Inside the Secret Deal That Dropped Trump's $10 Billion IRS Lawsuit

A small circle of Trump-aligned lawyers quietly engineered a sweeping legal settlement that dissolved a $10 billion presidential lawsuit against the IRS while delivering two massive gifts to Donald Trump: a $1.8 billion taxpayer-funded compensation pool for people claiming they were victimized by government 'weaponization,' and broad immunity from IRS audits that could have cost Trump personally more than $100 million.

The negotiations were so tightly controlled that senior White House officials said they were blindsided, learning of the deal only after it was nearly complete. On one side sat Todd Blanche, the acting attorney general and former Trump criminal defense lawyer. On the other were Trump's private attorneys, including Boris Epshteyn — ironically a former client of Blanche's — who acted as the central coordinator, shuttling between Trump himself, his personal legal team, and Justice Department officials. The key technical architect inside DOJ was Trent McCotter, Blanche's senior deputy, who proposed modeling the fund on a 2010s Obama-era class-action settlement, Keepseagle v. Vilsack, which compensated Native American farmers for government discrimination. McCotter even floated a patriotic branding flourish: setting the fund at exactly $1.776 billion.

The underlying lawsuit stemmed from the leak of Trump's tax records during his first term by IRS contractor Charles Littlejohn, who was prosecuted by the Biden administration and sentenced to five years. Trump demanded $10 billion from the IRS despite Littlejohn's conviction. The IRS itself, treating the suit as routine, prepared a 25-page memo recommending dismissal on two grounds: the suit was filed too late, and it wrongly attributed Littlejohn's actions to the agency. That memo apparently never reached the Justice Department, and no government lawyer ever appeared on the court docket to defend the IRS. Federal Judge Kathleen M. Williams, an Obama appointee in Miami, grew so alarmed by the absence of any adversarial process that she ordered DOJ to explain itself — and it was that May 20 deadline that forced the deal into existence.

Beyond the fund, a second, quieter agreement granted Trump and his business entities sweeping protection from existing IRS audits, including a long-running dispute over a massive tax refund Trump claimed around 2010, partly based on declared losses on his Chicago tower. That battle had already reached the settlement-negotiation stage with the IRS before the lawsuit deal effectively made it disappear entirely. Critics — including former DOJ lawyers who worked on the original Keepseagle case — immediately noted that Keepseagle involved years of litigation and judicial oversight, while the Trump deal was hammered out in private by lawyers with direct personal loyalty to the plaintiff. The Treasury Department's top lawyer, a Trump appointee, resigned in protest. The blowback was severe enough that within days senior administration officials began preparing to dismantle the fund, even before Judge Williams took the extraordinary step of reopening the case on Friday to ask whether the parties had deceived her.