President Donald Trump is poised to walk away from his $10 billion lawsuit against the Internal Revenue Service in the coming days, trading the legal fight for the creation of a $1.7 billion fund designed to compensate Americans who say they were wrongfully targeted by the Biden administration, ABC News reported, citing sources familiar with the matter.
The proposed settlement would establish a five-member commission with authority to distribute approximately $1.7 billion drawn from the Treasury Department's Judgment Fund, a permanent appropriation the federal government uses to pay court judgments and settlements. The deal, if finalized, would resolve Trump's lawsuit over the 2019 leak of his tax returns while opening a far broader channel for payouts to allies who claim they suffered under what the administration has called the "weaponization" of federal law enforcement.
Sources cautioned that final terms will not be set until officially announced. But the outlines already raise pointed questions about transparency, legal authority, and who stands to collect.
Trump's IRS suit dates to the 2019 leak of his confidential tax information. A spokesperson for the president's legal team framed the case in blunt terms:
"The IRS wrongly allowed a rogue, politically-motivated employee to leak private and confidential information about President Trump, his family, and the Trump Organization to the New York Times, ProPublica and other left-wing news outlets, which was then illegally released to millions of people. President Trump continues to hold those who wrong America and Americans accountable."
The lawsuit asked for $10 billion. But the case ran into a structural problem that even the president acknowledged. Last year, when asked about the claim, Trump conceded it "sort of looks bad." In October, he went further in remarks from the Oval Office.
"It's interesting because I'm the one that makes a decision, right, and, you know, that decision would have to go across my desk. It's awfully strange to make a decision where I'm paying myself."
U.S. District Judge Kathleen Williams picked up on that tension. In a ruling last month, she questioned whether Trump and the federal defendants he was suing, the IRS and the Treasury Department, are "sufficiently adverse" for the case to proceed at all. She ordered Trump and the Justice Department to justify by next week why the litigation should continue.
Williams wrote that "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." She added that "President Trump's own remarks about this matter acknowledge the unique dynamic of this litigation."
That looming deadline appears to have accelerated the settlement talks. The New York Times first reported that DOJ officials were considering settling the IRS lawsuit ahead of next week's court-ordered deadline, ABC News noted.
The proposed commission would go well beyond resolving Trump's personal IRS claim. Under the reported terms, the five-member body would have authority to award more than a billion dollars to claimants, with no obligation to disclose its procedures or decision-making process.
That lack of transparency stands out. Sources told ABC News the commission's structure was loosely modeled on the civil claims process that followed the 2010 Deepwater Horizon oil spill. But the comparison only goes so far. The BP fund operated under intense public scrutiny and a court-appointed administrator. The proposed Trump commission, by contrast, would give the president authority to remove its members without cause.
The settlement terms would reportedly bar Trump from directly receiving payments related to three of his own legal claims. But entities associated with Trump are not explicitly barred from filing additional claims, a gap that critics inside and outside the administration have flagged. Some administration officials have raised ethical concerns about the arrangement, ABC News reported.
Trump has also filed $230 million in separate legal claims related to the 2022 search of his Mar-a-Lago estate and the Russia collusion investigation he faced during his first term. How those claims interact with the proposed fund remains unclear.
The fund's potential beneficiaries extend far beyond Trump's own grievances. Since the president issued blanket pardons of defendants charged in connection with the Jan. 6 attack on the U.S. Capitol, hundreds have begun seeking payouts from the federal government. Nearly 1,600 individuals were charged in connection with the Capitol breach.
Trump has spoken openly about his sympathy for those defendants. In an interview with Newsmax last year, he said "a lot of the people that are in government now talk about" compensating pardoned Jan. 6 defendants and that officials "really like that group of people." He has also called them "patriots," adding, "I talk about them a lot. They were treated very unfairly."
Whether the proposed $1.7 billion fund would cover Jan. 6-related claims is not spelled out in the reported terms. But the administration's broader posture, including the Justice Department's use of a "Weaponization Working Group" over the past year to examine alleged abuses of power under Biden, suggests the universe of potential claimants could be wide. That working group identified cases of alleged anti-conservative and anti-Christian bias, laying groundwork for the kind of claims the fund appears designed to address.
House Democrats moved earlier this year to head off Jan. 6 payouts, introducing a bill to ban pardoned defendants from receiving such compensation. That effort has not advanced. The administration, meanwhile, has shown little interest in limiting the fund's scope. Trump's broader approach to dealmaking across multiple fronts, from foreign policy to domestic legal disputes, reflects a president who favors bold strokes and executive leverage over incremental negotiation.
The reported settlement faces significant legal hurdles that remain undefined. What legal mechanism would authorize the commission to distribute funds? What criteria would govern who qualifies? Who would serve on the five-member panel? None of these answers have been made public.
The IRS and Treasury Department did not immediately respond to requests for comment. A Justice Department spokesperson declined to comment.
The opacity of the proposed structure is the central concern. A commission that can award more than a billion dollars in taxpayer funds, with no disclosure requirements and members removable at the president's discretion, concentrates extraordinary power in a body with minimal accountability. That arrangement may serve the legitimate goal of compensating Americans who were genuinely mistreated by a politicized bureaucracy. Or it may create a vehicle for payouts that would never survive ordinary judicial scrutiny.
The president himself identified the core tension months ago when he said it was "awfully strange" to make a decision where he was paying himself. The proposed settlement attempts to address that strangeness by barring Trump from directly collecting on three claims. But the broader architecture, a fund controlled by a commission he appoints and can fire, distributing money to allies who share his grievances, does not fully resolve the conflict he described.
Trump's willingness to set aside personal financial considerations in pursuit of what he frames as larger goals has been a recurring theme of his second term. Whether this particular arrangement serves the public interest or primarily benefits a political coalition is a question the proposed commission's secrecy makes harder to answer.
The case for a compensation mechanism rests on a real grievance. The leak of a sitting president's confidential tax information was a serious breach of law and institutional trust. The broader pattern, from the Mar-a-Lago search to the sprawling prosecutions of Jan. 6 defendants to the Russia investigation, left millions of conservatives convinced that federal agencies had been turned against them for political reasons.
The Justice Department's Weaponization Working Group spent the past year documenting what it described as those abuses. If the findings are credible, some form of remedy is warranted. The question is whether a $1.7 billion fund administered in secret, outside the courts, and under direct presidential control is the right remedy, or whether it trades one form of institutional abuse for another.
Trump has pursued a pattern of forceful executive action across multiple policy areas, from foreign negotiations to domestic enforcement. Supporters see a president willing to use every available tool to correct injustices that conventional channels failed to address. Skeptics, including some within his own administration, worry about precedent.
The president's pledge to donate any personal proceeds to charity offers some reassurance. But charity pledges are not enforceable settlement terms, and the reported agreement does not appear to codify that promise.
Judge Williams's order next week may render the entire question moot if the court finds the case cannot proceed. The settlement, if finalized, would preempt that ruling, and with it, any judicial examination of the underlying claims.
That timing is worth noting. A president dropping a lawsuit he filed against his own government, days before a judge might dismiss it, in exchange for a fund that pays his allies, all financed by taxpayers, is the kind of arrangement that demands rigorous public accounting. The proposed commission's reported exemption from disclosure requirements moves in exactly the opposite direction.
The administration's negotiating posture in other high-stakes contexts has generally favored transparency and public pressure as leverage. Applying that same standard here would go a long way toward answering the open questions.
Conservatives who rightly demanded accountability from the Biden-era IRS and DOJ should demand the same from any mechanism that spends $1.7 billion of their money. Sunlight was the right answer when the problem was a politicized bureaucracy. It is still the right answer now.
