President Donald Trump is preparing to drop his $10 billion lawsuit against the Internal Revenue Service as part of a proposed deal that would create a massive compensation fund for political allies who claim they were targeted by the Biden administration — including Jan. 6 defendants, according to a report Thursday night.
Under the proposed arrangement, first reported by ABC News, a newly created commission would oversee roughly $1.7 billion in taxpayer-funded payouts to individuals and organizations alleging they were victims of what Trump and his supporters have long described as the “weaponization” of the federal government.
That pool of money could benefit nearly 1,600 people charged in connection with the Jan. 6 Capitol riot, along with other Trump allies — and potentially entities tied to the president himself.
The deal is not yet finalized, according to ABC News, but sources familiar with the negotiations said the compensation fund is “the main condition” for Trump dropping several major legal claims against the federal government.
Trump filed the IRS lawsuit in January after his confidential tax returns were leaked to the media during his first term.
The breach stemmed from the actions of Charles Littlejohn, a former IRS contractor employed by Booz Allen, who admitted to illegally disclosing Trump’s tax information to news outlets including The New York Times and ProPublica.
The leaked records fueled headlines in 2020 claiming Trump paid just $750 in federal income taxes in both 2016 and 2017.
Littlejohn later pleaded guilty to unauthorized disclosure of tax returns and was sentenced in 2024 to the maximum penalty of five years in prison.
Trump’s sons, Donald Trump Jr. and Eric Trump, who now oversee the Trump Organization, also filed related lawsuits tied to the disclosures.
According to ABC News, the proposed settlement would establish a commission with broad authority to distribute compensation to people claiming they were politically targeted under President Joe Biden’s administration.
“President Donald Trump is expected to drop his $10 billion lawsuit against the Internal Revenue Service in exchange for the creation of a $1.7 billion fund to compensate allies who claim they were wrongfully targeted by the Biden administration, sources familiar with the matter told ABC News,” the outlet reported.
“The commission overseeing the compensation fund would have the total authority to hand out approximately $1.7 billion in taxpayer funds to settle claims brought by anyone who alleges they were harmed by the Biden administration’s ‘weaponization’ of the legal system, including the nearly 1,600 individuals charged in connection with the Jan. 6 Capitol attack as well as potentially entities associated with President Trump himself.”
Shortly after returning to office on Jan. 20, 2025, Trump issued sweeping pardons to nearly every defendant charged or convicted in connection with the Capitol riot.
The IRS case is not the only legal dispute Trump is currently pursuing against the federal government.
The president is also seeking $230 million from the Department of Justice over the FBI’s Russia investigation into his 2016 campaign and the bureau’s 2022 raid on his Mar-a-Lago residence.
Rather than filing a lawsuit in that matter, Trump submitted administrative claims that will ultimately be reviewed by officials within his own administration.
ABC News reported that the proposed settlement would block Trump personally from receiving payments tied directly to the IRS, Russia investigation, or Mar-a-Lago claims.
However, the outlet noted that “entities associated with Trump are not explicitly barred from filing additional claims.”
In a statement to ABC News, a spokesperson for Trump’s legal team defended the president’s position and blasted the original leak.
“The IRS wrongly allowed a rogue, politically-motivated employee to leak private and confidential information about President Trump, his family, and the Trump Organization to the New York Times, ProPublica and other left-wing news outlets, which was then illegally released to millions of people,” the spokesperson said.
“President Trump continues to hold those who wrong America and Americans accountable.”
