Trump Poised to Drop $10 Billion IRS Lawsuit in Exchange for Public Apology and $1.7 Billion Weaponization Compensation Fund

WASHINGTON — President Donald Trump is expected to drop his $10 billion lawsuit against the Internal Revenue Service over the unauthorized leak of his tax returns, according to multiple reports citing sources familiar with the negotiations.

Under the emerging settlement, the IRS would issue a public apology for the breach and the government would create a $1.7 billion taxpayer-funded compensation fund to pay individuals and entities who claim they were wrongfully targeted by the Biden administration’s “weaponization” of the justice system. The fund would be administered by a five-member commission with broad authority to award money by majority vote. Trump would have the power to remove commission members without cause, and the process could keep recipient identities and award details private in many cases.

The proposed deal would also resolve related claims stemming from the 2022 search of Trump’s Mar-a-Lago estate and the Russia collusion investigation during his first term. Trump himself would be barred from directly receiving payments tied to these three specific matters, though entities associated with him are not explicitly prohibited from filing claims. Any unspent funds would be returned to the Treasury shortly before Trump leaves office.

The lawsuit, filed in January 2026 in federal court in Florida by Trump, his sons Eric and Donald Trump Jr., and the Trump Organization, accused the IRS of failing to protect private tax information. The records were leaked to The New York Times and ProPublica by former IRS contractor Charles Edward Littlejohn, who pleaded guilty and was sentenced to five years in prison. The leaks revealed Trump paid only $750 in federal income taxes in 2016 and none in several other years due to reported business losses.

A Trump spokesperson 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.”

U.S. District Judge Kathleen Williams had questioned whether the lawsuit could proceed, noting that as sitting president, Trump’s named adversaries (the IRS and Treasury Department) are entities under his direction. The judge had ordered the parties to justify why the case should continue, creating a deadline that the settlement would sidestep.

Negotiations are in the final stages, with sources saying an agreement could be reached and announced in the coming days. The Justice Department has been internally discussing settlement options, including the possibility of the IRS dropping ongoing audits of Trump, his family members, and related businesses.

The arrangement has drawn criticism from government watchdog groups, which argue it raises constitutional, legal, and ethical concerns because the president effectively controls both sides of the litigation. Public Citizen warned in a letter to the attorney general and IRS that any such settlement could expose IRS employees to legal risk and urged officials to follow proper procedures.

No final deal has been formally announced, and the lawsuit remains active until a settlement is filed with the court. If completed, the agreement would mark a significant resolution to one of several legal disputes Trump pursued against federal agencies over alleged misconduct during the Biden years.