Trump drops IRS lawsuit, paving the way for a settlement

The Internal Revenue Service building is seen in February 2025 in Washington, D.C. Tasos Katopodis/Getty Images hide caption

A federal judge on Monday dismissed a $10 billion lawsuit President Trump filed against the IRS over the leak of his tax returns years ago, following Trump's request.

Ethics watchdogs and Democrats in Congress had sought to intervene in what is the first known instance of a president suing the government he leads.

Hours after the request to dismiss the case, the Department of Justice announced an "anti-weaponization fund" as part of the settlement with Trump. In a statement, the department said the $1.7 billion fund would allow the DOJ to settle and pay cases.

U.S. District Judge Kathleen Williams, who presided over the case, says court rules allow a plaintiff to walk away from the suit. But she had earlier raised her own doubts about the merits of the suit, citing Trump's own rhetoric that in some ways, he was negotiating with himself as both plaintiff and president.

She also pointedly questioned the DOJ for not sharing the settlement details publicly.

"Defendants—federal agencies represented by the Department of Justice, which has an independent obligation to uphold the 'public's strong interest in knowing about the conduct of its Government and expenditure of its resources' and the 'fair administration of justice,' — neither submitted any settlement documents nor filed any documents ensuring that settlement was appropriate where there was an outstanding question as to whether an actual case or controversy existed," she wrote in her dismissal.

Trump and the Trump Organization sued the Internal Revenue Service and the Treasury Department in January, demanding $10 billion over the leak of his tax returns years ago.

Legal experts described the case as weak, since the leak has been attributed to a federal contractor, not a full-time employee of the U.S. government. That man is currently serving prison time . They also questioned whether the statute of limitations might have expired; the leaks of tax information happened between 2018 and 2020.

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Trump would like the government he leads to pay him billions

There's a process in place at the Justice Department for people who say they've been harmed by the federal government.

In the normal course of business, those claims get evaluated by career lawyers. They rarely involve high-profile criminal investigations like Trump's.

"Some of them are run-of-the-mill, right?" Rupa Bhattacharyya, a former Justice Department lawyer who evaluated these kinds of allegations, said ahead of the suit being settled. "Postal vehicles get into traffic accidents, Veterans Affairs doctors have malpractice claims brought against them, people slip and fall in federal buildings."

Even in the most serious cases, like ones that involved injuries to people cleaning up after the terrorist attack on Sept. 11, 2001, Bhattacharyya said the payouts almost never amounted to more than $10 million.

Edward Whelan, a prominent conservative lawyer, had told NPR it would make sense to pause the litigation until Trump leaves the White House.

"There is a glaring conflict of interest with Trump being on both sides of the claim," said Whelan, a former lawyer at the Justice Department who once clerked for the late Justice Antonin Scalia. "It is outrageous that he and those answering to him would be deciding how the government responds to these extravagant claims."