Twenty-one U.S. states and the District of Columbia filed a lawsuit on Tuesday, October 27, 2026, against the administration of President Donald Trump. The legal challenge seeks to overturn a finalized rule that exempts domestic companies and U.S. owners of foreign firms from reporting beneficial ownership information to the federal government. The lawsuit, filed in the U.S. District Court for the District of Oregon, argues that the executive branch cannot use rulemaking to repeal requirements established by legislation.
The dispute centers on the 2021 Corporate Transparency Act, a law designed to combat illicit finance by requiring businesses to disclose their owners to the Treasury Department’s Financial Crimes Enforcement Network. In August 2026, the Trump administration finalized a rule rolling back these requirements. Treasury Secretary Scott Bessent stated at the time that the change was intended to eliminate a burdensome reporting requirement for millions of law-abiding business owners without compromising national security.
The coalition of states alleges that the administration’s new rule exempts more than 99.9% of the companies originally covered by the 2021 law. New York Attorney General Letitia James stated that the rollback allows the true owners of shell companies to remain anonymous. The lawsuit names Secretary Bessent, the Treasury Department, the Financial Crimes Enforcement Network, and the heads of the Departments of Justice and Homeland Security as defendants.
The outcome of this case affects small-business owners, corporate executives, and law enforcement agencies. According to the lawsuit, the rule exempts more than 99.9% of companies previously required to report ownership data—a figure representing millions of domestic and foreign-owned entities. For individual business owners, the rule removes a federal filing requirement.
State attorneys general and U.S. Senator Elizabeth Warren (D-MA) argue the reporting exemption changes the landscape of financial oversight, stating it increases the risk of fraud, drug trafficking, and the evasion of international sanctions. They contend that by allowing owners of shell companies to remain anonymous, the rule makes it more difficult for state and federal investigators to track illicit money. The administration maintains the change provides relief to business owners from what it characterizes as a burdensome requirement.
The legal challenge addresses the limits of executive power to modify or narrow the scope of laws passed by Congress through agency rulemaking. If the court rules in favor of the states, businesses may be required to resume ownership disclosures under the original 2021 standards. The Treasury Department has not yet issued a formal response to the lawsuit. Further court dates and deadlines for the administration to respond to the filing have not been reported.