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Trump Drops $10 Billion IRS Lawsuit, Settles for $1.8 Billion Fund and Tax Audit Shield

Politics10h ago
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A newer version of this story is available at IRS Settles Trump Tax Leak Suit, Creates $1.8 Billion Fund and Grants Audit Immunity.

President Donald Trump has settled his $10 billion lawsuit against the IRS, dropping the case in exchange for a formal apology and the creation of a $1.776 billion 'Anti-Weaponization Fund' to compensate allies who claim political persecution. The settlement also includes an addendum that permanently bars the IRS from auditing Trump's past tax returns. The fund's oversight and the broad terms of the settlement are now facing legal and legislative challenges.

Facts First

  • Trump dismissed his $10 billion lawsuit against the IRS with prejudice, preventing him from refiling it.
  • A $1.776 billion 'Anti-Weaponization Fund' was created to pay individuals who believe they were targeted by politically motivated prosecutions.
  • The IRS is 'forever barred' from auditing Trump's past tax returns per a settlement addendum signed by Acting Attorney General Todd Blanche.
  • A five-member commission appointed by Blanche will oversee the fund, with decisions that cannot be appealed in court.
  • Two police officers from the Jan. 6 Capitol attack have sued to block the fund, and congressional Republicans have signaled legislative scrutiny.

What Happened

President Donald Trump, his sons, and the Trump Organization voluntarily dismissed their $10 billion lawsuit against the IRS and Treasury Department on Monday, May 18, 2026. The lawsuit was related to the leak of Trump's confidential tax returns by a former contractor, who was later sentenced to prison. The dismissal was filed 'with prejudice,' meaning it cannot be refiled. In exchange for dropping the suit, the Justice Department announced the creation of a $1.776 billion 'Anti-Weaponization Fund' and issued a formal apology to Trump. A separate, one-page addendum to the settlement, signed by Acting Attorney General Todd Blanche, states the U.S. government is 'forever barred and precluded' from examining or prosecuting tax returns filed by Trump, his family, and the Trump Organization prior to the May 2026 agreement.

Why this Matters to You

This settlement uses taxpayer money from the federal Judgment Fund to create a $1.8 billion compensation program. Acting Attorney General Todd Blanche has stated that almost anyone alleging 'weaponization' or 'lawfare' can apply, and he did not rule out eligibility for individuals convicted of assaulting police during the Jan. 6, 2021, Capitol riot. The fund's five-member commission, appointed by Blanche, has the authority to award payments without the possibility of court appeal, and the settlement does not require public disclosure of who receives money. Furthermore, the permanent shield against IRS audits for the president's past taxes may be seen as setting a significant precedent regarding presidential accountability and the independence of tax enforcement.

What's Next

The settlement is facing immediate pushback. Two police officers who defended the Capitol on Jan. 6 filed a lawsuit to dissolve the fund, arguing it violates the 14th Amendment's prohibition on paying debts incurred 'in aid of insurrection.' In Congress, Democrats are preparing amendments to block the fund or ban payments to Jan. 6 participants, and some Republicans, including Rep. Brian Fitzpatrick and Rep. Kevin Kiley, have expressed opposition or willingness to support restrictions. Senate GOP leaders are expected to abandon a separate $1 billion security funding request for a White House ballroom project due to parliamentary issues, but the 'anti-weaponization' fund itself may be subject to a 'vote-a-rama' of amendments as early as Thursday. The fund is scheduled to operate through December 15, 2028.

Perspectives

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Democrats argue that the 'Anti-Weaponization Fund' is an unconstitutional and corrupt 'slush fund' designed to enrich President Trump's allies and January 6 rioters using taxpayer money.
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The Trump Administration maintains that the fund is a lawful effort to provide redress for victims of political 'lawfare' and 'weaponization' by the previous administration.
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Legal Experts and Judges express significant doubt regarding the legality, transparency, and constitutional standing of the fund, noting that Trump's dual role as plaintiff and president creates a 'glaring conflict of interest'.
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Conservative Lawmakers express discomfort with the fund's cost and the political risks of Trump's recent actions, with some labeling the settlement as 'kryptonite' for the party.
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Plaintiffs and Critics condemn the fund as a corrupt mechanism that endangers public safety by rewarding insurrectionists and using taxpayer money to finance paramilitary groups.
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The Trump Organization defends the business dealings of the president, asserting that foreign and private patronage of Trump properties is based on brand prestige and quality.