Four Midwest states refine laws on foreign ownership of farmland; result is bans on foreign-adversary purchases, new state-level enforcement

Who owns the land where our nation’s food is being produced? Should there be limits or bans on foreign ownership?

A wave of legislative activity since 2021 shows that lawmakers continue to grapple with these questions, even in states where restrictions of some kind already were in place. This year, for example, new laws are taking effect in South Dakota, Indiana, Iowa and Nebraska. In each of these states, legislators refined statutory language on how foreign ownership is reported and/or further defined who cannot own this land. Absent any federal-level bans, it’s left to the states to decide when to prohibit, when to provide exceptions, and when to outright allow foreign ownership.

Many of the new laws change this balance in some way. They also are putting a greater emphasis on state-level data collection and enforcement.

Know more to do more

South Dakota Sen. Erin Tobin says HB 1231, signed into law in March, reflects a demand among legislators and constituents to know more. “[We want] a better idea of what issues exist,” she says, noting the link between ownership of agricultural land and the issues of food security and national security.

That is why much of HB 1231 focuses on data collection, public reporting and state-level enforcement.

To date, states have largely relied on provisions in the U.S. Agricultural Foreign Investment Disclosure Act (AFIDA). This federal law does not prohibit foreign ownership, but requires “foreign persons” to report their interests in agricultural land.

“Foreign persons” are defined as individuals who are not citizens or lawful permanent U.S. residents. That definition and the law’s reporting requirements also extend to: a) entities organized or having their principal place of business outside the United States; b) foreign governments; and c) certain domestic legal entities and those that are more than 50 percent foreign-owned.

“While foreign entities are required to report ownership, it’s easy to fall through the cracks,” Tobin says.

In a January 2024 report, the U.S. Government Accountability Office found that while the U.S. Department of Agriculture collects the required foreign ownership data, the “processes to collect, track and report key information are flawed.” Further, the GAO notes, data about foreign purchases were not shared in a timely manner, and faulty verification processes resulted in errors.

South Dakota’s new law (of which Tobin was a prime sponsor) mandates that foreign purchasers submit a copy of their AFIDA filing to the state’s Department of Agriculture. The department, in turn, is required to refer evidence of non-compliance to the state attorney general’s office for investigation and enforcement of the new state law. Every year, South Dakota’s secretary of state must release an annual report on foreign ownership of agricultural land to the public.

Under HB 1231, Tobin and other legislators also tightened the definition of “prohibited entities.” For the first time, South Dakota now flatly bans people, organizations and governments from China, Cuba, Iran, Korea, Russia and Venezuela from owning agricultural land in South Dakota. Foreign entities, individuals and governments from non-prohibited countries can own up to 160 acres. They may lease agricultural land without restraint.

Indiana closes loopholes

Until recently, Indiana had permitted foreign ownership of agricultural land. That changed in 2022, under a law (SB 388) that prohibited foreign entities from acquiring an interest in agricultural land used for crop farming or timber production. Still, Rep. Mike Aylesworth says, the law had too many loopholes and exceptions, and had no provisions to outright prevent purchases by foreign adversaries.

Now, under this year’s HB 1183 (signed into law in March), farmland cannot be purchased or leased by governments, entities and individuals (but not dual citizens) from foreign-adversary countries, as designated by the U.S. Department of Commerce. This list of prohibited countries largely mirrors the one in South Dakota.

Under HB 1183, Aylesworth says, prohibited business entities include those wholly owned, headquartered in, or having a majority of stock held by foreign adversaries. The law also prevents prohibited persons from acquiring leases as well as mineral, water or riparian rights on agricultural land.

Have constituents expressed concerns about missing an economic opportunity to sell to potential buyers because of the law?

No, Aylesworth says, adding that support was widespread in town halls and committee hearings. “There wasn’t any pushback; I even got some applause,” he says. The bill passed with near-unanimous legislative support.

This year, too, Iowa’s SF 2204 and Nebraska’s LB 1301 passed without a single “no” vote (see below for details on these laws).

Behind the recent trend

Foreign ownership is a small portion of the nation’s privately held agricultural land. In the Midwest, 2.3 percent of this land is owned by foreign entities, according to the USDA. China-based entities, for instance, own only 1,781 acres of the region’s 353 million acres of agricultural land.

So what is behind all of this recent legislative activity?

Several potential factors have been cited. For one, the not-so-distant COVID-19 pandemic disrupted food supply chains, particularly impacting meat and feed producers, and raised awareness about the importance of domestic food security. Additionally, recent reports of China-based groups buying land in Texas and North Dakota near military installations captured considerable attention. (Some of the new laws ban or restrict purchases near sensitive military areas.)

Another explanation is the increased demand on agricultural land. It is used to produce ethanol, and a growing number of renewable projects are being sited in rural areas. According to the American Farmland Trust, tracts also continue to be taken out of production due to urban development.

These trends in land use shift mindsets: When agricultural land is thought of as a finite, less-abundant natural resource, understanding who owns it and what it is used for becomes increasingly important.

Overview of laws enacted in 2024 on foreign ownership of agricultural land

Indiana | HB 1183

• Eliminates all exceptions to a state ban on purchases or leasing of land by citizens, entities and governments of a federally designated foreign adversary
• Prohibition (see above) extends to acquisition of mineral, water or riparian rights
• Establishes state investigatory and enforcement procedures

Iowa | SF 2204

• Requires foreign owners of agricultural land to register with the secretary of state and provide information on their identity and planned use of land
• Secretary of state must provide reports on foreign ownership
• Establishes investigatory and enforcement procedures, including penalties of up to 25 percent of property’s value and/or $10,000 per violation

Nebraska | LB 1301

• Refines/modernizes existing law restricting foreign ownership
• Adds language to prevent purchases from “restricted entities” (based on U.S. sanctions lists)
• Establishes investigatory and enforcement procedures, including divestment with additional penalties of up to $50,000 that apply to restricted entities
  

South Dakota | 1231

• Bans ownership by persons, entities and governments from six different nations: China, Cuba, Iran, North Korea, Russia and Venezuela
• Foreign adversaries may lease up to 320 acres for contract feeding of livestock
• Non-resident aliens (from non-foreign adversaries) must divest if they acquire more than 160 acres of land
• Establishes state-level reporting requirements as well as investigatory and enforcement procedures