California Legislators Pass Bill Banning Sale of Agricultural Land to Foreign Governments; Increase Ownership Disclosure Requirements

On 31 August 2022, California legislators passed a bill that would ban the sale of agricultural land in the state to foreign governments. Introduced by state Senator Melissa Hurtado (D-Fresno), the Food and Farm Security Act aims to protect the state’s agricultural industry from potentially adverse foreign interests, citing a concern over volatile commodity prices and global food security issues resulting from Russia’s invasion of Ukraine earlier this year.

The bill would, beginning 1 January 2023, prohibit a foreign government from purchasing, acquiring, leasing, or holding a controlling interest in agricultural land in the state. The bill defines a “foreign government” to include not just an actual foreign state, but also a state controlled-enterprise of a foreign government. “Controlling interest” means possession of 51% ownership interests in an entity; a lesser ownership interest also qualifies as a controlling interest if a foreign government “actually directs the business and affairs of the entity” without the requirement or consent of another party. The bill does not affect land owned by a federally recognized Indian tribe or its government units and enterprises, and does not apply to any interest held by a foreign government prior to 1 January 2023. Transactions in violation of this law would be void.

The bill would also require the California Department of Food and Agriculture (CDFA) to publish federal data regarding foreign ownership interest in California farmland. This data comes from the filings submitted pursuant to the Agricultural Foreign Investment Disclosure Act (AFIDA). Currently, AFIDA filings are maintained by the United States Department of Agriculture (USDA) and only available to the public via a Freedom of Information Act search. The proposed bill would require the CDFA to publish information relating to foreign interest in California farmland, including, (i) the total amount of California farmland owned by foreign interests, (ii) changes and trends in foreign ownership of farmland on a year-to-year and 10-year comparison, (iii) foreign ownership of water rights in California, (iv) information regarding foreign ownership of water desalination facilities, and (v) information regarding foreign ownership of energy production, storage, or distribution facilities in California. The CDFA would be charged to publish this report on an annual basis on its public website.

The bill now goes to Governor Gavin Newsom, who has until the end of the month to sign it into law. California’s bill follows a similar effort on the federal level sponsored by Republican senators Tom Cotton (R-Arkansas), Tommy Tuberville (R-Alabama), and Roger Marshall (R-Kansas) that would prohibit members of the Chinese Communist Party from purchasing any land in the United States. Further, the proposed federal legislation would increase the minimum penalty under AFIDA with respect to late or improper filing of federally mandated disclosures of foreign interest in farmland; this increased penalty would apply to any foreign person that has failed in their disclosure obligations under AFIDA, not just those persons affiliated with the Chinese Communist Party.