Trump Settles IRS Case As DOJ Creates $1.8 Billion ‘Weaponization’ Compensation Fund

Last Updated:May 19, 2026, 07:16 IST

As part of the settlement, Trump, his sons and the Trump Organization will receive a formal apology, though no financial compensation has been included.

US President Donald Trump settled his $10 billion lawsuit against the IRS, with the agreement paving the way for a $1.776 billion fund aimed at compensating individuals who allege they were subjected to government “weaponization."

The fund would establish an unprecedented taxpayer-backed system to provide compensation to people claiming they were unfairly targeted by the government, potentially including defendants linked to the January 6 Capitol riot.

Reports had earlier indicated that Trump was weighing the creation of the nearly $1.8 billion fund as part of negotiations to settle the case.

As part of the settlement, Trump, his sons and the Trump Organization will receive a formal apology, though no financial compensation has been included.

The lawsuit stemmed from the leak of Trump’s confidential tax returns to The New York Times and ProPublica during his first term by a former IRS contractor, who later pleaded guilty and was sentenced to prison.

Court filings state the case has been dismissed “with prejudice," preventing Trump from filing it again.

The case drew attention as Trump sought damages from agencies that now fall under his administration’s control as president.

Acting Attorney General Todd Blanche, formerly Trump’s criminal defense lawyer before joining the Justice Department, signed the settlement.

The agreement was finalised two days before a court deadline requiring parties to justify why the lawsuit should continue. US District Judge Kathleen Williams had raised concerns over whether Trump and the agencies involved were “sufficiently adverse" for the case to proceed.

Under the settlement framework, a five-member commission appointed by the attorney general will review claims, issue compensation and provide formal apologies where applicable.

Trump will have the authority to remove commission members. The fund is expected to operate until December 2028, shortly before the end of Trump’s presidential term.

Funding for the initiative will come through the Treasury Department’s Judgment Fund, which is financed by taxpayers and used for government settlements.

“You are creating a government program and doing it without going through Congress and having Congress set it up and fund it," said Paul Figley, a legal expert who spent 32 years in the Justice Department’s Civil Division and has written extensively about the Judgment Fund.

Figley told Axios that the Judgment Fund is a “huge loophole" in Congress’s control over federal spending that “sat dormant for a long time" before the Obama administration used it for major settlements.

“It’s a breathtaking abuse of the tax and legal system," NYU 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."

Defending the settlement, a spokesperson for Trump’s legal team said: “President Trump is entering into this settlement squarely for the benefit of the American people," adding that “he will continue his fight to hold those who wrong America and Americans accountable."

The White House referred queries to the Justice Department, which did not immediately respond to Axios’ request for comment.

News world Trump Settles IRS Case As DOJ Creates $1.8 Billion ‘Weaponization’ Compensation Fund

Read More