Midwestern politicians are drumming up support for increased oversight of foreign ownership of U.S. agricultural farmland. At the state and federal level, there are bills seeking to reduce or increase reporting obligations for foreign ownership of farmland. Arkansas even went so far as to order Syngenta (whose parent company is Chinese) to divest 160 acres of Arkansas farmland used for research and development. Although these efforts may seem new, the reality is that the United States Department of Agriculture (USDA) has been requiring “foreign persons” to identify themselves when purchasing farmland in the U.S. since 1978.
Who is a “foreign person” in the eyes of USDA?
The Agriculture Foreign Investment Disclosure Act, passed in 1978, requires all “foreign persons” to report land acquisitions to the USDA. The Act defines who is a foreign person, or who has to report land ownership. From a natural person standpoint, a foreign person under the Act is an individual who is not a U.S. citizen. That is simple enough, but a lot of farmland is purchased by legal entities, not individuals.
Under the Act, corporations, limited liability companies, partnerships, and other organizations may too be considered “persons” (which is generally consistent with U.S. law). The Act also defines “foreign persons” to include any “person” which is created or organized under the laws of a foreign government or which has its principal place of business located outside of all the states. Thus, a corporation organized or headquartered in another country is a “foreign person.”
There are also many companies that are incorporated in a U.S. state but owned by foreign persons. Under the Act, some of these companies may be considered “foreign persons” too, even if every officer, employee, and asset is located inside the U.S. The Act states that USDA may consider a domestic corporation to be a foreign person if “significant interest or substantial control is directly or indirectly held” by foreign individuals, foreign corporations, or foreign governments. The regulations go deeper to explain what “substantial control” and “indirectly held” mean.
Why does it matter? Many USDA programs prohibit participation by or funding to foreign persons.
If you are wondering whether these definitions apply to you, you should consult an attorney. The explanation above is a summary, and many exceptions and nuances apply.
More Information: USDA AFIDA
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