Trump seeks resolution to $10 billion IRS lawsuit, drawing ethics concerns

President Donald Trump is seeking a "resolution" to a $10 billion lawsuit he filed against the Internal Revenue Service and the US Treasury Department, prompting legal and ethical concerns among watchdog groups and experts.

Critics say any settlement would involve Trump negotiating with parts of the executive branch and the Justice Department that fall under his authority, raising questions about a potential conflict of interest, reports Al Jazeera.

Legal advocacy group Democracy Forward said in an amicus brief: "This case is extraordinary because the President controls both sides of the litigation, which raises the prospect of collusive litigation tactics."

The group added: "To treat this case like business as usual would threaten the integrity of the justice system and the important taxpayer and privacy protections at the heart of this case."

The lawsuit stems from a 2017 incident in which Charles "Chaz" Littlejohn, a contractor with Booz Allen Hamilton working with the IRS, stole and disclosed Trump's tax returns. The records were later published by The New York Times and ProPublica, showing Trump paid no income taxes in 10 of the 15 years prior to the reports, often reporting more losses than gains. Littlejohn was sentenced in 2024 to five years in prison.

Trump filed the lawsuit in January 2026, alleging: "Defendants have caused Plaintiffs reputational and financial harm, public embarrassment, unfairly tarnished their business reputations, portrayed them in a false light, and negatively affected President Trump and the other Plaintiffs' public standing."

His legal team has since asked the court to pause proceedings for 90 days to allow time for a potential settlement, saying in a filing: "This limited pause will neither prejudice the parties nor delay ultimate resolution... Rather, the extension will promote judicial economy and allow the Parties to explore avenues that could narrow or resolve the issues efficiently."

Legal experts say the case faces several hurdles that could lead to dismissal. They note that the damages figure is based on media references to the leaked returns, whereas legal standards typically calculate damages based on the number of unauthorised disclosures by government employees. They also point out that Littlejohn was an outside contractor rather than a direct government employee, which could complicate liability claims.

Questions have also been raised about the statute of limitations. Trump's lawyers argue he did not discover the violations until 2024, while critics say he had publicly stated as early as 2020 that his tax information had been "illegally obtained".

Some experts have also cited potential constitutional concerns tied to the Emoluments Clause. Although Trump has suggested any settlement funds would be donated to charity, he said: "Nobody would care because it's going to go to numerous very good charities."

Separately, Trump is seeking about $230 million in additional damages related to federal investigations he has described as unfair, including the Federal Bureau of Investigation probe into Russian interference and a search of his Mar-a-Lago estate.