Real Estate Associate Christina Rather: Prepare for AFIDA

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The sequel can sometimes be much different than the original. That could be the case with the proposed update of the Agricultural Foreign Investment Disclosure Act (AFIDA).

But if a proposed overhaul moves forward, many additional farmers, landowners, investors, and businesses may suddenly find themselves learning about it.

The proposal has been nicknamed "AFIDA 2.0," and according to ArentFox Schiff Senior Associate Christina Rather, it represents one of the biggest expansions of the law since it was enacted in 1978.

RELATED: Read the proposed changes to AFIDA here.

"This is a lot," Rather told American Farmland Owner.

Rather is an attorney with ArentFox Schiff, a firm that advises various stakeholders (entrepreneurs, investors, and industry groups) that are involved in food, agriculture, and plant/animal health.

She is part of the firm’s agtech emphasis and expects to field a flurry of questions on AFIDA 2.0

AFIDA generally requires foreign persons or entities with qualifying ownership interests in U.S. agricultural land to report certain land transactions to USDA.

"The way that I generally think of AFIDA filings," Rather explained, "is that if you transfer land, you have a foreign interest and you sell land, you have a foreign interest and you buy land, or you lease land for longer than 10 years...that triggers a requirement to do an AFIDA filing."

The proposed rule, however, doesn't just affect future transactions.

Christina Rather bio:

• ArentFox Schiff – Real Estate Associate

• Thompson Hine LLP – Former Associate

• Arent Fox – Former Associate

• AFIDA provisions

The proposal would apply to existing land holdings. It isn’t just for future arrangements.

"It would also apply to current holdings of land," Rather said. "So, it's not like if you have a foreign interest now and you don't sell it, and you just keep holding it, you wouldn't have to file. You will have to file now."

USDA has discussed providing roughly a one-year grace period, but Rather believes compliance could still be overwhelming.

"It would be, I think, very, very massively difficult if you have big holdings of land to go through and figure out each form, what is the market value?” she wondered. “How are we breaking down the acres? There's all sorts of information you have to figure out."

Definition of agricultural land

The proposal also dramatically expands what qualifies as agricultural land.

AFIDA 1.0 rules largely focus on traditional farmland. Under the 2.0 proposal, reporting requirements could also extend to property used for wind and solar generation, farm product warehousing and processing, agricultural research, conservation land capable of farming or timber production, and pipeline transportation corridors.

Rather noted the definition could even extend to some retail properties connected to food service or grocery operations.

"It's really going to broaden what is covered," she said. "It's also going to mean people that never thought that they would need to file now need to file."

Small acreages lose their AFIDA exemption

Current AFIDA rules exempt properties smaller than 10 acres that generate less than $1,000 annually in agricultural production.

That exemption could disappear. Rather offered a simple example of someone selling tomatoes from a small garden. Under today's rules, no filing is required. Under the proposal, even those small properties could become subject to reporting.

"For a small holding of land to figure out all this information and make a filing on it, it would be... extraordinarily difficult," she said.

AFIDA changes lease rules

Another major change involves leases. Currently, AFIDA generally applies only to leases longer than 10 years. The proposed rule lowers that threshold to just over one year.

That means many short-term renewable energy, agricultural, or business leases that previously escaped reporting could now require filings. The proposal would also require reporting on easements and rights-of-way that currently aren't covered.

"When you think of all the new people this could be covering," Rather said, "it really is a lot."

RELATED: This Midwestern farmer pushes for these changes to expand energy sources for rural landowners.

How AFIDA impacts energy projects

Landowners with wind and solar leases may also have to pay attention to AFIDA 2.0. If a foreign-owned company leases your land, "It's their requirement to file. So, it wouldn't be your requirement," Rather explained.

Still, she warned landowners could receive confusing notices if filings aren't completed properly.

"You might get a letter in the mail...that says, you haven't filed, you now owe a penalty of $100,000. And it's not your penalty, but that's a real shock to the conscience,” she said.

AFIDA compliance penalties could increase

The proposal also requires substantially more information during filing. Ownership diagrams, identification of all foreign owners, tax identification numbers, foreign passport information, geospatial mapping of properties, and electronic filing through login.gov could all become part of the process.

Meanwhile, penalties become significantly steeper.

Rather noted the current late penalty accrues at one-tenth of one percent per week. Under the proposal, it jumps to 1.5% per week, with certain foreign adversary-related violations increasing to 2.5% weekly until reaching the existing 25% cap.

"That's going to really start ticking very quickly," she said.

AFIDA comment period

None of these changes are final. USDA is accepting public comments, and Rather encouraged anyone who believes the proposal would affect them to participate.

"If this is something you're really concerned about, express it. Make a comment. Make a suggestion," she advised.

RELATED: Submit a comment for AFIDA changes here. 

Rather acknowledges the government's goal of protecting national security and improving transparency over foreign ownership of agricultural land.

"I know that knowing who owns our agricultural land is a really important thing," she said. "But I just think this is going to be hard for people to do."