DOJ Kills $1.8B Victim Fund but Keeps Trump's IRS Shield Intact

Acting Attorney General Todd Blanche told a House Appropriations subcommittee Tuesday that the Justice Department is permanently scrapping a proposed $1.8 billion fund to compensate people claiming to be victims of government prosecution — but will preserve a separate, highly controversial agreement shielding President Trump, his family, and their businesses from IRS audits on already-filed tax returns.

The $1.8 billion fund had triggered a rare Republican revolt. Senate Republicans, already wary of the fund's optics heading into midterm elections, had made killing it a precondition for advancing a major immigration enforcement bill. Opponents branded it a slush fund for Trump allies, and a federal judge had temporarily paused its implementation. Blanche's declaration — 'We're not moving forward with the fund, period' — is expected to break that Senate impasse. Democrats, meanwhile, repeatedly pressed Blanche to rescind the fund's creation order in writing, and he flatly refused, saying only he would honor his verbal commitment.

What survives is arguably more consequential: a directive Blanche personally signed on May 19 that confers sweeping IRS audit protection on Trump, his family, and business 'affiliates.' Tax lawyers and former IRS officials say the protection is unprecedented in scope. A single IRS investigation into how Trump claimed losses on his Chicago tower could have exposed him to more than $100 million in liability. The deal emerged from a settlement of Trump's $10 billion lawsuit against the IRS over the leak of his tax returns — a lawsuit that had nothing to do with ongoing audits. A federal judge has since reopened the case, citing potential deception by negotiating lawyers, but it remains unclear whether that inquiry can unwind the tax protection. Internal IRS lawyers had prepared a 25-page memo urging the Justice Department to dismiss Trump's suit rather than settle it.

Blanche also appeared on a Sean Hannity podcast — dressed in a polo shirt rather than his standard suit — where he confirmed the existence of a 'grand conspiracy' investigation targeting former intelligence officials, named James Comey, John Brennan, and James Clapper as targets, and disclosed that two secret grand juries have been empaneled — one in Florida, one in another unnamed state. That disclosure breaks sharply with Justice Department policy barring public discussion of ongoing grand jury proceedings.

The political fallout is multilayered. Democrats are already framing the surviving IRS deal as proof that Republicans are protecting a billionaire president from a $100 million tax penalty while ordinary Americans struggle financially — a potent midterm attack line. Republican senators, including Susan Collins, have largely stayed silent on the tax protection even as they cheered the fund's demise. Blanche, who was paid nearly $10 million by a Trump-allied group for his personal legal defense of Trump between 2023 and 2024, rejected Democratic accusations of conflict of interest.