Senate Bill S10585

                                 
BILL NUMBER: S10585

SPONSOR: GIANARIS
 
TITLE OF BILL:

An act to amend the tax law, in relation to assessing a separate tax on
distributions from designated federal settlement funds

 
PURPOSE:

To impose a separate New York State tax, at a rate of 100%, on distrib-
utions received by New York resident individuals, estates, and trusts
from the federal "Anti-Weaponization Fund" established by the United
States Department of Justice as part of the settlement of Trump v.
Internal Revenue Service, No. 1:26-cv-20609 (S.D. Fla.), so that no
resident of this State is enriched by what is, in substance, a public-
ly-funded political payout negotiated between the President and his own
Administration.

 
SUMMARY OF PROVISIONS:

Section 1: Amends the Tax Law by adding a new section 603-a.  Subsection
              

(a) imposes, in lieu of the tax otherwise imposed by section 601, a
separate annual tax equal to 100% of the gross amount of any distrib-
ution received during the taxable year by a resident individual, estate,
or trust from a designated federal settlement fund, and provides that
the tax shall not be reduced by any deduction, exemption, or credit
otherwise allowed under law.  Subsection (b) defines "designated fund"
as the federal Anti-Weaponization Fund established pursuant to the
settlement agreement in Trump v. Internal Revenue Service, No.
1:26-cv-20609 (S.D. Fla.), and defines "distribution" to include any
payment, distribution, or monetary transfer received, directly or indi-
rectly, by a resident individual, estate, or trust.

Section 2: Provides that the act shall take effect immediately.

 
JUSTIFICATION:

On May 18, 2026, the United States Department of Justice announced the
creation of a $1.776 billion "Anti-Weaponization Fund" as part of a
settlement of Donald Trump's $10 billion personal lawsuit against the
Internal Revenue Service. The arrangement is without precedent in Ameri-
can law. The plaintiff was the President of the United States, suing in
his personal capacity together with two of his sons and his family busi-
ness. The defendant agency was, and remains, under his direct super-
vision. The Acting Attorney General who signed the settlement order,
Todd Blanche, served on the President's personal criminal defense team
before assuming office. The United States District Court for the South-
ern District of Florida was deprived of any meaningful opportunity to
scrutinize the terms of the settlement, because the suit was voluntarily
dismissed before judgment could enter; the presiding judge, in closing
the case, observed that she had been "stripped of jurisdiction" to do
otherwise. The result is a $1.776 billion taxpayer-financed compensation
program negotiated between the President and officials he himself
appointed, drawn from the federal Judgment Fund, and operating outside
any judicial supervision.

The architecture of the Fund confirms what its origins already suggest.
The "Anti-Weaponization Fund" is administered by a five-member commis-
sion, all of whose members are appointed by the Attorney General (only
one of whom is selected in consultation with congressional leadership)
and each of whom may be removed by the President at will. Eligibility
criteria have not been published.  Acting Attorney General Blanche has
testified that the commission will determine for itself who qualifies
and that "anybody in this country can apply," and both he and. Vice
President Vance have publicly declined to rule out payments to individ-
uals convicted of assaulting law enforcement officers during the January
6, 2021 attack on the United States Capitol.

Criticism of the Fund has been bipartisan and broad: ninety-three
Members of Congress have filed an amicus brief warning that the settle-
ment creates a "specter of corruption unparalleled in American history";
the editorial board of the Wall Street Journal has described the Fund as
a political payoff to the President's allies; and Capitol Police offi-
cers injured defending the Congress on January 6 have filed suit to
block the Fund's operation.

A portion of the $1.776 billion will, in due course, be distributed to
residents of the State of New York. This bill ensures that no New York
resident will retain any part of those distributions. A rate of 100% is
appropriate because these distributions are not, in any conventional
sense, compensation. They are not the product of an adversarial proceed-
ing, of findings by a neutral adjudicator, or of any determination of
legal liability made by a person outside the President's own circle of
appointees. They are transfers of public money, negotiated by the recip-
ient class's political patron, drawn from a federal account to which the
taxpayers of this State contribute substantially, and disbursed at the
discretion of commissioners appointed by---and removable by---that
patron. To treat these distributions as ordinary income, subject to the
ordinary rates and protections of section 601 of the Tax Law, would be
to dignify them as something they plainly are not.

New York has long been one of the largest net contributors to the feder-
al Treasury in the Union. Its taxpayers should not be required to subsi-
dize, and its residents should not be permitted to profit from, a
settlement whose foreseeable beneficiaries include individuals convicted
of political violence, and whose foreseeable structure is one of patro-
nage rather than redress. This legislation reflects the considered judg-
ment of the New York State Legislature on that question.

 
LEGISLATIVE HISTORY 
:

NEW BILL.

 
STATE AND LOCAL FISCAL IMPLICATIONS:  THE TAX WILL GENERATE REVENUE. A
PRECISE ESTIMATE IS NOT FEASIBLE AT THIS TIME BECAUSE THE ANTIWEAPONIZA-
TION FUND IS NOT SCHEDULED TO CEASE OPERATIONS UNTIL DECEMBER 15, 2028,
THE COMMISSION HAS NOT ADOPTED ELIGIBILITY CRITERIA, AND THE IDENTITIES
OF CLAIMANTS AND AWARD AMOUNTS ARE NOT YET KNOWN. ANY REVENUE COLLECTED
WILL ACCRUE TO THE GENERAL FUND.

 
EFFECTIVE DATE:
THE ACT WILL TAKE EFFECT IMMEDIATELY.