Inside the Deal to Drop Trump’s $10 Billion IRS Lawsuit
President Donald Trump dropped his $10 billion lawsuit against the Internal Revenue Service on May 18, 2026, in exchange for the creation of a $1.776 billion “Anti-Weaponization Fund” — a settlement that has sparked bipartisan outrage, multiple legal challenges, and a temporary judicial freeze. The deal resolved Trump v. Internal Revenue Service, a case filed in January 2026 alleging the IRS failed to prevent contractor Charles Littlejohn from leaking Trump’s tax returns to The New York Times and ProPublica. A secret addendum issued the following day ordered the IRS to permanently end all audits of Trump, his family, and his businesses, according to The Associated Press.
The Lawsuit and Its Unprecedented Nature
On January 29, 2026, Trump, his sons Donald Trump Jr. and Eric Trump, and the Trump Organization sued the IRS and the Department of the Treasury in the U.S. District Court for the Southern District of Florida, seeking $10 billion in damages. The plaintiffs claimed the IRS was negligent in allowing contractor Charles E. Littlejohn to access and leak Trump’s tax returns covering 2005 to 2020 to two news organizations between 2018 and 2020.
The lawsuit was unprecedented: a sitting president suing an agency under his own control. Legal experts noted that Trump’s appointment of agency leaders and his authority over the Department of Justice — which would defend the IRS — created an unavoidable conflict of interest. Trump himself acknowledged he was “supposed to work out a settlement with myself.” Judge Kathleen M. Williams appointed six private attorneys to examine whether the lawsuit was legitimate, as the Wikipedia article on the case details.
The Settlement: A $1.776 Billion Fund
Under the settlement announced May 18, Trump voluntarily dismissed the lawsuit with prejudice. The DOJ created the Anti-Weaponization Fund — a $1.776 billion pool of money, the amount referencing 1776, the year of the Declaration of Independence — to compensate individuals claiming the DOJ was weaponized against them. According to the DOJ’s official announcement, the fund will be overseen by a five-member commission appointed by the Attorney General, with one member chosen in consultation with congressional leadership. The President can remove any member. The fund operates until December 1, 2028, and its decisions are irreversible and not subject to judicial oversight.
Trump and his sons received a formal apology but no direct monetary payment. However, the fund’s terms do not explicitly prohibit Trump or his entities from applying for payouts. Trump also withdrew administrative claims for damages from the FBI search of Mar-a-Lago and the Mueller Russia-collusion investigation.
The Secret Addendum
On May 19, Acting Attorney General Todd Blanche issued a supplemental order directing the IRS to permanently end all current and future audits of Trump, his family, related associates, and their businesses. As Forbes reported, this likely eliminated a dispute over a $72.9 million tax refund Trump claimed from his time hosting “The Apprentice.” The addendum raised significant legal questions, as federal law generally prohibits the president from ordering the IRS to start or stop audits, though there appears to be a carve-out for the Attorney General.
Bipartisan Backlash
The settlement drew condemnation from across the political spectrum. Acting Attorney General Blanche defended the fund, stating, “The machinery of government should never be weaponized 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.”
But critics were swift and forceful. Rep. Alexandria Ocasio-Cortez called the settlement “outright corruption.” Rep. Jamie Raskin, the top Democrat on the House Judiciary Committee, said, “This case is nothing but a racket designed to take $1.7 billion of taxpayer dollars out of the Treasury and pour it into a huge slush fund for Trump at DOJ to hand out to his private militia of insurrectionists, rioters, and white supremacists.”
Perhaps most striking was the criticism from Senate Majority Leader Mitch McConnell, who said: “So the nation’s top law enforcement official is asking for a slush fund to pay people who assault cops? Utterly stupid, morally wrong — take your pick.” Sen. Ron Wyden called it “the most brazen theft and abuse of taxpayer dollars by any president in American history.”
Judicial Pushback
Two federal judges have taken action against the fund. On May 29, U.S. District Judge Leonie M. Brinkema in Virginia temporarily blocked the creation of the fund pending a court hearing, as CBS News reported. Her order prevents the Justice Department from transferring money to the fund, considering claims, or making any payments. The same day, Judge Williams reopened the case to explore “grievous allegations” about the settlement, after a group of 35 former federal judges filed a motion arguing the settlement may constitute fraud on the court.
Multiple Lawsuits Filed
At least four lawsuits have been filed challenging the fund. Plaintiffs include January 6 police officers who argue the administration exceeded its statutory authority, Citizens for Responsibility and Ethics in Washington (CREW), and a group of 35 former federal judges. Donald Sherman, president of CREW, called it “one of the single most corrupt acts in American history.”
Constitutional and Legal Questions
The settlement raises profound constitutional questions. Legal experts have pointed to potential violations of the Domestic Emoluments Clause, which prohibits presidents from profiting beyond their salary, and the Appropriations Clause, which gives Congress control over spending. The fund draws from the Treasury Judgment Fund, a perpetual appropriation intended for settling actual litigation — not creating open-ended compensation programs. Critics also note that the DOJ cited the Obama-era Keepseagle case as precedent, but that case involved actual victims of racial discrimination, not individuals claiming political targeting.
What’s Next
The fund’s future remains highly uncertain. With two federal judges actively scrutinizing the settlement, multiple lawsuits pending, and bipartisan criticism mounting in Congress, the Anti-Weaponization Fund faces an uphill battle. Democrats have introduced the Ban Presidential Plunder of Taxpayer Funds Act, though passage in a GOP-controlled Congress is uncertain. A court hearing on the temporary block is expected in the coming week, and Judge Williams has given plaintiffs two weeks to respond to the “grievous allegations” about the settlement.
The controversy is likely to become a major campaign issue ahead of the 2026 midterm elections, with Democrats painting it as corruption and Republicans deeply divided. For now, the $1.776 billion fund sits frozen — its future, and the precedent it would set for presidential power, hanging in the balance.