On April 3, 2023, Idaho Governor Brad Little signed into law House Bill 173 (“H 173”) which seeks to restrict certain foreign purchases of farmland located within the state. In 2023, the majority of states have proposed at least one piece of legislation that seeks to prohibit or restrict foreign investments and landholdings in land, specifically agricultural land, within the boundaries of their states to some degree. Idaho is one of four states—along with Arkansas, Utah, and Virginia—to enact a foreign ownership law in 2023.
Background
Ownership of U.S. land, specifically agricultural lands, by foreign persons or entities has been an issue that traces to the origins of the United States. Today, approximately eighteen states specifically forbid or limit nonresident aliens, foreign businesses and corporations, and foreign governments from acquiring or owning an interest in agricultural land within their state. To see a compilation of the various restrictions enacted by each state, check out the National Agricultural Law Center’s “Statutes Regulating Ownership of Agricultural Land” chart here.
Although these states have instituted restrictions, each state has taken its own approach. In other words, a uniform approach to restricting foreign ownership has not yet been established because state laws vary widely. For instance, each state’s statute may define “agricultural land” and “farming” differently, only restrict certain types of foreign investors, make distinctions between resident and nonresident aliens, allow foreign purchasers to acquire up to a certain acreage amount of farmland, and provide different enforcement procedures and penalties for alleged violators.
Most states have not enacted restrictions or prohibitions on foreign ownership of privately held agricultural land. Rather, most of these states expressly allow foreign ownership of real property within their state. Before the enactment of H 173, Idaho was a prime example of such a state. In general, these states provide foreign persons and entities the same real property rights as natural born citizens of their state. For example, Idaho state law previously permitted an “alien” to “take, hold, and dispose of property, real or personal.” Idaho Code Ann. § 55-103 (effective to April 2, 2023; repealed by H 173). Accordingly, with the enactment of H 173, certain foreign investors are prohibited from acquiring the state’s farmland.
H 173
Like the other seventeen states that have a foreign ownership law, Idaho takes its own approach to restricting foreign investments. Specifically, H 173 prohibits a “foreign government” and a “foreign state-controlled enterprise” from purchasing, acquiring, or holding a “controlling interest” in Idaho “agricultural land, water rights, mining claims, or mineral rights….” Although all foreign ownership laws prohibit or restrict foreign ownership of agricultural land, many states’ laws exempt certain foreign interests in oil, gas, and other mineral rights in the land. Unlike those states, H 173 expressly prohibits certain foreign acquisitions in not just agricultural land, but rights and claims to minerals and water on any land located within Idaho.
In general, the definitions contained in any piece of legislation are important because they provide context to how the words or phrases are to be understood throughout the legislative text. This is especially true for legislation that seeks to restrict certain foreign investors from purchasing specific types of real estate within the state. H 173 defines “agricultural land” as “land actively devoted to agricultural purposes” as provided in I.C. § 63-604, and “mineral right” as defined under I.C. § 47-701. A “water right” is a legal right to the “use of water for beneficial purposes.” I.C. § 42-230(e). Further, the law defines “mineral claim” as “a portion of land containing minerals that a miner has a right to occupy and possess for the purpose of extracting minerals.”
H 173 defines “foreign government” as a government other than the U.S. government and the governments of any U.S. state, territory, or possession. A “state-controlled enterprise” includes business entities and wealth or investments funds which a foreign government has a controlling interest. Under the law, a “controlling interest” means: (i) an ownership interest in an entity that is more than 50%, or (ii) 50% or less ownership interest in an entity, but a foreign government “directs the business and affairs of the entity without the requirement or consent of any other party.” Accordingly, an entity is a “state-controlled enterprise” restricted from acquiring Idaho agricultural land if a foreign government owns 50.1% or more interest in the enterprise, or an interest 50% or less in the business entity whose business decisions are controlled by a foreign government.
Like every foreign ownership law, H 173 contains exceptions to the restriction prescribed under the law. Even so, the exceptions under Idaho’s law are limited compared to several states’ foreign ownership laws. First, the law includes a “grandfather clause,” which exempts certain persons from the requirements of a law by allowing these persons to continue with the activities that were permissible before the implementation of the new law. Under H 173, foreign governments and foreign state-controlled enterprises that held an interest in agricultural land, water and mineral rights, and mining claims before April 2, 2023, may continue to own those rights and lands without being in violation of the law.
Second, the restriction prescribed under H 173 does not apply to a “foreign pension fund.” The law defines “foreign pension fund” as an entity or trust—created under the laws of a foreign government—which provides retirement or pension fund benefits. This definition expressly excludes trusts and entities “owned by or subject to a controlling interest of a sovereign wealth fund” (i.e., a state-owned investment fund). Thus, private foreign investment and trust companies are the types of entities generally exempt from the restriction under H 173.
Although H 173 now restricts foreign governments and state-controlled enterprises from acquiring farmland within the state, the law is silent on enforcement. Many states’ foreign ownership laws contain an enforcement provision. These states generally authorize their state’s attorney general to bring legal action against a suspected violator. Usually, if a foreign party is found to be in violation of the restriction, these states’ laws direct a judge to order the agricultural land be sold through judicial foreclosure or public auction. Essentially, H 173 does not contain a similar provision, meaning there are no specific procedure for the enforcement of the restriction prescribed under the law.
Conclusion
Arkansas, Idaho, Utah, and Virginia may not be the only states in 2023 to enact a law that restricts certain foreign acquisitions of land within their state. In fact, proposals in Montana (SB 203) and North Dakota (HB 1135) have been passed by the legislature but are not yet fully enacted. NALC is tracking each states’ foreign ownership proposal(s) and will update its Statutes Regulating Ownership of Agricultural Land compilation when there are changes to a state’s law.
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