Trump’s US$10 billion lawsuit against the IRS raises conflict of interest concerns

A sign is displayed outside the Internal Revenue Service building May 4, 2021, in Washington. (AP Photo/Patrick Semansky, File)

WASHINGTON — Legal experts say U.S. President Donald Trump’s US$10 billion lawsuit against the IRS over the leak of his tax information raises a plethora of legal and ethical questions, including the propriety of the leader of the executive branch pursuing scorched-earth litigation against the very government he is in charge of.

The lawsuit, filed Thursday in federal court in Florida, includes the president’s sons Donald Jr. and Eric as plaintiffs. It alleges that the leak of Trump’s and the Trump Organization’s confidential tax records caused “reputational and financial harm, public embarrassment, unfairly tarnished their business reputations, portrayed them in a false light, and negatively affected President Trump, and the other Plaintiffs’ public standing.”

In 2024, former IRS contractor Charles Edward Littlejohn, of Washington, D.C. — who worked for Booz Allen Hamilton, a defense and national security tech firm — was sentenced to five years in prison after pleading guilty to leaking tax information about Trump and others to two news outlets between 2018 and 2020.

The outlets were not named in the charging documents, but the description and time frame align with stories about Trump’s tax returns in The New York Times and reporting about wealthy Americans’ taxes in the nonprofit investigative journalism organization ProPublica. The 2020 New York Times report found Trump paid $750 in federal income tax the year he first entered the White House and no income tax at all some years thanks to reported colossal losses.

Legal analysts say that Trump does have a legitimate claim against the IRS but question the amount he is seeking as well as his decision to pursue the case at all. The disclosure violated IRS Code 6103, one of the strictest confidentiality laws in federal statute, which provides a legal remedy for individuals whose tax information is leaked, including a minimum of $1,000 per disclosure.

Since Littlejohn stole tax records of other billionaires, including Jeff Bezos and Elon Musk, there is a possibility the case sets a precedent for other high-wealth earners to seek compensation from the government over the leak.

David Gair, a tax attorney with Troutman Pepper Locke in Dallas who represents individuals whose tax information was included in the Littlejohn leak, told The Associated Press that several clients have already reached out about bringing a potential claim against the government.

“People are saying, well, if he can do it, then why can’t I do it? And so I think you will have a lot more people filing similar lawsuits, thinking that they might be able to piggyback on what he’s doing.”

Amy Hanauer, executive director at the Institute on Taxation and Economic Policy, says a legal remedy has already been provided for the leak.

“The contractor who leaked this information has been imprisoned, the Trump administration’s Treasury Department canceled its contracts with the company that employed the leaker, and the IRS issued a rare public apology to taxpayers affected by the leak,” and the IRS has pledged to strengthen its data protection procedures as a result, Hanauer said.

She adds that “even if an unbiased judge rightly rejects Trump’s demands as preposterous, there is a great danger that the IRS would ‘agree’ to settle and pay out an enormous sum of taxpayer dollars to Trump.”

Trump, when asked by a reporter over the weekend how he will manage being on both sides of the lawsuit, referred to a previous complaint he filed against the Department of Justice seeking roughly $230 million in damages over investigations into his 2016 campaign’s Russia ties and the 2022 Mar-a-Lago classified documents case.

He added that he’s supposed to “work out a settlement with myself.”

“I think what we’ll do is do something for charity,” Trump said Saturday. “We could make it a substantial amount. Nobody would care because it’s going to go to numerous very good charities.”

A White House representative did not offer details on what organizations might receive any settlement money.

Individuals whose tax information has been leaked don’t have to prove compensatory damages, Gair noted, though Trump is also seeking punitive damages, changing the stakes.

Referring to the deals that Trump’s family business has inked since he won reelection, Gair said Trump may have a hard time showing real harm.

“It’s hard for me to believe that he really had any losses, but maybe,” Gair said.

Fatima Hussein, The Associated Press