Donald Trump Tax Immunity Scandal: Judge Throws Out $1.8bn Deal As Lawyer Faces Discipline

Donald Trump's bid to secure tax audit immunity through a controversial IRS settlement has been thrown out by a federal judge, who also referred one of his lawyers for possible disciplinary action. The ruling centres on a $1.8bn (£1.3bn) arrangement that the court said was never a proper legal dispute.

The decision intensifies scrutiny of a deal that had already triggered criticism over whether Trump, who as president oversees the IRS, was effectively on both sides of the case. It also leaves the settlement terms in jeopardy and could reopen the path for future tax audits.

Federal Judge Strikes Down $1.8bn Trump IRS Deal

US District Judge Kathleen Williams said the lawsuit had been filed for an improper purpose, according to the court ruling. She ruled that the case was not a genuine attempt to resolve a factual or legal dispute between adversarial parties.

Williams wrote that the lawsuit 'was never about a party seeking judicial resolution of a legal issue or a factual dispute' between Trump and the IRS. She also said the court was being used to 'provide some legitimacy' to an agreement that would confer immunity on people and entities affiliated with the president.

The case began after Trump and co-plaintiffs sued over the leak of his tax information, then later agreed to a settlement in May that included tax protections and the creation of a $1.8bn (£1.3bn) fund tied to so-called government weaponisation. Officials abandoned the fund after a public backlash, Reuters reported.

The BBC reported that the judge viewed the lawsuit as far removed from a normal clash between two opposing sides because Trump oversaw the IRS as president. That point went to the heart of her finding that the matter had been presented to the court in a way that was not legally proper.

Trump Lawyer Referred for Disciplinary Review Over 'Improper' Filing

The judge referred Trump lawyer Alejandro Brito, along with senior Justice Department officials who signed off on the agreement, to state bar authorities for investigation, Reuters reported. The judge's order directed that their conduct be examined over potential ethics violations.

Reuters said the order was sent to disciplinary authorities in New York, where Todd Blanche has his law licence, and Washington, DC, where senior Justice Department official Stanley Woodward is barred. Bloomberg Law reported that the ruling also bars Trump or the government from citing the settlement in future regulatory or judicial proceedings.

The BBC said the decision prevents those involved in the case, including Trump and his sons, from referring to the settlement or relying on its terms in future court or regulatory proceedings. That means the Internal Revenue Service could still move ahead with future audits of Trump's tax claims.

The order also wipes away the legal force of the settlement itself, at least for the purposes of the IRS case. Reuters reported that the judge's language suggested the agreement had been used to try to end-run ordinary legal scrutiny.

What the Ruling Means for Trump's Future Tax Audits

The case drew extra attention after former IRS and Justice Department officials urged the court to scrutinise the deal, describing it as 'breathtakingly improper', according to ABC News. Former judges separately argued that the agreement could amount to a fraud on the court. Reuters reported that the agreement would have let the administration set up an anti-weaponisation fund with taxpayer money, adding another layer of political sensitivity.

For Trump, the immediate effect is that the settlement cannot be used to block reference to the deal in later proceedings, weakening any claim that the IRS is barred from pursuing past tax matters. Reuters said the judge's order may also shape any appeal or renewed attempt to revive the agreement.

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