President Donald Trump is flipping what had been a doomed lawsuit against the IRS into a free pass from the agency.

Astonishment is rippling through tax world at a settlement that goes far beyond the specifics of Trump’s suit — he sought billions of dollars as compensation for some of his tax records being leaked to the news media — to instead provide him, his family and his businesses sweeping protections against government scrutiny of his taxes.

Under the plan signed off on by Acting Attorney General Todd Blanche, the IRS would be “FOREVER BARRED and PRECLUDED” from all audits of “any matters currently pending.” What’s more, some worry it may mean Trump will never again be audited by the agency, pointing to vague language in the settlement barring examinations that stem from “lawfare.”

“I’ve never seen anything like this,” said Steve Rosenthal, a former longtime senior fellow at the Tax Policy Center, a nonpartisan think tank.

The one-page document the Justice Department released Tuesday represents the most audacious step yet in Trump’s ongoing efforts to shield his taxes from scrutiny. He’s long bucked a decades-old tradition of presidents voluntarily releasing their filings, but this would prevent the IRS from examining them as well — special treatment that the IRS does not provide any other American. It would also flout the agency’s longstanding policy of automatically auditing every president.

It also promises a massive fight with Democrats if they vault back into power in this year’s midterm elections, with the agreement rocketing up lawmakers’ oversight to-do list.

“Democrats are going to fight every element of this,” said Sen. Ron Wyden (Ore.), the ranking Democrat on the tax-writing Finance committee.

It’s also likely to become an ongoing headache for Republicans who have had little to say publicly about the plan.

And it’s the result of a lawsuit that was unlikely to be successful in the first place.

Result of ‘phony’ litigation

Trump had sued the IRS in January for $10 billion over the leak of his tax information by an agency contractor, Charles Littlejohn, to the New York Times. Littlejohn, who pleaded guilty to the leak in 2023, told a court he released the information because he was incensed by Trump’s refusal to release his returns.

The administration has cast the settlement, which would also set up a nearly $1.8 billion fund to compensate those allegedly harassed by the Biden administration, as a response to the “weaponization” of law enforcement by the previous president.

But the leak actually happened in 2019, during Trump’s first term in office, and Littlejohn was prosecuted by Biden’s Justice Department. The Times used the information to produce a blockbuster report in September 2020 showing Trump frequently paid little or nothing in taxes. Littlejohn also leaked tax records of numerous other prominent wealthy people, including Elon Musk, Jeff Bezos and Michael Bloomberg, to ProPublica.

Experts noted Trump’s suit over the leak was never likely to succeed, in part because he missed the two-year statute of limitations to file a civil suit over the unauthorized disclosure of tax information. And there were major questions about whether there was a legitimate dispute for a court to referee since Trump was effectively both plaintiff and defendant. Trump pulled the suit in favor of the settlement shortly before a judge could weigh in.

“This all arises out of a phony piece of litigation,” said Rosenthal.

When Ken Griffin, a hedge fund billionaire whose tax data was also leaked, sued the IRS, he settled for an apology — something Trump will also receive under the settlement.

“[Griffin] should have asked for more,” joked one former longtime IRS lawyer, granted anonymity to speak candidly. “He needs a better attorney.”

In that case, the IRS argued it wasn’t liable for the leak because Littlejohn was a contractor, and not a direct employee.

The Treasury Department’s top lawyer, Brian Morrissey, quit Monday after the settlement fund was announced.

Tax pros described the agreement as breathtaking in scope. It nixes any audits, even of returns filed years before Trump became president. And it extends those protections to Trump’s sister, parent, “family or others filing jointly” as well as trusts, related companies, affiliates or subsidiaries.

It rules out examinations of any currently pending matters including returns filed before the agreement’s May 19 date. Democrats worry that an additional clause banning examinations arising from “lawfare and/or weaponization” could be interpreted to preclude any future audits as well and allow Trump to simply ignore the IRS from now on.

“It’s hard to see how he ever meaningfully participates in our taxation system again,” said Rep. Richard Neal (Mass.), the ranking Democrat on the Ways and Means committee.

Back to the tax-return fight

The IRS is not required by law to audit the presidents but, to avoid any hint of favoritism, it has a long-standing internal policy dating to 1977, and enshrined in its employee manual, of automatically vetting every president’s and vice president’s returns. Trump has complained for years that he has been under audit.

During Trump’s first term, Democrats went to the Supreme Court to force the release of his filings, tapping a special power given to the heads of Congress’s tax committees allowing them to examine anyone’s returns. Neal argued they needed to know how well the IRS was vetting his filings. How the agency goes about auditing the president is highly secretive.

Now lawmakers are likely to experience déjà vu.

Trump’s taxes are likely to once again be a major focus for Democrats, though it’s not clear what, if anything, they can do about the agreement.

There were immediate, and unanswered, questions about whether the administration has the power to make such an agreement, and who might have the power to challenge it in court. Some wonder if the settlement could be legally vulnerable because one of its signatories, IRS Chief Executive Officer Frank Bisignano, is serving in a role created by the administration that bypassed Senate confirmation.

Another question: Did the administration break a 1998 law barring the White House from interfering in tax audits?

Neal and Rep. Jamie Raskin (D-Md.), the ranking member of the House Judiciary Committee, fired off a letter to the administration Wednesday demanding it preserve internal documents related to the agreement and Trump’s suit against the IRS.

Some tax law experts wonder too if Democrats, should they regain power, will face pressure to once again force the public release of Trump’s returns.

“I think there would be a lot of pressure to find out what Trump is hiding here, and at least audit him in the court of public opinion,” said Rosenthal.