Federal Judge Voids Trump's $1.8bn IRS Settlement, Blocks Tax Audit Immunity

US District Judge Kathleen Williams voided a legal settlement between President Donald Trump and federal agencies on Monday, ruling that the agreement was filed in bad faith and used the judicial process improperly. The settlement, reached earlier in 2026, included a $1.8bn "anti-weaponisation" fund designed to compensate individuals claiming they were unfairly targeted by the government, along with tax audit immunity for Trump, his family, and related entities.

Trump and his sons had filed a $10bn lawsuit against the IRS over the leak of his tax returns by a former IRS contractor, Charles Littlejohn. The leaked information formed the basis of a 2020 New York Times investigation revealing Trump paid only $750 in federal income taxes in 2016 and no taxes in 10 of the previous 15 years. The government reached the settlement without contesting the lawsuit, but the arrangement drew swift bipartisan criticism, prompting acting attorney general Todd Blanche to announce the Justice Department was scrapping the fund — though tax immunity provisions initially remained in place.

In her 56-page ruling, Williams found no genuine legal controversy existed between the parties, since Trump as president controls the Treasury Department and IRS. She wrote that the lawsuit "was never about a party seeking judicial resolution of a legal issue" but rather "an attempt to use the court to provide some legitimacy to an agreement to confer immunity to people and entities affiliated with the president." Williams noted that Trump did not pursue claims about the tax leak until after regaining the White House and appointing allies to the Department of Justice, and that one of his lawyers never properly sought permission to appear in the Florida court despite doing so in other cases.

The ruling blocks Trump, his sons, his business, and the government from citing or using any terms of the settlement in future proceedings, effectively allowing the IRS to move forward with audits into Trump's tax claims. Williams referred Trump attorney Alejandro Brito to the Florida bar for potential disciplinary action and barred attorney Daniel Epstein from appearing on behalf of clients in the southern district of Florida for at least one year. Tax experts noted the decision does not prevent future attempts at presidential self-dealing without congressional action to strengthen protections against political interference in the tax system.