On October 27, 2026, a coalition of 21 U.S. states and the District of Columbia filed a lawsuit in federal court in Oregon against the Trump administration to challenge an August 2026 Treasury Department rule. The rule exempts over 99.9% of businesses from reporting corporate ownership disclosures established under the 2021 Corporate Transparency Act. Treasury Secretary Scott Bessent defended the rollback as eliminating costly burdens for law-abiding business owners, while state attorneys general argue the executive branch exceeded its authority by effectively repealing statutory law and creating loopholes for illegal shell companies.
States file lawsuit against the rollback
- ▪On October 27, 2026, 21 U.S. states and the District of Columbia sued in U.S. District Court in Oregon to overturn the Trump administration Treasury Department's August 2026 rule and stop deleting existing ownership records.
- ▪The lawsuit against the ownership reporting rollback names Treasury Secretary Scott Bessent, FinCEN, the Treasury Department, and the heads of the Departments of Justice and Homeland Security as defendants.
Legal arguments in the states' lawsuit
- ▪The states' lawsuit claims FinCEN violated the Administrative Procedure Act by exceeding its authority and acting arbitrarily without reasonable explanation in exempting nearly all businesses.
- ▪In their lawsuit complaint filed in federal court in Oregon, the coalition of states asserted that the executive branch cannot repeal a law through administrative rulemaking.
- ▪The lawsuit alleges the Treasury Department failed to conduct required consultation steps with the Homeland Security secretary and U.S. attorney general prior to exempting businesses.
Officials criticize the reporting rollback
- ▪U.S. Senator Elizabeth Warren stated in August 2026 that rolling back corporate reporting requirements increases risks of sanctions evasion, fraud, drug trafficking, and human trafficking.
- ▪California Attorney General Rob Bonta stated that corporate reporting requirements assist law enforcement in tracking criminals who use anonymous shell company accounts to launder money and hide kickbacks.
- ▪New York Attorney General Letitia James stated that the Trump administration's rule allows the true owners of foreign and domestic shell companies to remain anonymous.
The Trump administration's reporting rollback
- ▪U.S. Treasury Secretary Scott Bessent defended the August 2026 rule as eliminating a burdensome reporting requirement for millions of law-abiding business owners without compromising national security.
- ▪Under the August 2026 rollback rule, the U.S. Treasury Department is purging all previously collected corporate ownership information from its database.
- ▪In August 2026, the Trump administration's Treasury Department rule exempted over 99.9% of companies, including U.S. domestic companies and American owners of foreign companies, from reporting beneficial ownership information to FinCEN.
Background on the Corporate Transparency Act
- ▪Willful violations of the Corporate Transparency Act reporting obligations carry potential penalties of up to $10,000 in fines and two years in prison.
- ▪The National Small Business Association estimated that complying with the Corporate Transparency Act cost small-business owners an average of nearly $8,000 in the first year alone.
- ▪Congress passed the Corporate Transparency Act in 2021 requiring covered businesses to report beneficial ownership information to FinCEN to combat illicit finance and shell company abuse.
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