How Trump's IRS settlement could block tax audits of him, his family and their businesses
14 hours ago
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The US Department of Justice has announced that this week's unprecedented settlement of President Donald Trump's lawsuit over the leaking of his tax returns blocks the IRS from reviewing tax filings that Trump, his family and his businesses made in the past.
Some lawmakers and legal experts say the department has violated federal law with its addendum to the settlement that shuts down current possible tax audits and investigations. The justice department, however, says the addendum is simply a customary waiver used in legal settlements.
In January, Trump and his two eldest sons sued the IRS [Internal Revenue Service] for $10bn over leaks of their business and personal tax returns. It was the first time a president had sued the US government.
What does the addendum do?
On Tuesday, a day after announcing the settlement with Trump, the justice department released the addendum ending any possible pending audits.
The one-page addendum states that the United States is "FOREVER BARRED AND PRECLUDED" from a long list of actions that the IRS normally carries out to determine if a person or company has paid proper taxes and to seek recourse when they have not.
That list includes filing claims, conducting examinations or similar reviews, and seeking injunctive relief related to taxes filed by Trump, his family members, and their trusts, companies or subsidiaries.
Key in the addendum is that the taxes must have been filed before 19 May, 2026. The justice department issued a statement clarifying that the addendum "is only with respect to existing audits, not future".
The IRS does not announce its investigations, and so we do not know what - if anything - it was reviewing related to the President, his family and their enterprises.
In its statement, the department describes the addendum as "customary", and also a necessary part of settling lawsuits in a way that ends them for good.
"There would be little point in settling several significant claims if either party could simply turn around and seek to initiative more adverse claims that could have been pursued previously," the department said.
As news of the addendum spread, though, lawmakers and legal experts raised alarms.
The top Democrat on the Senate Finance Committee, Ron Wyden, said in a statement it is "clearly a violation of the law that prohibits interference by executive branch officials in IRS audits".
"Democrats are going to fight every element of this self-dealing settlement, but regardless of the outcome of those efforts, future administrations and IRS leadership should consider this illegal directive completely invalid," said Wyden, who graduated from University of Oregon's law school.
Under US law, the president, vice-president and most other high-ranking members of the executive branch cannot directly or indirectly ask the IRS to terminate an investigation.
The major exception is the attorney general, and the addendum is signed by Acting Attorney General Todd Blanche. It can be argued, then, that the administration has followed the law.
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Trump and family members would be immune from pending tax audits under the addendum
Critics, such as the leaders of advocacy group Public Citizen, take the view that Trump has indirectly sought to end the audits.
Public Citizen co-presidents Robert Weissman and Lisa Gilbert said in a statement that Trump filed a "bad-faith lawsuit" and, with the settlement, "aims to escape from IRS audits".
IRS officials who receive illegal requests to terminate audits must report them or face possible criminal prosecution, and experts warn that the agency's employees could now be at legal risk.
But there are other ways that this agreement appears to diverge from US law, tax experts say.
The IRS closes individual cases by reaching agreements with the taxpayers involved or it refers them to the justice department. There is no record of the IRS taking either of those steps.
Instead, the addendum has been included in a lawsuit against the IRS, not a tax case. And it is a broad, blanket waiver blocking investigations, which is not standard and which was not reached by the IRS.
"It purports to put the President, his entities, and his family above the tax laws—even though DOJ alone doesn't have authority to offer those extraordinary protections," Tax Law Center Policy Director Brandon DeBot said in a statement where he called the entire settlement "a breathtaking abuse of the tax and legal system".
What about the rest of the settlement?
Just as the US government has never been sued by its president, it has never settled a lawsuit involving the head of the executive branch.
Before the case was settled, a federal court set a 20 May deadline for both sides to address whether a legitimate legal dispute existed, given that Trump oversees the IRS.
In exchange for the president dropping his case, the justice department agreed to establish a $1.776bn "Anti-Weaponization Fund" that would pay claims from "those who suffered under weaponisation and lawfare".
Most Democrats have called it a "slush fund" where Trump can hand out money to allies as well as rioters who breached the US Capitol on 6 January 2021.
Already, at least one claim has been filed.
Michael R Caputo, was a Trump campaign adviser and later served in the first Trump administration, is seeking $2.7m, saying in a letter posted on X that "the machinery of government was clearly weaponized against my family" during the investigation into possible Russian involvement in the 2016 election.
In a statement to the BBC, he said his family was "profoundly grateful" that Trump "will not let this political weaponization stand."
At the same time, resistance is also already mounting.
Two police officers who were at the capitol on 6 January 2021 filed a lawsuit on Wednesday arguing the fund is illegal because "no statute authorizes its creation, the settlement on which it is premised is a corrupt sham, and its design violates the Constitution and federal law".
They also argued it could endanger their safety by providing funds to rioters who regularly threaten their lives and could lead to the funding of paramilitaries.