US President Donald Trump has dropped a $10 billion lawsuit against the Internal Revenue Service (IRS) stemming from leaked tax returns and announced that his administration will create a $1.77 billion anti-disarmament fund to compensate some of Trump’s political allies.
A court filing released Monday in Florida did not disclose the terms of the deal, including whether either party has settled.
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However, the Department of Justice (DOJ) on Monday announced the creation of a $1.77 billion fund called the Anti-Weapons Fund, which will “provide a systematic process for hearing and redressing the claims of others who have been subjected to weapons use and legal treatment.”
The Justice Department said in a press release that this is part of the settlement agreement.
ABC News first reported last week that the president was willing to drop the case as part of a deal to create a fund to pay out Trump allies deemed unfairly investigated and prosecuted.
Trump, his adult sons Donald Trump Jr. and Eric Trump, and the Trump Organization sued the IRS in January, arguing that the agency should have done more to prevent former contractors from disclosing their tax returns to the media during the president’s first term.
The case stemmed from former IRS contractor Charles Littlejohn leaking President Trump’s tax returns to media outlets including the New York Times and ProPublica in 2019 and 2020.
Those returns showed Trump paid little or no income taxes over the years, The Times reported in 2020.
In 2023, prosecutors charged Littlejohn with leaking the tax records of Trump and thousands of other wealthy Americans to the media, saying he was motivated by political objectives. Littlejohn later pleaded guilty to improper disclosure, and a judge sentenced him to five years in prison.
Trump filed the lawsuit personally, not in his official capacity as president.
political backlash
The court filing does not mention the terms of the potential agreement, but news that the president would create a fund to protect political allies sparked a backlash.
Democratic Rep. Jamie Raskin of Maryland called the idea “unconstitutional.”
“This is, of course, a political grievance fund that Donald Trump can use to pay back his friends,” Raskin, the top Democrat on the House Judiciary Committee, said in an interview on ABC News’ “This Week” on Sunday.
“If these people have a valid cause of action, they should go to court like any other American would, use the system of due process, and prove things by clear and convincing evidence, or by overwhelming evidence. Go and prove it. But the idea that Donald Trump can just hand it out like a pardon is ridiculous,” he said.
California Governor Gavin Newsom also criticized the president in reports about the deal.
“Donald Trump wants to settle a joke lawsuit with his own Internal Revenue Service that would have given $1.7 billion of our tax dollars to the January 6th insurrectionists and their cronies,” Newsom said in a post on X.
“It’s outrageous that American taxpayers have to pay for it, and that we have a president who commits such blatant corruption in front of everyone and expects us to follow suit,” Democratic Rep. Pramila Jayapal of Washington state told the progressive Meidas Touch Network.
Despite the criticism, it is not clear who exactly will benefit from the fund.
Mr. Trump has long argued that the Justice Department was used against him under his predecessor, Democratic President Joe Biden, citing criminal charges against him for allegedly conspiring to overturn the results of the 2020 presidential election, which he lost by more than 7 million votes, and for allegedly storing classified documents at his Mar-a-Lago mansion.
Merrick Garland, who served as attorney general in the Biden administration, denied allegations of politicking. The Justice Department also investigated prominent Democratic politicians, including Biden’s son Hunter Biden and former Democratic Sen. Bob Menendez of New Jersey.
Acting Attorney General Todd Blanche said in a release: “No government institution should ever be armed against any American person. It is the Department’s intent to right the wrongs of the past while ensuring that this never happens again.”
But the Trump administration has aggressively pursued cases against perceived political opponents, including former FBI Director James Comey and former Federal Reserve Chairman Jerome Powell. Fed Governor Lisa Cook, New York Attorney General Letitia James, Arizona State Senator Mark Kelly, and California State Senator Adam Schiff.
The Justice Department said the fund has precedent, citing a program called Keepsigle under the administration of former Democratic President Barack Obama. This created a fund to address allegations of racism against the federal government.
The White House referred Al Jazeera to the Justice Department for comment. The Justice Department did not respond.
Citizens for Responsibility and Ethics (CREW), a government watchdog group, announced on X that it would investigate the use of the funds.
“As Americans struggle with the affordability crisis, President Trump intends to use nearly $1.8 billion in taxpayer money to repay friends and allies, including potentially the violent insurrectionists who stormed the Capitol on January 6,” CREW President Donald K. Sherman said in a statement provided to Al Jazeera.
“President Trump and the Department of Justice just committed the most brazen act of self-examination in the history of the Presidency by settling a frivolous $10 billion lawsuit against his own administration, doing so in a hurry to avoid judicial scrutiny and very likely violating the Constitution’s Household Allowance Clause in the process. This is one of the most corrupt acts in American history.”
It’s been a while
Lawyers for the president asked a federal judge in April to suspend the lawsuit for 90 days while both sides work toward a settlement or settlement.
“This limited moratorium will not prejudice any party and will not delay final resolution,” the April filing said. “Rather, this extension will promote judicial economy and allow parties to explore avenues to efficiently narrow down and resolve issues.”
When asked in February how he would address potential damage from the lawsuit, President Trump said, “I think what we’re going to do is do something for charity.”
“I was able to make quite a bit of money,” he said at the time. “No one will care because it will go to a lot of very good charities.”
The case against the IRS raises new legal questions, including conflicts of interest, about whether presidents can sue their own governments. It is unclear whether the judge will accept President Trump’s decision to drop the lawsuit.
Under the U.S. Constitution, federal courts can only hear genuine disputes between litigants who have conflicting interests in the outcome.
Miami U.S. District Court Judge Kathleen Williams, who is overseeing Trump’s case, wrote last month that it was unclear whether the parties in the case were “truly adversaries of each other.”
Williams had set a court hearing for May 27 to hear arguments on whether the case should be dismissed on those grounds.
