On June 25, 2026, the USDA published a proposed rule overhauling the regulations implementing the Agricultural Foreign Investment Disclosure Act of 1978 (AFIDA). The proposed rule transfers administration of AFIDA from the Farm Service Agency to USDA’s Office of Homeland Security, reflecting a reorientation of the program toward national security objectives. The most consequential changes include:
Expanded definition of “agricultural land”: Now encompasses solar and wind energy generation, pipeline transportation, agricultural supply chain facilities, conservation land, and agricultural research, all using updated NAICS codes. The 10-acre/$1,000 de minimis exemption is eliminated. Land meeting the expanded definition is treated as agricultural land regardless of local zoning classification, even if rezoned for non-agricultural use.
Revised “significant interest or substantial control” test: The aggregate foreign ownership threshold triggering reporting drops from 50% to 10%, and a new “beneficial owner” concept captures any foreign person exercising decision-making authority over agricultural land regardless of equity interest.
Lease threshold reduction: The lease exemption drops from 10 years to 1 year for non-adversary foreign persons, and is eliminated entirely for foreign adversaries and Foreign Adversary Controlled Entities.
New foreign adversary framework: Definitions for “foreign adversary” (tied to countries of concern including China, North Korea, Russia, and Iran) and “Foreign Adversary Controlled Entity” create a tiered enforcement regime.
Mandatory electronic filing: All reports must be submitted through the USDA’s online portal.
Increased penalties: Late-filing penalties accrue at 1.5% of fair market value per week (2.5% for foreign adversaries), with a 25% FMV cap per violation. Downward adjustments are eliminated. The penalty appeal process is also restructured: the response window shrinks from 60 to 30 days, the options to submit a written statement or request a hearing are replaced by a single review by the OHS Director, and decisions are administratively final with unpaid penalties referred to DOJ.
Easements and rights of way now reportable: The prior exemption for surface and subsurface easements unrelated to agriculture is removed.
Issues
I. The proposed rule will likely expand reporting requirements for the agricultural real estate sector given the proposed rule’s revised “significant interest or substantial control” test, including the new “beneficial owner” definition.
II. The proposed rule likely expands the congressional intent in 1978 of AFIDA.
III. State reporting requirements and ownership restrictions will still need to be complied with in addition to AFIDA rules.
Explanation
The proposed rule fundamentally reorients AFIDA from a passive data-collection statute into a disclosure instrument oriented toward national security objectives. AFIDA does not authorize USDA to block, condition, or unwind a transaction; national security review authority over agricultural land transactions remains with CFIUS. Nevertheless, the revised “significant interest or substantial control” test, with its new beneficial owner concept, represents the most consequential change for the agricultural real estate industry. The proposed rule will materially expand the compliance obligations of companies and require the land management industry to integrate AFIDA awareness into its brokerage, management, and advisory functions. The proposed rule’s national security orientation represents a meaningful departure from the 1978 Act’s original purpose as a pure information-gathering statute, though recent congressional appropriations directives have begun to bridge that gap. Real estate groups and associations may want to submit comments addressing the undefined scope of “decision-making authority,” the absence of safe harbors for domestic intermediaries, and the practical burdens on legitimate agricultural investment.
I. Impact of the “Significant Control” Test
The proposed rule restructures “significant interest or substantial control” into three independent channels:
(1) Equity threshold: An interest of 10% or more held by any foreign person or combination of foreign persons, including through shell corporations, trusts, and partnerships, regardless of whether the persons act in concert. This represents a significant tightening from the current rule, which requires 50% aggregate foreign ownership for non-concerted interests; the proposed rule reduces that to 10%.
(2) Beneficial ownership: Any interest held by a foreign person meeting the definition of “beneficial owner,” which means any foreign person who “directly or indirectly, through any contract, understanding, relationship, or other arrangement, exercises decision-making authority over the agricultural land or the legal entity holding the land, including but not limited to the power to direct the sale, lease, or use of the property.” A beneficial owner is deemed to have significant interest or substantial control simply by virtue of being a beneficial owner, regardless of the amount of equity interest they possess.
(3) Foreign adversary interest: Any interest of any size held by a foreign adversary or Foreign Adversary Controlled Entity.
This structure represents a fundamental shift from the historical approach. Under the current regulations, “significant interest or substantial control” is defined purely by equity ownership thresholds: 10% for a single holder, 10% for holders acting in concert, or 50% in aggregate for non-concerted holders. The proposed rule retains the equity prong but adds the two additional, independent channels that are not tethered to equity percentages at all.
Impact on Land Management Operations
The “beneficial owner” prong introduces a control-based test that, by its terms, captures any foreign person who exercises “decision-making authority” over agricultural land through “any contract, understanding, relationship, or other arrangement.” This language is broad enough to implicate management agreements, advisory arrangements, and other contractual relationships that vest operational authority in a party distinct from the equity owner.
The proposed rule does create indirect exposure for land management firms in two respects. First, proposed § 5100.3(e)(10) requires foreign landowners to disclose “information on the current management of the land, and any preexisting relationships between the foreign person now owning the land and the previous management of the land, including, but not limited to, involvement in day-to-day operations of the land being reported.” A firm’s management relationships will thus become part of the AFIDA disclosure record for any foreign client. Second, foreign persons who serve on the boards of entities that own agricultural land, or who hold contractual authority under management or advisory agreements to direct land use, could be captured as beneficial owners in their own right.
The undefined scope of “decision-making authority” is a significant concern. USDA’s preamble acknowledges that its definition of “beneficial owner” differs from other federal regulatory definitions, including the SEC’s approach under 17 CFR 240.13d-3, and is “more limited in scope” in that it “focus[es] on instances in which a party is vested with decision-making authority but not necessarily with financial interest in the agricultural land.” The preamble provides one illustrative example (a board of directors for a foreign-based non-profit organization that acquired agricultural land), but does not define the outer boundaries of what constitutes “decision-making authority” or provide a safe harbor for customary protective rights, advisory input, or de minimis management functions.
Impact on Land Brokerage Operations
The brokerage function presents a lower-risk profile than land management. A broker facilitating a transaction does not “hold, acquire, or transfer any interest” in agricultural land, which is the statutory predicate for AFIDA’s reporting obligation. The brokerage relationship is a transactional agency, not an ownership or control interest. A broker recommends and facilitates, but does not hold independent authority to “direct the sale, lease, or use of the property” as the beneficial owner definition requires.
The more relevant impact on brokerage operations is operational: brokers representing foreign buyers or sellers will need to ensure that their clients understand and comply with the substantially expanded reporting requirements. The proposed rule requires disclosure of information that would typically surface during the brokerage transaction, including purchase price, current and intended land use with geospatial mapping, ownership diagrams, beneficial ownership identification, and tax identification numbers. A broker who fails to flag these requirements to foreign clients exposes the client to penalties.
Practical Scenarios
The following scenarios illustrate when the proposed “significant control” test would be triggered in typical agricultural real estate transactions:
Scenario 1: Direct foreign acquisition. A Canadian family office acquires 2,000 acres of cropland through a land brokerage firm. Since the family office is likely a “foreign person,” it must file an AFIDA report within 90 days including all § 5100.3(e) information, plus the § 5100.3(f) ownership diagram and beneficial owner identification. The brokerage firm is not a reporting obligor but should ensure the client is aware of the obligation.
Scenario 2: Layered entity structure. A Luxembourg-domiciled fund acquires farmland through a Delaware LLC in which it holds 15% equity. The LLC is itself a “foreign person” because a foreign person holds significant interest (10%+), notwithstanding that the LLC is organized domestically. The fund must be identified in the ownership diagram. Any individual foreign nationals on the fund’s board who exercise decision-making authority over the land are “beneficial owners” and must also be identified. The proposed rule’s broad definition of “shell corporation” may also capture the LLC and similar holding vehicles common in institutional real estate structures, triggering additional disclosure of all intermediary tiers.
Scenario 3: Land management with foreign owner. Management firm manages 5,000 acres on behalf of a German institutional investor. Management firm exercises day-to-day operational control under a management agreement. The management firm is not a “beneficial owner” (the proposed definition is limited to foreign persons, and the management firm is a domestic entity with no reportable foreign ownership). However, the German investor must disclose “information on the current management of the land” and “involvement in day-to-day operations” in its AFIDA filing, which will reference the management firm’s management role.
Scenario 4: Energy lease on managed farmland. A foreign-owned entity holds a 15-year solar lease on agricultural land. Under the proposed rule, this lease is reportable (exceeds the 1-year threshold for non-adversary lessees), and the land qualifies as “agricultural land” under NAICS code 221114 (solar electric power generation). The foreign lessee must file an AFIDA report.
Scenario 5: Foreign adversary connection. An entity with indirect ties to a country of concern (e.g., through a minority investor from the People’s Republic of China) acquires farmland. Any interest of any size held by a foreign adversary or Foreign Adversary Controlled Entity constitutes “significant interest or substantial control.” The entity must file, and the foreign adversary penalty track applies.
Transition Period
The proposed rule provides a 90-day window after the final rule’s effective date for parties with newly reportable holdings to come into compliance. During this window, holders of interests that become reportable solely by reason of the revised rule may file initial reports without penalty exposure. The proposed rule also establishes a one-year reduced-penalty transition period following the effective date, during which the accrual rates for late-filing penalties are reduced. Parties with existing agricultural land holdings should evaluate whether the expanded definitions and lowered thresholds create new reporting obligations and, if so, plan to file within the 90-day compliance window.
Industry-Wide Implications
For the broader agricultural real estate intermediary sector, the proposed rule creates several categories of impact:
Transaction attorneys and title companies will need to conduct expanded due diligence on beneficial ownership and foreign person status, particularly for entity buyers.
Farm managers and operators who are domestic entities are not directly captured, but their roles will be disclosed in AFIDA filings by foreign owners.
U.S.-organized entities with upstream foreign ownership should not assume AFIDA is inapplicable. A domestic fund, partnership, or holding company becomes a “foreign person” subject to reporting if foreign persons hold a significant interest (now 10% in aggregate) or if a foreign person exercises decision-making authority as a beneficial owner. The question turns on who holds direct and indirect interests in the entity, not on the entity’s place of organization.
The proposed rule’s revised definition of “transfer” presents an additional compliance concern for institutional investors. Under the proposed definition, any action resulting in alienation or change in ownership, including retitling or conveyance of property rights, constitutes a reportable transfer. This would capture intercompany transfers, fund restructurings, and changes in upstream fund ownership that do not alter operational control of the underlying agricultural land. Because modern investment fund ownership structures are fluid and subject to change through monthly or quarterly investor trades, the revised definition could trigger frequent reporting obligations for routine portfolio activity that has no bearing on who controls or uses the land.
II. Congressional Intent
Congressional intent shifted materially beginning in 2022-2023, driven by concerns about Chinese acquisition of agricultural land near military installations and broader national security anxieties. The Consolidated Appropriations Act of 2023 (Pub. L. 117-328) required USDA to establish an electronic submission system and internet database. The Consolidated Appropriations Acts of 2024 and 2025 went further, requiring USDA “to the maximum extent practicable, to notify CFIUS of any agricultural land transactions that are believed to be covered transactions under CFIUS based on AFIDA reporting.” The FY2025 appropriations act also designated the Secretary of Agriculture as a member of CFIUS for certain covered transactions “involving agricultural land, agriculture biotechnology, or the agriculture industry,” though this designation does not carry the full authority of permanent CFIUS membership under 50 U.S.C. § 4565.
This evolution reflects a transformation of AFIDA from a passive data-collection tool into a node in the broader national security screening infrastructure, though AFIDA’s legal authority remains limited to disclosure and does not extend to transaction review or approval. Congress has effectively grafted national security objectives onto a statute that was designed as an agricultural census.
Comparison: Proposed Rule vs. Original Intent
The proposed rule implements this evolved congressional mandate, but in several respects extends beyond what Congress has expressly directed:
(1) Several provisions implement recent congressional directives: the electronic submission portal, data sharing with CFIUS, and the disaggregated internet database all respond directly to statutory requirements in the Consolidated Appropriations Acts. The transfer of administration to the Office of Homeland Security aligns with the explicit national security framing Congress adopted.
(2) The “beneficial owner” concept, the “foreign adversary” and “Foreign Adversary Controlled Entity” definitions, the tiered penalty structure, and the elimination of downward penalty adjustments are regulatory innovations without express congressional authorization. While Congress directed USDA to strengthen enforcement, AFIDA’s text does not reference “beneficial owners,” “foreign adversaries,” or differentiated penalty tracks. USDA is exercising its delegated rulemaking authority to define these concepts.
(3) The original Act was focused on “the effects such transactions and holdings have, particularly on family farms and rural communities.” The proposed rule’s preamble reframes the program’s purpose around “foreign investment and ownership of American agricultural land, particularly as it might present a national security risk.” The proposed rule explicitly rejects the position, raised in ANPRM comments, that “AFIDA is a reporting and financial disclosure statute without the intent of stringent enforcement,” characterizing that position as running “counter to a plain reading of the statute” and as inconsistent with “Congressional intent, which has repeatedly stressed the national security aims of AFIDA.”
(4) The shift from a purely quantitative equity-ownership test to a control-based “beneficial owner” test is the clearest example of regulatory expansion beyond the original statutory framework. Congress left “significant interest or substantial control” undefined, but the legislative history and four decades of regulatory practice established it as an equity-percentage test. The proposed rule’s introduction of a qualitative, facts-and-circumstances “decision-making authority” test represents a fundamentally different approach. While the statutory text is broad enough to accommodate this interpretation (Congress used both “interest” and “control” in the disjunctive), the absence of any legislative history suggesting Congress intended a control-based test independent of ownership is notable.
Areas of Potential Deviation
First, the “beneficial owner” definition’s focus on “decision-making authority” rather than financial interest transforms a disclosure requirement into something closer to a control-person identification regime, which is more characteristic of securities regulation than agricultural census-taking.
Second, the expansion of “agricultural land” to include solar, wind, and pipeline uses stretches the statutory concept of “farming, ranching, forestry, or timber production” into energy and infrastructure.
III. Interaction with State Law
Roughly two dozen states now restrict foreign ownership of agricultural land or impose their own reporting requirements, and these vary widely in scope, triggers, and penalties. The proposed rule states that conflicting state and local laws would be preempted, while also providing that USDA will continue sharing AFIDA filings with state departments of agriculture and reminding filers that they must continue to comply with applicable state and local restrictions that do not conflict with federal requirements. Filers must comply with both federal and state reporting requirement.
Conclusion
The proposed AFIDA rule represents the most significant overhaul of agricultural foreign investment disclosure requirements since the Act’s passage in 1978. While the rule implements several recent congressional directives, its expansion of the “significant interest or substantial control” test through the beneficial owner concept, and its broader reorientation toward national security, extend beyond the statute’s original information-gathering mandate. The comment period closes August 10, 2026, which presents a timely opportunity to shape the final rule in ways that protect legitimate agricultural investment while supporting USDA’s national security objectives.
