New York and 20 other attorneys general are suing to block a Treasury Department rule that exempts domestic companies and U.S. owners of foreign companies from federal ownership disclosure requirements.
Attorney General Letitia James said the rule undermines the Corporate Transparency Act and removes information useful in criminal investigations and tax enforcement, according to a news release. The coalition is asking a court to declare the rule unlawful and prevent its implementation.
Congress passed the Corporate Transparency Act in 2021 to address anonymous shell companies. The law established requirements for domestic and foreign companies to report information about their owners to the Financial Crimes Enforcement Network, known as FinCEN, within the Treasury Department.
That information is intended to help state and federal law enforcement identify who controls companies used to conceal money or criminal activity. James said the new exemptions make it harder to trace illegal profits and stolen funds.
Exemptions reach nearly all previously covered companies
Shell companies typically have no employees or physical presence beyond a mailing address and produce no goods, according to the attorney general’s office. Networks of them can be used to obscure the identities and finances of their owners.
The office said those arrangements are used in tax evasion, financial fraud, money laundering and funding networks connected to terrorism, drug trafficking, human trafficking and political corruption. The lawsuit challenges the loss of disclosure requirements intended to help investigators trace such activity.
Millions of companies submitted ownership information in 2024, the first year of implementation. At that time, Treasury estimated that about 32.6 million companies would be covered, with roughly 5 million new eligible companies formed each year.
The Treasury rule issued in 2025 exempts all domestic companies and allows foreign companies to withhold the identities of U.S.-based owners, according to the coalition. James’s office said the administration’s estimates show more than 99.9% of companies that otherwise would face reporting requirements are now exempt.
The coalition also challenges Treasury’s announced plan to delete information already collected from companies that have become exempt. The attorneys general argue the department lacks legal authority to erase those records.
States challenge the rule’s legal basis
The states contend that the exemptions violate the Administrative Procedure Act by conflicting with the transparency law and Congress’s purpose in enacting it. They also argue the rule violates the Constitution’s separation of powers and Take Care clauses by effectively undoing legislation the executive branch is required to carry out.
James’s office said state and local investigators can use FinCEN records in civil and criminal cases. States also use ownership information to investigate taxes, and the coalition argues that allowing owners to conceal funds will make it easier to avoid payment.
Joining New York are Arizona, California, Colorado, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, North Carolina, Oregon, Rhode Island, Virginia, Washington, Wisconsin and the District of Columbia.
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