Trump and IRS Prepare to Settle $10 Billion Tax Returns Lawsuit

President Trump and the Internal Revenue Service are preparing to settle a $10 billion lawsuit that Trump filed in January over the agency's handling of his tax returns after a contractor disclosed details to news outlets. It could also lead the IRS to drop its ongoing audits of the president and his businesses.

News of the potential settlement comes as a federal judge has been preparing to decide whether the litigation is valid. The judge has questioned whether Trump and the IRS are actually adverse parties with opposing interests, as required for a lawsuit to proceed.

The judge has asked both sides to file briefs by May 20 on whether they are sufficiently opposing parties and has scheduled a hearing for May 27. Trump is reportedly seeking to settle the case before those deadlines. Even if the judge ultimately determines the lawsuit should not move forward, legal experts said a settlement reached beforehand would likely stand and could not be blocked by the court.

The plaintiffs, which include Trump, his sons and the Trump Organization, told the court they were considering a settlement even before the IRS responded to the lawsuit. The speed of those discussions prompted the judge to examine whether the parties are truly adverse.

The proposed $1.7 billion fund would compensate people who claim they were unfairly targeted by the prior administration. Trump would drop other claims against the government, including a reported request for $230 million related to Justice Department cases against him, in exchange for creation of the fund.

Democrats in Congress have introduced legislation to bar payments to January 6 rioters, though the bills face long odds of passage. Any settlement would likely face separate legal challenges, particularly if it involves payments from the proposed fund.

It remains unclear what the final terms will be.