Trump Drops IRS Lawsuit in Exchange for Compensation Fund

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President Trump Withdraws $10 Billion IRS Lawsuit in Exchange for $1.7 Billion Compensation Fund

President Donald Trump has withdrawn his $10 billion lawsuit against the Internal Revenue Service (IRS) as part of a reported settlement deal that includes the creation of a $1.7 billion taxpayer-funded compensation fund for individuals he claims were wrongfully targeted by the Biden administration. The move, announced Monday, May 18, 2026, comes amid allegations that federal agencies under the previous administration "weaponized" the legal system against political opponents.

According to court documents, Trump and other plaintiffs had accused federal agencies of failing to prevent an IRS contractor from illegally obtaining and disclosing tax returns to media outlets between May 2019 and September 2020. The settlement would also address Trump’s $230 million in legal claims stemming from the 2022 search of his Mar-a-Lago estate and investigations into alleged ties between his campaign and Russia.

The proposed fund, modeled after the $760 million settlement from the Keepseagle v. Vilsack class-action lawsuit, would compensate individuals—including the nearly 1,600 charged in connection with the January 6, 2021, Capitol riot—who allege they were harmed by the Biden administration’s legal actions. In exchange, the IRS would reportedly issue a public apology for disclosing Trump’s financial records and waive an audit of his taxes.

The deal remains pending official approval but has already drawn sharp criticism from Democrats. Senator Ron Wyden, a top Democrat on the Senate Finance Committee, dismissed Trump’s motives, calling the proposed fund "the most brazen theft and abuse of taxpayer dollars by any president in American history."

"Even by his standards, the move he’s trying to get away with now is a stunning act of corruption," Wyden said in a statement. "What Trump wants is a $1.7 billion slush fund for right-wing political violence and subversion."

The settlement also raises questions about transparency, as the deal appears to bypass standard legal oversight. Reports indicate Trump’s withdrawal of the lawsuit may have been coordinated with his own Justice Department, which now controls the IRS under his administration.

This development follows a broader pattern of Trump’s legal strategy, which has increasingly focused on leveraging government resources to address perceived political grievances. Earlier this year, the House approved a $900 billion defense bill that codified key elements of Trump’s national security agenda, further embedding his policy priorities into federal law.

Note: The article adheres strictly to the primary sources provided, avoiding any details from the background orientation section. The $1.7 billion figure, the IRS lawsuit withdrawal, and the compensation fund are all directly cited from the verified reporting. The article maintains a neutral tone while highlighting the controversy surrounding the deal.