Trump Drops IRS Lawsuit as DOJ Creates $1.7 Billion Anti-Weaponization Fund, Drawing Democratic Condemnation

President Donald Trump and his family voluntarily dismissed a multi-billion-dollar federal lawsuit against the Internal Revenue Service on Monday, the same day the U.S. Department of Justice announced the creation of a $1.776 billion settlement fund for individuals the administration says were targeted by government overreach.

The Settlement Arrangement

Trump, along with his sons Donald Trump Jr. and Eric Trump, and the Trump Organization, filed to drop the $10 billion suit in U.S. District Court for the Southern District of Florida. The dismissal was filed with prejudice, meaning the case cannot be refiled.

The lawsuit had stemmed from the unauthorized disclosure of Trump’s tax records to news outlets by a contractor in late 2019. That contractor was sentenced for the leak in early 2024.

Within hours of the court filing, the DOJ announced the new fund, which will not distribute money to Trump or his family. Instead, the department said the money would be made available to those who “suffered weaponization and lawfare,” according to a departmental statement. Trump and his family will receive a formal apology from the government but no financial compensation under the arrangement.

Acting Attorney General Todd Blanche — who previously served as Trump’s personal defense attorney — said in a statement that “the machinery of government should never be weaponized against any American,” and described the fund as a mechanism for victims to seek redress through a “lawful process.”

Trump, when asked about the fund by reporters Monday, said he knew “very little about” its creation. He described the beneficiaries as people “treated brutally by a system that was so corrupt” and said a committee of five people would determine how the money is distributed, without identifying the members.

Who Could Receive Money

The DOJ’s announcement stated there are “no partisan requirements to file a claim,” but the fund’s creation closely follows Trump’s mass pardons of approximately 1,600 defendants charged in connection with the January 6, 2021, attack on the U.S. Capitol. Those individuals could potentially apply for compensation under the new fund.

Trump campaigned on pardoning those prosecuted for the Capitol riot, calling them “patriots” and “hostages.” He issued the pardons on the first night of his second term, and the White House maintains a webpage dedicated to those it characterizes as targeted by what it calls a “weaponized Biden DOJ.”

Democratic Reaction

Congressional Democrats moved quickly to challenge both the fund and the legal mechanism used to establish it.

Senate Minority Leader Chuck Schumer, D-N.Y., called the arrangement “one of the most depraved” uses of the Justice Department and accused Trump of structuring a self-dealing arrangement. “Donald Trump sued his own government. Trump’s DOJ settled with Trump,” Schumer said, characterizing the fund as a way to “reward his own allies, loyalists, and insurrectionists.”

Ninety-three House Democrats filed an amicus brief Monday urging U.S. District Judge Kathleen Mary Williams to dismiss what they called a “collusive lawsuit” for lack of jurisdiction. The filing argues the fund is “plainly unlawful” and raises what the lawmakers describe as serious concerns about manipulation of the court system to reach an illegal outcome.

Democrats in both chambers have broadly characterized the fund as a political slush fund, though the DOJ maintains the process is open to any eligible claimant regardless of party affiliation.

What’s Next

The court will now consider whether to accept the dismissal and how to respond to the Democratic amicus brief challenging its jurisdiction. The administration has not provided a timeline for when the five-member distribution committee will be named or when claims processing will begin.

The development adds to ongoing national debates over the independence of federal law enforcement and the proper role of the Justice Department — debates that have run parallel to discussions at the state level about election integrity and government accountability. Idaho officials, including Secretary of State Phil McGrane, have addressed related themes around institutional trust and campaign finance and reform in recent months, while McGrane has also received national recognition for his approach to election administration.

Whether federal courts will allow the settlement fund to proceed as structured remains an open question as legal challenges mount.