Introduction
The Agricultural Foreign Investment Disclosure Act of 1978 (AFIDA) requires that foreign investors who acquire, transfer, or hold an interest in U.S. agricultural land report such holdings and transactions to the Secretary of Agriculture on Form FSA-153.[1] The underlying purpose of AFIDA was to create a nationwide system for collecting information pertaining to the foreign ownership of U.S. agricultural land. The information collected from these disclosures is used in preparing periodic reports to the President and Congress concerning the effect of such holdings upon family farms and rural communities.[2]
These annual reports can be accessed through the USDA website. The reports summarize the percentage and amount of U.S. agricultural land owned by foreign persons and contain maps and charts detailing areas of concentration of foreign ownership. For example, in 2020, it was reported that foreign persons held an interest in nearly 37.6 million acres of U.S. agricultural land, with Texas encompassing the largest amount of foreign-held U.S. agricultural land.[3] In addition, the reports list the foreign countries that own U.S. agricultural land, with their respective holdings by acreage, and describe the land use of the foreign-owned land and the trends of foreign holdings. While foreign owners may desire to remain anonymous, AFIDA disclosures are subject to the Freedom of Information Act, and therefore, are subject to public disclosure.
This post summarizes the AFIDA reporting requirements to aid in determining what transactions require reporting. First, we summarize critical terms in the AFIDA provisions. Next, we summarize the deadlines for reporting covered transactions and the penalties for non-compliance. Lastly, we conclude this post on how AFIDA considerations play a role in renewable energy developments.
Key Definitions
Pursuant to 7 C.F.R. § 781.3(b), “[a]ny foreign person who held, holds, acquires, or transfers any interest in United States agricultural land” is subject to AFIDA reporting requirements (emphasis added).
“Agricultural land” is defined as land used for forestry production and land currently used for, or, if currently idle, land last used within the past five years for farming, ranching, or timber production.[4] Land used for forestry production means land that exceeds 10 acres, where 10 percent is stocked by trees, including land that formerly had such tree cover that will be naturally or artificially regenerated.[5]
Secondly, “foreign person” is broadly defined to encompass:
- any individual who is not a citizen of the United States, Northern Mariana Islands or the Trust Territory of the Pacific Islands, or who is not lawfully admitted to the United States for permanent residence or paroled into the United States under the Immigration and Nationality Act;
- any person, other than an individual or government, which is created or organized under the laws of a foreign government or which has its principal place of business located outside of the United States or other territory or possession of the United States;
- any foreign government; and
- any person, other than an individual or government that is created or organized under the laws of any U.S. state or territory, in which a significant interest or substantial control is directly or indirectly held by any person described in items (i), (ii), or (iii), above.[6]
As used in the preceding, “person” means any individual, corporation, company, association, partnership, society, joint stock company, trust, estate, or any other legal entity.[7] Of particular significance is item (iv) above, which subjects U.S. entities to the AFIDA reporting requirements if a significant interest or substantial control of their company is held by a “foreign person.” “Significant interest or substantial control” is generally a low threshold, meaning a domestic entity is a “foreign person” if a foreign person or persons own 10 percent or more interests or even up to 50 percent interests in the aggregate depending on the type of foreign persons or entities involved, whether held directly or indirectly.
What Interests are Covered & What Exemptions Apply
The term “any interests” means any interest acquired, transferred, or held in agricultural land, except for a security interest (i.e. a mortgage or other debt-security instrument).[8] This encompasses foreign persons acquiring a fee ownership or leasehold interest in U.S. agricultural land, or obtaining significant interest in or substantial control over a company that has a fee or leasehold interest in U.S. agricultural land. However, AFIDA exempts leaseholds of less than 10 years’ duration, contingent future interests, non-contingent future interests that do not become possessory upon termination of the present estate, non-agricultural easements and rights-of-ways, and interests solely in mineral rights.[9]
Additionally, there is an exemption for land that does not exceed ten acres, in the aggregate, so long as the annual gross receipts from agricultural or timber use on that land do not exceed $1,000.[10]
What to Submit & When
Once a covered transaction occurs, a report must be submitted within 90 days of the date of the acquisition or transfer of the interest in the land.[11] In instances where a person holds or acquires an interest in agricultural land at a time when such person was not a “foreign person” subject to the AFIDA reporting requirements, but subsequently becomes a “foreign person,” then they must report within 90 days of becoming a foreign person.[12] Likewise, if the land is not “agricultural land” at the time a foreign person holds or acquires interest in the land, but later becomes “agricultural land,” then a report must be submitted no later than 90 days after the date the land becomes agricultural.[13]
The FSA-153 form can be accessed online on the USDA’s website. The completed form must be filed with the County Farm Service Agency (FSA) office where the tract of land is located; however, the FSA office in Washington, DC may allow more complex filings to be filed with their office.[14] Additionally, a revised report or written notification of change of status must be filed within 90 days if (i) the land in a report ceases to be agricultural; (ii) a foreign person in a report ceases to be a foreign person, or (iii) there is a change to certain legal names or addresses disclosed on a prior filing.[15]
Section 7 C.F.R. § 781.3(e) lists the information required to be disclosed under the reports, which includes, but is not limited to, the legal name and address of the foreign person; the type of interest acquired; the legal description and acreage of the agricultural land; the purchase price or other consideration given for the land, or the current estimated value of the land reported; and the date the interest in land was acquired or transferred.
Penalties for Non-Compliance.
Failure to report, or an incomplete or false or misleading submission, could subject the foreign person to a civil penalty of 25 percent of the fair market value of the land.[16] Failure to timely report incurs a late fee of one-tenth of one percent of the fair market value of the land for each week the violation continues, with a cap of 25% of the fair market value of the land.[17] The FSA may reduce the penalties based the duration of the violation, method of discovery, extenuating circumstances, and nature of the misstated or missing information.[18]
Intersection with Renewable Energy Developments.
AFIDA reporting should be considered in renewable energy developments whenever a foreign entity, or domestic entity with any foreign ownership or control, is involved that may fall into the “foreign person” definition summarized above. In these instances, AFIDA reporting arises frequently as wind projects and large-scale solar projects are invariably developed on agricultural land. Wind and solar leases typically exceed 10-year lease terms, and most projects greatly surpass 10 acres in the aggregate, meaning these exceptions to the AFIDA reporting requirements are inapplicable. Furthermore, it is irrelevant that the foreign person’s intended use of the land as an energy project is not related to agriculture, as the “agricultural land” definition is not future-facing. Nonetheless, each land acquisition and/or transfer necessitates an analysis of the AFIDA provisions to determine whether the definitions summarized above capture the project at hand.
Contact us
For questions on AFIDA reporting requirements, please contact a member of our Energy and Natural Resources Team.
[1] 7 C.F.R. § 781.3.
[2] 7 C.F.R. § 781.1.
[3] U.S. DEP’T OF AGRIC, FOREIGN HOLDINGS OF U.S. AGRICULTURAL LAND THROUGH DECEMBER 31, 2020, at iii and 4 (2020), https://www.fsa.usda.gov/Assets/USDA-FSA Public/usdafiles/EPAS/PDF/2020_afida_annual_report.pdf.
[4] 7 C.F.R. § 781.2(b).
[5] Id.
[6] 7 C.F.R. § 781.2(g).
[7] 7 C.F.R. § 781.2(h).
[8] 7 C.F.R. § 781.2(c).
[9] Id.
[10] 7 C.F.R. § 781.2(b).
[11] 7 C.F.R. § 781.3(b)(2).
[12] 7 C.F.R. § 781.3(c).
[13] 7 C.F.R. § 781.3(d).
[14] 7 C.F.R. § 781.3(a).
[15] 7 C.F.R. § 781.3(i)-(k).
[16] 7 C.F.R. § 781.4(b)(2).
[17] 7 C.F.R. § 781.4(b)(1).
[18] 7 C.F.R. § 781.4(b)(3).
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