Hot topics in agricultural law were the theme of Harrison Pittman’s recent presentation during the annual meeting of the Southern Cotton Ginners Association (SCGA) on Feb. 29 at the Peabody Hotel in Memphis.

Pittman, director at the National Agricultural Law Center (NALC), addressed the crowd of attendees with updates on pressing issues that farmers and industry leaders should keep an eye on.

He specifically shared about three heavy hitters: the Corporate Transparency Act (CTA), foreign ownership laws, and contractual agreements for solar and carbon markets.

Corporate Transparency Act

This CTA was passed in 2021 and went into effect Jan. 1, 2024. However, when Harrison asked attendees for a show of hands on their familiarity with the CTA – few hands went up around the room.

“That is typical,” he said of the response. “This is probably the most important thing I am going to communicate to you today. It is really nobody’s job in government to tell people this law exists. That is partly why more hands were not raised when I asked that question.”

Simply put, the CTA is a statute designed to prevent fraud and money laundering. Compliance involves reporting and applies to any corporation, of any kind registered with the Secretary of State or equivalent in all 50 states. This includes limited liability companies (LLCs), members of LLCs, along with limited partnerships and limited liability partnerships.

Related:The nation’s leading source for ag and food law

Deadlines have already kicked in. For corporations established prior to the effective Jan. 1 date, they have until the end of the 2024 calendar year to comply with reporting. Going forward, newly formed corporations are also bound by law to report.

Pittman said CTA reporting goes to the U.S. Department of Treasury. Failure to comply potentially results in penalties, fines and even criminal penalties.

“There are 21 million LLCs alone across the country. This will have a huge impact across the economy, particularly in agriculture,” Pittman noted.

"This is something to really pay attention to, because these requirements could catch a lot of people flatfooted and off guard.”

Foreign Ownership

In 2021, foreign ownership became a major topic, with an uptick in legislative proposals. However, as Pittman explained, most of those proposals failed at the time due to their broad focus on foreign ownership – no matter the country of origin.

Yet in 2023, direction took a turn when proposals began distinguishing U.S. land owned by foreign adversaries. Proposals shifted focus to what Pittman calls the “Big 4” – China, Russia, North Korea, and Iran – with many proposals tailored to land within a certain vicinity to miliary installations.

Related:Corporate Transparency Act hits farms, ag businesses

More and more, states began passing foreign ownership laws, and Pittman said the fulcrum was the focus on adversarial nations. He anticipates this issue to linger for a while, noting we have yet to see the full scope of what can happen at the federal level.

Another element is the tie that binds many of these foreign ownership statutes to an executive branch or department like the U.S. Department of Commerce.

Pittman said it is important to pay attention to this aspect. “Even if laws do not change on the state level, future presidential administration could expand the list of countries beyond the ‘Big 4’ with a potential ripple effect across state laws in years to come,” he said.

Pittman also noted the possibility of amending the Agricultural Foreign Investment Disclosure Act (AFIDA), a federal law dating back to 1978 that requires reporting of foreign ownership. Additionally, he shared some AFIDA quick stats updated through Dec. 31. 2022.

There are 43.4 million acres of U.S. private agricultural land tied to some sort of foreign ownership, including owned land and long-term leases. Pittman said this calculates to 3.4% of all privately held U.S. farmland. Of that, 48% is forestry, 28% is crop land, and 21% is pasture.

Two-thirds of this foreign ownership lies amongst five countries: Canada, The Netherlands, Italy, The United Kingdom, and Germany. Pittman said the remaining third is spread across roughly 100 countries.

"I always get questions about China,” he said. “Chinese foreign ownership comes out to less than 1%. Nationwide that is just north of 335,000 acres of privately owned ag land where ownership somehow traces back to China.”

Solar Contracts

When it comes to solar and carbon contracts, Pittman warned these are different than farm leases and he spelled out what to expect.

While solar contracts are quite lengthy, carbon contracts can be remarkably short, and both tend to remain silent on important factors. Pittman’s advice? Do not enter one of these contracts without competent legal advice, and keep in mind that just because something seems obvious to you does not mean it is part of the contract.

“The silent parts of the contract are begging for negotiation,” he said.

For solar projects, there are many upfront considerations with four specific phases to look for in the contract: options, construction, generation, and decommissioning. A breakdown of these phases can be found in this Farm Press article, Solar leases, Part 2: Phases of solar projects.

Pittman said pay close attention to the fine print – especially for decommissioning. It is possible for the landowner to get to the end of the contract period and be stuck with the disposal of the project.

“You may be thinking about the here and now and the per acre payment, but what happens when this thing is over? Who is responsible for removing the panels? Does the land have to be returned to the state it was in before?” he proposed.

Other important considerations include easements and the acreage bound to the project. Keep in mind, more land may be taken out of production than you fully anticipate, to accommodate for construction and infrastructure.

Furthermore, do not presume the developer understands agriculture. Ask if power lines will be buried below the plow depth and if there will be any implications to the drainage established on the property.

Carbon Contracts

In comparing solar to carbon, Pittman noted while some practical factors interrelate, the developing carbon market has a long way to go.

“I think of it as a waterfall. We are going to go over the waterfall on these carbon markets, whether they work or not. From public sector incentives that have been created or will be created to the private sector interest, we are going to try the carbon market space – win, lose, or draw.

“Wherever it lands, there will be a time when a tremendous amount of money siphons through, and we are going to have to see what happens after that.”

When it comes to contracts, Pittman said to think of carbon as a commodity, like soybeans, cotton, or any other crop. If you fall short of the contract agreement, it is often the producer’s responsibility to make up for it.

Over time, carbon credits could turn out to be the same scenario to be considered a commodity that holds value, and that comes with risk.

Pittman explained, “The idea of carbon sequestration is to keep it in the soil, through no-till practices, cover crops, and the like. But what if there is a natural disaster or weather event? It would be like losing a crop, without crop insurance.”

Profitability is an obvious consideration. The big question is, can you implement the required practices and still make money? Or at least, not lose money?

“What is this contract going to cost you?” Pittman asked. “You can quickly pencil it out and find you lose money or break even at best.”

Also be aware of modification clauses that can abruptly change the terms, and confidentiality clauses that prevent sharing the terms you have entered or been offered.

Bottom line: a lot of these contracts simply do not name the price. Make sure you can get a copy of the agreement and take it to an attorney for review.