States take aim at Trump’s IRS settlement

MIAMI (CN) — Twenty-three Democratic state attorneys general asked a federal judge Tuesday to probe “egregious misconduct” by President Donald Trump over his $10 billion lawsuit against the IRS and U.S. Department of the Treasury.

In an amicus brief filed in Miami federal court, the state attorneys general argue Trump and Attorney General Todd Blanche conspired to use the justice system to commandeer a favorable settlement for the president and his family.

“The parties’ conduct makes clear that they manufactured a lawsuit for the sole purpose of executing a collusive settlement to benefit the Trump family and enrich President Donald Trump’s political allies, in an end-run around constitutional limits on executive power,” the state attorneys general wrote. “The president sued agencies whose leadership serve at his pleasure so that the Justice Department would be able to use its settlement authority to provide him and his allies with an unlawful and unethical windfall.”

Trump sued the IRS in January, accusing the agency of not properly safeguarding his financial information and allowing a former contractor to access his tax returns and disseminate them to “leftist media outlets” like The New York Times and ProPublica.

The president’s sons, Donald Trump Jr. and Eric Trump, joined the lawsuit along with the Trump Organization. Trump sued in his personal capacity and not in his official capacity as president, but early in the case U.S. District Judge Kathleen Williams questioned the appropriateness of a president suing an agency he controls.

Trump dropped the suit last month in exchange for immunity from past tax audits and the creation of a nearly $1.8 billion “anti-weaponization fund,” meant to help people wrongfully targeted by the government. The fund received immediate bipartisan pushback from those concerned the fund could compensate criminals convicted in the Jan. 6, 2021, riot at the Capitol. The Justice Department subsequently scrapped plans for the fund.

Williams, a Barack Obama appointee, reopened the case to scrutinize the settlement agreement after a group of 35 former federal judges described the deal as “fraud upon the court.”

The state attorneys general echoed that sentiment on Tuesday.

“The conduct of the parties during this litigation makes clear that the court was correct to raise jurisdictional questions, and the ‘settlement’ that purports to resolve the case is further evidence that the litigation has been colored by fraud from the beginning,” the group wrote. “That ‘settlement’ is not a reasonable resolution of the claims asserted here. Instead, it is a mechanism to enrich President Trump’s political allies and attempt to immunize the Trump family from legitimate law enforcement, all at the expense of American taxpayers.”

Trump’s legal team did not immediately respond to a request for the comment, but in a filing earlier this month, his lawyers argued the Justice Department has broad authority over IRS settlements and the court cannot reverse the deal in question.

The Treasury Department and the IRS did not immediately respond to a request for comment.

Trump’s lawsuit came after Charles Littlejohn, working as a consultant for the IRS, obtained the tax returns of some of the wealthiest Americans, including Elon Musk and Florida Senator Rick Scott, and leaked them to the press. The subsequent reports in the The New York Times and ProPublica found the country’s richest people paid little to no income tax.

In 2023, the Justice Department charged Littlejohn with unauthorized disclosure of tax returns. Prosecutors claimed he intentionally applied for a job with the IRS to release Trump’s tax returns because the president was “a threat to democracy.”

Littlejohn was convicted in January 2024 and sentenced to five years in prison. He is currently appealing his sentence.

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