Donald Trump has struck a $1.8 billion deal with his own IRS to funnel taxpayer money to victims of 'lawfare', including January 6 rioters and his political allies, in a settlement that Democrats are calling the most corrupt presidential act in history.

The President, his sons Don Jr and Eric, and the Trump Organization filed suit against the Treasury and IRS in the Southern District of Florida federal court after the leak of their tax returns.

They agreed to drop their suit Monday, as well as two claims, including for damages resulting from the raid on Mar-a-Lago in 2022 and the Russian election interference probe, in exchange for the government's creation of the 'Anti-Weaponization Fund.'

The $1.776 billion fund will have the power to issue formal apologies and monetary relief owed to claimants. It will be governed by a five-member commission appointed by the Attorney General, with Trump given the power to remove any member. 

While Trump is barred from directly receiving payments from the fund, entities associated with him are not explicitly prohibited from filing additional ones.

The settlement drew immediate fury from Democrats, among them Senate Finance Committee member Ron Wyden, who said it represented a brazen new level of corruption. 

'Even by his standards, the move he's trying to get away with now is a stunning act of corruption,' said Wyden.

'What Trump wants is a $1.7billion slush fund for right-wing political violence and subversion, and if he follows through, it will be the most brazen theft and abuse of taxpayer dollars by any president in American history.'

Acting Attorney General Todd Blanche said: 'The machinery of government should never be weaponized against any American, and it is this Department's intention to make right the wrongs that were previously done while ensuring this never happens again.

'As part of this settlement, we are setting up a lawful process for victims of lawfare and weaponization to be heard and seek redress.' 

The extraordinary arrangement comes despite the misgivings of the judge in the case, Kathleen Williams, who was investigating a potential conflict of interest as Trump sued his own government.

Trump himself conceded last October that 'it's awfully strange to make a decision where I'm paying myself.'

However, the judge has limited legal authority to halt any settlement deal.