On May 14, 2026, The New Republic reported that Trump's $10 billion personal lawsuit against the IRS — filed in his personal capacity in January 2026 over the leak of his tax returns to the New York Times — has entered settlement negotiations in which the proposed settlement would 'drop any IRS audits of Trump, his family, or his businesses.' The defendant agency (IRS) is in the executive branch Trump controls. The plaintiff's negotiating counsel (DOJ) is also in the executive branch Trump controls.
U.S. District Judge Kathleen M. Williams (Obama appointee) had already flagged the structural problem in an April 24, 2026 order. Williams: '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 ordered both parties to address by May 20 'whether a case and controversy exists' — the constitutional threshold for federal-court jurisdiction. The settlement negotiations are happening on the docket while Williams's case-or-controversy question is still pending.
The proposed settlement structure removes the IRS audit power over Trump and his family in exchange for some unspecified payment from the IRS to Trump personally. The penalty amounts from any future Trump audits (which would now be dropped) are unknown but historically Trump's tax filings have been the subject of decades of IRS scrutiny. The 2019 Manhattan DA criminal investigation found Trump's tax filings included approximately $900 million in losses that the prosecutors believed were fraudulently constructed; the leak that triggered the original $10B lawsuit revealed Trump paid little or no federal income tax for multiple years. Both lines of inquiry would, under the proposed settlement, end as a condition of the settlement.
The Trump-IRS lawsuit also runs in parallel with two earlier administrative claims against the Justice Department totaling $230 million (related to the FBI Russia investigation and the Mar-a-Lago documents investigation). The combined picture is a sitting president collecting from agencies he runs over actions taken by their prior leadership against him, with no independent oversight. CREW and Public Citizen have filed amicus briefs arguing any settlement violates the Domestic Emoluments Clause; Senate Democrats (Warren, Wyden, Schumer, Raskin, Min) have introduced bills banning settlements paid to sitting presidents, including a 100% tax on any such settlement (Wyden bill) and an outright ban (Warren bill). The bills have not advanced in the Republican-controlled Congress.
By June 1, 2026, the fund was collapsing. On Friday, May 29, U.S. District Judge Leonie Brinkema (Eastern District of Virginia) blocked the DOJ from creating or disbursing any money from the fund while a lawsuit against it proceeds, and set a June 12 hearing. Hours earlier, Judge Kathleen Williams in Miami reopened Trump's underlying lawsuit against the IRS, saying she wanted to probe “grievous allegations” that Trump and the DOJ voluntarily dismissed the case to avoid her scrutiny; her move followed a filing by 35 former federal judges warning that the secret settlement raised “profound questions about the parties' candor toward the Court and manipulation of the judicial system.” By Monday, June 1, after House Speaker Mike Johnson met with Trump at the White House, Axios and Punchbowl reported the administration had decided to comply with the court order and not proceed, with a senior official calling the fund “dead for now.” Senate Majority Leader John Thune said the “best way to handle it is if the administration decides to shut it down themselves.” Senate Minority Leader Chuck Schumer said Democrats would “launch a coordinated effort to kill the slush fund before one cent goes out the door” and force Republicans to vote on banning it in law: “Trump's word is nowhere near enough.” The DOJ said it “disagrees strongly” with Brinkema's ruling but “will abide by” it.
On July 13, 2026, U.S. District Judge Kathleen Williams found that the parties were never adverse (“It is risible to suggest that there was ever adverseness between the Parties”) and did not void the settlement (corrected October 27; see the correction below), but she ruled that Trump's lawsuit was brought for “an improper purpose.” She wrote that it “was never about a party seeking judicial resolution of a legal issue or a factual dispute” between Trump and the IRS he controls, and described the deal as a bid to “provide some legitimacy to an agreement to confer immunity to people and entities affiliated with the President and to earmark billions of dollars from American taxpayers to redress grievances not defined in the law.” As sanctions, she referred Trump's lawyer Alejandro Brito to the Florida Bar, ordered that any application by another of his lawyers, Daniel Epstein, to appear pro hac vice in the Southern District of Florida be denied for a year, and barred the parties from citing the agreement in any official proceeding “as evidence of a 'settlement' reached in this matter.” She also had copies of the ruling sent to the New York and D.C. bars, of which acting Attorney General Todd Blanche and Associate Attorney General Stanley Woodward are members, Democracy Docket reported. The BBC said the bar on citing the agreement “could mean that the IRS can move forward with future audits.”
Update (September 30, 2026): an appeals court has refused to put Judge Williams's ruling on hold. On September 29 a three-judge panel of the Eleventh Circuit (Judges Jordan, Rosenbaum and Newsom) denied Trump's motion for a stay pending appeal, writing that “the appellants have not made a strong showing that the district court committed clear error in its collusion and bad faith findings.” It is not a decision on the appeal itself; the panel noted that as a stay panel its decision “does not of course bind the merits panel.” It also left in place the sanctions against Trump's lawyers Alejandro Brito and Daniel Epstein, “Because of our significant doubts about appellate jurisdiction.” Some coverage described the order as upholding the collusion finding; it did not decide the appeal.
The appeal record shows the problem Williams identified. The Justice Department, representing the IRS and Treasury that Trump had sued, filed a brief in August on Trump's side of the stay request, arguing that “The District Court's Order should be stayed immediately” and calling the former judges' motion “frivolous.” It was signed by Acting Deputy Attorney General R. Trent McCotter. A spokesman for Trump's legal team said after the ruling, “President Trump continues to hold those who wrong America and Americans accountable.”
Correction (October 27, 2026): this entry said Judge Williams's July 13 order “voided the entire settlement,” that its bar referral named Todd Blanche, and that it “clears the way for the IRS to audit his returns after all.” The order found the parties were never adverse and imposed non-monetary sanctions; it did not void the settlement. Only Brito was referred to a bar; Democracy Docket reported that copies of the ruling went to the bars of which Blanche and Woodward are members.
The bar on citing the agreement covers its use as evidence of a settlement reached in that case, and on September 29 the Eleventh Circuit noted that the district court “has not yet ruled on the former judges' request to reopen the case and set aside the dismissal.” A quotation of the order, “filed for an improper purpose,” has been replaced with the words Democracy Docket quotes. The text above has been corrected.