The Trump administration is moving to settle a lawsuit against its own Internal Revenue Service, creating an unprecedented $1.8 billion fund that could potentially direct taxpayer money to the president and his allies, according to court filings reviewed by multiple news outlets.
The lawsuit, originally filed by conservative activists challenging IRS practices, was taken over by the Justice Department after Donald Trump returned to the White House. Rather than defend the agency, the administration is now proposing a settlement that would establish a massive fund to compensate individuals who claim they were subjected to improper IRS scrutiny.
Constitutional law experts from both parties expressed alarm at the arrangement, which they say has no clear precedent in American governance. "This raises serious questions about the separation of powers and conflicts of interest," said Jonathan Turley, a law professor at George Washington University who has testified before Congress on executive power. "The president is effectively suing his own administration to access taxpayer funds."
According to the proposed settlement terms, anyone who believes they faced "enhanced scrutiny" from the IRS between 2010 and 2025 could file a claim against the fund. The president himself has repeatedly claimed he was unfairly targeted by the IRS during previous administrations, potentially making him eligible to receive compensation from the very fund his administration is creating.
Democratic lawmakers immediately questioned the legality of the move. "Congress never appropriated this money, and the president can't just create a $1.8 billion slush fund through a settlement with himself," said Representative Jamie Raskin of Maryland, ranking member of the House Oversight Committee. "This looks like an attempt to funnel taxpayer dollars to political allies."
Republican responses were more muted, though some expressed concerns about the process. Senator Mitt Romney of Utah, who has occasionally broken with his party on Trump-related issues, told reporters he needed to "review the details" but acknowledged the arrangement was "highly unusual."
The Mother Jones investigation that first detailed the settlement found that several prominent Trump allies who have publicly complained about IRS treatment could also potentially benefit, including conservative organizations and donors who supported his campaigns.
Legal experts note that while the Justice Department has authority to settle lawsuits, such settlements typically require congressional approval when they involve appropriating significant sums of taxpayer money. "There's a reason the Constitution gives Congress the power of the purse," explained Lisa Graves, executive director of the watchdog group True North Research. "The executive branch can't simply decide to pay out billions without legislative authorization."
The timeline of the settlement has also raised eyebrows. The lawsuit languished for years under previous administrations, with the IRS mounting a vigorous defense. But within months of Trump taking office, the Justice Department reversed course and began negotiating a settlement that far exceeds what plaintiff attorneys had originally sought.
The settlement still requires approval from a federal judge, who will hold a hearing next month. Several government ethics organizations have already filed briefs opposing the arrangement, arguing it violates conflict-of-interest principles and constitutional spending limits.
As Americans like to say, "all politics is local"—even in the nation's capital. But this case represents something different: a fundamental question about whether a president can use the powers of his office to potentially direct taxpayer funds to himself and his supporters through the court system, bypassing the normal congressional appropriations process entirely.
