Trump's $10 billion IRS suit hits snag with skeptical judge

Erik Larson, Bloomberg News on Apr 24, 2026

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A judge questioned whether President Donald Trump’s $10 billion lawsuit against the Internal Revenue Service and the U.S. Treasury can proceed with Trump effectively in control of both sides of the litigation.

U.S. District Judge Kathleen Williams on Friday ordered the Justice Department, which represents the agencies, to explain in writing by May 20 how she can oversee the case when the Constitution requires legitimate adversarial disputes for courts to have jurisdiction.

The order comes days after Trump and the federal government told the judge in a court filing that they were in settlement talks, with taxpayers poised to cover any payout to the billionaire president. Trump has previously mused that his lawsuit would essentially require him to settle with himself.

“Although President Trump avers that he is bringing this lawsuit in his personal capacity, he is the sitting president and his named adversaries are entities whose decisions are subject to his direction,” the judge said. “Indeed, President Trump’s own remarks about this matter acknowledge the unique dynamic of this litigation.”

Trump sued in January, alleging the government must pay him damages over a 2020 leak of his tax records to the media. The Justice Department has argued in similar cases over the same leak that the government wasn’t liable.

Williams said it is “unclear to this court whether the parties are sufficiently adverse to each other” to establish her jurisdiction.

Williams delayed for now a looming deadline for the government to formally respond to Trump’s suit. Trump has asked for a 90-day delay to allow for the negotiations but the judge did not rule on that request, focusing instead on the potential conflict of interest. The judge also set a hearing on the matter for May 27.

“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,” said a spokesman for Trump’s Legal Team. “President Trump continues to hold those who wrong America and Americans accountable.”

Trump’s lawsuit revisits a clash that took center stage weeks before the 2020 election, when The New York Times published an explosive report on his tax records that was based on leaked IRS data.

Former IRS contractor Charles Littlejohn pleaded guilty in 2023 to stealing Trump’s tax data and leaking it to the Times. He also stole tax records for thousands of other wealthy Americans, including Ken Griffin, Elon Musk and Jeff Bezos, which he leaked to ProPublica.

The IRS and Treasury “had a duty to safeguard and protect plaintiffs’ confidential tax returns and related tax return information from such unauthorized inspection and public disclosure,” Trump’s lawyer, Alejandro Brito, said in the suit.

The judge said in a footnote of her order that Trump has issued multiple executive orders aimed at tightening his control of executive branch employees, including barring them from advancing any interpretation of the law that “contravenes” his own interpretation.

“One such employee of the executive branch, the Attorney General, has a statutory obligation to defend the IRS when it is hailed into court, but then is ostensibly required by executive mandate to adhere to the president’s opinion on a matter of law in such a case,” Williams wrote in the footnote. “This raises questions over whether the parties here are truly antagonistic to each other.”

The judge’s apparent concern echoes the conclusions of outside groups that have filed memorandums in the case, blasting what they say is a glaring conflict of interest in the suit.

A group of former IRS officials and tax experts said in an earlier filing that Trump’s “collusive litigation threatens the integrity of the judicial process by risking the court’s entanglement in an illegitimate proceeding.”

The outside groups have urged the judge to put the case on hold until Trump is out of office, though Williams has yet to respond to that suggestion.

The Justice Department did not immediately respond to a message seeking comment. The agency has previously said that it will follow the guidance of “career ethics officials.”