By Tom Hals and Jonathan Stempel
May 20 (Reuters) - Opponents of President Donald Trump’s sweeping legal settlement with the U.S. Internal Revenue Service will face high hurdles in challenging its $1.776 billion fund for victims of alleged political “weaponization” and its provision barring audits of his taxes, according to legal experts.
Congressional Democrats derided the so-called Anti-Weaponization Fund as a slush fund to steer taxpayer dollars to Trump’s political allies, while watchdog groups called the tax immunity agreement illegal. Even some Republicans expressed qualms. Senate Majority Leader John Thune, for instance, said he was “not a big fan” of the plan.
Two police officers who defended the U.S. Capitol on January 6, 2021, against a failed bid by Trump supporters to stop Congress from certifying Democrat Joe Biden’s 2020 election victory, have already sued. The officers allege that the fund will reward and empower rioters who have harassed them and made death threats.
Legal experts said it is unclear whether challengers will be able to block payouts or undo Trump’s shield against audits of past taxes if Congress, controlled by Trump’s fellow Republicans, stays silent.
‘NO LONGER A VENUE’
In part, that is because Trump dismissed his $10 billion lawsuit against the IRS before the settlement was announced, preventing the judge in that case from doing anything.
“There’s no longer a venue to challenge the legality of this settlement,” said Danny Werfel, who served as IRS commissioner during the Biden administration.
The Justice Department announced the fund on Monday, shortly after Trump voluntarily withdrew his lawsuit accusing the IRS of wrongdoing in media leaks of his tax returns during his first term as president.
Trump also dropped claims over the government’s investigations of contacts between his 2016 presidential campaign and Russians, and the FBI’s 2022 search of his Mar-a-Lago home in Florida for classified documents he retained after his first term ended. Trump will also get an apology under the plan.
On Tuesday, the Justice Department quietly released an addendum signed that day by acting U.S. Attorney General Todd Blanche, which “FOREVER BARRED and PRECLUDED” the government from prosecuting or pursuing pending tax claims against Trump, his family and his businesses. Blanche is a former personal lawyer for Trump.
‘WEAPONIZATION OR LAWFARE’
The $1.776 billion fund, an apparent nod to the year of the country’s founding, will be controlled by Trump allies.
It will be used to compensate people who claim to have been damaged by U.S. government “weaponization or lawfare.” Trump has accused the Biden administration and other political opponents of improperly using law enforcement, intelligence and regulatory agencies to target him and his allies.
The fund will be financed from the Judgment Fund, which Congress established in 1956 to pay legal claims made against the government.
Blanche told U.S. senators on Tuesday there was precedent for the creation of the anti-weaponization fund. He cited a $680 million fund created in 2010 for Native American farmers during Democratic President Barack Obama’s administration to resolve years-long litigation known as the Keepseagle case.
While that settlement was deemed fair, reasonable and adequate by a federal judge, Blanche said the IRS settlement will not undergo court review. Blanche also said January 6 defendants, who already have received clemency from Trump, could get payments.
LEGAL STANDING
Legal experts said opponents of the $1.776 billion fund will have a difficult time establishing a legal right to sue, known as standing, because it may be tough to demonstrate they have been harmed in some way.
The two police officers who sued in federal court in Washington claimed they faced injury because the fund would encourage January 6 defendants to keep threatening them and potentially commit violence.
“The increased risk of threats, harassment and violence our plaintiffs are suffering as a result confers standing,” said Public Integrity Project CEO Brendan Ballou, who filed the lawsuit.
THE HUNTER BIDEN QUESTION
Some experts said the best chance to challenge the fund may come later, when claimants - even Trump opponents - might allege they were harmed because their payouts were too low.
Josh Gardner, a lawyer who led the Justice Department’s handling of the Keepseagle case, pointed to Hunter Biden, the former president’s son.
Hunter Biden was convicted of tax and gun crimes during his father’s presidency in a case pursued by a Trump-appointed federal prosecutor who later was elevated to the position of special counsel. President Biden pardoned his son seven weeks before Trump returned to office.
“If Hunter Biden were to submit a claim and his claim were rejected, he would have standing to challenge not just his denial, but I think the entire structure of this settlement,” Gardner said.
‘REMARKABLY LOOSE’
If litigants establish standing, they could argue that the IRS settlement violates several laws, according to legal experts.
One issue is whether the fund violates the U.S. Constitution’s Appropriations Clause, which gives Congress power of the purse, because U.S. lawmakers did not authorize it. Ninety-three Democratic lawmakers filed a legal brief making that very point shortly after Trump dismissed his lawsuit but before the judge formally closed the case.
Another issue is whether the fund may violate a U.S. law governing the Judgment Fund if payments are made to people with no pending or imminent claims against the federal government.
“The real problem is, Congress has been remarkably loose in controlling these kinds of payments,” said Paul Figley, an emeritus law professor at American University. “It’s wrong, but not illegal.”
There also is the question of whether Trump’s tax immunity provision violates a U.S. law that protects against political interference in taxpayer audits.
Werfel, the former IRS commissioner, added that future administrations often unwind non-legislative actions of prior administrations.
Some experts said one or both chambers of Congress, though not individual lawmakers, could challenge the fund. That is unlikely for now, with Republicans controlling the House of Representatives and Senate.
“There’s a ferment of outrage that is justifiable against this deal, and that will bring off the sidelines many people who are hurt by it,” said Norm Eisen, co-founder of Democracy Defenders Action, a Democratic-leaning legal advocacy group representing the 93 lawmakers in the IRS case.
(Reporting by Tom Hals in Wilmington, Delaware and Jonathan Stempel in New York; Editing by Amy Stevens and Will Dunham)
