The federal government is abandoning an effort to create a $1.8bn secretive fund to compensate Donald Trump’s allies, but is maintaining an agreement that prohibits the Internal Revenue Service (IRS) from auditing Trump, his family and related entities, the acting attorney general, Todd Blanche, said on Tuesday.

“We are not moving forward with the fund, period,” Blanche said during a House appropriations committee hearing on Tuesday. “The reasons for the fund is something that President Trump talked about for a long time, which is the fact that there were a lot of people in this country who had their government weaponized against them. The reasons for the fund, I think, remain as important as they were before, but we are not moving forward with the fund.”

He later added that the justice department would continue granting immunity to Trump and his family members on tax matters before the agreement was reached last month. He did not say why the department was dropping the weaponization fund but proceeding with the anti-audit provision.

The agreements were reached to resolve a long-shot $10bn lawsuit filed by Trump against the IRS over the leak of his tax returns. Democrats and Republicans objected strongly to the creation of a loosely controlled $1.776bn fund to be awarded with no restrictions to allies of the president.

Blanche insisted on Tuesday that the agreement allowing for immunity from audits was normal, but former IRS officials have said they are not aware of a single other similar instance. “Whether you are the president or Joe the Plumber, people expect the same tax rules and enforcement framework to apply to everybody,” Daniel Werfel, a former IRS commissioner, told NPR.

Others have said the agreement may run afoul of the constitution’s emoluments clause, which bars the president from receiving a personal financial benefit from the position. Discharging the president’s potential tax liability could be a financial benefit.

The fund has faced significant headwinds in recent weeks. A federal judge in the eastern district of Virginia blocked the Trump administration from taking any action on the fund for the next few weeks while legal motions are pending. A federal judge in Florida overseeing the lawsuit that led to the creation of the fund and the agreement allowing audit immunity also took the extraordinarily unusual step of reopening the case to see if there had been wrongdoing.

Even though the federal government is scrapping its plans to create the fund, individual victims may be able to seek compensation by filing administrative claims for damages against the government. The justice department has broad discretion to choose how to settle those cases, so January 6 and other defendants could still conceivably receive compensation. Enrique Tarrio, the former leader of the far-right Proud Boys who was convicted of seditious conspiracy, told a reporter for PBS News Hour that was a possible path for January 6 defendants to continue to pursue compensation.