A federal judge on Monday voided President Donald Trump’s settlement with the IRS, ruling that the agreement represented an unlawful effort to use the courts for personal and political gain.

The decision nullifies a deal that included a $1.776 billion fund and broad immunity protections for Trump and his associates.

Judge Kathleen M. Williams declared the settlement invalid, stating that Trump and the IRS were not genuine adversaries in the underlying lawsuit.

She ordered sanctions against the parties and referred Trump’s attorney to the Florida Bar for potential disciplinary action.

The Settlement

The agreement stemmed from a January 2026 lawsuit filed by Trump, his sons Donald Jr. and Eric, and the Trump Organization against the IRS. The suit sought $10 billion, alleging the agency failed to protect Trump’s tax returns from disclosure.

Before the case advanced on its merits, the parties reached a settlement in May 2026. The deal created a so-called “anti-weaponization fund” of $1.776 billion to compensate individuals claiming government misuse against them.

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It also granted sweeping immunity to Trump, his family members, and related entities from certain federal prosecutions or civil actions.

Williams had initially approved the dismissal but later reopened the matter after 35 former federal judges urged her to investigate, citing concerns over collusion and potential fraud on the court.

Judge’s Key Findings

In her ruling Monday, Williams determined the lawsuit lacked a true case or controversy. She wrote that Trump improperly used the litigation “as a means of conferring legitimacy upon a course of action that they were unwilling to subject to judicial review.”

The judge concluded that the plaintiffs acted in bad faith. She barred all parties from referencing the settlement agreement or applying its provisions in any official proceedings.

“The settlement 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 stated.

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Sanctions and Referrals

Williams imposed both monetary and non-monetary sanctions. The monetary penalties will go to the former federal judges who moved to reopen the case. She also referred Trump’s attorney Alejandro Brito to the Florida Bar.

Copies of the order were directed to disciplinary proceedings already underway against Acting Attorney General Todd Blanche and Associate Attorney General Stanley Woodward.

Trump’s personal legal team did not comment directly on the ruling. They instead criticized the IRS for its handling of the president’s tax returns and said Trump “continues to hold those who wrong America and Americans accountable.”

Earlier this year, the Justice Department, representing the IRS, had agreed to the deal. Criticism came from both Democrats and some Republicans, who questioned the fund’s creation and the immunity provisions.

By early June, the administration had already stepped back from parts of the fund while maintaining audit protections for the Trump family.

The lawsuit originated from the 2022 disclosure of Trump’s tax returns by contractor Charles Littlejohn, who later pleaded guilty.

Trump filed suit exactly two years after learning of the leak, raising questions about the statute of limitations and the IRS’s liability.