US President Donald Trump speaks to the press in front of the Star-Spangled Banner as he departs the White House on May 12, 2026 in Washington, DC.
Kevin Dietch | Getty Images
Democratic lawmakers on Friday criticized the Trump administration over reports that President Trump would drop a $10 billion lawsuit against the Internal Revenue Service in exchange for what some called a $1.7 billion “slush fund.”
“This administration is corrupt from top to bottom, but rushing a settlement to steal $1.7 billion in taxpayer funds before a judge can dismiss a junk lawsuit would be one of the most corrupt acts in the history of American politics,” said Sen. Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee.
“This case was nothing more than a swaying of the American people by a crook president and his crook lawyers,” Wyden said.
President Trump, his two eldest sons, and his family business have sued the IRS and Treasury Department in the U.S. District Court for the Southern District of Florida over the leak of the president’s 2019 tax returns. This was an unprecedented step and raised concerns of a conflict of interest at the time.
ABC News reported Thursday that President Trump and the IRS may settle the lawsuit in exchange for compensation funds that could be used to compensate allies of the president who say they were unfairly targeted by the Biden administration, ABC News reported, citing people familiar with the situation.
The New York Times reported Tuesday that the Justice Department is considering settling Trump’s IRS lawsuit, also citing sources familiar with the matter.
The deal could include exchanging taxpayer funds and other public benefits to Trump and ending audits of him, his family and businesses, the newspaper said.
The White House did not respond to a request for comment Friday.
News of the potential settlement comes ahead of a May 20 deadline set by U.S. District Judge Kathleen Williams, who asked the Justice Department and Trump’s lawyers to explain whether the president and both parties’ lawsuits can be heard in federal court.
“While President Trump recuses himself from bringing this lawsuit in his personal capacity, he is a sitting president and his named adversaries are entities whose decisions are subject to his direction,” Williams said in an April court filing.
“It is unclear to this court whether the parties are sufficiently adverse to each other” to satisfy the constitutional requirement that federal cases adjudicate only suits or disputes.
Williams’ comments came after lawyers for both Trump and the IRS asked for a 90-day pause on the resolution process.
“Mr. Trump is ‘dropping’ his bogus lawsuit against the IRS in exchange for slush funds that can be used to pay off political allies,” Sen. Chris Van Hollen, D-Maryland, posted on X on Friday.
“While people are drowning in high prices and inflation, President Trump is lining the pockets of himself and his allies. We will fight this,” Van Hollen wrote.
The exact terms of the settlement have not yet been finalized, but the settlement could include a victim compensation fund as well as a truth and reconciliation-style commission that could vote on issuing financial rewards, ABC News reported.
“Donald Trump is orchestrating a $1.7 billion fraud on American taxpayers to line the pockets of his MAGA political allies. This is another part of his continued effort to turn the federal government into a personal teller machine for his unpopular extremist movement,” said Rep. Jamie Raskin, D-Md., the top Democrat on the House Judiciary Committee. “This is a massive and unprecedented dispossession of the American people by the president.”
