Virginia is likely to join fourteen other states that restrict or limit foreign landholdings in land, specifically agricultural land, within their state. According to a 2021 U.S. Department of Agriculture (“USDA”) report, foreign investors own approximately 254,000 acres of private Virginia agricultural land, which is the fourteenth-lowest amount among U.S. states. Most of this foreign-owned property is forestland at 163,357 acres, followed by 40,349 acres of cropland and 24,146 acres of pastureland. On February 15, 2023, the Virginia legislature passed SB 1438 which seeks to restrict certain foreign parties from owning an interest in Virginia farmland. The state legislature also passed SB 1438’s companion bill (HB 2325) on February 17, 2023, which contains the same legislative text as SB 1438.

Currently, SB 1438 is awaiting Virginia Governor Glenn Youngkin’s approval. Governor Youngkin is expected to sign SB 1438 into law as he recently called for the state legislature to pass “a bill to prohibit dangerous foreign entities tied to the [Chinese Communist Party] from purchasing Virginia farmland.” If the bill is signed into law, Virginia would become the second state in the past two years, behind Indiana, to enact a law restricting certain foreign landholdings.

Background

Today, approximately fourteen states specifically forbid or limit nonresident aliens, foreign businesses and corporations, or foreign governments from acquiring or owning an interest in agricultural land within their state. Virginia is currently not one of the fourteen states even though it has restricted certain foreign purchases of land even before entering statehood in 1788. Under current state law, Virginia provides “aliens” that are “not an enemy” the same real property rights as natural born citizens of their state. See Va. Code Ann. § 55.1-100. Although Virginia state law does restrict certain foreign persons from acquiring, holding, or owning an interest in real property within the state, the law derives from legislation enacted in the late-1700s and is likely not enforceable as currently written.

Although fourteen 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, 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. Like the states that have enacted restrictions, Virginia’s SB 1438 also takes its own approach to restricting foreign purchases of agricultural land within the state.

SB 1438

Under SB 1438, a “foreign adversary” would be prohibited from acquiring or transferring “any interest in agricultural land in the Commonwealth.” Thus, an individual or entity that meets the definition of “foreign adversary” cannot hold an ownership interest in “agricultural land” as defined under the bill.

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, such as agricultural land. SB 1438 defines “agricultural land” as “real estates used for an agricultural operation”, and “agricultural operation” means “any operation devoted to the bona fide production of crops, animals, or fowl, including the production of fruits and vegetables of any kind; meat, dairy, and poultry products; nuts, tobacco, nursery, and floral products; and the production and harvest of products from silvicultural activity.”

Further, a “foreign adversary” is defined as “any foreign government or nongovernment person…to have engaged in a long-time pattern or serious instances of conduct significantly adverse to” U.S. national security or the “security and safety of United States persons” as determined by the U.S. Secretary of Commerce. In other words, the foreign governmental entities and foreign individuals prohibited from owning Virginia farmland is determined by the U.S. Secretary of Commerce. Currently, the list of foreign governments and non-government persons the Secretary of Commerce considers to be a “foreign adversary” includes China, Cuba, Iran, North Korea, Russia, and Venezuela’s Maduro Regime. See 15 C.F.R. § 7.4. Of the fourteen states that currently have laws, none of them specifically restrict a “foreign adversary” from purchasing farmland.

SB 1438 specifies that the restriction does not apply to farmland owned or held by foreign adversaries before January 1, 2023 or “any federally recognized Indian tribe or its government units and enterprises.” The legislation also exempts any “foreign adversary” from the restriction if the restriction would be “inconsistent with any provisions of any treaty between the United States and another country.”

Additionally, SB 1438 directs the Virginia Department of Agriculture and Consumer Services (“VDACS”) to compile an annual report based on data provided to it by the U.S. Department of Agriculture (“USDA”) through the federal Agricultural Foreign Investment Disclosure Act (“AFIDA”) of 1978. Under AFIDA, certain foreign persons are required to disclose their interests in U.S. agricultural land to USDA. VDACS’s report must also include information such as the total amount of foreign-owned farmland, the purpose to which the farmland is being used, and the extent of foreign-owned energy production, storage, or distribution facilities within the state.

Importantly, SB 1438 does not specify that the report include information concerning only “foreign adversaries”, but agricultural land under “foreign ownership”. Therefore, SB 1438 may require VDACS to report the investments of all foreign individuals, business entities, and governments in the state’s farmland.

Conclusion

Virginia is likely to become the fifteenth state that restricts certain foreign agricultural landholdings within their state. However, Virginia may not be the only state to enact a foreign ownership law this year. Since the beginning of 2023, the majority of states have proposed at least one piece of legislation to prohibit or restrict foreign investments and landholdings in land—specifically private farmland—located within their state to some degree. NALC is tracking each states’ foreign ownership proposal(s) and will update its Statutes Regulation Ownership of Agricultural Land compilation when there are changes to a state’s law.

To read SB 1438, click here.

For compilation of state laws governing foreign ownership of agricultural land, click here.

A recording of NALC’s Foreign Ownership of Ag Land: Federal & State Legislative Update is available here.

For more articles discussing state proposals seeking to restrict foreign ownership of farmland, click here, here or here.

Subscribe to NALC’s bi-weekly newsletter The Feed for recent legal developments affecting agriculture, including foreign ownership of agricultural land here.

For previous issues of The Feed, click here.