WASHINGTON — President Trump filed a notice Monday that he is seeking to dismiss their $10-billion lawsuit against the Internal Revenue Service, which they had brought over the leak of the president’s tax returns.
ABC News reported that the president and the IRS have discussed creating a $1.7-billion fund to compensate Trump’s allies who say they were targeted by the agency during President Biden’s administration.
The motion to dismiss the lawsuit, which was also brought on behalf of Trump’s sons Donald Trump Jr. and Eric Trump, as well as the Trump Organization, made no mention of a potential deal.
Critics have blasted the lawsuit and potential because the president has ultimate authority over the agency he is suing and the Department of Justice, which would be responsible for defending the IRS.
The government had not yet filed anything in the case, which was brought in January.
The lawsuit is one of numerous legal attacks by Trump and his administration against a wide range of the president’s perceived enemies, including universities, media outlets and law firms.
A number of those cases were settled with promised payments to a future Trump presidential library, funds sent to the federal government, cash for workforce development programs and free legal work, variously.
Sen. Ron Wyden of Oregon, the top ranking Democrat on the Senate Finance Committee, was deeply critical of Trump’s decision to bring the lawsuit in the first place and the potential deal.
“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. “… If he follows through, it will be the most brazen theft and abuse of taxpayer dollars by any president in American history.”
In a separate court filing Monday in the case, 93 Democrat House members also blasted the potential IRS deal.
“Should this lawsuit achieve Plaintiffs’ desired ends, it would result in the improper and unconstitutional transfer of taxpayer dollars into the pockets of the President, his family, and his allies,” the filing reads.
The Trump complaint focused on leaks by a former IRS contractor, Charles Littlejohn, to the New York Times and ProPublica of tax information for Trump and other wealthy individuals.
Littlejohn pleaded guilty to the unauthorized disclsure of tax information was sentenced to five years in prison in 2024.
Beyond outrage and resistance voiced by Democrats in Congress, progressive legal organizations and former IRS and Justice Department officials have also spoken out against the president’s lawsuit and the reports of a looming settlement.
The progressive legal organization Democracy Forward had previously filed a brief in court challenging Trump’s lawsuit as raising serious legal concerns. The February brief was filed on behalf of two other groups — Common Cause and the Project on Government Oversight — as well as four former federal officials, including former IRS Commissioner John Koskinen.
The brief argued that the lawsuit was significantly flawed and barred by a statute of limitation, but also raised “serious concerns about collusive litigation tactics,” and that the court “should exercise its inherent authority to proactively manage” it.
“This case is extraordinary because the President controls both sides of the litigation, which raises the prospect of collusive litigation tactics. Collusive litigation threatens the integrity of the judicial process by risking the Court’s entanglement in an illegitimate proceeding,” the filing said.
The complaint “was filed too late, against the wrong party, and for an unsupported and excessive sum of damages,” the filing said.
Experts in tax law have also denounced Trump’s lawsuit and the reports of a potential settlement.
Last week, Brandon DeBot, a senior attorney advisor and policy director at the Tax Law Center at New York University Law, and Dave Hubbert, a senior fellow at the center, wrote that the lawsuit was “absurd,” and that a settlement — particularly one in which the IRS would agree to drop any audits of Trump, his family and their businesses — would be “deeply concerning.”
They wrote that the Justice Department has no authority to negotiate any such terms, and that “negotiations involving the President and White House officials to end audits of the President, his family, and his businesses risk violating laws protecting against political interference in tax administration.”
They noted that Congress had “strengthened the tax code’s protections against political interference on an overwhelmingly bipartisan basis following public revelation of President Nixon’s failed attempts to use the IRS to target political enemies,” and that any moves by anyone in the White House to “directly or indirectly” request an audit of the president be suspended would violate the law.
Trump’s legal maneuverings against the IRS come amid wider concerns about mismanagement at the agency and a wider battle over its providing the sensitive data of other taxpayers to Immigration and Customs Enforcement, at the Trump administration’s direction.
Trump removed IRS Commissioner Billy Long in August 2025, allowed Treasury Secretary Scott Bessent to serve as acting commissioner for a time and then created the new position of IRS “CEO,” which congressional Democrats have railed against as a “fake” position designed to avoid congressional oversight while the agency falls into “chaos.”
Congressional Democrats have also demanded answers about the release of taxpayer data to ICE, ostensibly for the purposes of deporting taxpayers who lack proper documentation to be in the country as part of Trump’s massive deportation campaign.
“The IRS now admits that this system led to exactly the kinds of grave mistakes our taxpayer privacy laws were designed to prevent,” Sen. Alex Padilla (D-Calif.) and several other senators wrote in February.
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