A new report from The New York Times claims that President Donald Trump is preparing to drop his $10 billion lawsuit against the Internal Revenue Service. The move is part of a deal that would create a $1.7 billion fund to compensate his political allies, including people connected to the January 6 Capitol riot. The original lawsuit, which also includes Donald Trump Jr. and Eric Trump, comes from a 2019 and 2020 leak of tax returns. The documents were leaked by Charles Littlejohn, a former IRS contractor who worked for Booz Allen. Littlejohn pleaded guilty to unauthorized disclosure and was sentenced to five years in prison in 2024. The leaks led to reports that Trump paid only $750 in federal income tax in 2016 and 2017. The deal is not yet finalized, but it is the main condition for the president to drop several legal actions against the federal government. The $1.7 billion compensation fund would be managed by a commission with full authority to distribute taxpayer money to people who claim they were harmed by the weaponization of the legal system under the previous administration. The $1.7 billion fund is set to benefit nearly 1,600 January 6 defendants who Trump already pardoned This group includes nearly 1,600 people who were charged or convicted in connection with the January 6 Capitol attack. It is worth noting that Trump pardoned almost everyone charged in that event shortly after taking office on January 20, 2025. The commission overseeing the fund would have total authority over how the money is distributed among those who file claims. Beyond the IRS case, Trump has also been pursuing $230 million from the Department of Justice. These claims relate to the FBI investigation into possible ties between his 2016 campaign and Russia, as well as the 2022 search of his Mar-a-Lago home. Critics have also raised broader concerns about how Trump is spending taxpayer money on other fronts. Rather than a formal lawsuit, these claims are being processed through an administrative route, where members of the current administration will decide whether the requested amount should be paid. President Trump is expected to drop his $10 billion IRS suit in exchange for the creation of a $1.7 billion fund for victims of governmental "weaponization," sources say. https://t.co/23J3AfcbX2 pic.twitter.com/cxSQnlbLZf— ABC News (@ABC) May 15, 2026 Sources say the settlement terms are expected to prevent Trump from directly receiving payments from any of these three legal claims. However, entities connected to him are not explicitly blocked from filing additional claims in the future. This means the door remains open for Trump-linked organizations to seek further compensation through separate legal channels down the line. A spokesperson for the president’s legal team released a statement about the matter. “The IRS wrongly allowed a rogue, politically-motivated employee to leak private and confidential information about President Trump, his family, and the Trump Organization to the New York Times, ProPublica, and other left-wing news outlets, which was then illegally released to millions of people. Let me get this straight. Trump sued his own IRS for $10 billion. His own Justice Department is now considering settling that case. And one of the terms on the table is that the IRS drops all audits of Trump, his family, and his businesses PERMANENTLY. He’s using the full…— Rep. Mike Levin (@RepMikeLevin) May 14, 2026 President Trump continues to hold those who wrong America and Americans accountable,” the statement said. The Department of Justice, which is currently representing the IRS, has been involved in internal discussions about the proposed settlement. The DOJ’s involvement adds another layer of complexity to the situation, as the agency finds itself on both sides of related legal disputes involving the administration. Meanwhile, on the international stage, Lindsey Graham’s warning to China shows that the administration is navigating pressure on multiple fronts at once. The outcome of this settlement would mark a notable shift in how these high-profile legal disputes are being resolved.