The Justice Department is holding internal discussions about settling President Trump’s lawsuit against the Internal Revenue Service in the coming days, according to three people familiar with the deliberations, a move that could involve the government directly providing taxpayer funds or another public benefit to the president. Whether to settle the suit and on what terms remains up in the air. One of the settlement options the Justice Department and White House officials are reviewing is the possibility of the I.R.S. dropping any audits of Mr. Trump, his family members or businesses, according to two of the people.
In January, Mr. Trump, along with two of his sons and the Trump family business, sued the Internal Revenue Service for at least $10 billion over the leak of their tax returns during the president’s first term. The Trumps argued that the I.R.S. should have done more to prevent a former contractor from disclosing tax information to The New York Times and ProPublica.
Given that Mr. Trump oversees the I.R.S., the agency that he is suing, the judge in the case has taken a series of novel legal steps to probe whether there is a genuine controversy between the Justice Department and Mr. Trump. For a lawsuit to be valid, the two parties must actually be on opposite sides, otherwise the judge can throw out the case. The judge has ordered Mr. Trump’s personal lawyers — along with the Justice Department, which represents the I.R.S. in federal court — to submit briefs by May 20 explaining whether they are in conflict with one another.
White House and Justice Department officials have in recent days been exploring ways to potentially settle the suit before that deadline, according to the people.
Mr. Trump has long maintained that the federal government was weaponized against him by political opponents, and he has spent much of his second term seeking retribution against, and sometimes compensation from, those he holds responsible. But depending on its terms, a settlement with the I.R.S. could be among Mr. Trump’s most brazen efforts to bend the government to his personal will — an agenda often carried out through the Justice Department.
Mr. Trump and his family have repeatedly disregarded Washington’s ethical guardrails aimed at preventing government officials from profiting from public office, including by pushing for more than $200 million in a separate administrative case with the Justice Department. But a settlement payment even a fraction of the size of Mr. Trump’s requested $10 billion could be much larger than his other attempts at private gain, potentially doubling his net worth.
The Justice Department declined to comment. The White House referred questions to Mr. Trump’s lawyers in the case, a spokesman for whom said, “President Trump continues to hold those who wrong America and Americans accountable.”
In a previous filing in the case, Mr. Trump’s lawyers said they were in discussions with unidentified Justice Department attorneys “designed to resolve this matter and to avoid protracted litigation.” A government attorney has yet to make an appearance in the case.
A settlement in the coming days would fly in the face of efforts by the federal judge overseeing the case, Kathleen Williams, an appointee of President Barack Obama in the Southern District of Florida, to try and manage the conflict of interest in the case. Not only has she requested briefings from Mr. Trump’s lawyers and the government by next week, she has appointed a group of six well-respected lawyers not otherwise involved in the case to provide her with their views on whether Mr. Trump’s lawsuit is legitimate.
If a settlement is reached before Judge Williams has a chance to make a decision about whether the underlying lawsuit is valid, it could frustrate her, though legal experts say that her authority beyond that would be limited.
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She would not likely be able to prevent Mr. Trump from simply withdrawing the suit and coming to a private agreement with the federal government. Even if the judge were to ultimately find that the settlement was collusive or reached in bad faith, she would likely be hamstrung in any effort to stop money or other benefits from changing hands.
Former government lawyers and experts see a clear defense to Mr. Trump’s suit, and do not see it as one the Justice Department would typically settle on its merits. A group of former I.R.S. and Justice Department officials filed an amicus brief in the case arguing, among other things, that Mr. Trump filed the suit too late and that his request for at least $10 billion was far too large.
Charles Littlejohn, the former I.R.S. contractor sentenced to five years in prison for the leak, provided tax return information about thousands of other wealthy Americans to ProPublica. Some of those people have also sued the I.R.S., and the Justice Department has defended those suits, in part by arguing that the government can’t be held liable for the actions of a contractor.
One of those suits against the I.R.S., from hedge fund billionaire Ken Griffin, was settled in 2024, but the government did not pay Mr. Griffin any damages. Instead, the I.R.S. made a public apology for the leak.
It is unclear or how much money Mr. Trump could receive in a settlement, or if he will be paid at all.
But protection from I.R.S. audits could prove quite valuable. I.R.S. procedures call for the mandatory audit of the president and vice president’s annual tax returns. The series of Times articles at the center of Mr. Trump’s suit, published in 2020, showed that he had paid little or no income tax for years. In 2024, the Times reported that a loss in an I.R.S. audit could cost Mr. Trump more than $100 million.
At the same time, federal law prohibits the president from ordering the start or conclusion of an I.R.S. audit of a specific taxpayer.
Andrew Duehren covers tax policy for The Times from Washington.
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