The Justice Department is scrapping plans for a $1.8 billion fund designed to compensate Donald Trump's political allies, acting attorney general Todd Blanche announced Tuesday, but the administration is keeping a far more controversial piece of the deal: a blanket prohibition on IRS audits of Trump, his family and related business entities.
Blanche told the House appropriations committee that the weaponization fund is dead. "We are not moving forward with the fund, period," he said, though he defended the underlying rationale that Trump has long promoted about government persecution of his supporters.
The reversal came after mounting bipartisan pressure and legal challenges to what critics called a slush fund with virtually no oversight. Both Democrats and Republicans in Congress objected strenuously to the prospect of nearly $1.8 billion flowing to the president's allies with minimal restrictions or accountability.
Yet Blanche made clear that the tax immunity agreement would stand. The Justice Department would continue granting Trump and his family members blanket protection from IRS audits on tax matters, he said. He did not explain why the administration was ditching the fund while maintaining the audit shield, which experts say is without modern precedent.
Former IRS Commissioner Daniel Werfel told NPR he is unaware of any similar arrangement in the agency's history. "Whether you are the president or Joe the Plumber, people expect the same tax rules and enforcement framework to apply to everybody," Werfel said.
Legal scholars have raised constitutional red flags about the audit protection. Some argue it may violate the emoluments clause, which prohibits the president from receiving financial benefits tied to his office. Shielding Trump from potential tax liability could constitute such a benefit.
The fund faced mounting legal obstacles. A federal judge in Virginia temporarily blocked the administration from implementing it while legal motions remained pending. Meanwhile, a federal judge in Florida overseeing the underlying lawsuit took the extraordinary step of reopening the case to investigate whether there was misconduct in how the fund and audit agreement were negotiated.
The deals emerged from a $10 billion lawsuit Trump filed against the IRS, claiming his tax returns were improperly leaked. The settlement included both the compensation fund and the audit immunity provision.
Even with the fund scrapped, potential beneficiaries may have another avenue. Administrative claims for damages can still be filed against the government, and the Justice Department retains broad discretion in settling such cases. January 6 defendants and other Trump allies could theoretically receive compensation through that channel. Enrique Tarrio, the Proud Boys leader convicted of seditious conspiracy, suggested to PBS NewsHour that this path remains open for Capitol riot defendants seeking redress.
Author James Rodriguez: "Killing the slush fund was politically necessary, but keeping the tax shield exposes the real priorities here, and the legal challenges are far from over."
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