Judge Voids Trump's $1.8 Billion IRS Settlement, Refers His Lawyers for Discipline

A federal judge in Miami didn't just reject Donald Trump's settlement with the IRS on Monday. She called the whole lawsuit a fraud on the court.

U.S. District Judge Kathleen Williams, an Obama appointee, voided the deal that had given Trump, his sons, and the Trump Organization sweeping immunity from federal tax audits. The settlement, struck in May, also would have created a nearly $1.8 billion "anti-weaponization" fund to pay people who claimed the government unfairly targeted them. That fund was already scrapped weeks ago after bipartisan blowback, according to Courthouse News Service, and a federal judge in Virginia separately blocked the administration from setting it up at all, according to Reuters reporting carried by WTVB.

What's new as of Monday is Williams' 56-page order tearing apart the legal theory behind the whole case. She found that Trump and the IRS were never actually adversaries, which the Constitution requires for a real lawsuit. Trump runs the executive branch. The IRS is part of it. Suing an agency you control and then settling with yourself, Williams ruled, isn't a lawsuit. It's theater.

"The Lead Plaintiff and the Government are one, a fully realized unitary interest," Williams wrote, according to the Miami Herald, rendering the case "non-adversarial, collusive, and jurisdictionally improper." She said the suit was "brought for an improper purpose — to gain the imprimatur of judicial legitimacy for a 'settlement' that had no viable basis in law or fact."

How this started

Trump filed the original $10 billion lawsuit in January, accusing the IRS of failing to stop former contractor Charles Littlejohn from leaking his tax returns to the New York Times and ProPublica. Those 2020 reports revealed Trump paid just $750 in federal income tax in 2016 and nothing at all in 10 of the prior 15 years, according to the BBC. Littlejohn was criminally charged in 2023 over the leak, according to Courthouse News Service.

Trump's team has a real grievance underlying the case. A government contractor illegally stole and leaked the president's confidential tax records, and Littlejohn was prosecuted for it. A Trump legal spokesperson reiterated that point Monday, saying "the IRS wrongly allowed a rogue, politically-motivated employee to leak private and confidential information about President Trump, his family, and the Trump Organization," and that Trump "continues to hold those who wrong America and Americans accountable," according to the Daily Wire. That's a legitimate underlying complaint. It just doesn't explain why the fix required blanket audit immunity and a $1.8 billion fund with no legal definition of who qualifies as a victim.

Williams didn't buy the framing. She noted Trump didn't pursue the case seriously until he was back in the White House and had installed his own former lawyer, Deputy Attorney General Todd Blanche, and others tied to the case's beneficiaries into top DOJ posts, according to the BBC. Those DOJ officials then negotiated the settlement with Trump's personal attorneys. "It is risible to suggest that there was ever adverseness between the Parties," Williams wrote.

The fallout for the lawyers

Williams didn't stop at voiding the deal. She referred Trump's Florida-based attorney Alejandro Brito to the state bar for potential discipline. She barred America First Legal Vice President Daniel Epstein from appearing in her court for one year. According to the Daily Wire, she referred Blanche himself and Associate Attorney General Stanley Woodward to their respective bar associations, where disciplinary proceedings are reportedly already pending.

The Daily Wire's coverage flagged something the other sources touched more lightly: the timing. Williams' ruling landed two days before Blanche's Senate confirmation hearing, where Democrats are expected to press him on the settlement and its aftermath.

The Miami Herald added a local wrinkle the national coverage skipped. Epstein, one of the barred attorneys, was recently named interim dean of Florida International University's law school, a move that reportedly has the FIU law community uneasy over his Trump ties.

What happens to Trump's tax returns now

Williams' order bars Trump, his sons, and the Trump Organization from citing the settlement or its terms in any future legal proceeding. Multiple outlets, including the Miami Herald and WTVB, reported that this effectively clears the way for the IRS to resume audits into Trump's and his companies' past tax claims, since the immunity provision no longer has legal force.

Whether the IRS actually reopens those audits is an open question. So is whether Trump appeals Williams' ruling; the Herald noted the decision is pending a possible appeal. The Justice Department did not respond to a request for comment from WTVB, and a Trump legal spokesperson has not directly addressed Williams' finding that the lawsuit was collusive, focusing instead on the original leak by Littlejohn. Blanche's Senate hearing is where the next round of public scrutiny is scheduled to play out.