President Donald Trump and the Internal Revenue Service spent years locked in a high-stakes audit battle over losses tied to the Trump International Hotel and Tower in Chicago, a dispute that tax experts said could have exposed the president and his businesses to more than $100 million in taxes and penalties. That fight has now effectively ended after the Justice Department ordered the IRS to permanently stop examining Trump's returns.
The decision, finalized in a 19 May addendum signed by acting Attorney General Todd Blanche, bars the IRS from conducting any future audit or review of tax returns filed by Trump, members of his family and affiliated businesses. The agreement was attached to a broader settlement tied to Trump's lawsuit against the IRS over the leak of his tax information by a former contractor.
The extraordinary intervention closes one of the most politically sensitive tax investigations in modern U.S. history and is already drawing scrutiny from former IRS officials, tax law experts and congressional Democrats, who argue the move undermines the agency's independence.
At the center of the dispute was Trump's Chicago skyscraper project, a 92-story tower along the Chicago River that opened in 2009 after construction delays, cost overruns and mounting financial pressure during the global financial crisis. The development had reportedly been financed with loans totaling as much as $770 million.
According to reporting cited from ProPublica and The New York Times, Trump claimed in 2008 that his investment in the project had become effectively worthless as sales collapsed, allowing him to declare losses totaling roughly $651 million. Two years later, Trump's advisers reportedly folded ownership of the tower into another partnership he controlled and claimed an additional $168 million in losses over the next decade.
IRS investigators later questioned whether that restructuring improperly allowed Trump to benefit twice from essentially the same underlying losses.
'I think he ripped off the tax system,' Walter Schwidetzky, a law professor at the University of Baltimore specializing in partnership taxation, said in comments cited in the reporting. Several tax experts consulted during the investigation reportedly argued the accounting structure would have faced serious challenges if fully litigated.
The DOJ's order now effectively removes the IRS's ability to revisit those filings.
Danny Werfel, who served as IRS commissioner between 2023 and 2025, told Politico he was 'unaware of a single precedent where the IRS has agreed in advance to permanently forgo examination of previously filed tax returns for a specific person or business.'
Brandon DeBot, policy director at the Tax Law Center, also warned that reversing the decision in the future would be extremely difficult absent 'a showing of fraud, malfeasance, or misrepresentation of a material fact.'
Former IRS Commissioner John Koskinen raised concerns about the practical implications of the delay. 'By the time a new IRS commissioner shows up, the money from the contested tax returns will be gone, and tracking it down will be difficult,' he said.
The audit settlement forms part of a much larger legal agreement resolving Trump's lawsuit against the IRS over the disclosure of his tax returns by a government contractor who later pleaded guilty. The settlement also establishes a $1.776 billion Anti-Weaponization Fund tied to Trump's wider $10 billion legal claims against the agency.
The political backlash was immediate. Democratic lawmakers accused the administration of engineering what they described as a politically motivated arrangement designed to protect Trump financially while weakening oversight mechanisms traditionally applied to taxpayers, including presidents.
In a statement cited in the reporting, House Democrats described the settlement as 'collusive litigation to force the American people to put money into his pockets, and the pockets of his family and friends.' They also argued the arrangement raised constitutional concerns tied to presidential powers and federal accountability.
Eric Trump, executive vice president of the Trump Organization, defended the family's position, saying the dispute 'was settled years ago, only to be brought back to life once my father ran for office.' He added that the company remained 'confident in our position, which is supported by opinion letters from various tax experts, including the former general counsel of the IRS.'
