A US judge has struck down a legal agreement between President Donald Trump and federal agencies that gave him immunity from tax audits and allowed his administration to create a $1.8 billion (£1.3 billion) “anti-armament” fund, since abandoned.

The fund, intended to compensate people who say they were unfairly targeted by the government, was unveiled in May in exchange for Trump dropping his $10 billion personal lawsuit against the Internal Revenue Service (IRS).

But on Monday, U.S. District Judge Kathleen Williams said the lawsuit was filed for an improper purpose.

He also referred a Trump attorney to state authorities to determine whether ethics rules were violated and disciplinary action was required.

In the ruling, Williams found that Trump’s lawsuit, which he, two of his sons and the Trump Organization filed in 2026, was far from a dispute between two opposing sides. Instead, he described it rather as an action carried out by lawyers linked to Trump and those who claimed to have been targets of the government.

Williams wrote that the lawsuit was “never about a party seeking judicial resolution of a legal issue or factual dispute” between Trump and the IRS, which he controls as president.

He also described the agreement as an attempt to “lend some legitimacy to an agreement to confer immunity on individuals and entities affiliated with the president and to direct billions of American taxpayer dollars to redress grievances not defined in law.”

The decision also prevents those involved in the case – including Trump and his children – from referring to the agreement or citing its terms in future legal proceedings. This, in turn, could mean the IRS can move forward with future audits of Trump’s tax claims.

In the initial lawsuit, Trump claimed that nothing had been done to prevent the leak of his private tax information by a former IRS contractor, Charles Littlejohn.

Just before the 2020 presidential election, which Trump lost, the leaked information formed the basis of a New York Times investigation that revealed he paid just $750 in federal income taxes the year he won his presidency in 2016, and no taxes in 10 of the previous 15 years.

“President Trump did not pursue his claims until he once again occupied the White House and appointed his former attorney, and the former attorney for individuals who are alleged beneficiaries of the ‘Anti-Gun Fund,’ to prominent positions in the Department of Justice,” Williams wrote, referring to the Department of Justice.

“These officials then negotiated on behalf of the United States with their current lawyers, including their former White House counsel, to reach a ‘deal.’ It is laughable to suggest that there was ever hostility between the Parties,” he added.

One of Trump’s lawyers, Alejandro Brito, was also referred to the Florida bar for possible disciplinary action, while a second lawyer, Daniel Epstein, will now be barred from joining cases in the Southern District of Florida for at least a year.

In a statement to the BBC, a spokesperson for Trump’s legal team said the IRS “wrongly allowed a dishonest and politically motivated employee to leak private and confidential information” to the media.

“President Trump continues to hold accountable those who harm the United States and Americans,” the spokesperson added.

Calling the deal a “sweet deal” for Trump that had given him “unauthorized and unprecedented” exemptions from tax audit rules, Tax Law Center policy director Brandon DeBot said it had run counter to “the tax system’s protections against political interference.”

“The court’s decision is important, but it does not eliminate the need for Congress to act to nullify the entire agreement and prevent any similar attempt at presidential self-dealing in the future,” he added in a statement to the BBC.

Based at New York University, the center offers legal analysis of taxes and public policy.

Plans for the proposed “anti-armament” fund were abandoned in early June, just a week after another judge temporarily blocked Justice Department officials from implementing it.

That order was issued after two men who alleged the fund was discriminatory filed a lawsuit in Virginia. The plaintiffs said they had been subjected to political retaliation by the Trump administration but believed they would not be allowed to file compensation claims.

The widely criticized plan sparked alarm among Democrats – and some Republicans – who argued that it could lead to payments to people prosecuted for the riot at the US Capitol on January 6, 2021, including those convicted of assaulting police officers.