US President Donald Trump speaks to the press in front of the US flag as he departs from the White House in Washington, DC on May 12, 2026.
Kevin Dietsch | getty images
Democratic lawmakers criticized the Trump administration on Friday over reports that President Donald Trump will drop his $10 billion lawsuit against the Internal Revenue Service in exchange for what some are calling a $1.7 billion “slush fund.”
Senator Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee, said, “This administration is steeped in corruption from top to bottom, but reaching a settlement to steal $1.7 billion of taxpayer money for a slush fund before a judge throws out your trash lawsuit would be one of the most corrupt acts in American political history.”
Wyden said, “This trial is nothing more than an attempt by a rogue president and his rogue lawyers to trample on the American people.”
Trump, his two eldest sons and their family business sued the IRS and the Treasury Department in the U.S. District Court for the Southern District of Florida over the 2019 leak of the president’s tax returns. This was an unprecedented move that raised concerns about conflicts of interest at the time.
ABC News reported, citing sources familiar with the situation. Said on Thursday that Trump and the IRS could settle their lawsuit in exchange for a compensation fund that could be used to compensate the president’s associates who claim they have been unfairly targeted by the Biden administration.
New York Times reported The Justice Department is considering settling Trump’s IRS lawsuit, it said Tuesday, citing sources familiar with the matter.
According to the Times report, the agreement could include the exchange of taxpayer funds or any other public benefits to Trump and an end to any audits into Trump, his family and businesses.
The White House did not immediately respond to a request for comment Friday.
News of the potential settlement comes ahead of a May 20 deadline set by U.S. District Court Judge Kathleen Williams, who has asked the Justice Department and Trump’s legal team to explain whether both sides’ president’s case can even be heard in federal court.
“[A]lthough President Trump does not agree that he is bringing this lawsuit in his personal capacity, he is the sitting President and his designated adversaries are entities whose decisions are subject to his direction,” Williams said. wrote in a court filing In April.
“It is not clear to this Court whether the parties are sufficiently adversarial to each other to satisfy the constitutional requirement that federal courts decide only cases or disputes.”
Williams’ comments came after attorneys for both Trump and the IRS requested a 90-day pause in the proceedings while they sought a resolution.
“Trump is ‘dropping’ his fraudulent lawsuit against the IRS in exchange for your tax dollars he can use to pay his political allies,” Senator Chris Van Hollen, D-Md., posted on Friday.
Van Hollen wrote, “While the people are drowning in high prices and inflation – Trump is lining his own pockets and those of his friends. We will fight this.”
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 on issuing monetary awards, ABC News reports.
Rep. Jamie Raskin, D-Md., the top Democrat on the House Judiciary Committee, said, “Donald Trump is committing 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.” “This is a massive and unprecedented presidential robbery of the American people.”