• House Democrats introduced legislation imposing 100% tax on civil settlements paid to sitting presidents who sue the federal government
• The bill responds to President Trump’s $10 billion lawsuit against the IRS and Treasury over unauthorized tax return disclosures from his first term
• Legal experts question the unprecedented conflict of interest as Trump would oversee agencies defending against his own lawsuit

WASHINGTON, DC (TDR) — House Democrats introduced legislation this week that would impose a 100% tax on any civil settlement or judgment awarded to a sitting president who sues the U.S. government, a direct response to President Donald Trump‘s $10 billion lawsuit against the Internal Revenue Service and Treasury Department over the leak of his tax returns during his first term.

Rep. Mike Thompson (D-CA), ranking member of the House Ways and Means Subcommittee on Tax, announced the Prevent Presidential Profiteering Act on February 2, arguing the measure would prevent presidents from enriching themselves through litigation against agencies they control.

“President Trump continues to use the Office of the Presidency for personal gain, including by suing the federal government to line his own pockets. That’s unacceptable,” Thompson said in a statement.

“That is why I am introducing legislation that ensures if a sitting president sues our government while in office, they get taxed 100% on any money paid to them through a trial or settlement.”

The Underlying Lawsuit

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Trump filed the $10 billion lawsuit on January 29 in federal court in Miami, alleging the IRS and Treasury failed to prevent former contractor Charles Littlejohn from accessing and disclosing his confidential tax information to The New York Times and ProPublica between 2018 and 2020. The lawsuit includes Trump’s sons Donald Trump Jr. and Eric Trump, as well as the Trump Organization, as plaintiffs.

“Defendants have caused Plaintiffs 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 lawsuit states.

Littlejohn was sentenced to five years in prison in January 2024 after pleading guilty to unauthorized disclosure of tax returns. The leaked documents revealed Trump paid only $750 in federal income taxes in 2016 and 2017, and paid no federal income tax in some years due to reported business losses. Littlejohn also stole tax records of approximately 400,000 other individuals, including billionaires Jeff Bezos and Elon Musk.

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Days before Trump filed his lawsuit, the Treasury Department canceled all contracts with Booz Allen Hamilton, the defense contractor that employed Littlejohn when he accessed the IRS databases.

Democratic Concerns About Conflict

Rep. John Larson (D-CT) co-sponsored the legislation, calling Trump’s lawsuit an attempt to “steal our tax dollars by suing himself.”

“Donald Trump has a long track record of filing frivolous lawsuits to pad his own pockets — from 60 Minutes to George Stephanopoulos and the Wall Street Journal,” Larson said.

“Now, he has a plan to steal our tax dollars by suing himself and leaving us on the hook for a $10 BILLION payout.”

Senate Finance Committee Ranking Member Ron Wyden (D-OR) condemned the lawsuit as “a shameless, disgusting act of corruption,” noting the irony that Trump’s Treasury Department is simultaneously sharing taxpayer data with ICE for immigration enforcement while the president claims to defend taxpayer privacy.

“While Trump is weaponizing taxpayer privacy laws for his own benefit, his Treasury Department is flouting those exact same laws to send tens of thousands of individual tax records to his anti-immigrant henchmen at ICE,” Wyden said.

Wyden and Sen. Elizabeth Warren (D-MA) sent a letter to Treasury Secretary Scott Bessent and Attorney General Pam Bondi questioning whether the agencies would vigorously defend against the lawsuit or coordinate with Trump to approve a settlement.

“Trump is in essence now suing the government for his own failures during his first term,” the senators wrote.

Trump’s Charity Defense

When asked aboard Air Force One how he would manage being both plaintiff and defendant, Trump suggested he might donate proceeds to charity.

“I think what we’ll do is do something for charity where I’ll give money to charity,” Trump said. “We could make it a substantial amount. Nobody would care because it’s going to go to numerous very good charities.”

However, the White House has not specified which organizations might receive settlement funds or committed to donating the entire amount.

Legal Expert Analysis

David Gair, a tax attorney with Troutman Pepper Locke who represents other individuals affected by the Littlejohn leak, told the Associated Press the lawsuit could trigger a wave of similar claims.

“People are saying, well, if he can do it, then why can’t I do it? And so I think you will have a lot more people filing similar lawsuits, thinking that they might be able to piggyback on what he’s doing,” Gair said.

Amy Hanauer, executive director at the Institute on Taxation and Economic Policy, argued that appropriate remedies have already been implemented.

“The contractor who leaked this information has been imprisoned, the Trump administration’s Treasury Department canceled its contracts with the company that employed the leaker, and the IRS issued a rare public apology to taxpayers affected by the leak,” Hanauer said.

Federal law provides individuals with legal recourse when their tax information is leaked, allowing claims for a minimum of $1,000 per unauthorized disclosure under IRS Code 6103. However, the two-year statute of limitations typically applies from when the taxpayer learns of the disclosure, which Trump’s legal team argues explains the delay in filing despite the leaks occurring in 2019-2020.

Constitutional Questions

Sen. Thom Tillis (R-NC), who is not seeking reelection, questioned the lawsuit’s implications on the Senate floor.

“Where’s that money coming from? The money fairies or your pocket?” Tillis asked.

The case was initially assigned to Judge Kathleen Williams, appointed by former President Barack Obama. The Justice Department attorneys defending the government include officials who previously served as Trump’s personal lawyers, creating additional conflict concerns.

If presidents can sue agencies they control and approve their own settlements, does the constitutional separation of executive branch responsibilities become meaningless — or does Thompson’s proposed 100% tax simply create a different kind of government overreach into legitimate legal remedies?

Sources

This report was compiled using information from Tax Notes’ coverage of the legislative response, statements from Rep. John Larson’s office and Rep. Mike Thompson, NBC News’ reporting on the Trump lawsuit, NPR’s coverage of the Littlejohn sentencing, ABC News analysis of conflict of interest concerns, Senate Finance Committee statements from Ron Wyden, the Associated Press, Kiplinger’s analysis of tax season implications, Accounting Today’s reporting, and Fox Business coverage of Trump’s charity comments.

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