Justice Department Considers Settlement in Trump IRS Lawsuit, Dropping Audits

The Justice Department was weighing a settlement that could spare Donald Trump, his family members and his businesses from future IRS audits, an extraordinary term under discussion in a lawsuit that already raises sharp questions about who the government is really serving. Any agreement that trades taxpayer money or regulatory relief for peace in the case would put the rule of law under a bright light, especially because Trump controls the agencies he is suing.

Trump, Donald Trump Jr., Eric Trump and the Trump Organization filed the $10 billion case in January against the Internal Revenue Service and the Treasury Department, accusing the agencies of failing to prevent the unauthorized disclosure of Trump tax information to The New York Times and ProPublica. The suit stems from one of the largest public leaks of tax data in U.S. history, carried out by former IRS contractor Charles Littlejohn, who was sentenced to five years in prison in January 2024. Littlejohn admitted leaking Trump-related tax information in 2019 and 2020, and he also obtained the tax records of thousands of other wealthy people. Reporting based on the disclosures showed Trump paid $750 in federal income taxes in both 2016 and 2017.

The case took on a new legal dimension on April 24, when U.S. District Judge Kathleen Williams ordered the Justice Department to explain by May 20 how the lawsuit can proceed when Trump effectively stands on both sides of the dispute. Courts require a genuine adversarial controversy, and Williams has pressed the government to show that the suit is more than a self-dealing maneuver dressed up as litigation.

People familiar with the talks said the Justice Department had been exploring ways to settle the case, and one option under review was for the IRS to drop any audits of Trump, his family members or businesses. Reuters reported on April 17 that Trump’s lawyers and the IRS were already in settlement discussions and sought a 90-day pause in the case. A deal of that kind would go well beyond a routine civil settlement: it could create a special carveout for a president and his family that ordinary taxpayers could never buy.

The House Ways and Means Committee later released six years of Trump’s tax returns on December 30, 2022, saying the IRS presidential audit program was effectively dormant during Trump’s presidency and that only one mandatory presidential audit was started before he left office, then left unfinished. Democrats in Congress have since introduced legislation aimed at barring presidents, vice presidents and their families from collecting settlement payments from the government. Trump has said he would donate any money from the IRS case to charity, but even then, any payment would still come from U.S. taxpayers.