William L. Kovacs

June 15, 2026

Democrats are criticizing President Trump and the IRS for settling a lawsuit the president brought against his own IRS over injuries allegedly caused by the leak of his tax records by the Biden administration. Initially, Trump sued for $10 billion but reached a settlement with the IRS to establish a $1.776 billion fund for individuals allegedly unfairly prosecuted by the federal government. Opponents called it a political “weaponization fund” because it would reward those prosecuted for their January 6th activities. It also included immunity for Trump, his family, and businesses from tax audits.

The controversy surrounding Trump’s settlement fund misses the larger constitutional issue. The real scandal is not who receives the money. It is that Congress created an unlimited, permanently appropriated Judgment Fund that allows administrations of either party to spend billions of dollars through settlements with little congressional scrutiny and limited public accountability.

In clearer terms, the fact that Trump created a weaponization fund is a news story. The critically important story is a constitutional one: Congress created a mechanism that allows any president to create a weaponization fund.

The settlement also raises serious constitutional questions because it blurs the distinction between genuine adversarial litigation and negotiated political outcomes.

Congress created a real mess by enacting and permanently funding the Judgment Fund, thereby authorizing any administration to pay billions to assist with a collusion-engineering scheme using the “Sue and Settle” mechanism. Administrations rewarded friends with cash and regulatory benefits and punished enemies. Trump did not invent the practice. He followed a path previously used by both Democratic and Republican administrations, although President Obama elevated ‘Sue and Settle’ into a major regulatory tool.

The Judgment Fund.

The Judgment Fund, 31 U.S.C. sec. 1301, is often referred to as the “mother of all slush funds.” It is a permanent, indefinite, and unlimited congressional appropriation that is continuously available to pay money judgments entered against the United States, as well as settlements for cases that are either in litigation or likely to be. The U.S. Congress established the fund to cover “whatever amount is necessary” to pay for qualifying judgments and settlements. It established this fund so it would not have to deal with the paperwork required to pay for the government’s questionable conduct. Such payments also allow the government’s illegal conduct to go unreported.

Because it is a permanent, unlimited, and indefinite appropriation, the specific amounts allocated are not debated in Congress. The Department of the Treasury pays these claims as soon as the necessary paperwork is received. Notably, in 2016, President Obama used the fund to deliver $1.7 billion in cash to Iran by military transport.

Over the years, the Judgment Fund has been used to pay for thousands of claims arising from the federal government’s illegal or negligent conduct. Among them are sexual harassment claims against members of Congress, a $1.25 billion discrimination settlement with Black farmers, and a $760 million settlement with Native American farmers and ranchers for discrimination.

The unusual aspect of the fund is that it is not publicly accessible and has no comprehensive ledger. Moreover, because many records are heavily redacted under the guise of privacy, the public has no clear picture of how much money has been paid out, or to whom. Until 2018, the Judgment Fund even paid harassment settlements for members of Congress, shielding them from personal financial responsibility for their actions.

In a 2016 article, Politico described how federal agencies, using the Judgment Fund, hid more than $4.3 billion in payments to settle sexual harassment complaints. In 2020, the Judgment Fund paid out nearly 7,500 payments totaling over $14 billion.

One of the more flagrant attempts to use the Judgment Fund was when the Biden administration was contemplating paying illegal migrant families $450,000 per person as a settlement for separating the children from their parents. Moreover, payments made to satisfy a judgment against the US or to settle the agency’s alleged illegal activity do not come from the agency’s budget. There is no penalty to the agency for misconduct or illegal activity since payments do not have to be reimbursed unless Congress appropriated funds to the agency for such payments. Simply, agencies are not required to pay for their misconduct or unlawful activities.

How did such a fund come about?

Prior to 1956, Congress actually appropriated funds to pay for every single judgment against the United States. Under this procedure, Congress was aware of the claims being made against the United States and could evaluate the actions of the agencies being sued.

In 1956 Congress passed the Judgment Fund Act to provide for payment of most judgments against the United States without the need for individual appropriations. The congressional justification was to enhance the efficiency of the appropriations process. In 1961, Congress amended the statute to authorize settlements in addition to judgments, with a $100,000 ceiling. In 1977, Congress eliminated the ceiling, and now the fund is available to pay any covered judgment or settlement, regardless of amount.

Trump, like Obama and Biden, used the deceptive Sue-and-Settle process to make his claims legal.

The Judgment Fund illustrates how Congress has made itself increasingly irrelevant. Rather than reviewing claims against the government and deciding whether taxpayer dollars should be spent, Congress delegated that responsibility to the Executive Branch through a permanent and unlimited appropriation. Administrations of both parties have predictably exploited that authority to advance political, regulatory, and ideological objectives.

The debate over Trump’s so-called weaponization fund therefore misses the larger constitutional failure. The issue is not whether one president used the fund wisely or unwisely. The issue is that Congress created a mechanism that allows presidents to spend billions of dollars outside the normal appropriations process.

If Congress wishes to restore its constitutional role, it should repeal the permanent appropriation, require affirmative congressional approval for large settlements, mandate full public disclosure of all payments, and require agencies to reimburse the Treasury from their own budgets when their misconduct results in judgments or settlements.

Until then, every administration will continue to treat the Judgment Fund as a convenient political tool, while Congress watches its constitutional power over the purse disappear.

William L. Kovacs served as senior vice president for the U.S. Chamber of Commerce and chief counsel to a congressional committee. His books include: Congress: An Irrelevant Institution or Guardian of the Republic; Reform the Kakistocracy, the recipient of the 2021 Independent Press Award for Social/Political Change; and Devolution of Power. He can be contacted at [email protected]