21 State Attorneys General Sue Treasury: Challenge CTA Exemptions

• A coalition of 21 state attorneys general has filed a lawsuit against the Treasury Department in the U.S. District Court for the District of Oregon.
• The lawsuit challenges a final rule issued by FinCEN on March 21, 2025, which creates new exemptions from beneficial ownership reporting.
• The challenged rule eliminates reporting requirements for domestic companies and certain U.S. owners of foreign entities, and plans to purge existing data.
• The attorneys general argue these exemptions violate the Corporate Transparency Act, the Administrative Procedure Act, and constitutional principles.
• The states seek to have the rules declared unlawful, vacated, and to prevent the deletion of beneficial ownership information.

The attorneys general contend that these exemptions disregard congressional intent and undermine the Corporate Transparency Act's objective of combating financial crimes.

A coalition comprising 21 state attorneys general has initiated legal action against the Treasury Department, challenging new regulations that exempt certain entities from beneficial ownership information reporting. The lawsuit was filed in the U.S. District Court for the District of Oregon and names the Treasury Department, its officials, U.S. Attorney General Todd Blanche, and Homeland Security Secretary Markwayne Mullin as defendants.

The core of the dispute centers on a final rule issued by the Financial Crimes Enforcement Network (FinCEN), a subagency within the Treasury Department, on March 21, 2025. This rule, according to the attorneys general, represents a significant reversal, as it eliminates reporting requirements for domestic companies and certain U.S. owners of foreign entities. Furthermore, the challenged regulation includes provisions to delete all beneficial ownership records previously collected, a move that has drawn strong opposition from the plaintiff states.

The Corporate Transparency Act (CTA), which became effective on January 1, 2024, mandates the collection of beneficial ownership information (BOI) to identify the true owners of corporations, particularly those operating through complex or secretive shell structures. This measure was designed to assist law enforcement in combating financial crimes such as money laundering and illicit financing. However, the coalition asserts that the final rule introduces two entirely new exemptions not contemplated by Congress: one for all U.S.-formed entities and another for foreign entities regarding their U.S. owners.

The attorneys general argue in their 54-page complaint that these exemptions are unlawful and exceed the department's authority. They contend that the Treasury Department ignored congressional intent, thereby violating the Administrative Procedure Act (APA) by promulgating rules that are

This lawsuit introduces significant uncertainty regarding the scope of beneficial ownership information reporting under the Corporate Transparency Act. Lawyers and compliance officers should closely monitor its progression, as the outcome will directly determine which entities are subject to reporting requirements and whether previously collected data will be purged, impacting compliance strategies.

Source: Original reporting via Courthouse News Service