US President Donald Trump moved to withdraw his $10 billion lawsuit against the Internal Revenue Service (IRS) on Monday, ending a legal fight over the leak of his confidential tax returns, reported The Associated Press. The decision came amid reports that the Trump administration was preparing a massive compensation fund for some of the president’s allies who claim they were unfairly investigated or prosecuted during Joe Biden’s administration.
The disclosure appeared in a filing submitted to a federal court in Florida, where Trump filed the lawsuit last year. The filing did not mention the terms of any agreement or possible settlement between Trump and the IRS.
According to ABC News, the Trump administration has discussed creating a $1.7 billion fund that could compensate allies of the president who believe they faced politically motivated investigations. The report said Trump was prepared to withdraw the IRS lawsuit as part of the broader arrangement.
The proposed fund immediately drew criticism from Democrats and legal experts. Jamie Raskin, top Democrat on House Judiciary Committee, attacked the proposal during an interview on ABC’s “This Week.” “This, of course, is a political grievance fund that Donald Trump can use to pay off his friends,” Raskin said.
“If these people have a valid cause of action, they should bring it to the court like every other American does,” he added. “But the idea that Donald Trump can just pass it out like a pardon is absurd,” he said.
Why did Trump sue IRS?
Trump filed the lawsuit earlier this year in a federal court in Florida. He accused the IRS of failing to protect confidential tax records belonging to him, the Trump Organization, and members of his family, reported AP.
The lawsuit claimed the leak caused “reputational and financial harm, public embarrassment,” and damage to the public image of Trump and his businesses. Trump’s sons, Donald Trump Jr and Eric Trump, were also listed as plaintiffs in the case.
The case traced back to the actions of former IRS contractor Charles Edward Littlejohn. Littlejohn worked for Booz Allen Hamilton, a defense and technology consulting company. In 2024, he received a five-year prison sentence after pleading guilty to leaking tax information about Trump and other wealthy Americans to media outlets between 2018 and 2020, reported AP.
The prosecutors did not publicly name the news organizations involved. A 2020 New York Times investigation reported that Trump paid only $750 in federal income taxes during his first year in the White House and paid no income taxes in several other years due to heavy business losses.
In April, lawyers representing Trump asked the federal court to pause the case for 90 days so both sides could explore a settlement. “This limited pause will neither prejudice the parties nor delay ultimate resolution,” the filing said. “Rather, the extension will promote judicial economy and allow the Parties to explore avenues that could narrow or resolve the issues efficiently,” it added.
Row over compensation fund
The possible compensation fund has become the newest flashpoint in Trump’s claims that the Biden administration used federal agencies against him and his supporters. Trump has repeatedly said that criminal cases filed against him after the 2020 election were politically motivated, reported AP.
Those cases included allegations tied to efforts to overturn the 2020 election results and the handling of classified documents at his Mar-a-Lago estate in Florida. Several Trump aides also faced prosecution, along with hundreds of supporters accused in connection with the January 6 Capitol riot.
Former United States Attorney General Merrick Garland repeatedly rejected accusations that the Justice Department acted for political reasons. Garland said investigations and prosecutions followed evidence and the law, reported AP. During his tenure, the Justice Department also investigated former President Joe Biden over classified documents and pursued separate tax and gun cases against Hunter Biden.
At the same time, Trump’s Justice Department has launched investigations targeting some of the president’s political opponents and critics. Officials have also pursued a wider inquiry into whether law enforcement and intelligence agencies worked together for years to damage Trump politically and prevent him from returning to power.
So far, no criminal charges have emerged from that investigation. Trump earlier suggested that money from any settlement in the IRS lawsuit could go to charity. “I think what we’ll do is do something for charity,” Trump said in February. “We could make a substantial amount,” he said.