Twenty-one Democratic attorneys general filed suit against President Donald Trump's administration this week, challenging a Treasury Department rule that exempts the vast majority of U.S. companies from disclosing who actually owns them. The coalition argues the rollback guts a 2021 anti-money-laundering law and lets shell company owners operate in the shadows.
The lawsuit, filed in the U.S. District Court for the District of Oregon, was brought by a coalition of mostly Democratic-led states, according to The News Tribune. The states are asking a federal court to overturn the rule and argue, per the complaint, that “the executive branch cannot repeal a law by rulemaking. That fundamental principle resolves this case.” Named as defendants are the U.S. Department of the Treasury, Treasury Secretary Scott Bessent, the Financial Crimes Enforcement Network, and the heads of the U.S. Departments of Justice and Homeland Security, per that same report.
At the center of the fight is the Corporate Transparency Act, enacted in 2021 with what American Banker describes as overwhelming bipartisan support, strong enough that Congress overrode Trump's veto of the legislation at the time. The law was designed to combat illicit finance by requiring companies to report their beneficial owners to FinCEN. The lawsuit alleges the administration's new rule exempts more than 99.9% of the entities originally required to report that ownership information, according to American Banker's reporting.
How the Exemption Rule Took Shape
The rollback didn't happen all at once. Treasury announced in March 2025 that it would not enforce the Corporate Transparency Act's reporting requirements, later narrowing reporting to foreign businesses operating in the United States, the outlet's report notes. The U.S. Government Accountability Office similarly found that in March 2025, FinCEN issued an interim final rule exempting domestic companies and U.S. persons from reporting requirements, noting that most of the affected entities were LLCs and corporations.
That interim approach became permanent in August 2026, when FinCEN issued a final rule. The agency said in a statement that the rule “permanently removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information to FinCEN under the Corporate Transparency Act,” according to the U.S. Department of the Treasury. The Federal Register describes the final rule as adopting, with limited changes, that earlier March 2025 interim rule narrowing the reporting requirements.
Attorneys General Push Back
California Attorney General Rob Bonta joined the 21-state coalition in filing the challenge, according to a release carried by EIN News. The coalition includes attorneys general from Oregon, Illinois, Arizona, Colorado, Delaware, the District of Columbia, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Rhode Island, Virginia, Washington and Wisconsin, per that release.
New York Attorney General Letitia James was among the more than 20 state attorneys general who filed the challenge, according to The News Tribune. James said the rule exempts domestic companies and U.S. owners of foreign companies, allowing owners of shell companies to remain anonymous, the paper reported. Sen. Elizabeth Warren, the top Democrat on the Senate Banking, Housing and Urban Affairs Committee, said rolling back the reporting requirements increased risks of sanctions evasion, fraud, drug trafficking, sex trafficking and organized criminal activity, according to the same report.
Treasury Defends the Rule
Bessent has defended the policy change, describing the rule as eliminating reporting requirements for millions of law-abiding business owners without compromising national security, The News Tribune reported. He stood behind Trump at a media appearance in Ankara, Turkey, in July, according to the outlet. The Treasury Department did not respond to a request for comment on the lawsuit, the paper noted.
The dispute follows years of legal turbulence over the Corporate Transparency Act's enforcement. In earlier litigation, the Justice Department appealed a court order on behalf of Treasury, with the Financial Crimes Enforcement Network stating at the time that it would continue implementing the act as required by Congress while complying with the court's order. Separately, federal law under 31 U.S.C. 5336 directs the Administrator for Federal Procurement Policy to revise acquisition regulations so certain federal contractors and subcontractors still provide beneficial-ownership information as part of bids exceeding the simplified acquisition threshold, according to the U.S. Code.
The case now heads to an Oregon federal courtroom, where the coalition of states will press its argument that Treasury overstepped its authority. Reuters reporter Kanishka Singh reported the underlying story from Washington, with Bill Berkrot editing.
