NEED TO KNOW

• Trump would drop his $10B IRS suit for a $1.7B taxpayer-funded compensation pool.
• Money draws from the Judgment Fund, requiring no congressional vote.
• Federal judge questioned whether Trump can sue agencies he controls.

RANDALLSTOWN, MD (TDR) — President Donald Trump may settle his $10 billion suit against the Internal Revenue Service for a $1.7 billion fund his administration controls.

The big picture: The structure routes Treasury money to people Trump's commission decides were victims of Biden-era "weaponization," potentially including Jan. 6 defendants and entities tied to Trump.

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• ABC News first reported the proposed terms.
• The commission has "total authority" to issue payouts; Trump can remove members without cause.
• Money draws from Treasury's Judgment Fund, which Congress does not vote on per payout.

Why it matters: A sitting president would settle with agencies he commands and direct proceeds to a fund his appointees control.

• Trump himself acknowledged last October: "It's awfully strange to make a decision where I'm paying myself."
• Judge Kathleen Williams questioned whether Trump and the IRS are "sufficiently adverse," with a May 20 deadline to justify continuation.
• The 2018-2020 IRS leak Trump cites was prosecuted under the Biden DOJ.

Driving the news: Settlement talks accelerated ahead of the court deadline, with Democrats calling it a "slush fund" and some administration officials raising ethical concerns.

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• Settlement would bar Trump from direct payments on three legal claims; entities tied to him are not barred.
• DOJ already settled with Flynn and Page for $1.25 million each and paid nearly $5 million to the Ashli Babbitt estate.
• Trump would receive a public IRS apology and audit waivers for himself, his family, and businesses.

What they're saying:

• Rep. Jamie Raskin, D-Md., House Judiciary ranking member — "The president has no authority to conjure up billion-dollar compensation schemes or raid the Judgment Fund."
• Trump legal team spokesperson — "The IRS wrongly allowed a rogue, politically-motivated employee to leak private and confidential information about President Trump."
• Duncan Levin, former federal prosecutor, Harvard Law lecturer — "Calling something a personal lawsuit does not change the fact that the defendants are federal agencies controlled by the plaintiff."

Yes, but: The leak Trump sued over was real. Littlejohn pleaded guilty in 2023 and was sentenced to 5 years for disclosing thousands of returns including Trump's. The IRS's failure to stop him was a documented breach. But the remedy now on offer converts that civil claim into a discretionary fund Trump's administration controls, a structure he himself called "strange" before pursuing it.

• DOJ is defending the government against Trump's suit while being run by his appointees.
• Judge Williams flagged the constitutional problem before any settlement was floated.

Between the lines: The Judgment Fund is the real story under the story. Congress built it in 1956 as a permanent appropriation to pay valid judgments without coming back for approval each time, a convenience mechanism rather than an oversight one. The design works when both sides of a case are genuinely adverse. It breaks when a president sues agencies he controls and his DOJ negotiates the settlement. The vulnerability predates Trump, but no prior administration has tested how far the fund can be pushed. Whether this settlement holds sets the precedent for the next president whose coalition has grievances worth settling.

What's next:

• May 20: deadline for Trump and DOJ to justify proceeding before Judge Williams.
• Final terms reportedly not yet set; sources caution against premature reporting.
• Democrats are exploring legal challenges to the fund's structure.

If presidents can use the Judgment Fund to pay people their administrations decide were wronged, what stops the next president from doing the same?

Sources

This report was compiled using reporting from ABC News, CNBC, TIME, Fortune, The New Republic, MS NOW, the U.S. House Judiciary Committee, the Department of Justice, and the Treasury Department.

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