AFIDA – The Basics of Disclosure of Foreign Ownership of Farmland | Husch Blackwell LLP

Introduction

The Foreign Agricultural Investment Disclosure Act (AFIDA) of 1978 requires foreign investors who acquire, transfer, or hold an interest in U.S. farmland to report such holdings and transactions to the Secretary of Agriculture on Form FSA -153.[1] The underlying purpose of AFIDA was to create a national system for collecting information relating to foreign ownership of US farmland. The information gathered from these disclosures is used to prepare periodic reports to the President and Congress regarding the effect of these operations on family farms and rural communities.[2]

These annual reports can be viewed on the USDA website. The reports summarize the percentage and amount of U.S. farmland owned by foreigners and contain maps and charts detailing areas of concentration of foreign ownership. For example, in 2020, foreign persons were reported to hold an interest in nearly 37.6 million acres of U.S. farmland, with Texas encompassing the largest amount of U.S. farmland held by foreigners.[3] In addition, the reports list the foreign countries that own US farmland, with their respective holdings by area, and describe the use of foreign-owned land and trends in foreign holdings. Although foreign owners may wish to remain anonymous, AFIDA disclosures are subject to the Freedom of Information Act and, therefore, are subject to public disclosure.

This article summarizes AFIDA’s reporting requirements to help determine which transactions should be reported. First, we summarize the key terms of the AFIDA provisions. Next, we summarize the timelines for reporting covered transactions and the penalties for non-compliance. Finally, we conclude this article on how AFIDA considerations play a role in the development of renewable energy.

Key definitions

Pursuant to 7 CFR § 781.3(b), “[a]New York foreign person that held, holds, acquires or transfers interests in the United States agricultural landis subject to AFIDA reporting requirements (emphasis added).

“Agricultural land” is defined as land used for forestry production and land currently used or, if currently unused, land last used within the past five years for agriculture, livestock or wood production.[4] Land used for forest production refers to land that exceeds 10 acres, 10 percent of which is treed, including land that previously had such tree cover that will be naturally or artificially regenerated.[5]

Second, “foreign person” is broadly defined to include:

  • any person who is not a citizen of the United States, the 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 on parole to the States United under immigration and nationality law;
  • any person, other than an individual or a government, that is created or organized under the laws of a foreign government Where whose principal place of business is outside the United States or another territory or possession of the United States;
  • any foreign government; and
  • any person, other than an individual or government created or organized under the laws of a U.S. state or territory, in which a significant interest or substantial control is directly Where held indirectly by any person described in (i), (ii) or (iii) above.[6]

As used in the foregoing, “person” means any individual, corporation, firm, association, partnership, corporation, corporation, trust, estate or other legal entity.[7] Of particular significance is point (iv) above, which subjects US entities to AFIDA reporting requirements if a significant ownership interest or substantial control of their business is held by a “foreign person”. “Significant interest or substantial control” is generally a low threshold, which means that a domestic entity is a “foreign person” if one or more foreign persons hold 10% or more of an interest, or even up to 50% of interest in total, depending on the type of foreign persons or entities involved, whether directly or indirectly owned.

What interest is covered and what exemptions apply

The term “any interest” means any interest acquired, transferred or held in agricultural land, other than security (ie a mortgage or other debt obligation).[8] This includes foreign persons who acquire fee or leasehold interest in U.S. farmland, or who obtain a material interest or substantial control over a corporation that holds a royalty or leasehold interest in U.S. farmland. However, AFIDA exempts leases with a duration of less than 10 years, contingent future interest, non-contingent future interest that does not become possessory upon termination of the current estate, non-agricultural easements and rights of way and non-agricultural interest only mining. rights.[9]

In addition, there is an exemption for land that does not exceed ten acres, in total, as long as the annual gross receipts from agricultural or timber use on that land do not exceed $1,000.[10]

What to submit and when

Once a covered transaction occurs, a report must be submitted within 90 days of the date of acquisition or transfer of the interest in the land.[11] In cases where a person owns or acquires an interest in agricultural land at a time when that person was not a “foreign person” subject to AFIDA reporting requirements, but subsequently becomes a “foreign person” , she must then report it within 90 days of becoming a foreign person.[12] Similarly, if the land is not “farmland” at the time a foreign person holds or acquires an interest in the land, but later becomes “farmland”, then a report must be submitted no later than 90 days after the date on which the land becomes agricultural.[13]

Form FSA-153 can be viewed online at the USDA website. The completed form should be filed with the County Farm Service Agency (FSA) office where the plot of land is located; however, the FSA office in Washington, DC may allow more complex documents to be filed with its office.[14] In addition, a revised report or written notification of change in 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 in a prior filing.[15]

7 CFR § 781.3(e) lists the information that must be disclosed in 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 area of ​​agricultural land; the purchase price or other consideration given for the land, or the estimated current value of the declared land; and the date the interest in land was acquired or transferred.

Penalties for non-compliance.

Failure to declare, or an incomplete, false or misleading declaration, could expose the foreign person to a civil penalty of 25% of the fair market value of the land.[16] Failure to report in a timely manner results in a late fee of 0.1% 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 depending on the duration of the breach, the method of discovery, the mitigating circumstances and the nature of the incorrect or missing information.[18]

Intersection with renewable energy developments.

AFIDA reports should be considered in renewable energy developments whenever a foreign entity, or a domestic entity with foreign ownership or control, is involved and may fall within the definition of “foreign person” summarized below. -above. In these cases, AFIDA reports arise frequently because large-scale wind and solar projects are invariably developed on agricultural land. Wind and solar leases typically exceed 10-year lease terms, and most projects are well over 10 acres in total, meaning these exceptions to AFIDA reporting requirements are unenforceable. Further, it does not matter that the foreign person’s intended use of the land as an energy project is not related to agriculture, as the definition of “agricultural land” is not forward-looking. Nevertheless, each acquisition and/or transfer of land requires an analysis of AFIDA provisions to determine whether the definitions summarized above reflect the project in question.

[1] 7 CFR § 781.3.

[2] 7 CFR § 781.1.

[3] US DEP’T OF AGRIC, FORETIGN HOLDINGS OF US AGRICULTURAL LAND THROUD 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 CFR § 781.2(b).

[5] ID.

[6] 7 CFR § 781.2(g).

[7] 7 CFR § 781.2(h).

[8] 7 CFR § 781.2(c).

[9] ID.

[10] 7 CFR § 781.2(b).

[11] 7 CFR § 781.3(b)(2).

[12] 7 CFR § 781.3(c).

[13] 7 CFR § 781.3(d).

[14] 7 CFR § 781.3(a).

[15] 7 CFR § 781.3(i)-(k).

[16] 7 CFR § 781.4(b)(2).

[17] 7 CFR § 781.4(b)(1).

[18] 7 CFR § 781.4(b)(3).,

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Amalia H. Mercado