In a surprising legal development that has ignited fierce partisan controversy across Washington, former president and current U.S. President Donald Trump has agreed to dismiss his $10 billion lawsuit against the Internal Revenue Service over the 2020 leak of his personal tax returns. The settlement paves the way for the creation of a $1.776 billion federal fund to compensate individuals who claim they were improperly targeted by government law enforcement actions.
Trump first launched the legal action in January, arguing that the IRS failed to intervene to stop a former agency contractor, Charles “Chaz” Littlejohn, from leaking years of confidential tax documents to national media outlets during his first term in office. The dismissal came just 48 hours before a critical May 20 court deadline, where both sides were scheduled to argue over whether a valid legal standing for the case even existed — a question raised given Trump now leads the executive branch that oversees the IRS.
Almost immediately after Trump’s legal team filed the motion to dismiss, the U.S. Department of Justice announced the terms of the broader settlement agreement. Under the deal, a new “anti-weaponisation fund” will be established to create a formal process for reviewing and resolving claims from people who say they were harmed when government law enforcement was improperly politicized. Trump, his sons, and the Trump Organization, all named plaintiffs in the original suit, will receive a formal apology from the department but no financial compensation, officials confirmed.
The fund will be managed by a five-member commission, four of which will be appointed directly by the U.S. Attorney General, and is allocated nearly $1.8 billion in taxpayer funding to resolve eligible claims. Quarterly public reports on all disbursements from the fund will be submitted to the Attorney General, per the agreement. “The machinery of government should never be weaponised against any American, and it is this Department’s intention to make right the wrongs that were previously done while ensuring this never happens again,” Acting Attorney General Todd Blanche said in a statement announcing the deal.
A spokesperson for Trump’s legal team framed the president’s decision to settle as a move driven by public interest, saying “the president is entering into this settlement squarely for the benefit of the American people. He will continue his fight to hold those who wrong America and Americans accountable,” the spokesperson added.
However, congressional Democrats have decried the agreement as an unconstitutional abuse of power, labeling the new fund an unaccountable “slush fund” that will be used to reward Trump’s political allies. More than 90 House Democrats have already filed a legislative motion to block the settlement from taking effect. Maryland Representative Jamie Raskin issued a blistering statement calling the deal a corrupt racket, arguing it would divert $1.7 billion in public funds to pay allies of Trump, including people convicted for their role in the January 6, 2021 Capitol riot and supporters of Trump’s efforts to overturn the 2020 presidential election.
Legal experts consulted by the judge overseeing the original suit last week had already described Trump’s legal action as historically unusual. “This case is unprecedented: A sitting president seeks monetary damages for alleged harm to his personal interests from an executive agency that he controls,” the experts wrote in their analysis, noting that Trump has publicly acknowledged he exercises control over both the IRS and the Department of Justice attorneys handling the litigation.
The controversy traces back to the 2020 leak of Trump’s tax records, which formed the basis of a landmark New York Times investigation published weeks before that year’s presidential election. The investigation confirmed that Trump paid just $750 in federal income taxes in 2016, the year he won the presidency, and paid no federal income tax at all in 10 of the 15 years prior to that election. Trump voluntarily released his tax records publicly in 2022, two years after the leak. Littlejohn, the contractor responsible for the leak, pleaded guilty in 2023 to stealing confidential tax data from Trump and thousands of other high-income Americans, and was sentenced to five years in federal prison in 2024.