FTPB 2016 Editions Discussion of Trump v. IRS and Its Resulting Machinations (8/3/26)

I am trying to wrap up the 2026 Editions of my Federal Tax Procedure Book but the ongoing drama by DOJ’s $2.77 billion Anti-Weaponization Fund and Trump and related party tax immunity does not permit an easy stopping point. But I have to stop and have just concluded all that will be in the 2026 Editions that I hope to publish later this week. I thought I would post the discussion below (the Student Edition version without footnotes by copy and paste into the blog below) and the Practitioner Edition version with footnotes that can be downloaded here.

                   2.     Examples (Including Trump v. IRS).

          A prominent example of this remedy is a suit brought by a Kenneth Griffin, a hedge fund billionaire. An employee of a third party contractor to the IRS, Booz Allen Hamilton, Inc., illegally accessed and disclosed the tax return information of Griffin and others to a news organization, ProPublica, which in turn published some of the tax return information. Griffin sued the IRS under (i) § 7431, alleging violation of § 6103, and (ii) the Privacy Act. The employee was prosecuted and pled guilty, receiving a five-year sentence. Griffin and the IRS settled the civil action resulting in a dismissal with prejudice. All of the terms of the settlement are not available, but apparently there was no monetary consideration and the IRS agreed to and did issue a public apology. Another reputed billionaire brought related action against the employee’s employer, Booz Allen Hamilton, Inc.

          A more prominent example arising from the same mass disclosures is a 2026 suit Donald J. Trump filed in his nominal personal capacity for $10 billion damages (asserting both the minimum $1,000 per disclosure with disclosures at $1,000 justifying $10 billion or actual damages of $10 billion) and for punitive damages in an amount not stated. The Plaintiffs included Trump’s sons and The Trump Organization, LLC. (referred to collectively as the Trump Plaintiffs). Before the DOJ filed an answer, the Judge asked the parties to brief whether, given President Trump’s control over the Government parties (IRS and DOJ) and personal interest as Plaintiff, the case met the required Article III case or controversy requirement. The Court also appointed amici to provide independent briefing on that issue. Before the parties presented their briefing but after the amici provided its initial brief, the Trump Plaintiffs moved to dismiss with prejudice under FRCP Rule 41(a)(1)(A)(i) which requires dismissal with prejudice. On May 18, 2026, the Court dismissed with prejudice, noting:

            Because the Notice does not reference any settlement or include a stipulation of settlement, there is no settlement of record. Additionally, Defendants—federal agencies represented by the Department of Justice, which has an independent obligation to uphold the “public’s strong interest in knowing about the conduct of its Government and expenditure of its resources” and the “fair administration of justice,” 28 C.F.R. §§ 50.9, 50.23—neither submitted any settlement documents nor filed any documents ensuring that settlement was appropriate where there was an outstanding question as to whether an actual case or controversy existed.

 In short, the Court smelled a rat but under the Rule was required to dismiss with prejudice.

           On the same day shortly after the dismissal, proving that the rat the Court smelled was real, DOJ announced that it had “settled” the underlying dispute (and all other disputes known or unknown between or among the opposing parties). The key terms of the “settlement” are:

           • Recitals including (i) the tax return information disclosure discussed above; (ii) administrative claims arising from the Biden administration “unlawful raid on Mar-a-Lago” and the Russia-collusion “hoax”; and (iii) but for the settlement, the Trump Plaintiffs planned to amend the complaint in Trump v. IRS to include other parties as a “putative class claim.”

          • As the Trump Plaintiffs “sole and complete relief,” the United States will issue a “formal apology” to the Trump Plaintiffs (citing the Griffin settlement); that relief will not include “monetary payment or damages of any kind” to the Trump Plaintiffs (citing the Griffin settlement). Trump Plaintiffs will dismiss with prejudice the claims in Trump v. IRS (discussed above) and withdraw the administrative claims noted in the Recitals.

          • DOJ will create an “Anti-Weaponization Fund” for a nominal $1.776 billion to pay damages to others than the Trump Plaintiffs and affiliates for prior administration’s weaponization and lawfare improperly targeting others for political purposes.

          • By separate agreement dated May 19, 2026 (which I call the “Release Order” because that is what the Court called it in a later Order discussed below), Treasury and the IRS (the Defendants in the litigation) release the Trump related parties (the Trump Plaintiffs and any “related or affiliated individuals (including, without limitation, family or others filing jointly), or parties including trusts, parent, sister, or related companies, affiliates, and subsidiaries”) that had accrued and thus could have been asserted by the Defendants (Treasury and IRS) as of the Effective Date. The Release Order purports to give the stated beneficiaries (Trump and related parties, although there is some murkiness as to who precisely the related parties are) immunity from tax investigations, audit, or other tax related matters (civil and criminal).

           This “settlement” or “settlements” created a firestorm of public pushback back resulting in the following:

           • In Trump v. IRS (the dismissed case), 35 retired federal judges moved the Court to reconsider the dismissal based upon potential fraud on the Court in moving to dismiss under Rule 41. Other filings were made raising issues as to aspects of the settlement or settlements.

          • Another case was commenced in N.D. Virginia to enjoin the creation of the Anti-Weaponization Fund. The judge issued a temporary injunction and set a hearing on the injunction.

          • On July 13, 2026, the District Court in Trump v. IRS entered an Order calling the suit a sham to give the illusion of bona fide “settlements” of a court case. See Trump v. IRS, 2026 WL 1145973, 2026 U.S. Dist. LEXIS 94772 (April 24, 2026). In effect, Trump and his underlings at DOJ (Blanche, et al.) who serve the President under Trump v. Slaughter, 609 U.S. ___, 225 L. Ed. 2d 664 (2026) had raided the public fisc and colluded to use the case as cover. The opinion is excellent and highly recommended.

          • As a result of the public pushback and perhaps the filings in Trump v. IRS and N.D. Virginia, AAG Blanche announced that the “Anti-Weaponization Fund” would not go forward but resisted putting that “commitment” in writing. Since that “commitment” was facially nonbinding, the judge in the N.D. Virginia expanded the scope of the injunction and gave the DOJ one-week to provide a sworn statement that the Fund would not go forward. DOJ gave no such assurance. During his confirmation hearing for his appointment as Attorney General, AAG Blanche continued his refusal to make the commitment in writing. The refusal caused two Republican Senators required for confirmation to say that they would not vote for confirmation if he did not make his commitments in writing. Blanche then, in order to save his nomination, released two documents the purport to (i) close all possibility of the $1.77 billion weaponization fund and (ii) scale back the IRS audit and investigation immunity to (a) include only the names plaintiffs in Trump v. IRS–Trump, his sons, and his corporation and (b) apply only retroactively to claims in existence on the date of the Release Order. There are problems now surfacing with this gambit but given the fact that I am trying to publish this book hopefully on August 4, 2026, I cannot delve further into them. I likely will post further on my Federal Tax Procedure Blog.

          • In any event, if the original settlement documents were binding contracts, the Plaintiffs and perhaps even the other related parties who were beneficiaries of the contract would have to agree, presumably in writing. None of the documents have been signed by any parties other than DOJ which was itself not a formal party in Trump v. IRS.

          • One problem with getting such assurances that the Fund will not go forward is that the DOJ via AAG Blanche can “settle” or compromise legally cognizable claims brought anyone, including the intended beneficiaries of the Fund, and thus achieve the same goal with no oversight whatever (unless Congress flexes its muscles (i.e., power) and morals on the issue). The Attorney General’s settlement authority for such claims does not require any pending case, so AAG Blanche could just do it on the quiet (at least in theory). As with many of Trump’s violations of norms for his financial benefit, however, the “discretionary” exercise by AAG Blanche (or anyone else serving in the role of AG) has never been tested when that discretion has been exercised for arguably corrupt or political purposes when the claims settled have little or no merit.

          • I just want to state the inference I draw that the Weaponization Fund and even the audit and investigation immunity for most persons covered was all a feint to give Trump some bona fides for “settling” back to just audit and investigation immunity for himself, his sons, and his corporation. That’s all he really cares about, and if it came down to taking away the immunity of his sons and his corporation to save himself, he would do so.

Exercise for Students: Readers of Chapter Six discussing tax and tax-related crimes should be able easily to spot several tax and tax-related crimes that this conduct might implicate, particularly the ubiquitous defraud conspiracy. One possibility is that anyone participating materially in the audit immunity could be an affirmative act of evasion with respect to the taxes covered or an overt act of conspiracy (offense or defraud). In theory, if that were viable, all of the key players in this drama stand exposed to criminal prosecution.  Of course, the prosecutions, if any, will have to be brought by DOJ which Trump can prevent while he is President but can then be brought in the next Administration unless Trump gives sweeping pardons to all who were involved. (I suspect and have read that those actors are counting on such pardons.) One final question worth asking is whether Trump’s control of DOJ and IRS could implicate some conduct for which the Supreme Court has given full or qualified immunity in Trump v. United States, 603 U.S. 593 (2024).

Another Exercise for Students: Tax procedure students should think about the settlement authorities discussed earlier in this text. Thus, generally, only the IRS has settlement authority for cases that it has not yet referred to DOJ. DOJ has settlement authority only for cases that the IRS referred. Facially, it appeared in Trump v. IRS that the IRS had only transferred authority to DOJ over the § 7431 wrongful disclosure same. There is no indication that the IRS referred all of the matters sweepingly released in the Release Order to DOJ, and there is no indication that the IRS “settled” those claims.

Concluding thoughts: If nothing else, Trump v. IRS and its resulting commotions will occupy tax procedure and tax crimes enthusiasts for a long time.

This blog entry is cross-posted to my Federal Tax Procedure Blog here.