Trump tax returns get protection from IRS under fund settlement

Federal tax returns filed by President Donald Trump, family members, the Trump Organization, and related trusts and affiliates before this week are protected from potential Internal Revenue Service enforcement actions under a controversial $1.8 billion settlement with the Justice Department, a new document posted Tuesday shows.

The Justice Department, as part of the settlement, barred the federal government from prosecuting or pursuing “any and all claims” that could have been made by the IRS, which included “tax returns filed before” the effective date of the settlement, according to the document, signed by Acting Attorney General Todd Blanche.

The protection extends to Trump, his family members, the Trump Organization and “parties including trusts, parent, sister or related companies, affiliates, and subsidiaries.” It covers any pending tax audits of Trump and the others referred to in the addendum that the IRS would have been conducting at the time of the settlement.

Blanche is Trump’s former criminal defense lawyer.

The document, first reported by Politico, is an addendum to the conditions of the settlement first revealed Monday by the Justice Department.

The Justice Department did not immediately respond to a request for comment on the addendum.

Sen. Ron Wyden, an Oregon Democrat, said the provision violates federal law “that prohibits interference by executive branch officials in IRS audits.”

“Democrats are going to fight every element of this self-dealing settlement, but regardless of the outcome of those efforts, future administrations and IRS leadership should consider this illegal directive completely invalid,” said Wyden, the ranking member of the Senate Finance Committee. “The Trump family is not above the law, no matter what Trump or his personal attorney say.” 

The federal statute that Wyden referred to states, “It shall be unlawful for any applicable person to request, directly or indirectly, any officer or employee of the Internal Revenue Service to conduct or terminate an audit or other investigation of any particular taxpayer with respect to the tax liability of such taxpayer.”

The term “applicable person” refers to “the President, the Vice President, any employee of the executive office of the President, and any employee of the executive office of the Vice President; and any individual (other than the Attorney General of the United States) serving in” a presidential cabinet.

The settlement resolved a $10 billion lawsuit filed in Miami federal court by Trump, Donald Trump Jr., Eric Trump, and their company against the IRS over the leak of Trump-related tax filings by an IRS employee.

The Trumps on Monday dropped that suit in exchange for the Justice Department agreeing to finance a so-called Anti-Weaponization Fund with $1.8 billion. The fund is set up to be used to compensate purported victims of law enforcement actions by the department under the Biden administration. The Trump administration has referred to such action as “lawfare.”

Democratic members of Congress have called the settlement a “slush fund” for allies of Trump, including defendants convicted for their roles in the Jan. 6, 2021, riot, when Trump supporters stormed the U.S. Capitol and disrupted the confirmation of the electoral victory of former President Joe Biden.

Blanche, during testimony to a Senate appropriations subcommittee on Tuesday morning, would not rule out allowing people convicted of assaulting police officers during the Jan. 6 riot to get compensation from the fund.

Trump agreed as part of the settlement on Monday to withdraw two administrative claims, “including for damages resulting from the unlawful raid of Mar-a-Lago and the Russia-collusion hoax,” the Justice Department said in a statement.

A spokeswoman for the Justice Department, when asked why the addendum related to Trump-related tax returns was included in the settlement, and why it was not originally disclosed, told CNBC in an email, “As is customary in settlements, both sides have executed waivers of a variety of claims that were or could have been brought.”

“There would be little point in settling several significant claims if either party could simply turn around and seek to [initiate] more adverse claims that could have been pursued previously,” the spokeswoman said. “The agreement allows for subsequent ‘waivers’ to get incorporated by reference—Part IV.A. Plaintiffs themselves executed a broad waiver, as well.”

“This is only with respect to existing [IRS] audits, not future,” she said.