Lansing, Michigan – A federal database built to help investigators follow hidden money could soon lose almost all of the businesses it was designed to track.
Michigan Attorney General Dana Nessel says that would not simply weaken the system, it would undermine a law Congress already passed.
Nessel has joined a coalition of 20 states and the District of Columbia in a lawsuit challenging the Trump administration’s actions under the Corporate Transparency Act, arguing that federal officials cannot effectively erase the law through sweeping exemptions and destruction of existing records.
The dispute centers on the Corporate Transparency Act, a bipartisan law enacted in 2021. It requires covered businesses to report information about the people who own or control them to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network, commonly known as FinCEN.
That ownership database was intended to give law enforcement another tool for tracing suspicious financial activity, locating stolen assets and investigating corruption, including bribes and political payoffs.
According to the multistate lawsuit, however, the Trump administration dramatically narrowed the law’s reach in 2026. An August rule exempted nearly all businesses from the reporting requirements.
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The states say FinCEN’s changes leave about 99.9% of businesses outside the compliance system.
The coalition is also challenging FinCEN’s plan to delete ownership information that businesses have already submitted. State officials argue those records could contain information relevant to unresolved criminal investigations and other financial misconduct.
“If this administration is allowed to gut the Corporate Transparency Act and erase important records, a critical safeguard against financial misconduct will be stripped away,” Nessel said.
“The federal government doesn’t get to circumvent a law it no longer wishes to enforce. We join this action to send the message that companies guilty of committing corruption, financial crimes and fraud will not get a free pass.”
The lawsuit argues that FinCEN exceeded its authority and violated both the Corporate Transparency Act and the Administrative Procedure Act.
Among the states’ allegations, the coalition says FinCEN failed to follow required procedures before changing the reporting rules, acted arbitrarily without providing an adequate explanation for its decision and did not properly consult with the secretary of Homeland Security and the U.S. attorney general before granting the broad exemptions.
The case therefore goes beyond a disagreement over how aggressively the federal government should enforce financial disclosure rules. The states are asking the court to decide whether an executive agency can exempt nearly an entire regulated population from requirements imposed by Congress.
The coalition wants the court to reject FinCEN’s rule and require the agency to continue collecting and maintaining beneficial ownership information for use by law enforcement.
Michigan is joined in the challenge by attorneys general representing states including Arizona, California, Colorado, Delaware, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Virginia, Washington and Wisconsin, along with the District of Columbia.
For Nessel and the other plaintiffs, the immediate goal is clear: preserve both the reporting requirement and the records already collected before the federal government can dismantle the database.