When Donald Trump seemingly abandoned his outlandish $10 billion lawsuit against the Internal Revenue Service in May, the president probably thought the litigation had run its course, and the case was effectively over. It’s increasingly obvious, however, that the dispute is very much alive.
Indeed, as this week came to an end, Trump’s lawyers filed an unexpected appeal of a recent court ruling that blocked him from using his so-called “settlement” with his own administration.
The basic details of Trump’s IRS lawsuit are likely familiar: During his first term, a contractor leaked his tax returns, and six years later, the president has filed suit against the tax agency, saying he’s entitled to $10 billion in taxpayer funds.
In May, he voluntarily withdrew his own litigation, and soon afterward, the administration unveiled his reward for having done so: a compensation fund worth $1.766 billion, which was quickly condemned by members of both parties as a “slush fund” that would be used to benefit the White House’s political allies.
That bipartisan pushback forced the president to seemingly back off his plans for the fund.
One of the underlying legal problems, however, persisted: The federal judge in the case, responding to a request filed by 35 former federal judges calling on her to reopen the case, raised serious concerns in late May, ordering Trump and his lawyers to address allegations that he committed fraud on the court.
In a four-page order, Williams said she intended to investigate “grievous allegations” that the hasty deal to resolve the dubious case was “premised on deception.” (This same judge, as recently as late April, expressed skepticism about the propriety of the case, since it appeared the president was, for all intents and purposes, both the plaintiff and the defendant.)
Earlier this month, she apparently did not like what she discovered, concluding that Trump and his lawyers acted “in bad faith” and filed a civil suit “for an improper purpose.”
“The nature of the suit itself and the conduct of the Parties and counsel from its filing make plain that this was an attempt to use the Court to provide some legitimacy to an agreement to confer immunity to people and entities affiliated with the President and to earmark billions of dollars from American taxpayers to redress grievances not defined in the law,” Williams wrote.
At the same time, the judge also issued sanctions and disciplinary referrals related to Trump’s lawyer, and included a demand to send a copy of the order to both the New York and District of Columbia bar associations, of which acting Attorney General Todd Blanche and Stanley Woodward are members.
Perhaps most importantly, Williams’ order also voided the provisions of the so-called “settlement agreement” as evidence of a valid settlement. (The judge even prohibited the parties from referring to it as a “settlement.”)
Time will tell what, if anything, comes of the appeal, but it’s an open question why Trump and his allies would bother to appeal the court order. If the slush fund is actually dead, what difference does it make whether the president’s deal from May is a valid agreement?
UPDATE (July 31, 2026, 4:42 p.m. ET): A spokesperson for Trump’s personal legal team acknowledged the appeal in a written statement, accusing the IRS of having “allowed” an employee to leak the tax returns that the president hoped to keep secret. “President Trump continues to hold those who wrong America and Americans accountable,” the statement concluded.
Reporting from MS NOW’s Lisa Rubin contributed to this report.
This post updates our related earlier coverage.
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