NEWS / Economy

Trump Just Dropped His $10 Billion IRS Lawsuit

Published May 18, 2026

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Summary:

President Trump, his two eldest sons, and the Trump Organization voluntarily dismissed their $10 billion lawsuit against the IRS on Monday.
The dismissal came two days before a court deadline asking whether Trump could legally sue an agency he oversees.
It also follows reports the Department of Justice is negotiating a $1.7 billion settlement for Trump allies.

A $10 billion lawsuit is hard to walk away from. Trump just walked away from one.

The timing is the most interesting part. The case was tossed two days before a federal judge was set to weigh in on whether it had constitutional standing at all.

The Court Deadline

Trump, Donald Trump Jr., Eric Trump, and the Trump Organization filed a notice on Monday in Miami federal court dismissing the case "with prejudice," which means the same claims cannot be filed again.

U.S. District Court Judge Kathleen Williams had asked the parties to explain whether there was even a real legal dispute, since Trump is now head of the executive branch and the IRS is one of its agencies.

Her wording suggested the court was about to question whether the suit had constitutional standing. Dismissing the case before that ruling lands kept the question from being answered.

The Monday filing also blocks the judge from going further, with Trump's lawyers arguing that "no judicial analysis is appropriate" once the plaintiffs walk away.

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The Settlement Story

The dismissal came on the heels of reports that the DOJ is in talks on a settlement that could see the federal government pay $1.7 billion into a fund to compensate Trump allies who claim mistreatment under the Biden administration.

Democratic members of Congress called that fund a "slush fund," raising concerns over how public money would be used to compensate political allies.

CNBC asked the DOJ whether Monday's dismissal is tied to a broader settlement of Trump's claims outside of court, but Trump's lawyers declined to say what prompted the filing.

The lawsuit itself was filed in late January, targeting the leak of Trump's tax information by IRS employee Charles "Chaz" Littlejohn in 2019 and 2020.

What To Watch

The dismissal closes the courtroom path, but it does not close the broader settlement track at the DOJ.

If a settlement is announced, expect a fight in Congress over how public money is used to compensate political allies of the president.

The legal fight is over. Now the political one begins.

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