In recent years, a growing number of states have enacted laws restricting foreign ownership of agricultural land. South Dakota is among the states that has enacted limitations on foreign ownership of agricultural land located within the boundaries of the state (codified at South Dakota Codified Laws §§ 43-2A-1 to 43-2A-8). During the 2026 legislative session, the South Dakota state legislature enacted Senate Bill 40 (“SB 40”), which becomes effective July 1, 2026, amends certain provisions of the state’s existing foreign ownership law.
Background & Existing Law
During the 2024 legislative session, the South Dakota state legislature expanded the state’s foreign ownership restriction with the enactment of House Bill 1231 (“HB 1231”). As discussed in this NALC article, HB 1231 clarified key definitions, extended the restriction to certain foreign business entities, and established reporting and enforcement procedures under the law. The legislation also imposed reporting requirements tied to the federal Agricultural Foreign Investment Disclosure Act (“AFIDA”) and directed state agencies to refer potential violations to the attorney general for enforcement.
Prior to HB 1231, South Dakota law restricted an “alien” and certain foreign governments from acquiring agricultural land within the state. However, the statute did not define key terms such as “alien” or “foreign government,” and the restriction did not clearly apply to foreign business entities. HB 1231 addressed these gaps by defining the types of foreign investors subject to the restriction, while also expanding the state’s restriction to certain business entities with foreign ownership interests.
Essentially, the legislation sought to restrict a “prohibited entity”—which includes certain non-U.S. citizen or resident individuals, foreign business entities, and foreign governments of China, Cuba, Iran, North Korea, Russia, or Venezuela—from owning agricultural land located within the state. The law also restricts, with some exceptions, a prohibited entity from leasing or holding an easement on South Dakota agricultural land. The exceptions include leases used exclusively for agricultural research involving no more than 320 acres or leases used for contract feeding of livestock at an animal feeding operation operated by a family farm unit, family farm corporation, or an authorized farm corporation.
The existing state foreign ownership law places some restriction on foreign individuals, business entities, and governments that are not of the six “prohibited entity” countries. Specifically, non-prohibited entity foreign investors are limited to owning up to 160 acres of agricultural land located within the state. Under the existing law, exceptions to this acreage limitation include agricultural land acquired by devise—a gift of real property made through a valid will—or inheritance and for agricultural land held as security for
indebtedness. In other words, foreign individuals, businesses, and governments that acquired agricultural land by devise, inheritance, or enforcement of a security interest were exempt from the 160-acre limitation. Additionally, these investors were not subject to limitations on leaseholds or holding an interest in easements on agricultural land, and the restriction does not apply to foreign individuals or entities whose right to hold land is secured by a treaty established by the U.S. government.
SB 40 Modifies Acreage Limitation Exception
SB 40 amended South Dakota’s foreign ownership restriction by narrowing the exceptions to the 160-acre ownership limitation for non-prohibited entity foreign owners. Prior to the amendment, the statute excluded both agricultural land acquired by devise or inheritance and land held as security for indebtedness from the acreage limitation. SB 40 removes the exception for agricultural land acquired through devise or inheritance. As a result, agricultural land obtained by devise or inheritance now counts toward the 160-acre ownership limit applicable to non-prohibited entity foreign investors. The exception for acquiring an interest in agricultural land through enforcement of a security interest remains unchanged.
Amendments to Enforcement and Penalty Provisions
SB 40 also amends the enforcement provisions under the state’s foreign ownership law. Like most states’ foreign ownership laws, South Dakota’s law contains enforcement and penalty provisions. Under existing law, agricultural land owned in violation of the chapter is forfeited to the state, and any agricultural land lease or easement held by a prohibited entity in violation of the statute is terminated.
The South Dakota Attorney General is responsible for enforcing forfeiture actions, which must be brought within three years after evidence of a violation is referred to the attorney general. The amendments under SB 40 add provisions addressing situations where agricultural land is acquired by devise or inheritance and a minority ownership interest violates the statute. In those circumstances, only the violating minority owner’s interest share is subject to forfeiture rather than the entire property interest. The minority owner in violation of the restriction is subject to a civil penalty equal to the fair market value of their interest share in the agricultural land.
SB 40 further establishes a process for handling fractional interests forfeited to the state. When real property is subject to forfeiture, the state obtains legal title, meaning it acquires ownership of the property, and generally sells the property through a public auction. However, under SB 40, any fractional interest forfeited must first be made available to the other equitable owners of the property at fair market value. The legislation gives the attorney general authority to determine the fair market value through an appraisal or by using twice the assessed taxable valuation of the land.
Reporting Requirement Penalties
Like many states’ foreign ownership laws, South Dakota’s law requires certain foreign investors to report certain information concerning their agricultural land interests to state authorities. Prior to SB 40, certain foreign persons required to file a report under AFIDA were required to submit a duplicate copy of that report to the South Dakota Department of Agriculture and Natural Resources. Under AFIDA, certain foreign persons with an interest in agricultural or forestland located within the U.S. are required to disclose certain information about their interest in the land. For more information on AFIDA, click here.
While SB 40 does not amend the reporting requirement, it does establish a new enforcement mechanism and penalty for foreign persons who fail to properly report their AFIDA disclosure to the state. Under the legislation, if a foreign person fails to file a required AFIDA report with the state, the state’s attorney general may impose a civil penalty of up to 10% of the fair market value of the agricultural land interest involved. The law also authorizes the attorney general to bring an action in a circuit court to collect the penalty from a foreign person who fails to properly file their disclosure.
Conclusion
South Dakota’s SB 40, which goes into effect on July 1, 2026, amends certain provisions of the state’s existing foreign ownership law. Specifically, the legislation removes the inheritance exception to the 160-acre ownership limitation, establishes new enforcement provisions addressing minority ownership interests obtained through inheritance, and creates civil penalties for foreign persons who fail to properly submit required AFIDA reports to the state. Although the legislation does not substantially expand the categories of restricted foreign investments in farmland, SB 40 continues the state’s efforts to strengthen enforcement and improve reporting compliance related to foreign agricultural landholdings.
To read SB 40, click here.
To read NALC articles discussing foreign investments in U.S. agriculture, click here.
To learn more about foreign ownership of U.S. land, click here.
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