Trump moves to dismiss US$10B suit against the IRS over leak of tax returns

President Donald Trump speaks to reporters aboard Air Force One, Friday, May 15, 2026, as he returns from a trip to Beijing, China. (AP Photo/Mark Schiefelbein)

WASHINGTON — U.S. President Donald Trump on Monday moved to withdraw his US$10 billion lawsuit against the Internal Revenue Service over the leak of his tax returns amid reports that his administration was poised to create a fund to compensate some of his allies.

The disclosure was made in a filing in federal court in Florida, where the lawsuit was filed last year.

ABC News first reported last week that Trump was prepared to drop his lawsuit as part of a deal that would create a $1.7 billion fund to pay allies of the president who believe they were wrongly investigated and prosecuted.

The court filing did not mention terms of any potential deal.

News that the Trump administration was contemplating a fund to pay Trump allies drew an immediate backlash from Democrats, including Rep. Jamie Raskin, who called the idea “unconstitutional.”

“This, of course, is a political grievance fund that Donald Trump can use to pay off his friends,” Raskin, the top Democrat on the House Judiciary Committee, said in an interview Sunday on ABC’s “This Week.”

“If these people have a valid cause of action, they should bring it to the court like every other American does, and use the system of due process, and proving things by clear and convincing evidence, or a preponderance of evidence, go and prove it. But the idea that Donald Trump can just pass it out like a pardon is absurd,” he added.

It was not immediately clear who precisely will stand to benefit from the fund but its creation reflects Trump’s long-running claims that the Biden administration Justice Department was weaponized against him.

He has cited as proof the since-dismissed criminal charges he faced between his first and second terms of conspiring to overturn the results of the 2020 presidential election he lost and of retaining classified documents at his Mar-a-Lago estate in Florida. Several aides of his were also prosecuted, as were hundreds of Trump supporters who stormed the U.S. Capitol on Jan. 6, 2021.

Merrick Garland, who served as attorney general during the Biden administration, has repeatedly denied allegations of politicization and has said his decisions followed facts, the evidence and the law. His Justice Department also investigated Biden for his handling of classified information and brought separate tax and gun prosecutions against Biden’s son Hunter.

Nonetheless, Trump’s current Justice Department has actively pursued the president’s retribution campaign and grievances, bringing criminal charges against some of his perceived adversaries and initiating a wide-ranging investigation that aims to establish a years-long conspiracy between law enforcement and intelligence officials to destroy Trump’s political prospects and keep him power.

No charges have been brought in that investigation and it is not clear that any ever will be.

Trump filed a lawsuit earlier this year in a Florida federal court, alleging that a previous leak of his and the Trump Organization’s confidential tax records caused “reputational and financial harm, public embarrassment, unfairly tarnished their business reputations, portrayed them in a false light, and negatively affected President Trump, and the other Plaintiffs’ public standing.”

The president’s sons, Donald Trump Jr. and Eric Trump, are also named plaintiffs in the suit.

In 2024, former IRS contractor Charles Edward Littlejohn, of Washington, D.C. — who worked for Booz Allen Hamilton, a defense and national security tech firm — was sentenced to five years in prison after pleading guilty to leaking tax information about President Trump and others to two news outlets between 2018 and 2020.

The outlets were not named in the charging documents, but the description and time frame align with stories about Trump’s tax returns in The New York Times and reporting about wealthy Americans’ taxes in the nonprofit investigative journalism organization ProPublica. The 2020 New York Times report found Trump paid $750 in federal income tax the year he first entered the White House, and no income tax at all some years, thanks to reported colossal losses.

In the first sign that a settlement was coming — lawyers for the president asked a federal judge in April to pause the case for 90 days while the two sides work to reach a settlement or resolution.

“This limited pause will neither prejudice the parties nor delay ultimate resolution,” the filing in April said. “Rather, the extension will promote judicial economy and allow the Parties to explore avenues that could narrow or resolve the issues efficiently.”

When asked in February how he would handle any potential damages from the case, Trump said, “I think what we’ll do is do something for charity.”

“We could make it a substantial amount,” he said at the time. “Nobody would care because it’s going to go to numerous very good charities.”

A group of lawyers wrote to the court this month, expressing concerns about whether the Justice Department was properly insulated from the president’s control of the case. Additionally, several ethics watchdog groups have filed friend-of-the-court briefs challenging the president’s lawsuit.

Fatima Hussein, Eric Tucker and Alanna Durkin Richer, The Associated Press