Trump IRS settlement blocks audits; lawmakers cry foul

The U.S. Department of Justice announced this week that an unprecedented settlement of President Donald Trump’s lawsuit over leaked tax returns permanently bars the Internal Revenue Service from auditing tax filings submitted by Trump, his family and their businesses.

Some lawmakers and legal experts said the settlement addendum violates federal law by shutting down potential audits and investigations. The Justice Department, however, described the addendum as a routine waiver common in legal settlements.

In January, Trump and his two eldest sons sued the IRS for $10 billion over leaks of their business and personal tax returns, marking the first time a sitting president had sued the U.S. government.

On Monday, the Justice Department announced the lawsuit had been settled and the government agreed to create a nearly $1.8 billion fund to compensate people who believe they were unfairly investigated.

On Tuesday, a day after announcing the settlement, the Justice Department released the addendum ending any pending audits.

The one-page addendum states the United States is “FOREVER BARRED AND PRECLUDED” from a long list of actions the IRS typically takes to verify tax compliance and seek recourse for underpayment.

That list includes filing claims, conducting examinations or similar reviews, and seeking injunctive relief related to taxes filed by Trump, his family members, and their trusts, companies or subsidiaries.

Key in the addendum is that the taxes must have been filed before May 19, 2026. The Justice Department clarified the addendum “is only with respect to existing audits, not future.”

The IRS does not announce investigations, leaving unknown what, if anything, it was reviewing concerning Trump, his family or their enterprises.

In a statement, the department described the addendum as “customary” and a necessary part of settling lawsuits conclusively.

“There would be little point in settling several significant claims if either party could simply turn around and seek to initiative more adverse claims that could have been pursued previously,” the department said.

As news of the addendum spread, lawmakers and legal experts raised alarms.

The top Democrat on the Senate Finance Committee, Ron Wyden, said in a statement it is “clearly a violation of the law that prohibits interference by executive branch officials in IRS audits.”

“Democrats are going to fight every element of this self-dealing settlement, but regardless of the outcome of those efforts, future administrations and IRS leadership should consider this illegal directive completely invalid,” said Wyden, who graduated from the University of Oregon’s law school.

Under U.S. law, the president, vice president and most other high-ranking executive branch officials cannot directly or indirectly ask the IRS to terminate an investigation.

The major exception is the attorney general, and the addendum is signed by Acting Attorney General Todd Blanche. It can be argued, then, that the administration has followed the law.

Critics, such as leaders of the advocacy group Public Citizen, take the view that Trump has indirectly sought to end the audits.

Public Citizen co-presidents Robert Weissman and Lisa Gilbert said in a statement that Trump filed a “bad-faith lawsuit” and with the settlement “aims to escape from IRS audits.”

IRS officials who receive illegal requests to terminate audits must report them or face possible criminal prosecution, and experts warn that agency employees could now be at legal risk.

But tax experts said there are other ways this agreement appears to diverge from U.S. law.

The IRS closes individual cases by reaching agreements with taxpayers or referring them to the Justice Department. There is no record of the IRS taking either step here.

Instead, the addendum was included in a lawsuit against the IRS, not a tax case. It is a broad, blanket waiver blocking investigations, which is not standard and was not reached by the IRS.

“It purports to put the President, his entities, and his family above the tax laws—even though DOJ alone doesn’t have authority to offer those extraordinary protections,” Tax Law Center Policy Director Brandon DeBot said, calling the entire settlement “a breathtaking abuse of the tax and legal system.”

Just as the U.S. government has never been sued by its president, it has never settled a lawsuit involving the head of the executive branch.

Before the case was settled, a federal court set a May 20 deadline for both sides to address whether a legitimate legal dispute existed, given that Trump oversees the IRS.

In exchange for Trump dropping his case, the Justice Department agreed to establish a $1.776 billion “Anti-Weaponization Fund” to pay claims from “those who suffered under weaponisation and lawfare.”

Most Democrats have called it a “slush fund” where Trump can hand out money to allies and to rioters who breached the U.S. Capitol on Jan. 6, 2021.

Some Republicans, including Senate Majority Leader John Thune, have also expressed skepticism.

Already, at least one claim has been filed.

Michael R. Caputo, a former Trump campaign adviser and later a first-term administration official, is seeking $2.7 million, saying in a letter posted on X that “the machinery of government was clearly weaponized against my family” during the investigation into possible Russian involvement in the 2016 election.

In a statement to the BBC, he said his family was “profoundly grateful” that Trump “will not let this political weaponization stand.”

At the same time, resistance is mounting.

Two police officers who were at the Capitol on Jan. 6, 2021, filed a lawsuit Wednesday arguing the fund is illegal because “no statute authorizes its creation, the settlement on which it is premised is a corrupt sham, and its design violates the Constitution and federal law.”

They also argued it could endanger their safety by providing funds to rioters who regularly threaten their lives and could lead to the funding of paramilitaries.