Democrats Demand Answers Over Reported $1.7 Billion IRS Settlement Fund Under Trump's Control

Congressional Democrats raised alarms Friday over reports that President Donald Trump is considering dropping his $10 billion lawsuit against the Internal Revenue Service in exchange for a $1.7 billion compensation fund that would fall under the president's control.

ABC News, citing sources familiar with the situation, first reported Thursday that Trump and the IRS were in discussions to settle the lawsuit. The potential agreement could include a victim compensation fund as well as a truth-and-reconciliation-style commission with the authority to issue monetary rewards, according to that report.

The New York Times, also citing sources familiar with the matter, reported earlier in the week that the Justice Department was weighing a settlement — one that could involve the exchange of taxpayer funds or another public benefit to Trump, and the end of any audit into Trump, his family, and his business.

Trump, his two eldest sons, and his family business sued the IRS and the Treasury Department over the 2019 leak of the president's tax returns. Democrats at the time raised concerns about conflicts of interest, and the lawsuit was widely characterized as an unusual use of presidential legal resources.

The exact terms of any potential settlement have not been finalized, officials said. The White House did not respond to a request for comment Friday.

Sen. Ron Wyden, D-Ore., the ranking Democrat on the Senate Finance Committee, delivered some of the sharpest criticism. "This administration is dripping with corruption from top to bottom, but rushing a settlement to steal $1.7 billion taxpayer dollars for a slush fund before a judge can toss your junk lawsuit would be among the most corrupt acts in American political history," Wyden said. "This lawsuit has never been anything more than a shakedown of the American people by a crook president and his crook lawyers," he added.

Sen. Chris Van Hollen, D-Md., posted to X on Friday: "Trump is 'dropping' his bogus lawsuit against the IRS in exchange for a slush fund, courtesy of your tax dollars, that he can use to pay off his political allies. While people drown in high prices and inflation — Trump's lining his and his buddies' pockets. We will fight this."

Rep. Jamie Raskin, D-Md., the top Democrat on the House Judiciary Committee, went further, characterizing the potential agreement as an act of fraud. "Donald Trump is orchestrating 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," Raskin said. "This is a massive and unprecedented presidential plunder of the American people."

Republicans have not publicly responded to Democratic criticism of the reported settlement terms as of Friday afternoon.

The reported settlement would, if finalized, allow Trump to drop a lawsuit that critics have long argued had little legal merit. ABC News reported that the compensation fund could be directed toward allies of the president who claim to have been wrongfully targeted by the Biden administration, a framing that has intensified Democratic opposition.

With no final terms confirmed and the White House silent on the matter, the political dispute over the reported agreement is likely to intensify heading into next week, as lawmakers on both sides of the aisle weigh whether to formally intervene.

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