On January 29, 2026, President Donald Trump, along with his sons Donald Jr. and Eric, and the Trump Organization, filed a lawsuit in the U.S. District Court for the Southern District of Florida against the Internal Revenue Service (IRS) and the Treasury Department. The suit seeks at least $10 billion in damages due to reputational harm, financial losses, and public embarrassment.
The suit alleges that the agencies failed to prevent the unauthorized leak of their confidential tax returns by Charles Littlejohn between 2018 and 2020. Littlejohn, who pleaded guilty in 2023 and was sentenced to five years in prison, disclosed the information to outlets like The New York Times and ProPublica, revealing details such as Trump’s minimal tax payments in several years.
However, this unprecedented action of a sitting president suing his own executive branch raises legal and ethical conflict of interest questions. Can this lawsuit succeed? Can the lawsuit proceed fairly for both sides?
First, the lawsuit could be dismissed before it gets to trial. The statute of limitations allows taxpayers to sue for unauthorized disclosures but requires claims to be filed within two years after the date of discovery. The Trump complaint argues that the clock began for President Trump in January 29, 2024 (exactly two years before the lawsuit was filed), when the IRS formally notified him of the breach via letter. However, considering that the leaked returns date back to September 2020, it is arguable that he should have known about it then. Since Trump was the sitting president at the time, the IRS could have notified Trump as soon as it knew his returns were leaked.
Assuming Trump succeeds on the statute of limitations issue, he will have to prove actual damages sufficient to justify the $10 billion he is demanding. The suit alleges broad harms like tarnished business reputations and negative public standing, but quantifying these will be difficult. The leaking of the tax returns did not seem to have hurt him financially. Also, his winning the 2024 presidential election could undermine claims of diminished public standing. And assuming he can prove financial losses or tarnished business reputations, the government could argue that any damages were self-inflicted considering that Trump has made numerous bombastic and sometimes offensive statements over the years.
Lastly, the statute provides that an officer or employee of the United States must be responsible for the unauthorized disclosure. The government could argue that Littlejohn was a contractor employed by Booz Allen Hamilton, which could raise questions about whether Littlejohn was a direct IRS employee.
Because Trump could potentially control both sides of the litigation, it can create a conflict of interest situation, especially where Trump can simply order the Treasury Department to concede the case and award Trump whatever amount he wants. The generally accepted way to mitigate this is to have the Department of Justice appoint independent counsel to represent the government. The judge assigned to the case cannot appoint a special independent counsel to represent the government.
But since Trump seems to value loyalty to him more than anything else, any special counsel Attorney General Pam Bondi appoints will be scrutinized with great skepticism. He will also be the butt of every talk show host’s opening monologue. Yes, that includes Greg Gutfeld.
One option suggested was to let the lawsuit proceed but have the judge schedule the trial date after Trump leaves office and reject questionable settlements offered while Trump is in office. If Trump’s successor in 2029 happens to be someone who worked closely with him — such as JD Vance or Marco Rubio — any settlement offers made during their tenure should also be approved by the court. The problem with this strategy is that Rule 41(a)(ii) of the Federal Rules of Civil Procedure allows dismissal of a lawsuit without court approval if both parties agree to the dismissal.
Another suggested option was to have a third party intervene in the litigation to ensure that the federal government’s interests are independently protected. While the intervention rules are beyond the scope of this column, it should be known that the potential intervenor must have standing to sue. To have standing, the intervenor must have concrete, particularized, actual or imminent injury fairly traceable to a party’s conduct which can only be remedied by a court. An individual will not have standing simply because he or she is a taxpayer or because they are concerned about the potential conflict of interest.
When Trump was asked about the potential conflict of interest, he said he is considering giving a substantial portion of the lawsuit proceeds to charity. That raises numerous questions, such as whether Trump actually will give the money to charity, and to which ones. Also, if it is supposedly not about the money, why is this lawsuit necessary, especially when Trump can direct the IRS to improve its security protocols to ensure this does not happen again?
The Trump family’s lawsuit should be allowed to proceed. While many people would find the lawsuit preposterous, it is not frivolous. But President Trump’s position of being both the plaintiff and the defendant’s boss makes this lawsuit look sketchy due to the conflict of interest. It is not a slam dunk case because President Trump has a statute of limitations issue and the Trumps may not have suffered damages worth $10 billion. Because of this, the parties must be adversarial to ensure that any resolution — settlement or otherwise — is fair to the taxpayers. Accordingly, both sides should agree to rules to ensure there is no conflict of interest, ideally by appointing a reputable independent counsel to represent the government.
Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at stevenchungatl@gmail.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.
The post Is President Trump’s $10B Lawsuit Against The IRS Legitimate Despite Being Both The Plaintiff And The Defendant? appeared first on Above the Law.