Key facts
- President Donald Trump is expected to settle his $10 billion lawsuit against the IRS.
- The proposed settlement includes a $1.7 billion taxpayer-funded compensation fund.
- The fund is intended to pay political allies, including Jan. 6 defendants, who claim they were targeted by the Biden administration.
- The settlement would permanently halt existing tax audits of Trump and several associates for returns filed before May 18, 2026.
- The IRS contractor who leaked Trump's tax returns, Charles Littlejohn, pleaded guilty in October 2023 and was sentenced to five years in prison.
- Legal experts describe the proposed use of public money with minimal oversight as unprecedented.
President Donald Trump is reportedly poised to settle a $10 billion lawsuit against the IRS and Treasury Department, a move that would create a $1.7 billion taxpayer-funded compensation fund for individuals claiming to be victims of "weaponization" by the Biden administration. The proposed deal, reported by ABC News on May 14, 2026, and not yet officially announced, would also permanently halt existing tax audits of Trump and several associates for returns filed before May 18, 2026.
The lawsuit stems from the actions of Charles Littlejohn, a contractor who illegally accessed and stole confidential tax return information of thousands of wealthy Americans, including Trump and his family, between 2018 and 2020. Littlejohn leaked this information to media outlets, leading to reports in September 2020 that Trump paid minimal federal income taxes in certain years. Littlejohn pleaded guilty to unauthorized disclosure of income tax returns in October 2023 and was sentenced to five years in federal prison in January 2024.
Trump and his sons, Donald Trump Jr. and Eric Trump, filed suit in January 2026, alleging the IRS failed to protect their confidential tax information and exploited security failures. Legal experts, while acknowledging the underlying wrong, noted significant obstacles to the lawsuit, including the statute of limitations and the difficulty of proving $10 billion in damages from a newspaper story.
The proposed settlement, announced by the Justice Department on May 19, 2026, would see Trump drop his lawsuit. The $1.776 billion fund, drawn from the Treasury Department's Judgment Fund, would be overseen by a commission with minimal oversight, allowing it to withhold procedures and recipient identities. Critics have labeled it a "slush fund" for Trump supporters, including those convicted in connection with the January 6, 2021 Capitol attack. The agreement to halt audits is considered unprecedented and would be difficult to challenge, though future administrations could attempt to void it on grounds of fraud or misrepresentation.