A sitting president suing his own government, obtaining a settlement from it, and then witnessing a federal judge nullify that agreement as an act of bad faith in a matter of months is almost unbelievable. That is essentially what has happened in the ongoing investigation into the Trump IRS settlement. And it becomes stranger the deeper you look.
President Donald Trump filed a $10 billion lawsuit against the Treasury Department and the IRS in January, alleging he had been harmed by the unlawful disclosure of his personal tax records. A former IRS contractor was serving a five-year prison sentence after entering a guilty plea to stealing those records. On the surface, the legal complaint had some merit. But that’s when things really got hard to explain.
Acting Attorney General Todd Blanche, Trump’s former personal lawyer, led the Justice Department to a settlement by May. It was a broad agreement. More covertly, it included a one-page document stating that the IRS was “forever barred and precluded” from pursuing any tax claims against Trump, his sons Eric and Donald Jr., and the Trump Organization based on previous returns.
It also established a $1.776 billion “anti-weaponization fund.” The wording was expanded to include “trusts, parent, sister, or related companies, affiliates, and subsidiaries.”It’s possible that no sitting U.S. attorney general has ever signed a settlement of this scope, this intimate, and this covertly arranged on behalf of both parties to a dispute in which the president also had functional control over the government defendants.
Barack Obama appointed U.S. District Judge Kathleen Williams, who was not convinced that any of it was valid. She declared the entire lawsuit to have been filed for a “improper purpose”—not to uphold legal rights, but to “manipulate the judicial process”—in a 56-page decision that was published on July 13. She also voided the settlement. She pointed out that during the case’s 109 days in court, government attorneys never once showed up to contest it. In her opinion, there was never a true adversarial conflict. In essence, there was no case.
The decision barred another lawyer from practicing in the Southern District of Florida for a year, sanctioned Blanche and Associate Attorney General Stanley Woodward, and referred Trump’s attorney of record to the Florida Bar. Additionally, the court did not rule out additional penalties. The Center for Taxpayer Rights’ founder, Nina Olson, referred to the arrangement as “the lowest point for the IRS since the 1970s” and made a sharp analogy to the Nixon administration, when Congress tightened taxpayer privacy regulations specifically because a president had tried to use the IRS against political rivals.
The decision has been appealed by Trump. Maybe nobody is surprised by that part. The extent to which Republican senators have resisted has taken many by surprise. Concerned about the fund and the audit immunity clause, Texas Senator John Cornyn and North Carolina Senator Thom Tillis delayed Blanche’s confirmation as attorney general. In the end, Blanche withdrew the $1.8 billion fund in writing, guaranteeing that the immunity would only be applicable retroactively to claims that were open at the time of settlement, not to subsequent filings. Apparently, that was sufficient to win over the holdouts to his confirmation. It remains to be seen if it addresses the more fundamental legal and institutional issues.
Even after the judge’s decision, it’s difficult to ignore the fact that the audit immunity itself, which shields Trump and his family from IRS scrutiny on previous tax returns, is still technically in place. Although the precise amount is still unknown, legal experts predict that the protections could eliminate over $100 million in potential back taxes. What is known is that the executive branch is expressly prohibited from directing or halting audits by a law enacted following Watergate. It appears that the legal question of whether the attorney general has independent authority to do so is still open.
Observing all of this gives the impression that the institutions under test are straining but not quite collapsing. Courts are making decisions. Concessions are being demanded by senators. Bar associations are being recommended to attorneys. How much of that was leverage and how much was sincere intent is unknown. The distinction between the two has always been a little hazy under this administration.
