U.S. President Donald Trump speaks in front of the American flag to the press as he departs the White House on May 12, 2026 in Washington, DC.
Kevin Dietsch | Getty Images
Democratic lawmakers on Friday slammed the Trump administration over reports that President Donald Trump would drop his $10 billion lawsuit against the Internal Revenue Service in an exchange for what some called a $1.7 billion “slush fund.”
“This administration is dripping with corruption from top to bottom, but rushing a settlement to steal $1.7 billion taxpayer dollars for a slush fund before a judge can toss your junk lawsuit would be among the most corrupt acts in American political history,” Sen. Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee.
“This lawsuit has never been anything more than a shakedown of the American people by a crook president and his crook lawyers,” Wyden said.
Trump, his two eldest sons, and his family business sued the IRS and the Treasury Department in U.S. District Court for the Southern District of Florida over the 2019 leak of the president’s tax returns. It was an unprecedented move that raised concerns about conflicts of interest at the time.
ABC News, citing sources familiar with the situation, reported on Thursday that Trump and the IRS could settle his lawsuit in exchange for a compensation fund that could be used to compensate the president’s allies who claim to have been wrongfully targeted by the Biden administration.
The New York Times reported on Tuesday that the Justice Department was considering settling Trump’s IRS suit, also citing sources familiar.
The agreement could involve the exchange of taxpayer funds or another public benefit to Trump and the end of any audit into Trump, his family, and business, the Times reported.
The White House did not immediately respond to a request for comment on Friday.
News of the potential settlement comes ahead of a May 20 deadline set by U.S. District Court Judge Kathleen Williams, who asked the Justice Department and Trump’s legal team to explain whether the case with the president on both sides can even be heard by a federal court.
“(A)lthough President Trump avers that he is bringing this lawsuit in his personal capacity, he is the sitting president and his named adversaries are entities whose decisions are subject to his direction,” Williams wrote in a court filing in April.
“It is unclear to this Court whether the Parties are sufficiently adverse to each other so as to satisfy” the constitutional requirement that federal cases only adjudicate cases or controversies.
Williams’ comment came after attorneys for both Trump and the IRS requested a 90-day pause in proceedings as they sought a resolution.
“Trump is ‘dropping’ his bogus lawsuit against the IRS in exchange for a slush fund, courtesy of your tax dollars, that he can use to pay off his political allies,” Sen. Chris Van Hollen, D-Md., posted to X on Friday.
“While people drown in high prices & inflation — Trump’s lining his & his buddies’ pockets. We will fight this,” Van Hollen wrote.
The exact terms of any settlement have not been finalized, but it could include a victim compensation fund as well as a truth-and-reconciliation-style commission that could vote to issue monetary rewards, ABC News reported.
“Donald Trump is orchestrating a $1,700,000,000 fraud on the American taxpayer to line the pockets of his MAGA political allies, another installment in his ongoing effort to turn the federal government into a personal cash 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 presidential plunder of the American people.”