Judge blocks Trump settlement with IRS that gave him sweeping tax protections
A federal judge voided a settlement reached by President Donald Trump and his two oldest sons with the IRS that gave the family and its company sweeping tax protections and could have benefited people who attacked Capitol police on Jan. 6, 2021.
In a July 13 court order, Judge Kathleen M. Williams, an Obama appointee, wrote that the lawsuit was an attempt to legitimize the government's effort under Trump "to confer immunity to people and entities affiliated with the President" and to "earmark billions of dollars from American taxpayers" to address unclear grievances.
Williams prohibited the three Trumps from using or referring to the deal, which she described as a "purported 'settlement agreement,'" in any official way, including in legal proceedings.
The settlement, which was negotiated by federal lawyers and a personal legal team for the Trumps, freed them of potential tax liability for past years. It also tried to create an "anti-weaponization" fund for certain people who alleged they were victims of abusive government legal proceedings. The fund drew bipartisan criticism after some questioned whether Jan. 6 rioters could receive taxpayer dollars.
Acting Attorney General Todd Blanche later said the Justice Department wouldn't move forward with the fund, and a federal judge also blocked the program.
The fund was announced as part of a settlement of a $10 billion lawsuit that Trump and his two oldest sons brought against the IRS. They alleged that the IRS was liable for failing to protect their confidential tax returns after a contractor leaked tax return information from Trump family members and from hundreds of thousands of other taxpayers.
The tax benefits to Trump under the settlement could have been steep. The New York Times reported in 2020 that Trump was in a decade-long audit battle with the IRS over a claimed $72.9 million tax refund, and losing that battle could cost him more than $100 million.
Williams also referred a lawyer for Trump, Alejandro Brito, to the Florida State Bar, which regulates how lawyers practice law in the state and has the power to review the situation and potentially discipline Brito. She blocked another lawyer who signed the settlement agreement on behalf of the Trumps from being able to represent plaintiffs in new cases in her Southern District of Florida court for a year.
The White House referred USA TODAY to Trump's personal lawyers.
A spokesman for Trump's legal team said in a statement that that the IRS "wrongly allowed a rogue, politically-motivated employee to leak private and confidential information about President Trump, his family, and the Trump Organization to the New York Times, ProPublica and other" news outlets, which the spokesman characterized as "left-wing."
"President Trump continues to hold those who wrong America and Americans accountable," the spokesman added.
The Justice Department, which represented the IRS in the case, didn't immediately respond to a request for comment.
Why did the judge block the settlement?
In ruling that Trump's settlement was improper, Williams wrote that the Constitution requires all court cases to actually involve a dispute between two adversaries. That, she said, hadn't happened in Trump's case.
Williams wrote that Trump, as president, had control over the people defending the government against his own lawsuit. She said that included control over the Justice Department's litigation strategy because Trump issued an executive order in February 2025 "to ensure Presidential supervision and control of the entire executive branch."
Williams noted that the DOJ didn't have a lawyer file anything indicating the government's position in the case before the Trumps dropped their lawsuit and the settlement was announced, even though the case had been pending for 109 days.
Essentially, Williams argued, Trump and the DOJ were acting as one unit, creating a lawsuit he couldn't lose.
"In sum, the facts before this Court demonstrate there was never adverseness between the Parties; there was never a case or controversy; and there was never a question as to who would prevail," Williams wrote.
This story has been updated with additional information.
This article originally appeared on USA TODAY: Judge blocks Trump settlement with IRS that gave him sweeping tax protections
Reporting by Aysha Bagchi, USA TODAY / USA TODAY
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This story was originally published July 13, 2026 at 1:47 PM.