Trump appeals judge's rebuke of $1.776B IRS settlement
President Trump has appealed a federal judge's order that found his $10 billion IRS lawsuit was filed in bad faith to secure a $1.776 billion taxpayer fund and exemptions from tax audits for his businesses.
President Donald Trump and the Trump Organization have appealed a federal judge’s scathing order that found their $10 billion lawsuit against the IRS was filed in bad faith to extract a favorable settlement. The Friday notice of appeal in Miami targets Judge Kathleen Williams' July 13 ruling and moves the case to the U.S. Court of Appeals for the 11th Circuit. Williams sanctioned two attorneys, barring Daniel Epstein from her court for a year and referring Alejandro Brito to the Florida Bar for potential discipline.
The underlying agreement at the center of the dispute carries significant implications for corporate governance and the equitable application of tax law. In exchange for dropping the lawsuit—triggered years ago by an ex-IRS employee leaking Trump's tax returns—the Department of Justice agreed to create a $1.776 billion fund for people claiming to be victims of government "lawfare." Crucially, the settlement also included a provision shielding the past federal tax returns of Trump, his family, and related business entities from IRS enforcement actions.
Williams concluded this litigation was merely a conduit to provide judicial cover for an arrangement that lacked a legal or factual basis. She determined the plaintiffs improperly leveraged the courts to secure direct access to taxpayer funds and sweeping audit exemptions. Although her order did not explicitly void the private agreement, she prohibited Trump and his co-plaintiffs from using the document as evidence that a legitimate settlement had been reached.
The fallout from the ruling has spilled into the executive branch's personnel confirmation process. Senator Thom Tillis and several other Republican senators have placed a hold on Todd Blanche, Trump’s nominee for attorney general. The lawmakers are demanding written proof that the $1.776 billion fund is permanently defunct, fearing it could be revived if Blanche takes office.
These concerns were amplified by Blanche's prior refusal to rule out using the fund to compensate individuals charged with assaulting police officers during the January 6, 2021, Capitol riot. Trump further fueled the uncertainty on Friday by publicly defending the fund on Truth Social, writing that victims of government abuse should be repaid for their ruined lives. He reiterated this frustration at a Camp David Cabinet meeting, stating, "The fund is dead, but, you know, I wish it weren't."
The Justice Department has firmly rejected the judge's assertion of bad faith. A spokesperson insisted there was no collusion and accused Williams of disregarding decades of precedent. Following the appeal filing, a spokesman for Trump's legal team doubled down on their original justification for the suit, stating, "President Trump continues to hold those who wrong America and Americans accountable."
