Trump May Drop $10B IRS Lawsuit in Exchange for $1.7B Fund for Political Allies

President Donald Trump may drop a $10 billion lawsuit against the Internal Revenue Service (IRS) in exchange for the creation of a $1.7 billion government fund designed to compensate political allies who claim they were wrongfully targeted by the Biden administration.

The proposal, first reported by ABC News and the New York Times, would utilize taxpayer funds to provide damages to individuals and entities alleging they were harmed by the weaponization of the legal system under the previous administration. According to the reports, the plan is being fast-tracked but has not yet received official approval.

If the settlement is approved, the fund would be available to those claiming they were targeted by the Biden administration, including approximately 1,600 people who were charged in connection with the January 6, 2021, insurrection.

The potential agreement stems from a lawsuit filed in a Miami federal court in January 2026. In that action, Trump and other plaintiffs alleged that federal agencies failed to prevent a former IRS contractor from illegally obtaining and disclosing tax returns to ProPublica, the New York Times, and other media outlets described by the plaintiffs as left-wing between May 2019 and September 2020.

Beyond the $10 billion IRS suit, the proposed settlement would also resolve $230 million in legal claims filed against the Justice Department. These claims are related to the 2022 search of Trump’s Mar-a-Lago estate and the investigation into alleged ties between his campaign and Russia during his first term in office.

As part of the terms, Trump would reportedly require the IRS to waive an IRS audit and issue a public apology for the disclosure of his personal financial records.

The New York Times reports that the Justice Department intends to model this compensation program after the Keepseagle v. Vilsack class-action lawsuit. That case, settled in 2011, resulted in a $760 million fund for Native American farmers and ranchers who alleged the U.S. Department of Agriculture (USDA) systematically discriminated against them in loan servicing and farm loan programs.

A member of President Trump’s legal team defended the action in a statement to ABC News:

The IRS wrongly allowed a rogue, politically-motivated employee to leak private and confidential information about President Trump, his family, and the Trump Organization to the New York Times, ProPublica and other left-wing news outlets, which was then illegally released to millions of people. President Trump continues to hold those who wrong America and Americans accountable.

Member of President Trump’s legal team

The proposal has drawn criticism from Democratic officials who have raised ethical concerns regarding the president’s role in managing a government fund that could potentially benefit his own associates.

Senator Elizabeth Warren characterized the move as corruption in a post on X on May 14, 2026.

An insane level of corruption—even for Trump. A $1.7 BILLION slush fund for Trump’s hand-picked stooges to hand money to January 6th insurrectionists and his political allies. Here’s the President’s priority as Americans sell their plasma to afford gas and groceries.

Senator Elizabeth Warren

The White House and the Justice Department have not responded to requests for comment regarding the status of the settlement.