In recent years, a growing number of states have enacted laws restricting foreign ownership of agricultural land and other real property. Tennessee is among the states that have adopted restrictions on certain foreign investments in land located within the boundaries of the state (codified under Tenn. Code Ann. §§ 66-2-301 through 66-2-309). During the current legislative session, the Tennessee state legislature enacted Senate Bill 2233 (“SB 2233”) and Senate Bill 2424 (“SB 2424”), both of which amend portions of the state’s existing foreign ownership framework. Essentially, these amendments expand the restriction to additional foreign investors, the type of property interests subject to the restriction, and reinforce the state’s foreign ownership law application to indirect ownership of real property located within the state.
Foreign Ownership Framework: Pre-SB2233 & SB2424
Tennessee’s existing foreign ownership law, which was originally enacted in 2024 (Senate Bill 2639), and amended in 2025 (House Bill 219), restricts a prohibited foreign party (“PFP”) or prohibited foreign-party-controlled business (“PFPCB”) from acquiring any interest in Tennessee agricultural land, whether or not the investor intends to use the land for nonfarming purposes. Further, existing law restricts PFPCBs from acquiring an interest in non-agricultural real property located within the state.
Like any piece of legislation, the definitions contained in a statute are important because they provide context to how the words or phrases are to be understood throughout the legislative text. Under the state’s existing foreign ownership law, a “PFP” is an individual, business entity, or government of (1) a country subject to International Traffic in Arms Regulations (“ITAR”) under 22 C.F.R. § 126.1, or (2) an entity designated by the U.S. Department of State as an entity of particular concern.
A U.S. business entity may qualify as a PFP if a PFP holds a “significant interest or substantial control” in the entity. A PFP has a “significant interest or substantial control” when they hold 33% or more interest in an entity. Multiple PFPs have a significant interest or substantial control of an entity when they hold, in the aggregate, a 33% or more interest and are “acting in concert.” Two or more PFPs that are not acting in concert have a significant interest or substantial control when they hold, in the aggregate, an interest of 50% or more.
Further, a PFPCB is any type of business entity or legal entity in which a PFP has a “controlling interest”, which is an interest of 50% or more in the aggregate. Therefore, if a single PFP or multiple PFPs hold, in the aggregate, an interest of at least 50% in a business entity, that entity classifies as a PFPCB. As a result, this entity is prohibited from acquiring an interest in Tennessee agricultural land.
Under the law, if a PFP or PFPCB acquires land in violation of the statute, the entity must divest of its interest in the agricultural land within 2 years, or the Tennessee Attorney General may initiate an enforcement action resulting in the sale of the property. Additionally, PFPs are subject to criminal penalties for violations of the restriction and must also report their agricultural landholdings with the state.
SB 2233 & SB 2424: Expanding the State’s Ownership Restriction
One significant change to Tennessee’s foreign ownership law under SB 2233 is the expansion of countries subject to the state’s restriction. Prior to this measure, the state’s law only applied to countries subject to ITAR and entities of particular concern, but SB 2233 expands the restriction to PFPs of countries designated by the U.S. Department of Commerce as “foreign adversaries” under 15 C.F.R. § 791.4. The countries currently designated as a foreign adversary include China, Cuba, Iran, North Korea, Russia, and Venezuela’s Maduro Regime.
Further, SB 2233 lowers the ownership thresholds for business entities owned or controlled by PFPs. Specifically, the legislation amends the definitions of “controlling interest” by lowering the ownership interest percentage from 50% to 33% and “significant interest or substantial control” by lowering the ownership threshold from 33% to 10%.
Another significant change under SB 2233 is the amendment to the definition of “PFPCB.” Under the new law, a PFPCB includes any entity in which a PFP holds a controlling interest, significant interest, or exercises substantial control. As a result, an entity may not qualify as a PFPCB based on a PFP holding as little as a 10% ownership interest.
SB 2233 also expands the types of property interests subject to the restriction. In addition to existing restrictions on agricultural and non-agricultural land, PFPs and PFPCBs are now prohibited from acquiring interests in oil, gas, coal, lignite, brine, and other commercially recognized mineral rights, groundwater rights, and surface water rights located within Tennessee.
SB 2424 further expands the restriction by prohibiting PFPs from acquiring interests in public or private non-agricultural real property located within Tennessee. Previously, this broader restriction applied only to PFPCBs, while PFPs were generally limited to agricultural land restrictions. Accordingly, under the new law, individuals and foreign governments that meet the definition of PFP are prohibited from acquiring an interest in any real property located within the state.
Agents, Trustees, and Fiduciaries
SB 2424 also reinforces the state statute’s application to individuals and entities acting on behalf of PFPs. Under the amended law, agents, trustees, and fiduciaries may not acquire or hold an interest in real property in Tennessee on behalf of a PFP. This provision ensures that restricted investors cannot bypass or avoid the restriction by placing ownership interests through an intermediary or representative, such as a layered business entity structure.
Property Interest Registration
Previously, PFPs were only required to register their agricultural landholdings with the Tennessee Secretary of State (“SOS”). Because SB 2424 extends the restriction to non-agricultural real property, those interests must now also be reported. Under the new law, for any interest acquired in non-agricultural land after January 1, 2025, a PFP must now register with the SOS their interest in the property within 60 days of acquiring their interest. PFPs that fail to timely register their non-agricultural land interests are subject to a civil penalty of up to $2,000, and PFPs in violation of the restriction face the SOS reporting their violation to the Tennessee Attorney General’s Office.
Further, SB 2233 modifies the registration deadlines applicable to PFP and PFPCB ownership interests in agricultural land. Under the previous law, prohibited investors were required to register their agricultural land interests with the Tennessee Commissioner of Agriculture 60 days after January 1, 2025, or 60 days after they acquired their interest, whichever was later. Now, the law requires registration within the later of 60 days after (1) the date a party becomes a PFP, (2) the date a business becomes a PFPCB, or (3) the date the property interest is acquired. This amendment addresses situations where an entity becomes subject to the state law after acquiring a prohibited ownership interest or following a subsequent designation as a foreign adversary, ITAR country, or entity of particular concern.
Conclusion
Tennessee’s SB 2233 went into effect on April 21, 2026, and SB 2424 goes into effect July 1, 2026, both of which amend certain provisions of the state’s existing foreign ownership law. Specifically, these measures expand the categories of foreign investors subject to the restriction by incorporating foreign adversaries designated under federal law, prohibit PFPs from acquiring interest in public and private non-agricultural land, extend the law to certain mineral and water rights, and strengthen restrictions on indirect ownership arrangements. As with similar laws enacted in other states, the effectiveness of Tennessee’s foreign ownership restrictions will likely depend on how the state implements and enforces the law going forward.
To read SB 2233, click here.
To read SB 2424, click here.
To learn more about foreign ownership of U.S. land, click here.
To register for our upcoming webinar ‘Foreign Ownership of Ag Land: Federal & State Legislative and Litigation Update,’ click here.
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