Judge Voids Trump's IRS Settlement, Orders Sanctions and Refers Lawyers for Discipline

U.S. District Judge Kathleen Williams ruled on July 13, 2026 that the civil settlement between President Trump and his own Justice Department in his $10 billion lawsuit against the IRS was an improper use of the courts, and she nullified it. Trump filed the suit in January over the leak of his tax returns during his first term; DOJ then agreed to a roughly $1.8 billion "anti-weaponization" fund for people the administration described as victims of government "lawfare," together with broad protections for Trump and affiliated parties. Williams found the two sides were not genuinely adverse, as the Constitution requires in civil litigation, calling the case "an attempt to use the Court to provide some legitimacy to an agreement to confer immunity to people and entities affiliated with the President." She ordered sanctions and referred Trump attorney Alejandro Brito and senior Justice Department officials who signed the deal to state bar authorities.

The ruling goes to a basic structural question: whether a president can direct the department that represents the United States to settle his personal lawsuit against the government on terms that benefit him, and then have a court bless the result. The judge's finding that the parties were not adverse, and her referral of the government's own lawyers for possible discipline, mark an unusually direct judicial rebuke of the Justice Department's conduct.

The administration had already backed away from the fund in June amid bipartisan objections. The referrals land days before Acting Attorney General Todd Blanche's confirmation hearing; Williams directed that a copy of her order be added to disciplinary proceedings already pending against Blanche and Associate Attorney General Stanley Woodward. An appeal is possible.