As a farmer or other agricultural landowner, you’re probably all too familiar with governmental regulations and legal necessities. From travel restrictions to liabilities to contracts, there’s much to stay on top of (beyond just working the land or caring for livestock). One area that gets little attention—but can have a big impact—is foreign interests in U.S. farmland.
Foreign investment in U.S. agricultural land has been around for years. But in recent years, more so than ever, causing the public and the government to take more notice. The United States Department of Agriculture’s (USDA) Farm Service Agency reported in 2014 that foreign individuals or entities held an interest in 26.7 million acres of U.S. agricultural land. That number has been increasing the past ten years. Here at home, the USDA reported nearly 300,000 acres of Hoosier agricultural land as being held by foreign interests in 2014.
AFIDA: The Agricultural Foreign Investment Disclosure Act
The USDA decided decades ago to put some reporting protocols in place to track information about foreign ownership and involvement with American agricultural land. And this law, the Agricultural Foreign Investment Disclosure Act (AFIDA), has been around ever since. In a nutshell, AFIDA stipulates that foreign owners who buy, sell, or gain interest in American agricultural land may be required to disclose holdings and transaction information to the USDA.
AFIDA might seem straightforward enough, but the Act defines some things more loosely than you might expect. There is quite a bit of variance around who or what is deemed “foreign,” what types of investment or involvement matter, and what kind of land is included. But it’s definitely worth some investigation, because AFIDA is not one to ignore. Strict penalties can result if the appropriate reporting measures aren’t taken in time.
So, who does AFIDA impact?
An entity or person may be deemed “foreign” under this law if any of these conditions are met:
- An individual who is not a U.S. citizen or permanent resident
- A foreign government
- A corporation or other business entity formally organized outside the U.S.
- A corporation or business entity with its principal place of business outside the U.S.
- A U.S. entity with foreign interests
Yes, you read that last one correctly. Even if you are a U.S. entity, the reporting burden (and possible penalties) can rest on your shoulders. Consequences vary based on circumstances, but can be as stiff as 25% of the fair market value of the foreign interest. And the types of land included under the Act also vary. Some of the property uses that might fold into the definition of “agricultural land” under AFIDA include:
- Crop farming
- Pasturing
- Timber production
- Ranching
Here’s an example: You meet a potential business partner, a Canadian resident, at a conference. The two of you start discussing the idea of collaborating on a new soybean hybrid. You eventually decide to become business partners and buy some U.S. farmland to start testing and developing your hybrids. Even if your business will be based on American soil and your new partner will only have 10% interest in the venture, this situation could still trigger reporting requirements under AFIDA.
Specific AFIDA reporting requirements can vary from state to state. Some states simply have defined disclosure and reporting nuances slightly different from the federal requirement. Others have limits or flat out bans in place on foreign farmland ownership. Indiana does not have any such restrictions in place.
Not sure whether AFIDA impacts you or your business ventures? We’re happy to sort that out for you and give you clear next steps and peace of mind. Reach out to Kyle Mandeville at 765-742-9066.
Disclaimer:
The content of this blog is intended to be general and informational in nature. It is advertising material and is not intended to be, nor is it, legal advice to or for any particular person, case, or circumstance. Each situation is different, and you should consult an attorney if you have any questions about your situation.