trump-irs-lawsuit-dropped

Trump creates $1.8B "anti-weaponization" fund after dropping IRS suit

Andrew Pantazi

President Trump speaks to reporters in front of an American flag before departing the White House for a trip to China on May 12, 2026, in Washington, D.C. — President Trump speaks to reporters before departing the White House on May 12. Photo: Kevin Dietsch/Getty Images

President Trump settled his $10 billion lawsuit against the IRS on Monday in exchange for a $1.776 billion fund to compensate those who claim they were targets of government "weaponization."

Why it matters: The fund creates an unprecedented, taxpayer-backed mechanism to compensate people who claim they were wrongfully targeted, potentially including Jan. 6 defendants.

Multiple news outlets had reported earlier that Trump was considering launching the nearly $1.8 billion fund as part of the talks to resolve his lawsuit.
Trump, his sons and the Trump organization will receive a formal apology but no payment under the settlement's terms.

Catch up quick: Trump sued the IRS after a former contractor leaked his confidential tax returns to The New York Times and ProPublica during his first term. The contractor pleaded guilty and was sentenced to federal prison.

The filing says the case was dismissed "with prejudice," which means Trump can't refile it.
The unusual case featured Trump demanding pay from the very agencies he oversees as president.
The settlement was signed by acting Attorney General Todd Blanche, who served as Trump's criminal defense lawyer before joining the Justice Department.
The settlement came two days before a court-imposed deadline to explain why the case should proceed. U.S. District Judge Kathleen Williams had questioned whether Trump and the agencies he controls were "sufficiently adverse" to justify the lawsuit.

How it works: A five-member commission appointed by the attorney general will hear claims. The commission can both give money out and issue formal apologies.

Trump can remove any member. The fund has until December 2028, just before the end of Trump's term, to process claims.
The money comes from the Treasury Department's Judgment Fund, paid for by taxpayers to pay government settlements.

What they're saying: "You are creating a government program and doing it without going through Congress and having Congress set it up and fund it," says Paul Figley, a legal expert who spent 32 years at DOJ's Civil Division and has written extensively on the Judgment Fund.

Figley tells Axios the Judgment Fund is a "huge loophole" in Congress's power of the purse that "sat dormant for a long time" before the Obama administration used it for large-scale settlements.

"It's a breathtaking abuse of the tax and legal system," NYU's Tax Law Center Policy Director Brandon DeBot said in a statement, "at the same time courts are finding this administration is violating the taxpayer privacy laws the president is now invoking to seek extraordinary sums of money for his own purposes."

The other side: "President Trump is entering into this settlement squarely for the benefit of the American people," a spokesperson for Trump's legal team said in an email, "and he will continue his fight to hold those who wrong America and Americans accountable."