Trump’s $10 Billion IRS Lawsuit: Settlement, Fund, and Court Fight

Trump’s $10 billion IRS lawsuit was a case filed in January 2026 by President Donald Trump, his two eldest sons, and the Trump Organization against the Internal Revenue Service and the Treasury Department, alleging the agencies failed to prevent a contractor from leaking his tax returns to the press. The plaintiffs dropped the case less than five months later in exchange for a Justice Department order creating a $1.776 billion “Anti-Weaponization Fund” and a sweeping bar on future federal tax scrutiny of Trump and his family. That settlement has since been frozen by a federal injunction, denounced by lawmakers in both parties, and is the subject of a fraud-on-the-court inquiry by the judge who was handling the original case.¹

What the Lawsuit Claimed

The complaint, filed January 29, 2026, in the U.S. District Court for the Southern District of Florida, alleged the IRS willfully failed to safeguard the plaintiffs’ tax data in violation of the confidentiality protections in Internal Revenue Code Section 6103. The case was assigned to U.S. District Judge Kathleen M. Williams.²

The core legal theory was that Charles Littlejohn, the contractor who leaked the returns, should be treated as a “joint employee” of the IRS because the agency exercised “extensive, detailed, day-to-day supervision” over his work. The $10 billion damages figure was calculated under IRC Section 7431 on the theory that every individual who viewed the leaked information in news reports counted as a separate $1,000 disclosure.³

The Leak Behind the Suit

Littlejohn, a 38-year-old government contractor working at the IRS, accessed Trump’s tax returns between August and October 2019 using broad search parameters designed to evade detection. He uploaded the data to a private website, saved it to personal storage devices including an iPod, and provided the records to The New York Times, which began publishing articles in September 2020. He later stole tax information for thousands of wealthy Americans and gave it to ProPublica.⁴

Littlejohn pleaded guilty in October 2023 to one count of unauthorized disclosure of tax return information and was sentenced on January 29, 2024, to the statutory maximum of five years in prison. The Trump lawsuit was filed exactly two years later.⁴

The Conflict at the Heart of the Case

The suit raised a constitutional problem from the day it was filed: the president was suing executive branch agencies he controlled. Former IRS Commissioner John Koskinen, along with Common Cause and the Project On Government Oversight, filed an amicus motion on February 5, 2026, questioning whether the case presented a genuine “case or controversy” under Article III.⁵

A week later, Citizens for Responsibility and Ethics in Washington and Public Citizen filed their own brief arguing Trump’s dual role created an “insurmountable conflict of interest,” because Justice Department lawyers could not vigorously defend the IRS while working under Trump’s direction. They also argued any monetary settlement would violate the Domestic Emoluments Clause, which bars the president from receiving federal payments beyond his salary.⁶

Judge Williams took the concerns seriously. On April 24, she issued an order noting that Article III prohibits suits that are “friendly,” “feigned,” or “collusive,” and questioning whether a federal court could hear a case where both sides answered to the same person. She appointed a team of prominent outside attorneys as court-appointed amici to analyze the jurisdictional issues, giving them until May 21 to submit their analysis.⁷

The Settlement: The Anti-Weaponization Fund

Three days before the court-appointed amici were due to file, Trump ended the case. On May 18, 2026, his attorneys filed a notice of voluntary dismissal with prejudice, arguing they had the right to dismiss at this early stage without the court’s approval. Judge Williams issued a three-page order closing the case that evening, noting the plaintiffs made no reference to a settlement and the defendants had submitted no settlement documents.⁸

The Justice Department announced the settlement separately. Acting Attorney General Todd Blanche issued a memo establishing a $1.776 billion “Anti-Weaponization Fund” to hear and redress claims from people who suffered “weaponization and lawfare.” Trump and his family received no direct payment. Instead, a five-member commission appointed by the attorney general — and removable by the president — would evaluate claims from individuals who believed they had been “improperly targeted by the federal government on political, personal, or ideological grounds,” with authority to issue monetary awards and formal apologies. The fund was set to stop taking claims by December 15, 2028, with any remaining money reverting to the government.¹

The money was to come from the federal Judgment Fund, a permanent Treasury appropriation that pays judgments and settlements against the United States. DOJ officials indicated pardoned January 6 defendants would be eligible to apply. Blanche said there were “no partisan requirements” and that “anybody in this country can apply.”¹

The Audit Shield

The morning after the fund was announced, the DOJ posted an addendum to the settlement on its website. Signed by Blanche, the addendum declared the federal government was “FOREVER BARRED and PRECLUDED” from examining the tax returns of Donald Trump, his family, the Trump Organization, and related companies for any return filed before the agreement’s effective date. The immunity extended beyond the IRS to the DOJ, FBI, SEC, FinCEN, and any other executive branch component. The government also agreed to “RELEASE, WAIVE, ACQUIT, and FOREVER DISCHARGE” the plaintiffs from any claims that were or could have been asserted.⁹

Because the case was dismissed unilaterally before any court reviewed the settlement, no judge approved or even saw the agreement. Legal scholars described the addendum as a novel form of federal immunity — neither a pardon nor a court-supervised settlement, but a contractual release. Critics argued the attorney general lacked statutory authority to waive the IRS’s independent examination powers, and that the agreement would not bind future administrations or state authorities.⁹

How the Deal Was Negotiated

Reporting by The New York Times found the settlement was brokered by a small group that included Blanche and Boris Epshteyn, one of Trump’s private lawyers. Epshteyn coordinated discussions between the president, his personal legal team, and Justice Department officials. Some senior White House officials said they were blindsided, learning of the deal only after it was nearly complete. Blanche, who ran the DOJ side of the settlement, had previously served as Epshteyn’s criminal defense lawyer.¹⁰

Congressional Backlash

Ninety-three House Democrats — led by Judiciary Ranking Member Jamie Raskin, Assistant Leader Joe Neguse, Ways and Means Ranking Member Richard Neal, and House Democratic Leader Hakeem Jeffries — filed an amicus brief on May 18 urging Judge Williams to dismiss the lawsuit for lack of jurisdiction and block the settlement. Raskin said “no one can be both plaintiff and defendant in the same case.” Neguse said the suit “lacks the bare minimum required to file a lawsuit: two opposing parties.”¹¹

Senate Ranking Members Elizabeth Warren and Ron Wyden sent a letter to Treasury Secretary Scott Bessent and IRS CEO Frank Bisignano demanding information about the settlement, and formally requested a Treasury Inspector General investigation.¹²

Republican pushback followed. Senate Republicans withheld votes on a Homeland Security funding bill to pressure the White House.¹³ On May 21, Representatives Brian Fitzpatrick, a Pennsylvania Republican, and Tom Suozzi, a New York Democrat, introduced the Bipartisan Transparency for American Taxpayers Act, which would prohibit any federal funds — including from the Judgment Fund — from being used to pay claims submitted to the Anti-Weaponization Fund.¹⁴

Court Challenges That Froze the Fund

Three lawsuits landed within days of the fund’s announcement.

Retired U.S. Capitol Police Officer Harry Dunn and Metropolitan Police Officer Daniel Hodges, both injured defending the Capitol on January 6, 2021, sued in the U.S. District Court for the District of Columbia on May 20. Represented by the Public Integrity Project, they argued the fund lacked statutory authorization, violated the Administrative Procedure Act, and ran afoul of the Fourteenth Amendment’s prohibition on paying debts “incurred in aid of insurrection or rebellion against the United States.”¹⁵

Democracy Forward filed a broader challenge in the Eastern District of Virginia on behalf of a former January 6 prosecutor, a California professor, the city of New Haven, Common Cause, and the National Abortion Federation. They argued the fund violated the First Amendment, equal protection principles, separation of powers, the APA, and constitutional restrictions on federal spending.¹⁶

On May 29, U.S. District Judge Leonie Brinkema entered a temporary restraining order barring the administration from transferring money into the fund, accepting claims, or making disbursements.¹⁷¹⁸¹⁹

Citizens for Responsibility and Ethics in Washington filed a parallel case in the District of Columbia. U.S. District Judge Richard Leon denied CREW’s request for a temporary restraining order on June 10, finding the case “appears to be moot” given the administration’s stated position that the fund was halted, but he kept the preliminary injunction request active and warned DOJ counsel: “Don’t play possum with me.”²⁰

The Fraud-on-the-Court Inquiry

Back in Florida, the original case took an unexpected turn. On May 27, 35 former federal judges — including retired appellate judge J. Michael Luttig — filed a motion under Rule 60 of the Federal Rules of Civil Procedure asking Judge Williams to reopen the case. They alleged the court had been “deceived” because the plaintiffs dismissed the lawsuit on May 18 without mentioning any settlement, while the DOJ simultaneously announced a sweeping agreement that had never been filed with or reviewed by the court.²¹

The former judges called the settlement a “product of collusion” and a “fraud on the court.” They argued the lawsuit had been used as a vehicle to distribute $1.776 billion through a Trump-controlled commission without constitutional or congressional authority, and to confer private benefits on the president and his family by barring all future government claims against them.²²

Judge Williams reopened the case. On May 30 she ordered Trump’s attorneys to respond by June 12 to the charges of collusion and to the question of whether the court was the victim of fraud. She was also reported to be weighing whether to compel Blanche to testify about the settlement’s circumstances.²³

Where Things Stand

Blanche appeared before the House Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies on June 2, 2026, and stated: “We’re not moving forward with the fund, period.” Asked by Representative Grace Meng whether the department was abandoning the fund permanently, Blanche replied, “Correct.”²⁴

He refused, however, to put the commitment in writing or to formally rescind the May 18 settlement order. “I’m not committing to putting anything in writing,” he testified. “I don’t know what the purpose of putting something in writing. I’m telling you what we’re doing.”²⁵ He also confirmed that the addendum barring federal tax scrutiny of Trump and his family remained in place, describing it as an “Attorney General order” that “nothing has changed” about.²⁴

The gap between Blanche’s verbal assurances and his refusal to formalize them became central to the ongoing litigation. Judge Brinkema in Virginia called the absence of any written rescission a “huge gap” and noted that his congressional statements were not made under penalty of perjury.¹⁹ As of mid-June 2026, no money had left the fund, no claims had been accepted, and the five-member oversight commission had never been formed.²⁶ The fund is frozen by court order, but the underlying settlement — including the permanent bar on IRS enforcement against Trump and his family — has not been formally withdrawn.

1
Time. Trump DOJ Anti-Weaponization Fund IRS Lawsuit Settlement
2
Civil Rights Litigation Clearinghouse. Trump v. Internal Revenue Service
3
Thomson Reuters Tax & Accounting. Trump’s $10B IRS Suit Over Tax Data Leaks Raises Legal Issues
4
U.S. Department of Justice. Former IRS Contractor Sentenced for Disclosing Tax Return Information to News Organizations
5
Common Cause. Amici Curiae Motion for Leave to File
6
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12
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13
PBS NewsHour. Justice Department Scraps Trump’s Anti-Weaponization Fund After Pushback From Congress
14
CBS News. DOJ Fund House Bill Fitzpatrick Suozzi
15
Tax Notes. Capitol Defenders Challenge Creation of Anti-Weaponization Fund
16
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17
NBC News. Judge Halts Trump Anti-Weaponization Fund
18
Roll Call. Court Extends Block on Anti-Weaponization Fund
19
CBS News. Anti-Weaponization Fund Justice Department Judge
20
Civil Rights Litigation Clearinghouse. Citizens for Responsibility and Ethics in Washington v. U.S. Department of Justice
21
CNBC. Trump IRS Case Judge Fraud DOJ Fund
22
Courthouse News Service. Former Judges Accuse Trump of Deceiving Court With Fraudulent Anti-Weaponization Settlement
23
The Guardian. Trump IRS Suit Reopened
24
CNN. Blanche House Testimony Trump Fund Takeaways
25
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26
PBS NewsHour. Judge Temporarily Blocks Payouts From Trump’s $1.8B Anti-Weaponization Settlement Fund