President Donald Trump quietly ended his $10 billion lawsuit against the Internal Revenue Service on Monday, filing a notice of voluntary dismissal in federal court just days before a judge had ordered both sides to explain why the case should be allowed to proceed at all.
The dismissal, filed in U.S. District Court for the Southern District of Florida, included Trump, his sons Donald Trump Jr. and Eric Trump, and the Trump Organization. It was filed "with prejudice," meaning the plaintiffs cannot bring the same claims in a new lawsuit.
No explanation was offered in the filing, which was reported first by CNBC.
The move came two days before a May 20 deadline set by U.S. District Judge Kathleen Williams, who had raised pointed questions about whether the case had any constitutional standing.
In an April court filing, Williams wrote that Trump "is the sitting president and his named adversaries are entities whose decisions are subject to his direction," casting doubt on whether the parties were "sufficiently adverse" to satisfy the constitutional requirement that federal courts only hear genuine disputes.
The dismissal did not arrive in a vacuum. Days before the court filing, The New York Times and ABC News reported that the Justice Department had been negotiating terms that would see Trump drop the IRS suit – along with roughly $230 million in separate legal claims related to the 2022 search of his Mar-a-Lago estate and the Russia investigation – in exchange for the creation of a $1.7 billion compensation fund formally dubbed the "Truth and Justice Commission."
That fund, according to sources familiar with the discussions, would draw from the Treasury Department's Judgment Fund and be administered by a five-member commission empowered to issue payments by majority vote. The commission's procedures and the identities of payment recipients could be kept private.
Eligible claimants would include Trump allies who allege they were wrongfully targeted by the Biden administration – including some of the nearly 1,600 individuals charged in connection with the Jan. 6 Capitol attack, who received blanket pardons shortly after Trump returned to office.
A spokesperson for Trump's legal team said the IRS "wrongly allowed a rogue, politically-motivated employee to leak private and confidential information about President Trump, his family, and the Trump Organization."
The Justice Department declined to comment. CNBC reported that it had asked the DOJ whether the lawsuit dismissal was connected to a broader settlement; no answer had been provided as of Monday morning.
Trump originally sued the IRS in late January over the 2019 leak of his tax records by former IRS contractor Charles "Chaz" Littlejohn, who obtained and distributed years of tax return data belonging to Trump and other wealthy individuals. Littlejohn was sentenced to five years in prison in January 2024.
The suit was unusual from the start. Legal scholars questioned whether a sitting president could meaningfully sue an agency within the executive branch he leads, and Judge Williams' April ruling suggested the court shared those doubts. Attorneys for both Trump and the IRS had previously requested a 90-day pause in proceedings while they sought a resolution – a sign that both sides were already looking for an exit before Monday's dismissal.
Trump himself acknowledged the awkwardness of the arrangement in an October Oval Office exchange. "It's interesting because I'm the one that makes a decision, right," he said at the time. "It's awfully strange to make a decision where I'm paying myself."
He added that any money he received would be donated to charity.
The proposed $1.7 billion settlement fund ignited sharp criticism from Democrats even before the lawsuit was officially dropped, with several lawmakers calling it a "slush fund" – a taxpayer-financed vehicle for rewarding Trump's political allies with little oversight or transparency.
"This administration is dripping with corruption from top to bottom, but rushing a settlement to steal $1.7 billion taxpayer dollars for a slush fund before a judge can toss your junk lawsuit would be among the most corrupt acts in American political history," Sen. Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee, said Friday, as per CNBC.
Rep. Jamie Raskin, D-Md., the top Democrat on the House Judiciary Committee, called it "a massive and unprecedented presidential plunder of the American people." Sen. Chris Van Hollen, D-Md., posted to social media that Trump was "lining his & his buddies' pockets."
A group of House Democrats had introduced legislation earlier this year to bar Jan. 6 defendants from receiving such compensation.
Among the more pointed concerns raised by critics: under the proposed settlement terms, Trump would retain the authority to remove commission members without cause, and the commission would face no obligation to publicly disclose how it allocates more than a billion dollars in taxpayer funds. Sources described it as an unprecedented use of the Treasury's Judgment Fund.
“While people drown in high prices & inflation – Trump’s lining his & his buddies’ pockets," Van Hollen wrote. "We will fight this.”
Citizens for Responsibility and Ethics in Washington, an advocacy group holding itself out as a champion for democracy and government accountability, called his legal action against the IRS "absurd" as it blasted the settlement.
"Trump and the Justice Department just engaged in the most brazen act of self-dealing in the history of the presidency, and did so quickly in order to avoid the scrutiny of the judicial process," CREW President Donald K. Sherman said in a statement following the news. "This is one of the single most corrupt acts in American history.”
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