A controversial settlement that protected US President Donald Trump from tax audits and laid the groundwork for a $1.8 billion “anti-weaponisation” fund has been overturned by a federal judge.
The agreement emerged after Trump withdrew a $10 billion lawsuit against the Internal Revenue Service, with the proposed fund intended to compensate people who claimed they had been wrongfully targeted by federal authorities.
US District Judge Kathleen Williams ruled on Monday that the legal action had not been brought to resolve a genuine dispute and instead served an improper purpose.
She also referred one of Trump’s lawyers to state authorities for a review of possible professional misconduct.
Trump, two of his sons and the Trump Organization filed the case in 2026. However, Williams said the proceedings did not resemble a genuine dispute between opposing parties, instead characterising them as an arrangement involving lawyers connected to Trump and individuals claiming to have been targeted by the government.
Williams wrote the lawsuit “was never about a party seeking judicial resolution of a legal issue or a factual dispute” between Trump and the IRS, an agency under his administration’s authority.
She said the settlement appeared designed to “provide some legitimacy to an agreement to confer immunity to people and entities affiliated with the President and to earmark billions of dollars from American taxpayers to redress grievances not defined in the law.”
The ruling bars Trump, his sons and others involved in the case from relying on the settlement or referring to its terms in future legal proceedings. The decision could also clear the way for the IRS to conduct future audits of Trump’s tax filings.
Trump’s original lawsuit accused the IRS of failing to prevent former contractor Charles Littlejohn from leaking his confidential tax records.
The leaked documents later formed the basis of a New York Times investigation published shortly before the 2020 presidential election. The report found that Trump paid $750 in federal income tax in 2016, the year he was elected president, and paid no federal income tax in 10 of the previous 15 years.
“President Trump did not pursue his claims until he once again occupied the White House and had appointed his former lawyer, and the former lawyer of persons who are putative beneficiaries of the ‘Anti-Weaponization Fund’ to prominent positions in the DOJ,” Williams wrote, referring to the Department of Justice.
“These officials then negotiated on behalf of the United States, with his current lawyers, including his former White House Counsel to reach a ‘settlement.’ It is risible to suggest that there was ever adverseness between the Parties,” she added.
Trump attorney Alejandro Brito was referred to the Florida Bar for possible disciplinary action. Another lawyer involved in the case, Daniel Epstein, will be barred from participating in cases in the Southern District of Florida for at least one year.
Responding to the ruling, a spokesman for Trump’s legal team said the IRS “wrongly allowed a rogue, politically-motivated employee to leak private and confidential information” to the media.
“President Trump continues to hold those who wrong America and Americans accountable,” the spokesman added.
Brandon DeBot, policy director at New York University’s Tax Law Center, described the settlement as a “sweetheart deal” that granted Trump “unauthorized and unprecedented” exemptions from tax audit procedures.
He said the agreement had undermined “the tax system’s protections against political interference”.
“The court’s decision is important, but does not remove the need for congressional action to nullify the entire deal and to prevent any similar attempts at presidential self-dealing in the future,” he added in a statement.
The proposed fund was dropped in early June, approximately one week after another federal judge temporarily blocked Department of Justice officials from putting it into effect.
That order followed a lawsuit filed in Virginia by two men who claimed the fund was discriminatory. Both said they had faced political retaliation from the Trump administration but believed they would be prevented from applying for compensation.
The proposal drew widespread criticism from Democrats and some Republicans, who warned that it could allow payments to individuals prosecuted over the January 6, 2021, attack on the US Capitol, including people convicted of assaulting police officers.
