Washington, May 18, 2026, 10:12 (EDT)
- Trump’s legal team pushed to have the case thrown out, while reports surfaced that his administration was considering a taxpayer-backed compensation fund.
- Details of the settlement weren’t included in the court filing, nor was there any mention of the proposed fund.
- Trump found himself in the rare spot of taking legal action against agencies within his own executive branch.
President Donald Trump on Monday withdrew his $10 billion lawsuit against the Internal Revenue Service tied to the disclosure of his tax records, according to a filing in Miami federal court. That move brings to a close—at least legally—one of the more peculiar battles of his second term.
The dismissal’s timing is notable, coming just as Trump’s team has floated a $1.776 billion compensation fund for those claiming harm from what Trump labels “weaponization” of government—his shorthand for alleged politically motivated actions by law enforcement and federal agencies. According to ABC News, that fund would be bundled into a broader deal connected to Trump’s decision to end the IRS lawsuit.
Trump’s lawsuit flagged a fundamental constitutional issue: he was suing the IRS and Treasury Department—both executive branch agencies—in his personal capacity. U.S. District Judge Kathleen Williams pressed on whether there was actual adversity between the parties, which federal courts need in order to take up a dispute. She had put a hearing on the calendar for May 27.
Trump’s filing left out any details on settlement terms — no word on the proposed fund, an IRS apology, or other concessions. The document didn’t indicate if the dismissal ties into a broader deal or if it’s just a strategic play ahead of the court deadline.
ABC News says the proposed fund would be overseen by a five-person commission, with potential payouts to individuals claiming harm from prosecutions or investigations linked to the Biden administration—Jan. 6 defendants among them. Trump himself wouldn’t qualify for payments on dismissed claims, according to the report, but there’s no specific exclusion for entities tied to him.
Trump’s lawyers pushed back on the charge, insisting the IRS let “a rogue, politically-motivated employee” leak confidential data tied to Trump, his family, and the Trump Organization to outlets including the New York Times and ProPublica. The Justice Department wouldn’t comment to ABC, while neither the IRS nor Treasury answered the outlet’s requests right away. ABC News
Former IRS contractor Charles Littlejohn sparked the case by leaking Trump’s tax records, along with tax data from thousands of wealthy Americans. The Justice Department said Littlejohn pleaded guilty to unauthorized disclosure and, in January 2024, received a five-year prison sentence.
Back in January, Donald Trump, his sons Donald Trump Jr. and Eric Trump, along with the Trump Organization, filed a lawsuit claiming the IRS and Treasury didn’t do enough to stop the leak that, they say, hurt them financially and damaged their reputation. The disclosed records fueled stories detailing how Trump paid minimal or sometimes zero federal income tax in multiple years.
Earlier this year, something similar happened—though it didn’t spark the same political firestorm. Citadel’s Ken Griffin abandoned his separate IRS leak lawsuit in 2024, following an apology and a promise from the tax agency to beef up its data security, according to contemporaneous reports.
There’s a risk here: the dismissal could just shift the battle out of the courthouse. Legal specialists and watchdog groups have flagged concerns—settlements that involve taxpayer funds, IRS audits, or anything tied to Trump-connected entities may well trigger legal and ethical complications. DOJ, according to the Tax Law Center at NYU Law, lacks the authority in this case to halt IRS audits beyond the damages claims in front of the court.
Criticism surfaced almost immediately. Rep. Jamie Raskin, the ranking Democrat on the House Judiciary Committee, labeled the proposed fund a “political grievance fund.” Public Citizen co-president Robert Weissman argued Trump was seeking a settlement “outside of court review.” AP News
What happens next hinges on a formal announcement from the administration about the fund—details, terms, all of it. For now, the only thing on the court docket: Trump’s $10 billion IRS lawsuit has been dismissed with prejudice. He’s barred from bringing the same claim again.
