In Real Assets Advisor, Real Estate Attorneys Discuss Legislative Proposals That Would Put Foreign Investors in U.S. Farmland Out to Pasture

In an article for Real Assets Advisor, real estate counsel Effie George Floyd and associates Michael Clark and Sarah Clemens evaluate recent federal legislative efforts that would alter the regulatory framework governing foreign investments in U.S. farmland.  “In light of post-pandemic concerns about supply chain and food security, federal lawmakers are increasingly scrutinizing such investments,” particularly those involving investors from countries with tense or adversarial U.S. relations.

Historically, foreign ownership of agricultural land has been lightly regulated by the Agricultural Foreign Investment Disclosure Act (“AFIDA”).  AFIDA requires foreign investors who acquire, hold or transfer an interest in farm, ranch, timber or forest land to report such transactions to the U.S. Department of Agriculture (“USDA”) and further mandates that USDA publish an annual report showing trends in such investments. As the article observes, “[m]any doubt the current self-reporting regime and its forms capture the true scope of foreign investment in U.S. farmland” given the voluntary nature of filings, USDA’s minimal use of fines and its enforcement authority, and filing forms that “do not account for the structures through which sophisticated investors acquire interests in U.S. agricultural land.”

Reforms have focused on increasing compliance with AFIDA’s reporting requirements and making filings more accessible to the public. Other proposals “would increase monetary penalties for failing to make required filings, expand or clarify the scope of those required to file,” including when indirect owners are required to make a filing, and “prevent foreign investors from participating in government-sponsored programs and subsidies.”  Beyond AFIDA, legislators have proposed banning specific foreign persons, governments, and entities from owning U.S. farmland and bringing such investments within the purview of CFIUS.

The article concludes that “[i]nstitutional investors and asset managers who hold or manage U.S. farmland will need to monitor the federal government and state legislatures as policymakers rethink how capital flows globally and whether more significant restrictions around foreign investment in U.S. farmland are in the national interest.”