In a sharp rebuke of emerging settlement terms for a $10 billion lawsuit President Donald Trump filed against the Internal Revenue Service, top congressional Democrats have accused the sitting president of orchestrating a massive scheme to divert $1.7 billion in public funds to his political allies, framing the deal as an unprecedented power grab that weaponizes federal institutions for partisan gain.
Citing multiple unnamed sources familiar with ongoing negotiations, ABC News first reported late Thursday that a deal is expected to be finalized in the coming days. Under the reported terms, Trump would drop his pending lawsuit against the IRS in exchange for two key concessions: the creation of a $1.7 billion compensation pool funded through the U.S. Treasury’s Judgment Fund, a taxpayer-backed account reserved for official court judgments and government settlements, and a public formal apology from the agency for the 2020s leak of Trump’s personal tax returns during his first presidential term.
The lawsuit itself stems from the unauthorized disclosure of Trump’s tax records by former IRS contractor Charles Littlejohn, who pleaded guilty to leaking the documents to The New York Times and ProPublica in 2024. Those leaks exposed that Trump had utilized aggressive, widely criticized tax avoidance schemes and paid no federal income taxes for multiple years leading up to his 2017 inauguration, breaking a decades-long bipartisan tradition of presidential tax transparency by refusing to release his returns voluntarily. Trump and his legal team initially sought a minimum $10 billion payout from the agency over the leak.
The proposed settlement has already sparked fierce condemnation from congressional Democrats, who warn that the deal’s structure exposes deep conflicts of interest and unprecedented corruption. As sitting president, Trump already exercises full executive control over the IRS, which is currently led by his handpicked appointee Frank J. Bisignano, who reports directly to Trump-aligned Treasury Secretary Scott Bessent. The Department of Justice, which is defending the IRS in the case, is also under Trump’s executive authority, leading legal observers to question the legitimacy of the suit, since both nominal opposing parties are ultimately controlled by the plaintiff.
Last month, U.S. District Judge Kathleen M. Williams, who is overseeing the case in the Southern District of Florida, publicly questioned the lawsuit’s constitutionality, noting that as sitting president, Trump holds authority over the federal entities he is suing. She has ordered both parties to submit legal briefs by May 20 proving a genuine adversarial conflict exists between the plaintiff and defendants, but legal analysts have noted the White House and DOJ can finalize a settlement before that deadline, leaving the judge with little power to block the deal. Beyond the $1.7 billion fund, multiple outlets have confirmed administration officials have also discussed dropping all outstanding IRS audits of Trump, his family, and his business entities—a move that could save Trump more than $100 million in back taxes, per a 2024 New York Times analysis.
“ This is another installment in Trump’s ongoing effort to turn the federal government into a personal cash machine for his unpopular extremist movement,” Rep. Jamie Raskin, the top Democrat on the House Judiciary Committee, said in a formal statement Thursday. Raskin called the proposed deal “a massive and unprecedented presidential plunder of the American people,” warning that the plan marks “a declaration that the prior payouts were just a down payment, and that he now intends to earmark billions more in taxpayer dollars for his political allies, sycophants, and private militia of unemployed insurrectionists.” Raskin emphasized that Trump holds no statutory authority to divert Judgment Fund resources for this purpose, arguing that “Congress must act immediately to reassert the power of the purse and stop this brazen looting of taxpayer funds before this ‘pilot program’ for corruption becomes the permanent operating system of our government.”
Other House Democrats echoed Raskin’s criticism. “Real story: Judge was about to throw out the case because Trump controls both parties,” Rep. Dan Goldman of New York wrote on social media Thursday. “Before it’s dismissed, Trump tells both parties to reach a ‘settlement.’ Settlement shields Trump from any future audit and creates a secret slush fund that can dole out money to anyone with no transparency.” Goldman called the arrangement “mind-boggling corruption.”
ABC News’ reporting notes the proposed settlement includes multiple unusual provisions that raise transparency concerns. Under the draft terms, Trump would be barred from receiving direct personal payments from the three core legal claims at the center of the suit, but no restrictions prohibit Trump-aligned entities from filing future additional claims. More critically, the president would hold the authority to remove members of the commission overseeing the $1.7 billion fund without cause, and the commission would face no mandatory requirements to disclose its award procedures or decision-making, creating what experts describe as an unaccountable, oversight-free pool of taxpayer cash.
Top Democratic lawmakers have gone even further in their assessments, describing the plan as the largest single instance of public corruption in U.S. history. “Trump is considering stealing billions of dollars from the American people,” said Rep. Don Beyer of Virginia, the ranking Democrat on the Joint Economic Committee. “He’s already the most corrupt president ever by a wide margin, but this would be fraud and theft on a scale even he has never attempted. The largest single act of grand larceny in American history.”
Sen. Elizabeth Warren of Massachusetts, top Democrat on the Senate Banking, Housing, and Urban Affairs Committee, added that a pre-ruling settlement would amount to “a massive, unprecedented scandal.” Warren has already introduced legislation that would bar sitting presidents, vice presidents, and their immediate families from collecting settlement payments from the federal government, and would require independent court-appointed counsel to defend agencies in claims brought by top executive branch officials. But the bill has failed to advance in the current Republican-controlled Congress.
The proposed settlement would represent a dramatic expansion of the pattern of self-dealing that has defined Trump’s second presidential term, according to tracking from the Center for American Progress, a left-leaning think tank that maintains a live public tracker of profits Trump and his family have earned through their hold on public office. To date, the tracker estimates Trump and his family have taken in more than $2.6 billion in cash and gifts through their positions, including roughly $1.5 billion from cryptocurrency ventures promoted from the White House, a $400 million luxury jet gifted by the government of Qatar, and more than $90 million in legal settlements from media and technology companies. Beyond the IRS suit, Trump has also demanded the Department of Justice pay him $230 million in damages over prior criminal investigations into his business and political activities.
Even a partial payout on Trump’s original $10 billion claim would dwarf the self-dealing of Trump’s first 18 months back in office, analysts have noted, potentially doubling Trump’s reported net worth through public funds diverted through the settlement.
Bharat Ramamurti, former deputy director of the White House National Economic Council under President Joe Biden, called the lawsuit and proposed settlement “a massive scam” that is “much worse” than Trump’s earlier proposal to divert $1 billion in taxpayer funds to renovate his White House ballroom.
