Trump ‘In Discussions’ With IRS to Settle Lawsuit Over Tax Record Disclosure

President Donald Trump’s legal team has confirmed in a recent court filing that they are engaged in active settlement talks with the Internal Revenue Service over a lawsuit tied to the disclosure of his tax records. The filing states the parties are in “discussions” aimed at “avoiding protracted litigation,” with Trump seeking $10 billion in damages over what his attorneys characterize as the unlawful release of his returns.

The lawsuit traces back to one of the most significant tax-privacy breaches in modern U.S. history. Charles Littlejohn, a former contractor at the IRS, pleaded guilty in 2023 to leaking confidential tax information belonging to Trump as well as to thousands of the wealthiest Americans. Those records fueled a series of investigative reports detailing how ultra-wealthy taxpayers often paid little or nothing in federal income tax. Littlejohn received the statutory maximum sentence of five years in federal prison in January 2024, with the presiding judge describing the conduct as an attack on the country’s constitutional democracy. Trump’s lawsuit, filed in the wake of that criminal case, alleges the IRS failed in its duty to safeguard taxpayer information under Section 6103 of the Internal Revenue Code, which carries statutory damages of $1,000 per unauthorized disclosure — a figure that, multiplied across the scope of alleged leaks, could theoretically reach the billions his team is demanding.

The prospect of a settlement carries unusual constitutional weight because Trump, as the sitting president, oversees the very executive branch agency he is suing. The IRS reports to the Treasury Department, whose Secretary serves at the pleasure of the president. Legal ethics scholars have noted that a president negotiating a payout from an agency under his own administration presents a structural conflict with few modern precedents. The Justice Department, which typically defends federal agencies in civil suits, would ordinarily oversee such litigation — another branch of the government Trump controls as chief executive. Any settlement funds would ultimately be drawn from the Judgment Fund, a permanent, indefinite appropriation Congress established to pay court judgments and compromise settlements against the United States.

Observers will be watching closely to see whether any settlement figure is publicly disclosed, whether Congress initiates oversight hearings into the use of the Judgment Fund, and whether inspectors general at Treasury or Justice review the negotiation process. The case also intersects with other high-profile settlements Trump’s administration has pursued with federal entities and private companies, including broadcasters and social media platforms, since his return to office. A finalized agreement could set a precedent for how future presidents handle personal litigation against their own government during their term.

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