District Court for SD Florida Calls Out Trump's Weaponization Fund and Get-Out-Of-Audit Free Release Order (7/13/26)

The big tax-related news today is the Order issued by Southern District of Florida judge, Kathleen Williams, today effectively holding the purported settlement between Trump and related plaintiffs and the Government (through DOJ) was effectively a sham. The Court also cast doubt upon the purported get out-of-tax audit-free benefit conferred in a separate document one day after the settlement agreement (the Court calls this separate document the “Release Order,” and I will use that term in this blog).

Today’s Court Order may be viewed CL here and GS here [to come]; the docket entries may be viewed here, with the order at docket # 106.

Since the Court Order has been adequately covered in the news, I will just make some points that may resonate with tax lawyers. 

1. The Release Order conferring get out-of-tax audit-free benefit was to me the biggest deal because it benefited Trump personally, as well as persons and entities close to him. By contrast, the Weaponization Fund would have helped a category of Trump supporters prone to violence in his name and other at least antisocial acts. When I first heard about the Weaponization Fund I believed it was strange on its face. But then a day later I the Release Order surfaced, making the whole gambit understandable. The Weaponization Fund was not the real object of Trump’s gambit; rather, the Weaponization Fund was a stalking horse to draw attention from the brazen Release Order that would more directly benefit Trump. I suspected that they (being his co-conspirators) planned all along that there would be so much public angst about the Weaponization Fund that they could give it up, with the Release Order sliding under the public radar screen/attention span.

 2. Some reasons that I think the Release Order was the real motive for Trump are:

• Trump has many years of potential exposure because of the unlimited statute of limitations for fraud on the return. (He may have exposure for his own fraud and potentially for fraud on the return caused by preparers or even more remote actors.)
• For any open year, the civil fraud penalty might apply, although I am sure Trump will argue that his tax returns are so complex that he did not have the tax crimes mens—intent to violate a known legal duty. But that only protects from criminal liability (which I don't think would be covered by the Supreme Court's grant of criminal immunity for Presidential conduct).
• In any event, for open years, he has the potential for large adjustments and accuracy related penalties and interest on both tax and penalties.

3. The Court’s Order suggests that the Release Order violates § 7217 (LII here). In relevant part, that § 7217(a) makes it

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.

Applicable persons include the President and White House personnel and any other high level agency official “other than the Attorney General.” § 7217(e). The Court does not address the Attorney General exception, so perhaps that will be a defense AAG Blanche serves up to avoid that heat. (I am assuming that an “Acting” Attorney General can qualify but have not researched that issue.) Rather, focusing on § 7217(a), the Court says (Slip Op. 34-35):

The explicit text of this statute prohibits President Trump and his lawyers—one of whom was former White House Counsel—from asking for or promoting termination of an audit directed toward him.52 And acquiescing to any such demand is wholly incompatible [*35] with the duties of DOJ attorneys (as well as CEO Bisignano for the IRS) to enforce the law and protect the public interest. Moreover, the conferral of possibly millions of dollars in tax relief and corollary benefits potentially violates Article II, Section I of the United States Constitution, a limitation surely known by former White House Counsel and the current Acting Attorney General. See U.S. CONST. art. II, § 1, cl. 7: “The President shall, at stated Times, receive for his Services, a Compensation, which shall neither be encreased nor diminished during the Period for which he shall have been elected, and he shall not receive within that Period any other Emolument from the United States, or any of them.”53 No sitting President has ever sued federal agencies completely subject to his control for monetary benefits, or any benefits that inure to him, his family, and associates. The failure of any attorney in this case to address, on this docket, the relationship of this Article II proscription with the benefits conferred by the “settlement” is a glaring omission that speaks to the control of the Lead Plaintiff.54

52 This proviso of the “settlement” also raises the question of whether the agreement violates Article II, Section 3 of the United States Constitution, which directs that the President “shall take [c]are that the Laws be faithfully executed[.]” U.S. CONST. art. II, § 3.
53 “Neither the Union nor any of its members will be at liberty to give, nor will he (the President) be at liberty to receive any other emolument than that which may have been determined by the first act.” THE FEDERALIST NO. 73 (A. Hamilton).
54 As recently discussed in a decision affirming attorney sanctions, the Eleventh Circuit observed that “one of a lawyer’s chief duties is to give his clients a clear-eyed view of whether the law says what the client wants it to say.” Est. of Lane Caviness v. Atlas Air, Inc., No. 24-11033 (11th Cir. July 10, 2026).

4. Whether or not the Release Order violates § 7217, it was of course bullshit as was the Weaponization Fund.

5. Also worth noting is that the Court takes aim at the enablers of the Settlement and Release Order, invoking potential sanctions for violation of FRCP Rule 11 and under the Court's inherent authority. (See Slip Op. 42-54.) The Court Order thus refers some to appropriate State Bar authorities for discipline. (noting Slip Op. 54 n70 that some of the actors already have ethics complaints). Along the same vein, the Court invites (Slip Op. 52-54) its court-appointed amicus to request recovery of attorneys as a sanction. If that sanction is given, I would assume that the Court would do something to at least try to make sure that the individuals are personally liable and not in any legitimate governmental capacity so that they do not pass the costs of their misconduct on to the taxpayers of this country.

6. My prediction is that all of Trump’s minions who acquiesced in the Settlement or the Release Order have some criminal exposure. I am not sure even Trump’s participation would be covered by the immunity the Supreme Court granted him because the Settlement and the Release Order are so obviously corrupt that it could not remotely be justified by Trump’s authority as President. But, for those without Presidential immunity, they are certainly exposed to criminal prosecution for the events leading to all this bullshit, so they must be hoping or praying (many are or claim to be Christian Nationalists, so prayer may be effective for them) that Trump will pardon them. There must be a long list of Trump people indeed throughout the Government who have criminal exposure for aiding and abetting Trump's excesses and are hoping they get on what must be a long list of people he pardons if he ever gets around to actually doing pardons for people other than himself and his family.

7. One picky point that perhaps would be caught only by a tax lawyer and then one who reads footnotes. The Court cites and quotes (Slip Op. 13) United States v. Windsor, 570 U.S. 744 (2013). The Court then explains in footnote 21 “In Windsor, the United States refused to pay the plaintiff a real estate tax refund due to § 3 of the Defense of Marriage Act’s definition of marriage, despite acquiescing to the plaintiff’s position that § 3 of the Act was unconstitutional.” Actually, Windsor an estate tax refund rather than a real estate tax refund. I assume that the Court will correct that obviously inadvertent misstatement.