Judge blocks Trump tax settlement, cites improper purpose and possible sanctions

U.S. District Judge Kathleen Williams ruled that Donald Trump used his IRS lawsuit for an improper purpose, finding the case was designed to create the appearance of judicial legitimacy for a settlement tied to a Justice Department he effectively controlled. She also referred Trump lawyer Alejandro Brito to the Florida Bar and sent her order to the State Bar of New York and the District of Columbia Bar for possible discipline.

The decision did not explicitly end the underlying case, Trump v. IRS in the Southern District of Florida, but it undercut the settlement that had drawn bipartisan outrage and multiple legal challenges. That May arrangement had set up a $1.8 billion anti-weaponization, or lawfare, fund and included language shielding Trump, his family members and related business entities from certain tax audits and enforcement actions tied to returns filed before the deal.

Williams barred the parties from using the purported settlement as evidence in any judicial or other proceedings, a move that effectively stripped the agreement of legal force as a shield in the tax dispute. Trump’s lawsuit had sought $10 billion over the leak of his tax information by a government contractor, centered on 2019 and 2020 leaks that his team called politically motivated and illegal.

The judge’s order came after 35 former federal judges urged her to reopen the matter and examine whether Trump’s lawyers knew from the start that the lawsuit lacked merit and was filed only to support a settlement the administration wanted to announce. Former IRS and Justice Department tax officials joined watchdog groups Common Cause and the Project on Government Oversight, arguing that the arrangement exceeded the Justice Department’s authority, violated the Domestic Emoluments Clause and Internal Revenue Code Section 7217, and would create two separate tax codes, one for Trump and his circle and another for everyone else.

Acting Attorney General Todd Blanche issued a separate immunity order the day after the settlement, extending sweeping civil and criminal immunity to Trump, his family and affiliated businesses across tax and non-tax matters. Trump later nominated Blanche to be attorney general. Stanley Woodward’s bar membership became relevant as Williams sent copies of her ruling to disciplinary authorities in New York and Washington.

People pardoned for their roles in the January 6, 2021 attack on the U.S. Capitol viewed the nearly $1.8 billion fund as a possible source of payouts, while police officers who defended the Capitol and former Justice Department prosecutors who pursued January 6 defendants filed suit to block it.