Foreign Investments in Agricultural Land: FAQs & Resource Library

Over the past decade, foreign investments in agricultural land have grown. As a result, an interest in restricting and monitoring foreign ownership of U.S. agricultural land is growing significantly among federal and state lawmakers.  This page is intended to provide resources and answers to some frequently asked questions concerning foreign ownership and investments in private agricultural land. If you have a question that is not answered below, please contact us.

This information is provided for educational purposes only. If you have concerns that go beyond the scope of what has been discussed in any of the questions below, we encourage you to seek legal advice from a licensed attorney in your area. The questions are meant to provide general information only, and do not constitute any legal advice offered by the National Agricultural Law Center, nor act as a substitute for legal advice and counsel. This resource was last updated January 30, 2023.

 

Updated date

MAJOR TOPICS

Q: What is a “foreign ownership law”?

In general, a “foreign ownership law” is a law that restricts certain foreign individuals, foreign entities, or foreign governments from acquiring, transferring, holding, or investing in U.S. real estate, specifically including private agricultural land located within the U.S. For purposes of this resource, the following questions and accompanying answers focus on privately held agricultural land.

STATE LAWS

Q: Are there any states that ban foreign ownership of agricultural land?

There are no states with an absolute prohibition on foreign ownership, however, approximately fourteen states specifically forbid or limit nonresident aliens, foreign business entities, or foreign governments from acquiring or owning an interest in private agricultural land within the boundaries of their state. To view states’ laws restricting foreign ownership of private agricultural land, see NALC’s Statutes Regulating Ownership of Agricultural Land here.

Some states, such as Arizona, Hawaii, Idaho and Oregon have laws that prohibit foreign ownership of public real estate and farmland; however, only Oregon specifically restricts foreign individuals from purchasing public lands within the state. See Or. Rev. Stat. Ann. § 273.255 which permits “[a]ny individual who…is a citizen of the United States, or has declared an intention to become a citizen, may apply to purchase state lands.” Mississippi did have a law (Miss. Code Ann. § 29-1-75) restricting nonresident aliens and corporations from purchasing or owning public lands within the state, but this law expired on July 1, 2022.

Q: How many states have foreign ownership laws?

Approximately fourteen states have laws that seek to restrict to some degree foreign ownership or investments in private agricultural land within the boundaries of their state.

Q: What states have a foreign ownership law?

Currently, states that have a law prohibiting or restricting foreign ownership and investments in private farmland include: Indiana, Iowa, Kansas, Kentucky, Minnesota, Mississippi, Missouri, Nebraska, North Dakota, Oklahoma, Pennsylvania, South Carolina, South Dakota, and Wisconsin.

Other states, such as Georgia, Maryland, New Jersey, and Virginia have enacted statutes that restrict foreign persons from purchasing real estate within their state. However, these states’ laws only restrict an “alien” who is “not an enemy” or foreign governments “not at peace” with the U.S., meaning most foreign investors have the same property rights as the citizens of those states.

To view a compilation of each states’ laws restricting foreign ownership of land, specifically farmland, click here.

Q: Do states have similar foreign ownership laws?

Even though approximately fourteen states have foreign ownership laws, each state has taken its own approach to restricting foreign ownership of farmland within its borders. For example, some states define “agricultural land” and “farming” differently from other states, restrict only certain types of foreign investors, or allow foreign purchasers to acquire a certain acreage amount of farmland.

Q: Why do states’ foreign ownership laws vary?

State laws restricting foreign ownership vary widely and without a generalized or uniform approach likely because many of these states’ laws developed at different “political flashpoints” in our nation’s history. These flashpoints include:

  1. Colonia Period/Signing of the Declaration of Independence
  2. Late 1880’s through the turn of the century, including the enactment of the Territorial Land Act of 1887 (e., westward expansion of the U.S.)
  3. Early 20th century through post-WWII
  4. 1970s, which resulted in the enactment of the federal reporting statute known as the Agricultural Foreign Investment Disclosure Act (“AFIDA”) of 1978
  5. 2021 – Present

Q: What type of foreign investors are restricted under these state laws?

Because each state has taken its own approach to its foreign ownership law, many states restrict different types of foreign investors, such as foreign individuals or nonresident aliens, foreign businesses and corporations, or foreign governments. Additionally, some states restrict certain parties associated with a restricted foreign investor, such as an agent or trustee. For example, Indiana’s foreign ownership law restricts only foreign business entities from purchasing agricultural land while Oklahoma’s law restricts nonresident individuals and foreign businesses and corporations.

Q: How are states’ foreign ownership laws enforced? What are the penalties for noncompliance?

Some states’ foreign ownership laws contain provisions that assign enforcement authority to the state’s attorney general or “a district attorney of the county where the foreign-owned land is located.” Other states provide private enforcement of its foreign ownership law, meaning a resident of the state in which the farmland is located can file a lawsuit to enforce the restriction against a foreign party. These enforcement provisions generally direct the enforcing parties to file an escheat or forfeiture action against a foreign party suspected of violating a state’s foreign ownership law. If the land escheats or forfeits to the state, meaning the state takes title of the land, the foreign party is penalized by losing their legal interest in the agricultural land. Other states prescribe civil (monetary) penalties for noncompliance of its foreign ownership law.

Q: What states have recently proposed laws?

From 2021 through 2022, the following states have proposed legislation that seeks to restrict certain foreign investments in agricultural land located within the boundaries of their state: Alabama (SB 14), Arkansas (SB 312) (original version), California (SB 1084), Indiana (SB 388), Missouri (HB 1947; SB 791), Oklahoma (HB 1497), Tennessee (SB 1070; HB 1451), and Texas (HB 58; HB 69; HB 305).

As of January 2023, twenty states have proposed, or have plans to propose, legislation that seeks to prohibit or restrict foreign landholdings and investments in land—specifically private farmland—located within their state to some degree, which include:

The Arizona state legislature also proposed a restriction (HB 2376/SB 1115) on foreign governments and foreign government-owned entities from purchasing, leasing, holding, or otherwise acquiring an interest in public farmland within the state, not private agricultural land.

Q: Where any of these proposals enacted into law?

Of these states, Indiana was the only state to enact a law restricting certain foreign investments in the state’s agricultural land. To read the statutory language of Indiana’s restriction law, click here. Both chambers of California’s state legislature unanimously passed a bill (SB 1084) that would restricting foreign governments from owning agricultural land within the state, but Governor Newsom vetoed the bill. To learn more on California’s SB 1084, read NALC’s “California’s Attempt to Restrict Foreign Agricultural Land Investments” article here.

Arkansas’ SB 312 (enrolled version) was enacted into law, but the original version of the bill sought to restrict foreign investments in the state’s agricultural land. The original version of the bill included identical language and provisions contained in Missouri’s foreign ownership law, but this version is entirely different from the bill that was enacted. The version of SB 312 that was enacted is a reporting requirement law. Accordingly, this law simply requires certain foreign investors to submit to the Arkansas Department of Agriculture a copy of their federal Agricultural Foreign Investment Disclosure Act (“AFIDA”) report they submit to the U.S. Department of Agriculture (“USDA”). AFIDA, as discussed in detail below, is a federal reporting statute that requires certain foreign investors to disclose their U.S. agricultural landholdings.

Q: Are foreign ownership laws and corporate farming laws the same?

There are similarities in foreign ownership laws and corporate farming laws in that they both restrict certain corporations from acquiring, purchasing, or otherwise obtaining land that is used or usable for agricultural production. However, corporate farming laws restrict the power of foreign or domestic corporations from engaging in farming or agriculture. Proponents of corporate farming laws assert that these laws are aimed at protecting the economic viability of family farms from threats of competition with domestic and foreign corporate-owned or managed farms. Alternatively, proponents of foreign ownership laws generally assert these laws seek to restrict only foreign investments in agricultural land as a way to discourage or prevent foreign competition in agriculture, increased production costs, and possible threats to the agricultural supply chain. Like foreign ownership laws, corporate farming laws vary from state to state, but each establish a general prohibition on corporate farming activities.

The NALC’s “Statutes Regulating Ownership of Agricultural Land” chart, which is available here, identifies the states that have enacted corporate farming laws and provides the relevant state constitutional and statutory provisions. More resources on corporate farming laws are available on NALC’s website here and here.

AGRICULTURAL FOREIGN INVESTMENT DISCLOSURE ACT (“AFIDA”)

Q: Is there a federal foreign ownership law?

Currently, no federal law exists that restricts foreign persons, entities, or governments from acquiring or holding U.S. agricultural land. While there are approximately fourteen states that specifically forbid or limit foreign ownership of farmland within their state, the federal government only monitors certain foreign acquisitions and landholdings in agricultural land through the Agricultural Foreign Investment Disclosure Act (“AFIDA”) of 1978. The statutory text of AFIDA is in the U.S. Code at 7 U.S.C. § 3501 et seq.

Q: What is AFIDA?

Enacted by Congress in 1978, AFIDA established a nationwide system for collecting certain information about foreign investments and ownership of U.S. agricultural land. Under AFIDA, a “foreign person who acquires or transfers any interest…in agricultural land” is required to disclose their interest in the land to the U.S. Department of Agriculture (“USDA”). Thus, a foreign person who acquires, holds, transfers, or disposes an interest in agricultural land within the U.S. is required to disclose certain information concerning such transactions and investments. This data is compiled into an annual publication that reports the amount of cropland, pastureland, forestland, and other types of agricultural land that is foreign owned. To learn more about AFIDA, read NALC’s article titled Answering to AFIDA: Reporting Requirements of Foreign Agricultural Land Investments here.

Q: Why did Congress enact AFIDA?

According to a U.S. House Report from the Committee on Agriculture (H.R. Rep. No. 95-1570, 2d Sess. (1978)) discussing AFIDA prior to its enactment, Congress was concerned with the economic strains many family farmers were experiencing and the declining number of family-farm operations across the nation. According to the report, “[i]ncreased land prices, higher taxes, escalating costs of agricultural inputs, greater transportation expenses, and other operating costs have combined with low farm product prices to push many farm families to the brink of economic disaster.” The Committee determined that “[i]ncreased foreign investments which forces up prices of U.S. agricultural land is seen by many as” a factor that adds to the economic pressures affecting family-farm operations.

However, the House Report asserts that determining the impact of foreign ownership and investments in farmland “is difficult to gauge…because of the lack of data on the nature, magnitude, and scope of foreign investment activity.” Specifically, the Committee pointed to a study conducted by the General Accounting Office (“GAO”)—published on June 12, 1978—that found that no accurate data exists on foreign ownership of agricultural land, and that none was likely to be produced through the current state and local recording efforts. As a result, Congress enacted AFIDA to collect this data in order to monitor foreign investments in U.S. agricultural land.

Q: Are there federal regulations?

Section 3507 of AFIDA directed USDA to implement regulations “for the purposes of carrying out the provisions” of AFIDA. These regulations are located in the Code of Federal Regulations at 7 C.F.R Part 781.

Q: Is there an agency handbook?

Yes. The Farm Service Agency (“FSA”) has published a handbook to assist the agency in administering the policies, procedures, and requirements of AFIDA. This handbook is available on FSA’s website here.

Q: How do foreign persons report their U.S. agricultural landholdings?

In general, foreign persons are required to disclose their interest(s) in U.S. farmland by delivering a FSA-153 report to the FSA county office in the county where the tract of land is located within 90 days after the date of such acquisition or transfer. However, some transactions are complex or require multiple filings, usually when a tract of land is located in multiple counties, or a foreign person has acquired separate tracts in multiple counties. In these instances, FSA’s AFIDA handbook explains that USDA may grant permission to a foreign person to file their reports directly with the agency.

Q: How are AFIDA disclosures used?

The information collected from these disclosures is compiled into an annual report and made public by FSA. As of the date of this writing, the most recent report contains data on foreign ownership of U.S. farmland through December 31, 2020. This report and all previous AFIDA reports are available on FSA’s website here. Section 3505 of AFIDA requires FSA to deliver, every 6 months, a copy of the disclosures to each state department of agriculture (or appropriate state agency) involving agricultural land within its state during the 6-month period.

Q: Are there state-level reporting requirements?

Yes. Some states (Arkansas, Illinois, Indiana, Iowa, Kansas, Maine, Minnesota, Missouri, Nebraska, North Carolina, North Dakota, Ohio, and Wisconsin) require foreign persons and entities to report their purchase or ownership interest in farmland within their state. These state reporting statutes often correspond with the federal reporting law under AFIDA. Pennsylvania and South Dakota do not have reporting requirements separate from AFIDA; rather, these states have enacted laws that require its states’ department of agriculture to review AFIDA data to ensure compliance with its states’ restriction on foreign ownership of agricultural land. These state-level reporting statutes are compiled on the NALC’s website here.

Q: Who must report under AFIDA?

AFIDA explicitly states that “[a]ny foreign person who acquires or transfers any interest…in agricultural land” is required to disclose the transaction to USDA. 7 U.S.C. § 3501(a). Foreign persons with a direct or indirect interest in agricultural land are required to disclose this interest under AFIDA.

Q: What is a “direct” and “indirect” interest in agricultural land under AFIDA?

A direct interest in farmland means the foreign person has title to land. On the other hand, foreign persons generally have an indirect interest when they hold an ownership interest in an entity, such as a business or corporation, that has title to the agricultural land. In either case, individuals and entities that fall within the scope of “foreign persons” under AFIDA are likely required to disclose their ownership or leasehold interest.

Q: What is a “foreign person” under AFIDA?

AFIDA defines “foreign person” as an individual who is not: “a citizen or national of the United States”; “a citizen of the Northern Mariana Islands or the Trust Territory of the Pacific Islands”; or someone “now lawfully admitted to the United States for permanent residence, or paroled into the United States, under the Immigration and Nationality Act.” 7 U.S.C. § 3508(3)(A).

Additionally, the term “foreign person” includes foreign governments and entities organized under the laws of a foreign government or its principal place of business is located outside the U.S. Further, a U.S. entity is considered a “foreign person” under AFIDA if a foreign individual, entity, or government holds “a significant interest or substantial control” over the domestic entity. 7 U.S.C. § 3508(3)(C). Therefore, a “foreign person” subject to the reporting requirement under AFIDA includes nonresident individuals, foreign businesses and corporations, and foreign governments.

Q: What is a “significant interest or substantial control”?

Foreign persons have a “significant interest or substantial control” of a domestic entity when a foreign person or multiple foreign persons who are “acting in concert” collectively hold 10% or more interest in the domestic entity. Foreign persons that “may not be acting in concert” have a “significant interest or substantial control” when they own an interest of 50% or more in a domestic entity. See 7 C.F.R. § 781.2(k).

Q: How does AFIDA define “agricultural land”?

Under AFIDA, the term “agricultural land” means “any land located in one or more States and used for agricultural, forestry, or timber production purposes.” 7 U.S.C. § 3508(1). AFIDA’s associated regulations further define “agricultural land” as land totaling 10 or more acres in the aggregate that is used for forestry production or land currently used, or used within the past 5 years, for farming, ranching, or timber production. 7 C.F.R. § 781.2(b). Land totaling less than 10 acres in the aggregate that generates annual gross receipts exceeding $1,000 from the sale of agricultural or timber products is considered “agricultural land.” Land used for forestry production is considered “agricultural land” when 10% of the land is “stocked by trees of any size, including land that formerly had such tree cover and that will be naturally or artificially regenerated.” 7 C.F.R. § 781.2(b).

In general, farming, ranching, and timber production means growing crops, livestock, or trees. Under AFIDA, farming, ranching, and timber production includes activities listed under the U.S. Department of Labor’s Standard Industrial Classification Manual except for the activities set forth in Major Group 07 (Agricultural Services), Industry Group 085 (Forestry Services), and Industry Group 091 (Commercial Fishing). Some activities listed in these classifications include soil preparation services, crop services, other animal services, contracted timber production services, forestry marketing and management plans, and catching or taking of certain fish for a commercial purpose. Accordingly, engaging in these types of activities would not warrant an AFIDA disclosure.

Q: How does AFIDA define “any interest” in agricultural land?

Under AFIDA, “any interest” in agricultural land means “all interest acquired, transferred or held in agricultural lands by a foreign person.” 7 C.F.R. § 781.2(c). An “interest” also includes leaseholds that are 10 or more years. There are certain types of ownership or investment interests in agricultural land that are excluded from the meaning of “any interests,” such as security interests, leases less than 10 years, contingent future interests, and interests solely in mineral rights. For a complete list of the types of interests excluded from AFIDA’s reporting requirement, see 7 C.F.R. § 781.2(c)(1)-(6).

Q: What information must a foreign person include in their disclosure?

The information a foreign person must include in their disclosure is listed at 7 U.S.C. § 3501(a) – (b), (e), (f), 7 C.F.R. § 781.3, and form FSA-153. Depending on the type of foreign person involved in a transaction for agricultural land, USDA may require the party to provide further information.

Q: What are the penalties for noncompliance under AFIDA?

Foreign persons that are determined by USDA to have violated AFIDA by either failing to report, submitting an incomplete report, or reporting false or misleading information may be subject to a fine up to 25% of the foreign person’s interest in the agricultural land. Late filings may be penalized at 0.1% of the fair market value of the foreign person’s interest in the land for each week the violation continues, up to 25%.

Q: What type of land is under foreign ownership?

AFIDA divides “agricultural land” into four different categories for the report: (1) cropland, (2) pasture, (3) forestland, and (4) other agricultural acreage. According to the most recent AFIDA data, which contains foreign interests through December 31, 2021, 47% of the reported foreign interests in U.S. land are timber or forest, 29% in cropland, and 22% in pastureland and other agricultural land.

Q: How much U.S. agricultural land do foreign persons own?

As of December 31, 2021, foreign persons reported holding an interest in over 40 million acres of U.S. agricultural land. This accounts for 3.1% of all privately held U.S. agricultural land and 1.8% of all land within the U.S. In the prior year’s data, foreign persons reported interests in nearly 37.6 million acres (or 2.9%) of private agricultural land.

Q: What countries are represented by foreign investors of farmland?

There are foreign investors from over 100 different countries that have an interest in U.S. land. Canadian investors own the largest amount of agricultural and non-agricultural acreage in the U.S. at 12.8 million acres, which represents 31% of all foreign-owned land. Investors from the Netherlands own 12% of all foreign-owned land, Italy is at 7%, and the United Kingdom and Germany each representing 6%.

Q: How much U.S. land does China own?

The most recent AFIDA data reports that China owns 194,179 agricultural acres within the U.S. According to this report, China owns 383,935 acres of agricultural and non-agricultural land, which is less than 1% of all foreign-owned acres.

Q: What state has the highest agricultural acreage of foreign ownership?

The most recent AFIDA data reports that Texas has the most foreign-held agricultural land at 4,719,144 acres, which is 3.1% of all the state’s private agricultural land. Texas is followed by Maine (3,504,096 acres), Alabama (1,780,937 acres), Colorado (1,766,890 acres), and Oklahoma (1,529,397 acres). To view all foreign investments by state, see Report 1 (pp. 12-13) of FSA’s most recent AFIDA report, which is available here.

Q: What state has the highest percentage of foreign ownership?

Through December 31, 2021, Maine has 20.1% of its private agricultural land held by foreign persons. Hawaii has the second highest percentage of foreign-held agricultural land (9.2%), followed by Alabama (6.3%), Florida (6.3%), and Louisiana (5.8%). Thus, these states account for approximately 20.9% of foreign-owned agricultural land within the U.S.

Q: Is Congress considering amendments to any provisions of AFIDA?

Yes, there has been a few proposals introduced in Congress that seek to amend certain provisions of AFIDA. For example, the Farmland Security Act of 2022 (S. 4667) would establish a public database that updates foreign investments in U.S. agricultural land in real time. Another proposal, the Securing America’s Land from Foreign Interference Act (S. 4703), seeks to revise the penalty provision under AFIDA. Under current law, persons determined by USDA to have violated AFIDA are subject to a fine up to 25% of the foreign person’s interest in the agricultural land. This bill seeks to amend this provision by directing USDA to impose a fine no less than 10%, or more than 25%, of the fair market value of a violator’s interest in the agricultural land.

Other measures seeking to amend certain provisions of AFIDA include the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2023 (S. 4661) and the Security and Oversight for International Landholdings Act (“SOIL Act”) of 2022 (S. 4821).

Another bill known as the United States Innovations and Competition Act of 2021 (H.R. 4521) sought to amend AFIDA by including a new section to the law that would require USDA to establish and update every 90 days a database listing foreign landholdings of agricultural land within the U.S. However, this provision was not included in the final version of the bill that was passed in Congress.

On December 29, 2022, a spending package for FY23 known as the Consolidated Appropriations Act, 2023 (“CAA”) (H.R. 2617) was signed into law. Section 773 of the legislation contained amendments to AFIDA.

Q: What changes did the Consolidated Appropriations Act, 2023 bring to AFIDA?

First, the CAA requires USDA to report to Congress on “foreign investments in agricultural land in the United States, including the impact foreign ownership has on family farms, rural communities, and the domestic food supply.” A similar type of report was required under the original language of AFIDA at 7 U.S.C. § 3504, but that provision was repealed in 1998. As required under the CAA, USDA will again be required to report certain data and analysis concerning foreign ownership and investments in U.S. farmland to Congress.

Second, the law requires USDA, within three years, to establish a process so that “foreign persons” required to report their agricultural landholdings under AFIDA can submit their disclosure electronically. Currently, foreign persons required to disclose their interests in U.S. farmland to USDA must generally complete and submit form FSA-153 to the FSA office in the county where the land is located. Thus, under the direction of the CAA, USDA must make disclosures available for online submission.

Third, the CAA directs USDA to establish “an internet database that contains disaggregated data from each disclosure submitted.” The database will include data from every disclosure submitted to USDA since the implementation of AFIDA, and all future disclosures submitted to the agency. The law requires USDA to organize the database information into two separate categories of foreign persons: (1) foreign individuals and (2) foreign persons that are not individuals or a government (i.e., foreign business entities). For investments of a foreign individual, the database will indicate and be organized based on the citizenship of the individual. If the “foreign person” is a foreign business, the data will be organized based on (i) the nature of the business entity; (ii) the country where foreign business entity is organized; and (iii) its principal place of business. Although the CAA requires USDA to establish a database that provides information concerning foreign ownership and investments in U.S. agricultural land, the law requires the agency to implement a “process to ensure the protection of personally identifiable information.”

Q: What other actions has Congress taken concerning AFIDA?

Aside from these legislative proposals, Congress has also requested an investigation in foreign farmland ownership. On October 1, 2022, U.S. House Republicans sent a letter to the Governmental Accountability Office (“GAO”) requesting a study on foreign transactions and acquisitions in U.S. agricultural land and its “impact on national security, trade, and food security.” The group of policymakers also requested this study to evaluate USDA’s procedures for collecting AFIDA data and whether these procedures ensure accurate disclosure of foreign ownership in U.S. farmland. The letter—including a complete list of issues House Republicans want GAO to address in a study—is available on the Republican’s House Committee on Agriculture website here.

Q: Has GAO conducted similar studies in the past?

This is not the first time Congress has requested GAO to conduct a study concerning foreign investments in U.S. agriculture. For decades, several policymakers, congressional committees and subcommittees, and federal agencies have requested GAO to analyze and assess information and data on foreign investments in U.S. real estate, specifically agricultural land. As a result, dating back to 1978, GAO has published several reports related to foreign investments and what effects these investments have on the U.S. Some of these reports are listed by date below:

FEDERAL PROPOSALS

Q: Is there a federal foreign ownership restriction?

Currently, no federal law exists that restricts foreign persons from acquiring or holding U.S. agricultural land. The federal government only monitors foreign investments in U.S. agricultural land through AFIDA.

Q: Has Congress proposed a federal restriction?

Yes, there were numerous proposals introduced in the 117th Congress (2021-2022) that sought to increase oversight and restrict foreign investments and acquisitions of U.S. land. Some of these measures sought to only prohibit the Chinese government and Chinese-owned entities from owning or investing in agricultural land, such as the Countering Communist China Act (H.R. 4792) and the Prohibition of Agricultural Land for the People’s Republic of China (H.R. 7892). Other measures (H.R. 4502; H.R. 8239; H.R. 8294) sought to compel USDA to take steps to prevent companies owned by China, Russia, North Korea, and Iran from purchasing agricultural land within the U.S. The 117th Congress also considered measures that sought to restrict foreign investments not only in agricultural land, but all public and private real estate located in the U.S., such as the Securing America’s Land from Foreign Interference Act (S. 4703/H.R. 3847) and the Protecting our Land Act (H.R. 8652).

For more information on the federal proposals introduced in the 117th Congress, read NALC’s article “Congressional Considerations on Restricting Foreign Investments in U.S. Agriculture” here.

Currently, the 118th Congress (2023-2024) is considering two bills that seek to restrict certain foreign purchases and acquisitions of U.S. land. The Protecting our Land Act (H.R. 212), which was introduced in the 117th Congress, seeks to require the president to “direct the heads of Federal departments and agencies to promulgate rules and regulations to prohibit the purchase of public of private real estate…by a foreign adversary, a state sponsor of terrorism,…any agent or instrumentality…or any person owned or controlled by, or affiliated with” such foreign parties. Additionally, Congress is considering the Securing America’s Land from Foreign Interference Act (H.R. 334)—which was also considered in the previous legislative session—that directs the president to “take such actions as may be necessary to prohibit the purchase of public and private real estate…by members of the Chinese Communist Party and entities that are under the ownership, control, or influence” of the Chinese government.

Q: What about the 2023 Farm Bill?

Because federal policymakers have become increasingly concerned about foreign investments in U.S. agricultural land, coupled with the number federal foreign ownership proposals being considered in Congress, it is likely a foreign ownership restriction will be proposed as part of the upcoming 2023 Farm Bill. The information provided here will be updated once more information is available.

MISCELLANEOUS

Q: Can foreign persons participate and receive benefits through USDA programs? What about foreign persons participating in USDA programs?

There are some USDA-administered programs, such as certain Disaster Assistance Programs and Market Facilitation Program, which foreign persons are not eligible to participate. Other farm programs, like the Agricultural Risk Coverage and Price Loss Coverage programs, exclude foreign persons from receiving program benefits unless they satisfy the “foreign person rule.” To satisfy this rule, a foreign person must contribute significant capital, land, and labor to a farming operation in order to receive program benefits.

Q: Is Congress considering any proposals to prevent foreign participation in farm programs?

Yes, there is legislation that has been introduced in the 117th Congress (2021-2022) that seeks to restrict foreign persons from participating in certain USDA-administered programs. For example, the Countering Communist China Act (H.R. 4792) seeks to restrict farmland owned by China or companies owned by China from participating in USDA programs. Another bill, known as the Farm Credit for Americans Act of 2022 (S. 4954), seeks to amend the Farm Credit Act by making foreign persons ineligible for “any credit or financial services provided by a Farm Credit System institution.”

For more information on recent federal proposals to restrict foreign persons from investing and participating in the agricultural sector, read the NALC’s “Congressional Considerations on Restricting Foreign Investments in U.S. Agriculture” here.

Q: Has Congress proposed legislation to increase oversight of foreign investments in agriculture?

During the 117th Congress, a number of bills were introduced that sought to amend the Defense Production Act (“DPA”) of 1950 to place the Secretary of USDA in the Committee on Foreign Investment in the United States (“CFIUS”). The proposals that sought to add USDA as a member of CFIUS include:

  • Foreign Adversary Risk Management Act (“FARM” Act) (H.R. 5490)
  • Agricultural Security Risk Act (H.R. 3413/S.1755)
  • Food Security is National Security Act (S. 3089)
  • Promoting Agriculture Safeguards and Security Act (“PASS” Act) (H.R. 8274/S. 4786)
  • Security and Oversight for International Landholdings Act (“SOIL Act”) of 2022 (S. 4821)

For a detailed explanation of the FARM Act, read NALC’s “Who Owns the FARM: Foreign Investment in US Agriculture” article here.

Q: What is CFIUS?

CFIUS is a multi-government agency entity that is authorized by the DPA (50 U.S.C. § 4565) to review certain transactions involving foreign investments and acquisitions of American companies and real estate to determine whether there is a threat to national security. Essentially, CFIUS has the power to suspend, renegotiate, and impose conditions to transactions (whether pending or already completed) that may pose a risk to the national security of the U.S. In other words, the Committee uses these measures to mitigate any threat to national security that arises from a transaction. Transactions that may pose a risk to the national security, for example, are investments and acquisitions of critical infrastructure, such as transportation, telecommunication, public health, and energy. CFIUS also closely reviews investments in critical technologies. In general, these technologies are created or used by certain U.S. businesses and industries that are essential to the nation’s economic and national security.

Q: How does adding USDA as a member of CFIUS increase oversight of foreign investments in agriculture?

Specifically, these bills seek to require CFIUS to consider agriculture-specific criteria when determining whether a foreign investment poses a risk to the United States national security. For example, some proposals incorporate provisions that direct CFIUS to review or investigate transactions that could result in foreign control of a U.S. business that engages in agriculture. Other proposals seek to include “security of food and agriculture systems” and “biotechnology related to the agriculture sector” as “critical infrastructure under the DPA. As a result, this would place the agricultural industry and food supply chains as areas CFIUS can consider as it relates to national security, meaning agriculture and food security will be considered as matters of national security. According to some sponsors of these bills, placing USDA as a CFIUS member will provide leverage to protect the interests of the agricultural industry in foreign investments and acquisitions of U.S. agricultural businesses.

Q: Why are there foreign investments in states that have enacted a foreign ownership law?

Each state that currently restricts foreign ownership includes exceptions to their restriction. In other words, states’ laws exempt certain foreign parties, agricultural practices, landholdings, and land use activities from the restriction. Many of these states’ laws include an acreage limit or cap to its restriction. In other words, a state’s foreign ownership law will only restrict a foreign investment in farmland if the investment exceeds a specified number of acres. For example, Wisconsin’s foreign ownership law caps foreign ownership to 640 acres before the restriction applies.

Some states also permit foreign persons to convert agricultural land into some use other than farming. Other states have an “estate exception” for situations where a foreign person obtains ownership of agricultural land by inheritance or through the terms of a person’s will. Further, other states’ laws permit foreign persons to acquire and hold title to farmland resulting from their enforcement of a lien against the property.

Additionally, foreign persons obtain an interest in real estate using different types of business entities and trusts that invests in property, such as a real estate investment trust (“REIT”).

Q: What is a REIT?

In general, a REIT is an entity that invests, owns, and operates real estate that generates income. Created in 1960 with the enactment of the REIT Act (a provision of the Cigar Excise Tax Extension Act), REITs were established to provide real estate investors the same benefits offered to mutual funds investing in stocks. REITs invest in various types of real property, such as office buildings, housing units, farmland, and forestland. The income generated from REIT-owned property is then distributed to its investors. Thus, REITs provide persons the ability to invest in real estate without having to hold the property directly.

Investing in REITs are sometimes attractive to foreign investors for a couple of reasons. First, a foreign person investing in a REIT is not taxed on their worldwide income, just the dividends from their REIT investment. Second, investing in REITs permit foreign investors the ability to hold an ownership interest in U.S. property without having to manage the day-to-day activities of the property. In other words, foreign persons do not have to reside—or spend a significant number of days—in the U.S. to profit on income-producing U.S. property.

For more information on REITs and foreign investments in REITs, see the Congressional Research Service’s article titled Real Estate Investment Trusts (REITs) and the Foreign Investment in Real Property Tax Act (FIRPTA): Overview and Recent Tax Revisions here.

Q: What are some resources to learn more on foreign ownership of agricultural land and foreign investments in U.S. agriculture?

NALC Publications
Other Publications and Resources
Statutes and Regulations