Trump Eyes $1.7B 'Weaponization' Fund for Allies Investigated by Biden

Trump may drop his lawsuit against the IRS. (TFT)
By Yuval Rosenberg and Michael Rainey

Happy Friday! Here are the fiscal developments we're watching while waiting to see who the New York Knicks will be playing next.

Trump Admin Plans $1.7 Billion 'Weaponization' Fund for Allies: Reports

President Trump is reportedly expected to drop a controversial $10 billion lawsuit he brought against the Internal Revenue Service and other legal claims against the federal government in exchange for the creation of a highly unusual $1.7 billion government compensation fund for Trump allies who say they were wrongly targeted by "weaponized" federal investigations under the Biden administration.

How we got here: Trump sued the IRS early this year over the leak of his tax return during his first term. The IRS lawsuit and other legal challenges he has brought against a federal government that he now controls raised clear questions about self-dealing and conflicts of interest. Trump acknowledged that the dynamics of the case are "awfully strange."

Adding to the extraordinary nature of the proposed settlement, a judge overseeing the case reportedly is considering tossing the suit. By dropping the lawsuit and agreeing to the proposed compensation fund, Trump would be able to secure a financial win that would benefit his allies - and do so before a judge dismisses his legal claim. Trump himself would reportedly be prohibited from receiving direct payments related to his lawsuits, but entities tied to him could still stand to benefit.

J6 rioters could benefit: The beneficiaries could include the nearly 1,600 people charged with crimes related to the January 6, 2021, attack on the U.S. Capitol. Such payouts "would represent the culmination of the government's comprehensive effort to rewrite history," Glenn Thrush, Andrew Duehren and Alan Feuer write at The New York Times. "The proposal would, in many respects, act as a bookend to Mr. Trump's issuance of clemency to those convicted of crimes during the Capitol riot - felons now valorized by his appointees as heroic and as 'survivors' who have been victimized."

A Trump spokesperson defended the proposal. "The IRS wrongly allowed a rogue, politically motivated employee to leak private and confidential information about President Trump, his family, and the Trump Organization to the New York Times, ProPublica and other left-wing news outlets, which was then illegally released to millions of people. President Trump continues to hold those who wrong America and Americans accountable," a representative for Trump's legal team told ABC News, which first reported the proposed fund.

Follow the money: ABC's Katherine Faulders, Peter Charalambous and Alexander Mallin reported that the proposed fund "would draw money from the Treasury Department's Judgment Fund, a permanent appropriation used by the federal government to pay court judgments and settlements," according to sources. Trump would reportedly be able to remove members of the commission overseeing the fund without cause, and the process involved in awarding payments would not have to be disclosed. The identities of the recipients could also be kept confidential.

The unprecedented plan, which reportedly has yet to be finalized, could very well face legal challenges of its own, with critics warning that it would essentially serve as a taxpayer-funded Trump slush fund. "An insane level of corruption - even for Trump," Democratic Sen. Elizabeth Warren of Massachusetts wrote in a post on X.

Senate Parliamentarian Rules Against Parts of GOP Immigration Funding Bill

The Senate parliamentarian ruled late Thursday that some parts of the $72 billion reconciliation bill that Republicans plan to use to fund Immigration and Customs Enforcement and the Border Patrol violate the chamber's rules.

The ruling by the parliamentarian, Elizabeth MacDonough, is a setback for Republicans, who will have to redraft some provisions of the package, which they hope to pass on a party-line vote next week.

A spokesperson for Senate Majority Leader John Thune brushed off the ruling, saying that it simply means that Republicans need to make some "technical fixes that were not unexpected." Democrats, though, welcomed the decision.

"As Senate Democrats warned time and time again, we were prepared to look at every line of this bill to ensure it was compliant with the Byrd Rule and the rules of the reconciliation process," Sen. Jeff Merkley, the senior Democrat on the Budget Committee, said in a statement, referring to the rule that forbids non-budgetary items from being included in reconciliation bills. "While we expect Republicans to continue to do anything Trump asks, this is a win for the rule of law ..."

Senate Minority Leader Chuck Schumer hailing the rulings as a win. "Democrats promised to fight this bill tooth and nail, and on Day One, we forced Republicans back on their heels," he said.

The ruling: The current draft of the reconciliation bill, which Republicans plan to pass with a simple majority, would provide funds for the screening of unaccompanied migrant children by U.S. immigration agents. The parliamentarian ruled that funding for those activities falls outside the jurisdiction of the Senate Homeland Security Committee.

In addition, the parliamentarian ruled against a provision that would provide another $2.5 billion for immigration enforcement programs funded by the massive reconciliation bill that passed last summer.

What comes next: Republicans are already reworking the legislation, but more rulings could be on the way. MacDonough was set to hear more arguments about parts of the bill Friday, potentially including the $1 billion Republicans want to give to the Secret Service for security on President Trump's $400 million ballroom.

House Passes First Spending Bill for Fiscal 2027

The House on Friday passed the first spending bill for fiscal year 2027, approving the Military Construction and Veterans' Affairs funding measure in a 400-15 vote.

The bipartisan bill would provide $157 billion in discretionary funding, a roughly 3% increase over the enacted 2026 level, including $19.2 billion for military construction and family housing ($537 million below the enacted 2026 level), $137 billion for the VA (an increase of $4.1 billion) and more than $350 million for related agencies (a $5 million decrease).

Including spending on mandatory programs, the bill provides more than $469 billion, including $450 billion for the Department of Veterans Affairs, which is $83.6 billion above the 2026 enacted level, according to a GOP breakdown of the bill.

Republicans and Democrats both highlighted the bill's inclusion of $53.7 billion in advance funding for fiscal 2028 for veterans exposed to burn pits and other toxic substances. Democrats also touted their success in ensuring that Secretary of Veterans Affairs Doug Collins would agree to testify before the Appropriations Committees.

"At a time when Americans too often only hear about division and dysfunction, this strong and bipartisan proposal demonstrates that support for our veterans, troops, and military families can still unite this institution around a common purpose," said House Appropriations Committee Chairman Tom Cole, an Oklahoma Republican.

Democrats also celebrated the largely bipartisan nature of the bill. "Overall, this bill reflects an increasingly rare, across-the-aisle delivery of critical healthcare, services and housing our veterans and servicemembers deserve," Rep. Debbie Wasserman Schultz, the top Democrat on the MilCon-VA Appropriations Subcommittee, said in a statement - though she noted that the bill isn't perfect given her view that it underfunds military construction and a NATO security infrastructure program.

"We're also still passing this bill in the dark," Wasserman Schultz said in a statement. "Both because we don't know how badly underfunded other budget bills will be that may harm veterans, or what kind of massive defense spending hikes are on the way."

What's next: This bill, the first of 12 needed for 2027, will head to the Senate, but while Cole suggested that it represents a strong start for the funding process ahead, that work is certain to get harder when the focus turns to measures covering the departments of Defense, Health and Human Services and Homeland Security, among others.

Democrats have already put up resistance to Republicans' proposed cuts across a broad range of programs, highlighting the challenges to come. The annual appropriations process is also likely to be complicated by Republicans' push to pass at least one and possibly two budget reconciliation bills and enact other key pieces of legislation.

 

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