Author: Micah Brown

On February 1, 2024, the U.S. Court of Appeals for the Eleventh Circuit granted a partial injunction in favor of two individuals challenging a Florida law that restricts certain foreign investments in real property. In May 2023, a group of Chinese citizens living in Florida and a real estate brokerage firm filed a lawsuit (Shen v. Simpson, No. 4:23-cv-208 (N.D. Fla. 2023)) against the state of Florida alleging that the state’s newly enacted foreign ownership law violates the United States Constitution. Florida’s law restricts certain foreign investments in real property located within the boundaries of the state, particularly investments by individuals and entities “domiciled” in China. After the district court denied the plaintiff’s motion to prevent the state from implementing and enforcing their foreign ownership law, the plaintiffs appealed to the Eleventh Circuit which granted a partial preliminary injunction.

Although the Shen plaintiffs claim that the Florida law is unconstitutional for several reasons, the court’s order granting the partial injunction rests solely on the plaintiffs’ preemption argument. The plaintiffs argue Florida’s foreign ownership law violates the Supremacy Clause of the U.S. Constitution by conflicting with the federal government’s system of regulating land purchases by foreign investors. 

According to the Eleventh Circuit’s order, two of the Shen plaintiffs have shown a substantial likelihood that the federal government’s role in monitoring certain foreign acquisitions of real property located within the U.S. preempts Florida’s foreign ownership law. As a result, the state is currently restrained from prohibiting these two individual plaintiffs from completing their real property transactions within the state of Florida.

Importantly, this is merely a decision on the preliminary injunction.  The court did not rule on the merits of the case. Oral arguments for the Shen case are expected to be set for April 2024, at which time the appellate court will hear arguments on the merits of the case.

Brown, Micah. “Foreign Ownership Law violates the U.S. Constitution???” Southern Ag Today 4(12.5). March 22, 2024. Permalink

During the 2023 legislative session, the issue of restricting foreign investments and ownership in U.S. land, especially agricultural land, emerged or reemerged in the majority of states. This reemerging interest in restricting foreign investments in U.S. land is partly due to the purchase of land near U.S. Air Force bases in Texas and North Dakota by two Chinese-owned companies.

Currently, there are approximately twenty-four states that specifically limit or restrict foreign individuals, foreign business entities, and/or foreign governments from acquiring or owning an interest in farmland within their state, which is up from fourteen states in 2022. During the 2023 legislative session, ten states enacted a new law restricting certain foreign investments in land located within their state, and two states—North Dakota and Oklahoma—amended their laws that prohibit certain foreign purchases of land. Although twenty-four states now have some type of restriction, state laws vary widely, and some states restrict only certain purchases. For example, the majority of foreign ownership laws enacted in 2023 seek to restrict investments from specific countries, particularly China, Iran, North Korea, and Russia.

Aside from state action, Congress is also considering several proposals that seek to establish a national restriction on certain foreign investments in U.S. land. Specifically, the Senate recently passed an amendment to its version of the bicameral National Defense Authorization Act (“NDAA”) which seeks to prevent certain investments in U.S. agricultural businesses and land by China, Iran, North Korea, and Russia. The Senate version of NDAA is currently being reconciled with the House version of the bill.

Brown, Micah. “Ten More States Pass Foreign Land Ownership Laws This Year.” Southern Ag Today 3(38.5). September 22, 2023. Permalink

In January 2023, the United States Department of Agriculture (USDA”) published its latest report of information collected under the Agricultural Foreign Investment Disclosure Act (AFIDA) of 1978, which provides data on foreign U.S. landholdings through December 31, 2021. Under AFIDA, certain foreign persons are required to disclose their ownership interests and investments in farm, ranch, and forestland to USDA. According to the report, foreign persons hold an interest in over 40 million acres of private U.S. agricultural land, an increase of 2.4 million acres from 2020. From 2011 through 2021, foreign ownership in private U.S. farmland has increased 35.7%.

This increase of foreign agricultural landholdings has become a growing concern for the majority of state legislatures. In the past two years or so, the issue of restricting foreign ownership and investments in privately held agricultural land emerged or reemerged in at least twenty-six states. Currently, there are approximately fourteen states that specifically forbid or limit nonresident aliens, foreign business entities, and/or foreign governments from acquiring or owning an interest in farmland within their state.

Additionally, several other states have introduced bills that take their own approach to restricting foreign acquisitions of farmland and real property. Some states have proposed measures that would restrict foreign ownership in not only agricultural land, but all real property located within their state. Of the states that have considered restrictions within the previous two years, Indiana is currently the only state to enact a foreign ownership law during that time period. With the majority of states considering proposals that seek to restrict foreign interests in farmland, other states may begin to consider the issue of prohibiting or limiting foreign purchases and ownership of land within their state.

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Brown, Micah. “State Foreign Ownership Proposals.” Southern Ag Today 3(8.5). February 24, 2023. Permalink

In June, the Federal Crop Insurance Corporation (“FCIC”) published a final rule amending the basic policy provisions of the federal crop insurance program. See 87 Fed. Reg. 38883 (June 30, 2022). Specifically, the rule brings more flexible production record requirements for producers obtaining crop insurance. Before this rule, producers were generally required to provide production records from disinterested third parties—such as sales receipts, storage records, or settlement sheets—or obtain a pre-harvest appraisal to verify their actual crop production to support their production report. The reports are submitted to an insurance provider to obtain insurance coverage, report annual production, and file loss claims.

However, not all producers have third-party records. For example, producers that are vertically integrated or market their insured crop directly to consumers do not use an intermediate party to store or sell their crop, eliminating access to these types of records.

In response, the rule incorporates new recording procedures, allowing producers to support their production report with farm management records; or records documenting the actual production “at the time of harvest, storing of the crop, or use of the crop for feed.” 7 C.F.R. § 457.8, Section 1. In other words, producers may be permitted to use some of their own records when generating required reports.

Further, the rule adopts a new section addressing situations for producers without either third-party production records or an intention to direct market their crop. These producers must notify their insurance provider or FCIC and complete a marketing certification form. Id. at Section 38(a). The goal of this section is to encourage producers without verifiable records to discuss available records with their insurance provider in advance, with the goal of decreasing pre-harvest appraisals.

This amendment is applicable for the 2023 and subsequent crop years for crop insurance policies with a change date on or after June 30, 2022. For all other crops, the final rule revisions are applicable for the 2024 and subsequent crop years.

Brown, Micah. “Amendments to the Federal Crop Insurance Basic Provisions“. Southern Ag Today 2(37.5). September 9, 2022. Permalink

Congress enacted the Agricultural Foreign Investment Disclosure Act of 1978 (AFIDA) to establish a nationwide scheme for collecting information on foreign investments in U.S. agricultural land. Under AFIDA, certain foreign investors are required to disclose their acquisitions and holdings in farm, ranch, and forestland to the United States Department of Agriculture (USDA). This data collected by USDA is compiled into an annual report to demonstrate the effect foreign holdings have on family farms and rural communities.

Recently, USDA published its latest AFIDA report, which provides data on foreign landholdings through December 31, 2020. According to the report, foreign persons hold an interest in almost 37.6 million acres of private U.S. agricultural land, an increase of 2.4 million acres from 2019. Since 2015, foreign investments have increased an average of 2.2 million acres per year.

The increased agricultural landholdings of foreign investors has become a growing concern for a few state legislatures. Over the past year, states such as Missouri, Indiana, Texas, and Alabama have considered legislation that would restrict foreign investments and ownership of agricultural land within the boundaries of their state. This is not a new concept, however, as ownership of agricultural land by foreign persons or entities has been an issue that traces to the origins of the U.S.

Today, approximately thirteen states specifically forbid or limit nonresident aliens foreign business and corporations, and foreign governments form acquiring or owning an interest in agricultural land within their state. However, state laws vary widely, and some states restrict only certain purchases while allowing for at least some level of foreign ownership of agricultural land. In response to the recently reported AFIDA data, more states may begin considering legislation aimed at limiting or restricting foreign investments in their states’ agricultural land.

Citations:

U.S. Department of Agriculture, Farm Service Agency. Foreign Holdings of U.S. Agricultural Land. Accessed February 10, 2022. https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/EPAS/PDF/2020_afida_annual_report.pdf.

Brown, Micha. “Foreign Ownership of Agricultural Land in the United States“. Southern Ag Today 2(8.5). February 18, 2022. Permalink