Trump's IRS settlement includes dropping tax cases, audits

Erik Larson, Bloomberg News on May 19, 2026

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WASHINGTON — President Donald Trump scored a major legal victory over the Internal Revenue Service on Tuesday as the agency he has long reviled was barred by the Justice Department from continuing any “known and unknown” probes into his tax returns.

The one-page agreement signed Tuesday by acting Attorney General Todd Blanche adds to a controversial settlement struck a day earlier in which Trump agreed to drop a $10 billion lawsuit he filed against the IRS in January over a 2019 leak of his tax records to the press.

Under the deal, the IRS is “forever barred” from pursuing “any and all claims” or demands for damages that have been or could have been filed against Trump before the agreement was reached. The accord represents a major triumph by Trump over an agency he has criticized for years for auditing his finances, but it’s opened up the administration to criticism from Democrats and ethics groups.

“The settlement and general release of claims is a breathtaking abuse of the tax and legal system,” Brandon DeBot, policy director of New York University’s Tax Law Center, said in a statement.

The agreement by the IRS is just one part of a major settlement resolving the case. Blanche on Monday said Trump had agreed to drop his suit in exchange for the Justice Department creating a $1.8 billion fund to compensate victims of alleged government “weaponization” by former President Joe Biden’s administration and others.

Blanche said Trump won’t benefit personally from the fund. Yet many of the president’s allies and supporters who were investigated in recent years could seek payouts.

The final details of how the fund will work haven’t been released, but Blanche on Tuesday told lawmakers he would not rule out payments being issued to rioters who attacked the US Capitol on Jan. 6, 2021, in a failed attempt to keep Trump in office.

The Justice Department referred calls to the IRS. The agency didn’t immediately return a message seeking comment.

On Monday evening, hours after the settlement was announced, U.S. District Judge Kathleen Williams, who oversaw the lawsuit, issued an order closing the case and questioning whether the government was being transparent about a settlement.

Williams expressed frustration with how the settlement was handled, saying that the U.S. has an “obligation” to uphold the “public’s strong interest in knowing about the conduct of its government and expenditure of its resources” and the “fair administration of justice.”

Even so, in her order, the judge said that neither the IRS nor the Justice Department “filed any documents ensuring that settlement was appropriate where there was an outstanding question as to whether an actual case or controversy existed.”

The judge had previously ordered Trump and the government to file briefs by May 20 explaining how the case could proceed with Trump effectively in control of both sides of the litigation. Williams on Monday canceled the deadline and said she no longer has any authority over the case.

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(With assistance from Chris Strohm.)