New reporting says President Donald Trump is expected to drop his $10 billion lawsuit against the Internal Revenue Service in return for creation of a $1.7 billion fund to compensate people who claim they were improperly targeted by the Biden administration.
ABC News reported the prospective deal late Thursday, saying the money would come from the Treasury Department’s Judgment Fund, which is used to pay court judgments and settlements against the federal government. The reported terms also include a public apology from the IRS for the leak of Trump’s tax returns during his first term.
House Democrats reacted angrily. Rep. Jamie Raskin (D-Md.), the top Democrat on the House Judiciary Committee, called the proposal “a $1,700,000,000 fraud on the American taxpayer” and accused Trump of turning federal mechanisms into a personal slush fund to reward political allies. Raskin warned the settlement would be an unprecedented transfer of taxpayer money with little oversight and urged Congress to reassert its power of the purse.
ABC cited unnamed sources who cautioned the settlement was not final, and reported the draft agreement would bar Trump from directly receiving payments tied to three legal claims but would not explicitly prevent entities connected to him from seeking awards. The network also said the plan would give the president the power to remove members of the commission overseeing the fund without cause and would not require the commission to disclose how it decides awards for more than a billion dollars.
The lawsuit stems from the 2018 leak of Trump’s tax records by a former IRS contractor, Charles Littlejohn, who pleaded guilty in 2024. The disclosures, published by The New York Times and ProPublica, alleged years of tax avoidance, questionable deductions and, in some years, no federal income tax paid. The complaint seeks at least $10 billion from the IRS for failing to prevent the leak.
Legal observers have highlighted an unusual conflict: the IRS and Department of Justice are effectively under the administration being sued. Federal Judge Kathleen M. Williams of the Southern District of Florida has questioned whether the parties are truly adversarial and ordered briefs demonstrating that a genuine conflict exists; the parties were given a deadline of May 20. According to reporting, if the DOJ and White House settle the case before the judge rules, she would have little power to stop it.
Some Democrats say a settlement could be used to shield Trump from future audits and to funnel taxpayer dollars to his supporters. Rep. Dan Goldman (D-N.Y.) said the judge was poised to dismiss the case for lack of adverseness and that a pre-dismissal settlement would protect Trump from audits while creating an opaque slush fund. Rep. Don Beyer (D-Va.), ranking Democrat on the Joint Economic Committee, called the scheme “the largest single act of grand larceny in American history.” Senator Elizabeth Warren (D-Mass.) warned that a DOJ settlement before a court ruling would be a “massive, unprecedented scandal” and urged Congress to block such payments; she has introduced a bill to bar presidents, vice presidents and their families from collecting federal settlement payments while in office, but it has seen little traction in the Republican-controlled Congress.
The Times has also reported that the White House and DOJ discussed ending audits into Trump, his family and his businesses as part of settlement conversations. Presidential audits are required for presidents and vice presidents, and a failed audit could cost Trump more than $100 million, a 2024 Times report said.
Critics note this potential settlement comes amid broader concerns about profiteering by the president and his family from their public positions. A tracker from the Center for American Progress cited in reporting says Trump and his family have taken in billions in cash and gifts since his return to the White House, including proceeds tied to cryptocurrency ventures, a reported luxury jet gift, and legal settlements with media and tech companies. Trump has also demanded $230 million from the DOJ over prior criminal investigations, according to earlier reports.
Former White House economic official Bharat Ramamurti called the IRS lawsuit a “massive scam,” likening it to earlier proposals by Trump to use taxpayer money for pet projects. Supporters of blocking the settlement say Congress must act quickly to prevent the use of federal funds in a way that would benefit the president’s political allies and to ensure accountability and transparency if any large payout is made.
The ABC report emphasized that the settlement details remained subject to change until formally announced. Until then, legal, constitutional and political fights over whether such a pact could be finalized — and whether it should be allowed to stand — are likely to continue.
