.²²²³

The Capitol Police Officers’ Suit

Former Capitol Police Officer Harry Dunn and Metropolitan Police Department Officer Daniel Hodges filed Dunn v. Trump in federal court in Washington on May 20, 2026. Both were injured on January 6 and argued the fund would be used to compensate the people who had assaulted them, in violation of the 14th Amendment’s ban on using federal money to pay debts incurred in aid of insurrection.²⁴²⁵ A separate suit filed by Citizens for Responsibility and Ethics in Washington (CREW) was dismissed by U.S. District Judge Richard Leon on June 10, 2026, partly because DOJ had by then said it was abandoning the fund.²⁶

Congressional Response

Senate Republican leadership pressured DOJ to scrap the fund, warning it could hurt the party in the 2026 midterms.²⁷ Senator John Cornyn posted that “the way to ensure the Trump retribution fund is more than mostly dead would be for Congress to put a stake through it.”²⁸

On June 2, 2026, Blanche told a House Appropriations subcommittee that DOJ would “not move forward with the fund, period.” He declined to put that in writing or formally rescind the May 18 order that created it, and he confirmed that cancelling the fund did not affect the audit bar on the Trump family’s returns.²⁹²⁸

Representative Jamie Raskin introduced the BLANCHE Act (H.R. 9210), which would prohibit a sitting president from receiving settlement payments from the federal government in cash or in kind, and would require independent judicial review of any such agreements to ensure they are “genuinely adversarial and free from collusion.” It was referred to the House Judiciary Committee on June 9, 2026.³⁰ Raskin also introduced separate measures to block any anti-weaponization program funding and to create a cause of action for constitutional-rights violations.³¹ A Schumer amendment that would have codified the fund’s abandonment was defeated 49-50 on June 4, 2026.³²

Where Things Stand Now

As of June 2026, the Anti-Weaponization Fund is blocked by court order and effectively abandoned by the administration, but not formally dissolved. Judge Brinkema’s preliminary injunction in the Eastern District of Virginia remains in effect, and the government has been ordered to provide sworn declarations that the fund is terminated.³³ In the Southern District of Florida, Judge Williams’s inquiry into whether the original lawsuit and settlement were a fraud on the court is still open.²⁹

The provision permanently barring IRS audits of Trump, his family, and their businesses remains in place, and DOJ maintains that the fund’s cancellation does not disturb that release.³⁴ Legal analysts have noted that this release does not bind state authorities, future Congresses, or future executive administrations, and that a later administration could challenge it as exceeding executive branch authority.¹³

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2
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3
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Native News Online. DOJ Proposal Invokes Native Farmers Settlement
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Courthouse News. Former Judges Accuse Trump of Deceiving Court
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CBS News. Lawsuit Over Trump Anti-Weaponization Fund by Former Police
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The Hill. Court Declines to Halt DOJ Anti-Weaponization Fund
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ABC News. Blanche: Administration Nixing Anti-Weaponization Fund
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Courthouse News. House Democrat Moves to Block Trump IRS Settlement
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NPR. Justice Department Anti-Weaponization Fund Pause
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GovInfo. H.R. 9210, BLANCHE Act of 2026
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House Judiciary Democrats. Raskin Unveils Legislative Package
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Democracy Forward. Federal Court Blocks $1.776 Billion Slush Fund
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Time. Trump DOJ Anti-Weaponization Fund