Trump moves to dismiss $10-billion suit against IRS after reports of a resolution

WASHINGTON- President Trump filed a notice Monday saying he is seeking to dismiss the $10 billion lawsuit against the Internal Revenue Service, filed following the leak of the president’s tax returns.

ABC News reported that the president and the IRS discussed creating a $1.7 billion fund to compensate Trump allies who say they were targeted by the agency during President Biden’s administration.

The motion to dismiss the lawsuit, which was also filed on behalf of Trump’s sons Donald Trump Jr. and Eric Trump, as well as the Trump Organization, made no mention of a potential settlement.

Critics have blasted the lawsuit and its potential because the president has ultimate authority over the agency he sues and the Justice Department, which would be responsible for defending the IRS.

The government has yet to file anything in the case, which was filed in January.

The lawsuit is one of several legal attacks launched by Trump and his administration against a wide range of the president’s perceived enemies, including universities, media outlets and law firms.

A number of these cases were settled through promises of payments to a future Trump presidential library, funds sent to the federal government, workforce development money programs and free legal work, among other things.

Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, sharply criticized Trump’s decision to sue in the first place and the potential settlement.

“Even by his standards, the move he is trying to make with impunity constitutes a stunning act of corruption,” Wyden said in a statement. “…If he follows through, it will be the most brazen theft and abuse of taxpayer dollars of any president in American history.”

In a separate lawsuit filed Monday in the case, 93 Democratic members of the House also blasted the potential deal with the IRS.

“If this lawsuit achieves Plaintiffs’ desired goals, it would result in an inappropriate and unconstitutional transfer of taxpayer dollars into the pockets of the President, his family, and his allies,” the filing states.

Trump’s complaint focused on leaks by a former IRS contractor, Charles Littlejohn, to the New York Times and ProPublica of tax information about Trump and other wealthy individuals.

Littlejohn pleaded guilty to unauthorized disclosure of tax information and was sentenced to five years in prison in 2024.

Beyond the outrage and resistance expressed by Democrats in Congress, progressive legal organizations and former IRS and Justice Department officials have also spoken out against the president’s lawsuit and reports of an imminent settlement.

The progressive legal organization Democracy Forward had already filed a brief in court challenging Trump’s lawsuit on the grounds that it raised serious legal issues. The February brief was filed on behalf of two other groups — Common Cause and the Project on Government Oversight — as well as four former federal officials, including former IRS Commissioner John Koskinen.

The brief asserted that the lawsuit was significantly flawed and barred by a statute of limitations, but also raised “serious concerns about collusive litigation tactics” and that the court “should exercise its inherent authority to proactively handle it.”

“This case is extraordinary because the President controls both sides of the litigation, raising the prospect of collusive litigation tactics. Collusive litigation threatens the integrity of the judicial process by risking involving the Court in illegitimate proceedings,” the filing states.

The complaint “was filed too late, against the wrong party, and for an unjustified and excessive amount of damages,” the filing states.

Tax law experts also denounced Trump’s lawsuit and reports of a possible settlement.

Last week, Brandon DeBot, senior counsel and policy director at New York University’s Tax Law Center, and Dave Hubbert, a senior fellow at the center, wrote that the lawsuit was “absurd” and that a settlement — especially one in which the IRS agreed to drop all audits of Trump, his family and their businesses — would be “deeply concerning.”

They wrote that the Justice Department has no authority to negotiate such terms and that “negotiations involving the President and White House officials to end audits of the President, his family and his businesses risk violating laws protecting against political interference in tax administration.”

They noted that Congress had “strengthened the tax code’s protections against political interference on a mostly bipartisan basis following the public revelation of President Nixon’s failed attempts to use the IRS to target political enemies,” and that any move by anyone in the White House to “directly or indirectly” request a stay of an audit of the president would violate the law.

Trump’s legal maneuvers against the IRS come amid broader concerns about mismanagement at the agency and a broader battle over providing other taxpayers’ sensitive data to Immigration and Customs Enforcement under the Trump administration.

Trump removed IRS Commissioner Billy Long in August 2025, allowed Treasury Secretary Scott Bessent to serve as acting commissioner for a time, then created the new IRS “CEO” position, which congressional Democrats denounced as a “phony” position designed to avoid congressional oversight as the agency descends into “chaos.”

Congressional Democrats also demanded answers about the disclosure of taxpayer data to ICE, apparently in an effort to deport taxpayers who lack the necessary documentation to be in the country, as part of Trump’s mass deportation campaign.

“The IRS now admits that this system led to exactly the kind of serious errors that our taxpayer privacy laws were designed to prevent,” Sen. Alex Padilla (D-Calif.) and several other senators wrote in February.