U.S. government agrees to drop tax claims against Trump in broadening of IRS lawsuit settlement

U.S. President Donald Trump speaks about prescription drug prices in the South Court Auditorium in the Eisenhower Executive Office Building on the White House campus, Monday, May 18, 2026, in Washington.

WASHINGTON — The U.S. government will permanently drop tax claims against U.S. President Donald Trump, according to a settlement document made public Tuesday, in an extraordinary use of executive power that could effectively help shield the president from further examination of his finances and legal conduct.

As part of the settlement deal meant to resolve Trump’s $10 billion lawsuit against the Internal Revenue Service over the leak of his tax returns, the U.S. is “forever barred and precluded” from examining or prosecuting Trump, his sons and the Trump organization’s current tax issues, according to a one-page document posted to the Justice Department’s website.

The White House referred Associated Press inquiries to the Justice Department, and the U.S. Treasury did not respond to Associated Press requests for comment.

The settlement refers only to existing audits, not future examinations, the Justice Department said in response to a request for comment on the expanded settlement.

The move comes after the Trump administration announced Monday, as part of the lawsuit settlement, the creation of a nearly $1.8 billion fund to compensate allies of the Republican president who believe they have been unjustly investigated and prosecuted, an arrangement that Democrats and government watchdogs derided as “corrupt” and unconstitutional.

The “Anti-Weaponization Fund” of $1.776 billion will allow people who believe they were targeted for prosecution for political purposes, including by the Biden administration Justice Department, to apply for payouts, creating what acting Attorney General Todd Blanche called “a lawful process for victims of lawfare and weaponization to be heard and seek redress.”

Blanche, who was grilled by lawmakers on Capitol Hill on Tuesday, would not rule out the possibility that people who carried out violence during the Jan. 6, 2021, riot at the U.S. Capitol will be considered for payouts from the new fund.

Democratic lawmakers and ethics watchdogs slammed the creation of the fund, saying it was corrupt, opaque and had the potential to become a “slush fund” for the president and his allies. Even Republican lawmakers have expressed signs of discomfort about the fund’s creation, including Senate Majority Leader John Thune, who told reporters that he’s “not a big fan.”

Trump told reporters at the White House on Monday that the fund is dedicated to “reimbursing people who were horribly treated.”

Daniel Werfel, a former IRS Commissioner during the Biden administration, said he was unaware of the IRS agreeing in advance “to permanently forgo examination of previously filed tax returns for a specific person or business.”

He said the arrangement granted Trump and his family separate tax rules from other Americans.

“Whether you are the president or Joe the Plumber, people expect the same tax rules and enforcement framework to apply to everybody.”

The fund was announced after Trump, his sons Eric Trump and Donald Trump Jr., and the Trump Organization agreed to drop their lawsuit against the IRS and the Treasury Department. The lawsuit alleged that a leak of confidential tax records caused them reputational and financial harm and negatively affected their public standing, among other allegations.

According to a separate settlement agreement posted to the Justice Department website Monday, Trump will receive a formal apology from the U.S. government but “will not receive any monetary payment or damages of any kind” from the settlement.

Kathleen Williams, the judge handling the lawsuit, dismissed the case on Monday and, in her filing, admonished the government agencies, notably the Justice Department, for failing to be transparent about the settlement.

She said no agency “submitted any settlement documents nor filed any documents ensuring that settlement was appropriate where there was an outstanding question as to whether an actual case or controversy existed.”

Fatima Hussein, The Associated Press