Federal courts are continuing to examine the legality of a controversial settlement between President Donald Trump and the Internal Revenue Service (IRS) despite the Department of Justice’s announcement that it has permanently abandoned a proposed $1.776 billion “Anti-Weaponization Fund” that was central to the agreement.
Acting Attorney General Todd Blanche told lawmakers Tuesday that the DOJ would not move forward with the fund under any circumstances.
“We are not moving forward with the fund, period,” Blanche told the House Appropriations Subcommittee on Commerce, Justice, Science and Related Agencies.
However, Blanche also confirmed that a separate addendum attached to the settlement remains in force, preserving provisions that critics argue raise significant constitutional and separation-of-powers concerns.
Settlement Stemmed From Trump Tax Return Leak Lawsuit
The dispute originated from a $10 billion lawsuit filed by Trump against the IRS and the US Treasury Department over the unauthorized disclosure of his tax returns by former IRS contractor Charles Littlejohn.
The case appeared resolved on May 18 through a settlement agreement that included the creation of the Anti-Weaponization Fund.
A one-page addendum signed by Blanche the following day stated that the federal government would be permanently barred from pursuing certain claims related to the plaintiffs’ tax information and prohibited future prosecutions involving conduct characterized as “Lawfare” or “Weaponization.”
The terms did not define either phrase.
Rep. Rosa DeLauro criticized the arrangement during Tuesday’s hearing, alleging that it effectively granted financial and legal protections to Trump’s family. Blanche rejected that characterization.
Constitutional Challenges Remain Active
The abandonment of the fund has not halted ongoing litigation.
Former federal prosecutor Andrew Floyd and California professor Jonathan Caravello filed suit in the US District Court for the Eastern District of Virginia, arguing that the fund violated the First Amendment, the Appropriations Clause, and equal protection principles.
The plaintiffs also contend that eligibility criteria tied to alleged targeting by Democratic administrations unlawfully excluded others from potential benefits.
On May 29, US District Judge Leonie Brinkema issued an order preventing the DOJ from taking further action related to the creation or operation of the fund pending a June 12 hearing.
“The court seeks to ensure that no funds are irreversibly disbursed,” Brinkema wrote.
Separate Lawsuit Raises Public Safety Concerns
A second challenge is pending in the US District Court for the District of Columbia.
Former US Capitol Police officers Harry Dunn and Daniel Hodges argue that the proposed fund could have provided financial benefits to individuals charged in connection with the January 6, 2021, attack on the US Capitol.
Their lawsuit contends that such payments would threaten public confidence in law enforcement and potentially endanger officers who responded during the riot.
Retired Federal Judges Seek Reopening of Original Case
Meanwhile, scrutiny has intensified in the court where Trump’s original lawsuit was filed.
US District Judge Kathleen Williams had ordered briefing on whether Trump’s lawsuit remained justiciable given that he effectively controlled both sides of the dispute after returning to office.
Two days before a court-imposed deadline, Trump’s legal team voluntarily dismissed the lawsuit without disclosing the existence of the settlement agreement.
The DOJ publicly announced the fund on the same day.
On May 27, a coalition of 35 retired federal judges filed a motion seeking to reopen the case, arguing that the circumstances surrounding the dismissal and settlement warranted further investigation.
The group includes former federal appellate judge J. Michael Luttig and former district judges Nancy Gertner and Shira Scheindlin.
“The unprecedentedly fraudulent scheme here more than warrants voiding the dismissal,” the filing argued.
Judge Williams has ordered Trump’s attorneys to respond by June 12 and stated that the court possesses authority to investigate potential misconduct affecting judicial proceedings.
Questions Remain Despite Fund’s Termination
Legal observers note that the DOJ’s decision to abandon the Anti-Weaponization Fund may not resolve broader concerns surrounding the settlement.
Critics argue that provisions limiting future government action relating to matters labeled as “Lawfare” or “Weaponization” remain unusually broad and potentially unprecedented in scope.
Former judges Gertner and Luttig said this week that terminating the fund does not eliminate the legal questions raised by the settlement itself.
They urged the court to continue examining the agreement, arguing that the issues extend beyond the fund and touch on judicial integrity, executive authority, and the limits of settlement power.
With hearings scheduled in multiple federal courts on June 12, the legal battle over the Trump-IRS settlement appears far from over, even as one of its most controversial components has been withdrawn.
