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By Steve Mollman
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President Donald Trump dropped his $10 billion lawsuit over the leak of his tax returns against the Internal Revenue Service, according to a court filing submitted Monday in Florida. The Department of Justice (DOJ) then announced an “Anti-Weaponization Fund” as part of the deal to resolve the lawsuit. It said the fund would compensate Trump allies who believe they were mistreated by the Biden administration DOJ.
“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," Acting Attorney General Todd Blanche said in a statement announcing the fund. "As part of this settlement, we are setting up a lawful process for victims of lawfare and weaponization to be heard and seek redress.”
The arrangement quickly triggered political and legal pushback, including efforts by congressional Democrats to challenge it in court, and sparked concerns about the use of taxpayer funds. It also raises broader questions about oversight when the president is involved in resolving claims against agencies within his administration. The IRS is part of the Treasury Department, which operates within the executive branch.
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As for how the fund would work, the DOJ said in its statement: "The Fund will receive $1.776 billion and will come from the judgment fund, which is a perpetual appropriation allowing DOJ to settle and pay cases. On a quarterly basis, the Fund shall send a report to the Attorney General outlining who has received relief and what form of relief was awarded."
Opposition to 'Huge Slush Fund'
Democrats and government watchdogs called the arrangement “corrupt” and unprecedented, warning it could channel taxpayer funds to Trump allies while inviting questionable claims of political persecution.
The House Democrats’ Litigation Task Force announced in a Monday statement that it had filed a motion "to block this unconstitutional taxpayer-funded settlement" as Trump "attempts to conclude the sham $10 billion lawsuit he filed against the Internal Revenue Service (IRS)—an agency he oversees as President of the United States."
“This is pure fraud and highway robbery," Representative Jamie Raskin of Maryland said in the statement. "No one can be both plaintiff and defendant in the same case. And no president can concoct a fake case for $10 billion in damages against the government so he can be plaintiff and defendant and then ‘settle’ his bogus case against himself as a judge."
Raskin, the top Democrat on the House Judiciary Committee, continued: "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, including those who brutally beat police officers on January 6, 2021, and sycophant accomplices to his election stealing schemes."
Raskin had on Sunday warned against a "political grievance fund that Donald Trump can use to pay off his friends" during an appearance on ABC’s This Week.
In response, White House spokesperson Davis Ingle told Newsweek, “Lightweight Jamie Raskin is a stupid person’s idea of a smart person.”
Donald K. Sherman, president of the nonprofit Citizens for Responsibility and Ethics in Washington, said in a statement sent to Newsweek:
"By settling his absurd $10 billion lawsuit against his own administration, Trump and the Justice Department just engaged in the most brazen act of self-dealing in the history of the presidency, and did so quickly in order to avoid the scrutiny of the judicial process, while quite likely violating the Constitution’s Domestic Emoluments Clause in the process. This is one of the single most corrupt acts in American history."
IRS Leak Case Traced to Contractor Who Pleaded Guilty
The lawsuit stemmed from the unauthorized disclosure of Trump’s tax returns by a former government contractor, who pleaded guilty in 2023 to leaking confidential taxpayer information. According to court records, the contractor admitted to accessing and sharing tax data belonging to Trump and other wealthy Americans with media outlets in 2019 and 2020.
Trump’s legal team argued that the IRS failed to adequately safeguard sensitive taxpayer information and sought at least $10 billion in damages, citing alleged financial and reputational harm resulting from the disclosures. The IRS has not disputed that the leak occurred but has pointed to the criminal prosecution of the contractor as evidence that safeguards and enforcement mechanisms were ultimately applied.
Judges Questioned Whether the Lawsuit Could Proceed
The case faced unusual legal hurdles from the outset because Trump, while describing the lawsuit as a personal action, was suing a federal agency that ultimately falls under the executive branch.
U.S. District Judge Kathleen M. Williams raised those concerns in an April order, questioning whether the case met the Constitution’s requirement for a genuine dispute between opposing parties.
“Although President Trump avers that he is bringing this lawsuit in his personal capacity, he is the sitting president and his named adversaries are entities whose decisions are subject to his direction,” Williams wrote. She added that it was “unclear” whether the Constitution permits a sitting president to sue the IRS.
In February, four former senior federal tax officials submitted a warning that the lawsuit threatened the integrity of the judicial process because Trump “effectively controls both sides of the case.” Their argument centered on the constitutional principle that federal courts can only adjudicate real conflicts between independent parties, not disputes where one side ultimately answers to the other.
Those concerns were never resolved in court, as the case did not progress to substantive rulings on the merits before Trump’s decision to drop it. In the filing on Monday, Trump's lawyers dismissed the case without prejudice, meaning he could not bring it up in court again.
What Happens Next
The Justice Department said the fund will establish a formal process for individuals to file claims alleging they were improperly targeted by the federal government, with authority to issue both apologies and financial compensation. The fund is expected to operate for several years and will be overseen by officials appointed by the attorney general, with periodic reporting and potential audits built into the process.
At the same time, the arrangement will face immediate legal and political challenges, with House Democrats having already moved to block the settlement in court. With questions also raised about whether the underlying lawsuit met basic legal standards, further litigation or congressional scrutiny could shape how—or whether—the fund ultimately operates.
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