May 25, 2023
The National Law Agriculture Center continues to answer questions regarding foreign ownership of agricultural land. Part 1 of this series, Foreign farmland ownership laws vary by state, defines the foreign ownership law and answers questions at the state level. In Part 2 of this series, the center defines the Agricultural Foreign Investment Disclosure Act (AFIDA), what it is and how it's used.
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 21 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 an 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, Florida, Illinois, Indiana, Iowa, Kansas, Maine, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee, 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 does not have reporting requirements separate from AFIDA; rather, the state has enacted a law that requires the Pennsylvania Department of Agriculture to review AFIDA data to ensure compliance with the state’s restriction on foreign ownership of agricultural land. In Virginia, foreign persons and entities are not required to report their agricultural landholdings, but state law requires the Virginia Department of Agriculture and Consumer Services to compile an annual report that contains certain information concerning foreign ownership and investments in the state’s agricultural land. 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. See7 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:
Nonresident and Nonfarm Operator Ownership of Farmland (CED-80-125) (August 6, 1980)
This GAO report was conducted after a request from the Senate Committee on Small Business concerning the committee’s report titledOwnership and Control of Farmland in the United States, Comm. Print 56-195, Jan. 10, 1980, which is available here.
The information provided by the National Agriculture Law Center is for educational purposes only. If you have concerns that go beyond the scope of what has been discussed in any of the questions below, the center encourages 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, according to the National Agriculture Law Center.
Source: National Agriculture Law Center
Read more about:Farmland
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