California’s Try and Prohibit Overseas Agricultural Land Investments

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Not too long ago, California’s state legislature handed a invoice (SB 1084) that’s geared toward proscribing international possession of agricultural land throughout the state. In keeping with a 2020 U.S. Division of Agriculture (“USDA”) report, international traders personal over 1.1 million acres of California agricultural land, which is the ninth-highest quantity amongst U.S. states. Most of this foreign-owned property is cropland at 416,082 acres, adopted by 318,519 acres of pastureland and 281,465 acres of forests. At present, the invoice is awaiting California Governor Gavin Newsom’s approval. If Governor Newsom doesn’t veto the invoice, sure international governments can be prohibited from buying or buying an curiosity in agricultural land situated throughout the state after December 31, 2022.

Background

Possession of U.S. land, particularly agricultural lands, by international individuals or entities has been a problem that traces to the origins of the USA. Immediately, roughly fourteen states particularly forbid or restrict nonresident aliens, international companies and firms, and international governments from buying or proudly owning an curiosity in agricultural land inside their state. To see a compilation of the assorted restrictions enacted by every state, take a look at the Nationwide Agricultural Regulation Heart’s “Statutes Regulating Possession of Agricultural Land” chart right here.

Though these states have instituted restrictions, every state has taken its personal strategy. In different phrases, a uniform strategy to proscribing international possession has not but been established as a result of state legal guidelines fluctuate broadly. As an example, every state’s statute might outline “agricultural land” and “farming” in another way, solely limit sure forms of international traders, make distinctions between resident and nonresident aliens, permit international purchasers to accumulate as much as a sure acreage quantity of farmland, and supply completely different enforcement procedures and penalties for alleged violators.

Most states haven’t enacted restrictions or prohibitions on international possession of privately held agricultural land. Slightly, most of those states expressly permit international possession of actual property inside their state. California is at the moment a main instance of such a state. Usually, these states present international individuals and entities the identical actual property rights as pure born residents of their state. For instance, California regulation permits noncitizens to speculate and maintain actual property throughout the state. Cal Const. artwork. I, § 20; Cal. Civ. Code § 671. Accordingly, despite the fact that present California regulation permits international possession of actual property, SB 1084 would—if enacted—exclude agricultural land as a kind of property which international governments might buy.

SB 1084

In keeping with the textual content of SB 1084, its objective is to limit potential “international authorities management of California’s agricultural land and pure assets” and to “safe the integrity” of the state’s farmland “because of the results it has on the worldwide meals safety.” To perform this, the invoice gives that “a international authorities shall not buy, purchase, lease, or maintain any curiosity in agricultural land within the State of California.”

Usually, realizing the definitions contained within the invoice is crucial to understanding exactly which events are restricted from buying property that qualifies as agricultural land. Beneath SB 1084, “agricultural land” has the identical which means as outlined underneath federal regulation, which states agricultural land is “any land situated in a number of States and used for agricultural, forestry, or timber manufacturing functions….” 7 U.S.C. § 3508(1). Due to this fact, if a bit of property is getting used to supply agricultural commodities or timber, it possible qualifies as “agricultural land” underneath SB 1084.

The regulation states that solely international governments are prohibited from buying or buying an curiosity in agricultural land. Beneath SB 1084, a “international authorities” is outlined as “a authorities or the state controlled-enterprise of a international authorities.” The U.S. federal authorities or any of its states or territories are usually not thought-about “international governments” for functions of SB 1084; solely governments of different nations are topic to the restrictions underneath the regulation.

SB 1084 specifies {that a} “state controlled-enterprise” is a “enterprise enterprise during which the federal government has a controlling curiosity.” A international authorities has a “controlling curiosity” if it owns (1) 51% or extra of an curiosity in an entity, or (2) lower than 51% of an curiosity in an entity, however directs the enterprise actions of the enterprise with out affect of one other celebration. Accordingly, international governments which have a controlling curiosity in a enterprise entity that holds an curiosity in California agricultural land is topic to the restriction and is probably going in violation of SB 1084.

Whereas SB 1084 restricts international governments from buying farmland throughout the state, there are some exceptions to this restriction. For instance, international governments that purchase or maintain agricultural land earlier than January 1, 2023 are exempt from the restriction. The restriction additionally doesn’t apply to “federally acknowledged Indian tribe[s] or its authorities items and enterprises.” Moreover, international governments which have a treaty with the U.S. are exempt from the restriction if it could be inconsistent with the phrases of that treaty.

Moreover, SB 1084 directs the California Division of Meals and Agriculture (“CDFA”) to publish an annual report primarily based on info supplied to it by the U.S. Division of Agriculture (“USDA”) via the federal Agriculture Overseas Funding Disclosure Act of 1978 (“AFIDA”). Beneath AFIDA, sure international individuals are required to reveal their pursuits in U.S. agricultural land to USDA. CDFA’s report should additionally embrace info regarding modifications or traits of foreign-owned farmland and the extent of foreign-owned water rights and foreign-owned water desalination amenities. Importantly, SB 1084 doesn’t specify that the report embrace info regarding solely international governments, however agricultural land underneath “international possession.” Due to this fact, CDFA might report the investments of international people and enterprise entities within the state’s farmland.

Conclusion

Over the previous yr, the problem of proscribing international investments and possession of farmland emerged in just a few states, equivalent to Alabama, Missouri, Oklahoma, Indiana, and Texas. California is now included on this listing of states trying to limit sure international investments in agricultural land underneath SB 1084. Beneath the invoice, international governments can be restricted from buying California agricultural land after December 31, 2022. Nonetheless, the invoice is at the moment awaiting Governor Newsom’s approval or signature. Accordingly, readers ought to reference the California state legislature web site for updates on the SB 1084 right here.

 

To learn SB 1084, click on right here.

To evaluate a NACL webinar discussing legal guidelines limiting international possession of agricultural land, click on right here.

For info on state legal guidelines governing international possession of agricultural land, click on right here.


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