CED-78-132 Foreign Ownership of U.S. Farmland: Much Concern,...

DOCUMENT RESUME

06469 - [ B20870901

Foreign Ownership of U.S. Farmland: uch Ccacern, Little ata.CED-78-132; B-114824. June 12, 1978. 13 pp. * 8 appendices (65PP. ·.

Report to Sen. Herman E. Talmadge, Chdiran, Senate Committee onAgriculture, Nutrition, and Forestry; by Robert F. eller,Acting Comptroller General.

Issue Area: Land Use Planning and Control: Planning Future LandUse (2 .,j1).

Contact: Community and Economic DeveloEpent Div.Budget Function: Natural Resources, Environment, and Energy:

Conservation and Land Management (302).Organization Concerned: Department of Agriculture.Conqressiondl eleva.lce: House Committee on Agriculture; Senate

Committee on Agriculture, Nutritict, and Forestry. Sen.Herman E. Talmadge.

Authority: Foreign Investment Study Act of 1974 (P.L. 93-479; 88Stat. 1450). International Investment Survey Act of 1S7T(P.L. 94-472; 90 Stat. 2059).

In response to a congressional inguiry, ifcrEaticn wascompiled on State laws that place constraints or eFcrtiLgrequirements on ownership of farmland by ncnresident aliens andon data collected as a result of State reporting requirements.There is virtually unanimous agreement among persons at alllevels of overnment and in the private sector that there is,currently, no eliable data on the amount f U.S. farmland ownedby nonresident aliens or on recent trends f such ownership.l indinqs/Conclusions: In the aggregate, State laws dc nctsignificantly inhibit foreign ownership of land. Ihe aws rangefrom general prohibitions on such cwnezship to a total absenceof provisions dealing with this subject. As of ay 1978, 25States had laws that placed some cnstraints on asns acquiringor holding farmland. Nine States had laws that generallyprohibit or restrict individual alien investors residing outsidethe United States from owning real estate in their names. Inestates have collected very little data on foreign cwwershiF offarmland. Only two States--Iowa and innesota--requirenonresident aliens to file annual relcrte cn their agLiculturallantdholditqs. In a survey of the 50 States, 18 indicated thattortiqn investment was not an actual cr otential prctlfm while10 States felt that it could become a rcblem in the future.County records provided little informaticn on foreign investmentin county farmland, and local authorities xpressed differingviews about the implications of nonresident aliens' urcases offormland. Recommendatios: The Senate Ccamittee on Agriculture,Nutrition, and Forestry should request the Department ofCommerce to adlust its reporting req irements to asecificallyidentify farmland and include such infcrmation in it. report tothe Congress. (RS)

REPORT BY THE

Comptroller GeneralOF THE UNITED STATES

Foreign Ownership Of U.S.Farmland-Much Concern,Little Data

This report is in response to a request from the Sen-ate Committee on Agriculture, Nutrition, and Forest-ry for information on (1) State laws on foreign invest-ment in U.S. farmland, (2) availability of data on thissubject at State and county levels, and (3) alternativesfor a natiorwide data collection system.

Twenty-five States had laws that placed some con-straints on foreign ownership of land; 25 States didnot. In the aggregate, State laws do not significantlyinhibit foreign ownership.

Information indicates that at least 44,700 acres (0.3percent) of total county farmland in 25 counties in 5States GAO visited were owned by nonresident alieninterests. Reliable data is difficult to obtain.

Current or planned Federal data collection efforts arenot encouraging. Of the alternatives considered,GAObelieves a Federal registration system, similar to thecurrent resident alien registration system, may be thesimplest and best means for obtaining nationwidedata.

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"io t.~ tap ('ED-78-1 32l~~~~~cc~~~~~o1J$¶S~~r ~JUNE 12, 1978

COMPTROLLER GENERAL OF THE UNITED STATES

.% SHINcTON. D.C. 054

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The Honorable Herman E. TalmadgeChairman, Committee on Agriculture,Nutrition, and Forestry

United States Senate

Dear Mr. Chairman:

By letter dated February 28, 1978 (app. VII), youasked us to (1) obtain information on State laws thatplace constraints or require reporting on ownershipof farmland by nonresident aliens, (2) obtain ant datacollected as a result of State reporting requirements oravailable from other sources or foreign ownership ofland, and (3) provide observations on possible approachesor follow-on initiatives for obtaining nationwide data onpurchases of U.S. farmland by foreigners. You also askedus to determine whether any information was available atthe county level to indicate the magnitude of foreigninvestment in farmland. The Chairman of the Subcommitteeon Agriculture, Rural Development and Related Agencies,Senate Committee on Appropriations, expressed a similarinterest (app. VIII).

Before receiving your request, we had made somepreliminary inquiries on the subject of foreigninvestment in U.S. farmland. As we reporte. to youor March 17, 1978, very little aggregate data existsabout the ownership of U.S. real estate; there is nonational system for obtaining such information; and,although some Federal studies have been made and otherefforts are underway, the data produced to date isvery fragmentary and inconclusive. The results of ourpreliminary inquiries are included as appendix VI inthis report.

In response to your request, we solicited in-formation from each State's Govetnor; visited sixStates (California, Georgia, Illinois, Kansas, Missouri,and Oklahoma) and 25 counties; talked with legislators,State and county officials, lawyers, brokers, farmers,and other agricultural experts; and reviewed variousState and county recordr. We also held discussions withvarious Federal officials. A detailed description ofthe scope of our work is in appendix I.

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The results of our review are summarized below andare discussed in more detail in appendixes II through V.

LIMITED MPACT OF STATE LAWS ONFOREIGN INVESTMENT IN U.S. FARMLAND

In the aggregate, State laws do not significantlyinhibit foreign owners'-ip of land. The laws range

from general prohibitions on such ownership to a totalabsence of provisions dealing with this subject. Thereare so many different provisions, exceptions, andstipulations that even classifying the laws into generalcategories is difficult. These differences seem tomirror the diversity of State perceptions as to whetherforeign ownership of land constitutes a present orpotential problem in the State-

Classification of State laws

As of May 1978, 25 States had laws that placed some

constraints on aliens acquiring or holding farmland. Assummarized beliow and discussed in more detail inappendix II, some of these laws had more than one typeof restriction or requirement. Also, 13 States had lawsthat placed restrictions on corporate ownership of U.S.farmland.

Numberof States

Restrictions on alien ownership ofU.S. farniland 25

General prohibition or majorrestrictions on nonresidentalien ownership of land 9

Restrictions on size of land-holdings or duration ofownership 11

Restrictions on inheritedland 9

Restrictions on acquisitionof State property 4

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Other minor restrictions onownership 6

No restrictions on alien ownershipof U.S. farmland 25

Restrictions on corporate ownershipof U.S. farmland 13

Some of the restrictions were major, while others were minorand seemed to be of little practical importance in deterringalien investment in U.S. land.

The nine States that have laws that enerally prohibit,or restrict in a major way, individual alien investorsresiding outside the United States from owning real estatein their names are Connecticut, Indiana, Kentucky, Minnesota,Mississippi, Missouri, Nebraska, New Hampshi:e, and Oklahoma.Most of these States have son.e exceptions to the generalprovisions on nonresident aliens, and some have limitationson ownership of land by resident aliens.

Five States have laws that limit the total acreagethat aliens can acquire or hold. These are Iowa, Missouri,Pennsylvania, South Carclina, and Wisconsin. The limits rangefrom 5 acres to 500,000 acres. Six States (Illinois. Indiana,Kentucky, Mississippi, Nebraska, and Oklahoma) have laws thatrestrict aliens from owning land for more than a specifiedtime. Illinois permits aliens to acquire land, either bypurchase or inheritance, but requires them to dispose of itwithin 6 years. The other five States require aliens to dis-pose of all or part of their landholdings within specifiedtimes if they do not become U.S. citizens or, in the case ofOklahoma, U.S. citizens or residents of the State.

The laws of the 13 States that restrict corporateownership of real estate vary in complexity and degree ofseverity--some apply to all corporations (regardless ofwhether aliens are involved); others apply only tocorporations that have alien interests behind them.

Pertinent excerpts from and citations to the laws ofindividual States are shown in appendix V.

Ten States (Alabama, California, Georgia, Illinois,Iowa, Kansas, Nebraska, Ohio, Oklahoma, and Wisconsin)

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told us of proposed legislation, at the time of our review,that would place additional constraints on foreign ownershipof their land or would require periodic reporting of suchlcndboldings. Most c these States already have laws

containing some restrictions on foreign ownership of land.

Even recognizing the proposed additional legislation,our overall impression is that effective control ormonitoring of foreign investments in U.S. farmland throughState legislation is a long way off.

Data collected by States

The States hve collected very little data on foreignownership of farmland. Only two States (Iowa and Minnesota)require nonresident aliens to file annual reports on their

agricultural landholdings. These two States and Nebraska

also require corporations with agricultural landholdingsto file annual reports identifying the names and addressesof alien shareholders. Vermont also prcvided some informa-tion on the amount of farmland purchased by nonresident

aliens in certain counties. Data obtained from thesefour States is as follows.

-- Iowa reported that 23 nonresident aliens ownedabout 7,000 acres in 1977, and that 6 of 13corporations with at least 5-percent alienownership owned about 2,100 acres. (Data was

not available for the other seven corporations.)The 9,100 acres represents 0.03 percent of Iowa'sfarmland.

--Minnesota reported that about 28,200 acres(0.09 percent of Minnesota's farmland) wereowned or leased in 1976 by nonresident aliensor by business entities with at least 10-percentalien ownership.

--A Nebraska official said that no landholdingswere reported undaL its requirement.

-- Based on a limited survey, Vermont reported thatnonresident aliens bought 951 acres, or about20 percent, of the 4,746 acres of farmland thatwere sold in 4 of its 14 counties during 1976and 1977.

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There is no basis for concluding whether the above dataprovides a good clue as to the nationwide situation.

How foreign investment in U.S. farmland isperceived by State governments

We asked the State Governors whether their Statesconsider foreign investment in farmland to be an actualor potential problem and the reasons for this belief.The results of this survey are summarized below and dis-cussed in more detail in appendix II.

Numberof States

Not an actual or potential problem 18

Could become a problem in the future 10

Is a problem (or limited problem) atthis time 2

No official position--but somelegislators and citizens areconcerned 7

Mixed views 2

Not enough information for opinionor no response 11

Total 50

States that viewed foreign investment in their farmlandas a potential problem generally cited one or more of thefollowing reasons.

-- Foreign investors might drive up the price of farmlandbeyond the reach of local residents.

--Too much foreign investment could eventually enableforeign interests to gain some control of theavailable farmland, especially prime agriculturallands. They could then gain some control overfood production and possibly food prices.

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-- Too much foreign investment could adverselyaffect the future of small family farms.

Most of the States that did not consider foreigninvestment to'be a current or potential problem did notprovide any insight into the reasons for their belief.Others said that

-- data was lacking or that available data did notindicate a problem,

--foreign investment could benefit agricultureexpansion,

-- the matter was primarily an emotional issue,

-- the issue has been blown out of proportion, and

-- farmland prices were being driven up by farmersbidding against each other just s much as byforeigners bidding for land.

DIFFICULTY OF FINDING OUTWHAT IS HAPPENING IN COUNTIES

We visited 25 counties in 5 States to see what kindof information was available on foreign land purchasesand to obtain data on the extent of such purchases inthose counties. The results of these visits are discussedin appendix III. We came away with the opinion that,generally, county public records are not a useful sourceof information on foreign investment in county farmland.We were able to obtain some information on the subjectfrom other sources and check it out through various means;however, the completeness of the information is uncertainand its collection depended largely on the knowledge andcooperation of various private and public firms, agencies,and officials.

In trying to obtain information about recent purchasesof farmland by nonresident aliens, we talked with personswho, because of their jobs or positions, we thought wouldbe knowledgeable about their county in general and farm-land transactions within that county in particular. Thesepersons included county court clerks and tax assessors;members of county committees involved with certain epartment

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of Agriculture activities; real estate agents, brokers, andappraisers; bankers and employees of other types oflending institutions; title insurance companies; localfarmers; and others.

We asked these persons for any information they hadon specific instances of farmland purchases within theirrespective counties by nonresident aliens sinceJanuary 1976. We tried to verify any information obtainedby reviewing available public records. We had no meansof checking the completeness of the information obtainedand therefore cannot say what proportion of all purchasesor of all foreign purch ses of lard in each county wasidentified.

Also, in cases where the owners of record werecorporations or other business entities, we could notidentify the beneficial owners of the farmland (forexample, the stockholders of a corporation). We thereforeconsidered such farmland to be foreign owned if hecorporations were either incorporated in a foreign countryor listed foreign addresses for one or more officers ordirectors. Included in this category were corporationslisting addresses in places with significant tax advantagessuch as the Netherlands Antilles. It is possible, however,that some of these corporations may be totally owned by U.S.citizens.

Identification of farmland owned bynonresident aliens in selected cjnties

The information we obtained for the selec*t- countiesis summarized below by State and is discussee ...

more detail in appendix III.

Information indicatesforeign ownership

Number of Total farmland fumter Percent ofState counties acres in counties c.r oares total acres

California 3 7,367,730 b8,86 0.1

Georgia 11 1,611,010 24,239 1.5

Kansas 3 771,000 2,678 0.3

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Number of Total farmland Number Percent oState counties acres in counties of acres total acres

Missouri 3 1,055,143 9,013 0.8

Oklahoma 5 5,342,872 0 0.0

Total 25 16,147,755 44,716 0.3

Further information on these transactions and on additionalscattered land transactions in these States is presentedstarting on page 25 cf appendix III.

Because information is not available for determiningwhether the above data is representative of foreign in-vestments in the counties visited, the information we wereable to gather could be only the "tip of the iceberg";on the other hand, it could represent a conservative-approximation of the situation in the counties involved.

Impact on land prices

We also acquired or developed some data on the pricesnonresident aliens paid for farmland in several counties,but we could.,not determine to our satisfaction whetherthese prices were on target or were considerably higheror lower than prevailing market prices for comparableproperty in those locations. Sales prices generally werenot recorded on the property deeds we reviewed. For somesales in Georgia, we estimated sales prices on the basisof the transfer tax and other information shown on propertydeeds.

For example, the estimated prices paid by nonresidentaliens for 17,400 of the acres we identified in sixcounties in east central Georgia ranged from $305 to $717an acre. According to county sources, the average priceof farmland in these counties ranged from $300 to $500 peracre--the better land costing more. Elsewhere in Georgia,prices paid for about 6,000 acres by nonresident aliens rangedfrom $925 to $3,155 an acre, compared with average pricesranging from $600 to $1,000 an acre. Another example showeddomestic investors paying about $150 an acre less for com-parable land than a foreigner.

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In one case in Kansas where we could determine theprice of foreign owned farmland, the price per acre wasabout $40 less than the average price paid by domesticpurchasers in eight sales of generally comparable land.

Opinions of local authorities and othersregarding foreign ownership of farmland

Local authorities and others expressed differing viewsabout the implications of nonresident aliens purchasingfarmland. Some were concerned that foreign purchases mightpose a potential problem; some believed that problemsalready have urfaced; and others said that such investmentwas beneficial. Nearly all of the persons we talked withhad heard rumors about nonresident aliens purchasing farm-land, either in their areas or elsewhere, but none ofthem knew the extent of such investment in theirparticular localities. More information on local viewsis presented starting on page 36 of appendix III.

OBSERVATIONS ON CURRENTEFFORTS AND ATERNATIVE INITIATIVES

There is virtually unanimous agreement among personsat all levels of government and in the private sector that,currently, there is ro reliable data on the amount of U.S.farmland owned by nonresident aliens or on recent trendsof such ownership. Such information would be very helpfulto the Congress if it wishes to formulate and implementa national policy on nonresident aliens owning farmland inthe United States. Clearly, efforts need to be startednow to produce useful and meaningful information.

Federal efforts

Several Federal efforts touching on this subject havebeen started or planned. They are summarized below anddiscussed in more detail in appendix IV.

--A planned Department cf Agriculture feasibilitystudy of ways to obtain nationwide land ownershipdata. (This has still not gotten off the groundbecause of funding problems.)

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--A Department of Agriculture questionnaire-typesurvey designed to obtain data on thecharacteristics of landowners and land uses.

--A Department of Commerce effort (by its Officeof Foreign Investment in the United States)to identify all types of foreign investments inthe United States, including those in theagriculture area.

--A Department of Commerce effort (by its Bureau ofEconomic Analysis) to require all nonresidentalien firms and individuals owning or leasingat lea3t 200 acres of real estate to report theparticulars of such landholdings.

--A Department of Commerce effort (by its Bureau ofthe Census) to obtain information on nonresidentalien owners of farmland through the 1979Agriculture Census.

The results of Federal ongoing and planned effortsfor obtaining useful data on foreign investment in U.S.farmland are not encouraging.

Recommendation

The effQrt planned by the Department of Commerce'sBureau of Economic Analysis to identify certain realestate owned or leased by nonresident alien firms andindividuals will not separately identify the amount offarmland acres included in the total acreage reported.We suggested to Commerce officials that such a breakoutof data would be useful to the Congress, but the officialstold us that they do not plan to do this. We thereforerecommend that your Committee request the Department ofCommerce (1) to adjust its reporting requirements tospecifically identify farmland and (2) include such in-formation in its report to the Congress.

Alternative new approaches

Following are some observations on various approachesthat have been suggested for obtaining information on non-resident alien investment in U.S. farmland. Before any systemis instituted, a number of related legal, procedural and

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coordination issues need to be addressed. These rediscussed below and in appendix IV.

1. As a condition for any individual or entityreceiving any'benefits through Federal rural/agriculturalprograms, they could be required to first register theiralien status and the acreage they own or lease at thecounty Agricultural Stabilization and Conservation Serviceoffice. This approach has the advantage of being anall-Federal system which should reduce legal andcoordination dilficulties. It also has a built-incompliance factor for those benefiting or planning tobenefit from such programs. A disadvantage would bethat all foreign oners of farmland may not participatein, and some may choose to disassociate themselves from,such Federal programs.

2. As part of a mandatory process of recording landtransfer transactions at the county level, new landowners or their agents could be required to identify on adata processing card the alien status and acreage of suchownership. This information could be routed through theStates to a central Federal point for tabulation andannual reporting. This would not provide data onexisting land ownership. It would require close coopera-tion of all States and counties, changes in State lawsand county ordinances, and uniform data collection andreporting systems. A major advantage would be that in-formation would automatically be generated on all purchasesby foreigners.

3. Another approach would be to require that allparties customarily involved in real estatt transfers reporton any land acquisitions involving foreign nterests. Majordrawbacks would include uncertainty that all foreignacquisitions have been identified, the large number ofdata collection points, the probability of much duplication,and the probable strong opposition from nearly everyoneconcerned in collecting the data. Also this would not pro-vide data on existing land ownership.

4. Periodic and extensive surveys, using scientificsampling techniques and centralized controls, mightprovide data that could be projected on a nationwide basis.The design and implementation of such an approach couldpresent serious problems, and the resulting data may notbe entirely satisfactory.

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5.. Of the alternatives considered, the most feasibleand simplest approach may be to federally legislatea nationwide registration system for foreign owners of U.S.land. Such a system could be generally similar to the alienresident registration system currently used by the Immigrationand Naturalization Service--which requires card-type reportsto be submitted annually by resident aliens through postoffices to a central Federal point. Such a system wouAd placethe reporting burden on the landowners (or their agentiJ),would require relatively little involvement by State orcounty governments, would be conceptually simple, and wouldprovide data on current ownership, rather than only subsequentfarmland transfers. The usefulness of such a system woulddepend on the completeness of the information reported.

Any system used would require the resolution of anyproblems caused by constitutional and legal issues, andalso should include the following.

--Standard definitions of terms and clear reportingcriteria.

--Stipulations that only data on foreign investmentsin farmland would be collected.

--Criteria as to the minimum number of acres to bereported,

-- Use o a standard card-type form to facilitate dataprocessing.

--Meaningful incentives or penalties to insure sub-mission of full and accurate data.

We trust the foregoing information will be useful toyour Committee. We plan to consult further with yourCommittee to decide on a future role for our Office in thisarea of concern.

To expedite reporting, we did not follow our normalpractice of obtaining formal agency comments on the mattersdiscussed in this report.

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As arranged with your office, we are furnishing coplesof thii report to interested congressional committees,.embers of Congress, and others.

Sincerely yours,

ACTING omptrollerGe be alof the United States

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Contents

Page

APPENDIX

I INTRODUCTION 1Scope of review 2Approaches used to obtain information

on State laws 2Approaches used to obtain information

in selected counties 3

II LIMITED IMPACT OF STATE LAWS ON FOREIGNINVESTMENT IN U.S. FARMLAND 5Classification of State laws according

to their effect on foreign ownershipof U.S. farmland 5General prohibition or major

restrictions on nonresident alienownership of land 6

Restrictions on size of landholdingsor duration of ownership 8

Restrictions on inherited land 9Restrictions on acquisition of Stateproperty and other minor restric-tions on alien landholdings 9


Proposed State legislation 11Data collected by States on foreignownership of farmland 14

Iowa 15Minnesota 16Nebraska 16Vermont 17

How foreign investment in U.S.farmland is perceived byState governments 17

III THE DIFFICULTY OF FINDING OUT WHAT ISHAPPENING IN THE COUNTIES 23

Problems in using public recordsto identify nonresident alien owner-ship of county farmland 23County land records 23Registration of corporations 24Tax assessors records 24Agricultural Stabilization andConservation Service countyoffice records 25

Page

Federal land banks 25Identification of farmland owned bynonresident aliens in selectedcounties 25California 26Georgia 28Kansas 31Missouri 32Oklahoma 33

Impact of nonresident alien ownershipof farmland in selected counties 34

Impact on land prices 34Opinions of local authorities andothers regarding foreign ownershipof farmland 36

Possible motives for foreigninvestment in U.S. farmland 37

IV OBSERVATIONS ON CURRENT EFFORTS ANDALTERNATIVE INITIATIVES 38

Federal efforts--ongoing or planned 38Alternative approaches to filling the

data void 39

V STATE LAWS ON ALIEN OWNERSHIP OF REALESTATE 43

VI U.S. GENERAL ACCOUNTING OFFICE--RESULTS OFPRELIMINARY INQUIRIES INTO FOREIGNOWNERSHIP OF U.S. FARMLAND 53

VII LETTER DATED FEBRUARY 28, 1978, FROM THECHAIRMAN, COMM!TTEE ON AGRICULTURE,NUTRITION, AND FORESTRY, UNITED STATESSENATE 63

VIII LETTER DATED JANUARY 25, 1978, FROM THECHAIRMAN, SUBCOMMITTEE ON AGRICULTURE,RURAL DEVELOPMENT AND RELATED AGENCIES,COMMITTEE ON APPROPRIATIONS, UNITEDSTATES SENATE 65

APPENDIX I APPENDIX I

INTRODUCTION

Foreign ownership of U.S. real estate, particularlyfarmland, has recently received a great deal of publicattention. The news media has been giving extensive coverageto stories which indicate that citizens of other countriesare buying large tracts of U.S. farmland. embers ofCongress, State legislators, and landowners from farmingStates have expressed concern about the increase inabsentee foreign landowners' holdings in their States.

Because of this growing concern, the Chairman of theSenate Committee on Agriculture, Nutrition, and Forestryasked us, by letter dated February 28, 1978, to (1) obtaincurrent information on State laws that place constraintson ownership of farmland by nonresident aliens or thatrequire any kind of reporting on such ownership, (2) obtainany specific data that may be available from any Statehaving reporting requirements related to such laws or anyState analyses of foreign land investments or ownership,and (3) provide observations on possible approaches orfollow-on initiatives for obtaining nationwide data onpurchases of U.S. farmland by foreigners. In addition,he asked us to select a few agricultural counties in severalStates and make inquiries to determine whether any informa-tion was available at that level to indicate the magnitudeof foreign investment in farmland in those counties.

The request was endorsed by the Chairman of the Sub-committee on Agriculture, Rural Development, and RelatedAgencies, Senate Committee on Appropriations.

Before receiving this request, we had made somepreliminary inquiries to obtain insight into the avail-ability and depth of information on foreign investment inU.S. farmland and to identify and summarize the legislativeand executive actions that had been taken, or were underwayor planned, to improve the data base on farmland ownership.As part of that work, we visited Iowa and obtained informa-tion on the results of its law which requires nonresidentaliens to annually report their agricultural landholdingsin that State.

The results of our preliminary inquiries are includedas appendix VI. In essence, very little aggregate dataexists about the ownership of U.S. real estate. There isno national system for obtaining such information.Although some Federal studies have been made and otherefforts are underway, the data produced to date is stillvery fragmentary and inconclusive.

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SCOPE OF REVIEW

We requested information from each State's Governor onState laws and related matters having to do with alienownership of farmland.

We visited six States (California, Georgia, Illinois,Kansas, Missouri, and Oklahoma) and talked with represent-atives of various State agencies, State legislators, andpersons considered to be experts in .-ultural issues.We also reviewed some State records m zhained on corpora-tions registered to do business within these States.

We visited the following 25 counties, talked with countyofficials and others, and reviewed sore local land recordsto determine their potential value as a source of data for anationwide land ownership recording or reporting system. Wewere able to obtain some information on the amount of farm-land acquired in these counties since January 1976 by non-resident aliens, but we have no way of knowing how completethe information is.

California (3) Kansas (3)Fresno AtchisonKern DoniphanTulare Leavenworth

Georgia (11) Oklahoma (5)Baker BeaverDecatur CimarronDougherty LeFloreEmanuel McCurtainJefferson TexasJenkinsJohnson Missouri (3)McDuffie MississippiSeminole New MadridSumter StoddardWashington

We also held discussions with various Federal officials,congressional staff members, and others to obtain informationand ideas for clarifying what is happening regarding foreigninvestment in U.S. farmland.

A proaches used to obtaininformation on State laws

According to a U.S. Department of Commerce report issuedto the Congress in April 1976, 29 States had laws imposingrestrictions or reporting requirements on alien landholdings.

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Volume 8 of the Commerce report discussed issues relating toforeign ownership of U.S. real estate, including farmland,and included information on pertinent requirementb of Statelaws. The report also identified the States that had nolegislative restrictions on foreign investment in real estate.

To obtain more current information on State legalrequirements, we sent letters to the Governors of all 50States and included excerpts from the Commerce reportpertaining to their particular State law. We asked theGovernors to tell us whether the information in theCommerce report accurately represented their current lawson the subject and, if not, to provide us with updated,complete information. We also asked for ny information thatwas available--as a result of State repor.ing requirementsor otherwise--on the extent and trends of foreign investmentsin farmland, and on State perceptions of the significance ofsuch investments.

We also requested information on any additionallegislative proposals addressing alien ownership of farmlandin the State. Ten States provided us information on this.Appendix II includes information furnished us on thepotential impact and legislative status of the State billsbut we made no attempt to independently determine thelikelihood of their enactment.

We received responses from 48 State governments.Arizona and Colorado did not reply but we checked theirexisting laws through other means. Most of the Statesreported that their laws were accurately presented inthe Commerce report. Some States provided us informationclarifying their laws or describing recent changes.

Approaches used to obtain informationin selected counties

As part of our effort to obtain information on thecontent of local land records and the availability ofinformation on farmland owned by nonresident aliens in the25 counties we visited, we talked with people who wethought might be knowledgeable about farmland transactionsin the county. These persons included members of countycommittees who help administer certain Department ofAgriculture programs; county court clerks and tax assessors;real estate agents, brokers and appraisers; bankers andemployees of other types of lending institutions; titleinsurance agents; local farmers; and others.

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We asked for any available information (or informationsources) on actual purchases of farmland in the countiesby nonresident aliens since January 1976. We then tried toverify this information by reviewing available publicrecords. We had no means of checking the completenessof the information obtained and therefore cannot say whatproportion of all purchases o of all foreign purchases ofland in each county was identified.

Also, in cases where the owners of record were corpora-tions or other business entities, we could not identifythe beneficial owners of the farmland (for example, thestockholders of a corporation). We therefore considered suchfarmland to be foreign owned if the corporations were eitherincorporated in a foreign country or listed foreign addressesfor one or more officers or directors. Included in thiscategory were corporations listing addresses in well knowntax havens, such a the Netherlands Antilles. It ispossible, however, that scme of these corporations may betotally owned by U.S. citizens.

Our review was not intended to be a broad investigationand/or verification of publicized accounts of purchases offarmland by nonresident aliens. Where such indicatedpurchases had a bearing on the foreign investment situationin the counties we visited, w tried to obtain more infor-m&tion abouit them; otherwise, we did not.

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APPENDIX II APPENDIX II

LIMITED IMPACT OF STATE LAWS ON

FOREIGN INVESTMENT IN U.S. FARMLAND

In the aggregate, State laws do not have a major impacton foreign ownership of land. The laws range from generalprohibitions on such ownership to a total absence of pro-visions dealing with this subject. There are so manydifferent provisions, exceptions, and stipulations thateven classifying the laws into general categories isdifficult. These differences seem to mirzor the diversityof State perceptions as to whether foreign ownership ofland constitutes a present or potential problem in theState. Few tates have reporting requirements that pro-vide any data on foreign ownership of land, and even inthose cases there is little or no assurance that thedata is complete and reliable.

Some further legislative efforts are under con-sideration in some States but, even recognizing theseefforts, our overall impression is that effective controlor monitoring of foreign investments in U.S. farmlandthrough State legislation is a long way off.

CLASSIFICATION OF STATE LAWS ACCORDING TOTHEIR EFFECT ON FOREIGN OWNERSHIP OF U.S.FARMLAND

As of May 1978, 25 States had laws that placed someconstraints on aliens acquiring or holding farmland;25 did not. Thirteen States--some in each group--hadrestrictions on corporate landholdings, which would affecttotally American owned corporations as well as thosepartially or fully owned by aliens.

Despite the many differences in State laws, weclassified them into several broad categories, as shownin the following table. The provisions of the laws ineach category vary considerably. Some have majorrestrictions and requirements, while others have minorones that seem to be of little practical importance indeterring alien investment in U.S. land. Many Statelaws have more than one type of rcstriction or require-ment. Pertinent excerpts from and citations to thelaws of individual States are shown in appendix V.

5


NumberGAO classifications of State laws of States

Restrictions on alien ownership ofU.S. farmland 25

General prohibition or majorrestrictions on nonresidentalien ownership of land 9

Restrictions on size of land-holdings or duration ofownership 11

Restrictions on inheritedland 9

Restrictions on acquisitionof State property 4

Other minor restrictions onownership 6

No restrictions on alien ownershipof U.S. farmland 25


General prohibition or major restrictions onnonresident alien ownership of land

Nine States (Connecticut, Indiana, Kentucky, Minnesota,Mississippi, Missouri, Nebraska, New Hampshire, andOklahoma) have laws that generally prohibit, or restrictin a major way, individual alien investors residing outsidethe United States from owning real estate in their names.As described below, most of these States have some exceptionsto the general provisions on nonresident aliens, and somehave limitations on ownership of land by resident aliens.

Connecticut generally prohibits nonresident aliensfrom owning land, except that nonresidentcitizens of France have the same rights asresident aliens, who can purchase, hold, in-herit, or transmit real estate. All othernonresident aliens may own real estate onlyfor mining or quarrying purposes. Also, thespouse and lineal descendants of an alienowner may inherit and hold real estate of thealien.

6


Indiana grants aliens who reside in that Stateand who have declared their intention tobecome U.S. citizens the right to acquireand hold land the same as U.S. citizens, butthey must dispose of land in excess of 320acres within 5 years of acquisition, unlessthey become U.S. citizens. All otheraliens, including nonresident aliens, mayacquire land only by inheritance and mustdispose of it within 5 years.

Kentucky permits only those aliens who havedeclared their intention to become U.S.citizens to acquire land in any manner, butthey may lose their right to the land ifthey do not become citizens within 8 years.Apparently, other aliens, including non-resident aliens, may acquire land only byinheritance and may hold it for only 8years. An alien who resides in Kentuckymay take and hold land for the purpose ofa residence or business for a period not toexceed 20 years.

Minnesota amended its law on real property in 1977to require (with some exceptions) that onlyU.S. citizens or permanent resident aliens canacquire any futuce interest in agriculturalland. The legislation does not affect therights of aliens to inherit land, or therights of citizens of a foreign country to holdland in cases where their rights are securedby treaty; nor does it affect rights to holdland for research or as security for a debt orte gain title in collection of such debt.The egisl-fion permits aliens to retaintitle to any agricultural land acquired beforeMay 27, 1977.

Mississippi treats resident aliens the same ascitizens. Nonresident aliens may not acquireor hold land, except that they may take a lienin land and take title to the land by foreclosingon the lien in which case they must dispose ofthe land within 20 years. Nonresident alienswho are citizens of Syria or Lebanon may inheritland.

Missouri amended its law on land ownership inMay 1978 to prohibit nonresident aliens from

7


acquiring more than 5 acres of agriculturalland for farming, but it permits nonresidentaliens to acquire and hold other types ofreal estate the same as U.S. citizens. Thenew legislation does not affect agriculturalland that nonresident aliens previously owned,as long as the land is held by the presentowner.

Nebraska does not permit aliens to hold real estateexcept within city or village limits and within3 miles of those limits. Aliens may holdleases in other lands for up to 5 years. Otheralien land ownership is prohibited. Nebraskaalso requires resident and nonresident aliensto sell inherited land within 5 years.

New Hampshire grants an alien resident in the Statethe same landholding rights as a citizen. nonresident alien may not hold real estate.

Oklahoma prohibits aliens from holding land unlessthey are bona fide residents of the State. Ifa resident alien- eaves the State, he must dis-pose of the land within 5 years. Both non-resident aliens and aliens who are U.S. (butnot Oklahoma) residents may inherit land and mayacquire title through foreclosure of a lien intheir favor, but must dispose of it within 5years.

Restrictions on size of landholdingsor duration of ownership

Five States have laws that limit the total acreagethat aliens can acquire or hold. Missouri does notallow nonresident aliens to acquire more than 5 acresof agricultural land for farming. owa and Wisconsinlimit nonresident alien ownership of land to 640 acres--Wisconsin's limit does not apply to inherited land.Pennsylvania limits alien real estate holdings to 5,000acres and South Carolina limits aliens and alien-controlledcorporation landholdings to 500,000 acres.

Six States have laws that restrict aliens fromowning land for more than a specified time. Illinoispermits aliens to acquire land, whether Dy purchase orinheritance, but requires them to dispose of it within 6years. The other five States (Indiana, Kentucky,Mississippi, Nebraska, and Oklahoma) require aliens todispose of all or part of their landholdings within

8

APPENDIX II APPENDI II

specified times if they do not become U.S. citizens or,in the case of Oklahoma, U.S. citizens or residents of theState. These restrictions are mentioned in the precedingsection.

Restrictions on inherited land

Five States (Iowa, Montana, Nebraska, North Carolina,and Wyoming) provide that nonresident aliens can inheritland in their States only if a reciprocal right exists fora U.S, citizen to inherit land in the alien's country. Thestatutory reciprocity of these States is unilateral in thesense that there is no formal agreement between theState and the foreign government. Kansas prohibits alienswho are not eligible for U.S. citizenship from inheritingproperty in the State except as provided by a treaty withthe United States.

Four states (Indiana, Kentucky, Nebraska, andOklahoma) that permit aliens to inherit land require thatthey dispose of it within a specified time as describedon pages 7 and 8.

Restrictions on acquisition of State propertyand other minor restrictions onalien landholdings

Three States (Arizona, Idaho, and Oregon) have lawsthat restrict individuals from acquiring State land unlessthey are U.S. citizens or have declared heir intentionto become U.S. citizens. (Two States--Alaska and Oregon--have some restriction on aliens establishing mineralclaims on State land.)

Six States (Arizona, Georgia, Maryland, New Jersey,Virginia, and Wyoming) have other types of minorrestrictions which would not likely deter alien investment.Most of these laws generally require that the home countryof aliens seeking to buy land be at peace with the UnitedStates.

Restrictions on corporate ownershipof U.S. farmland

Thirteen States (Iowa, Kansas, Kentucky, Minnesota,Missouri, Nebraska, North Dakota, Oklahoma, South Carolina,South Dakota, Texas, West Virginia, and Wisconsin) havelaws that restrict corporate ownership of real estate tosome degree. The restrictions vary in complexity anddegree of severity--some apply to all corporations

9


(regardless of whether aliens are involved); others applyonly to corporations that have alien interests behindthem.

Eight of the 13 States (Iowa, Kansas, Minnesota,Missouri, North Dakota, Oklahoma, South Dakota, andWisconsin) have laws that seek to exclude most corporationsfrom owning agricultural land or operating farms. Some ofthese laws provide exceptions for closely held family farmcorporations or qualified farming corporations.

Four States (Iowa, Nebraska, Minnesota, and Wisconsin)have laws that either restrict land holdings by corporations(1) with more than a specified percentage of alien ownership,(2) with alien directors or managers, or (3) incorporatedoutside of the United States, as discussed below.

-- In Iowa, corporations incorporated outside theUnited States, and all other corporations inwhich half or more of the stock is owned orcontrolled by nonresident aliens, may enforcea lieh or judgment for any debt or liabilityand may be a purchaser at a sale of Iowa realestate by virtue of such lien, liability, orjudgment if all Iowa real estate acquired bysuch method is sold within 10 years. In allother instances, such corporations are prohibitedfrom acquiring title to or holding Iowa realestate.

-- In Minnesota, corporations, with certain ex-ceptions, may not acquire or hold agriculturalland if foreign interest in the corporationexceeds 20 percent. This restriction alsoapplies to partnerships, trusts, and otherbusiness entities.

-- In Nebraska, a corporation may not acquire orhold land outside of 3 miles of any city orvillage limits (except under certain cir-cumstances) if a majority of its directorsare aliens, if its executive officers ormanagers are aliens, or if a majority of itsstock is owned by aliens.

-- In Wisconsin, a corporation may not acquire orhold more than 640 acres of real estate ifmore than 20 percent of the stock is held bynonresident aliens.

10


Certain other States have various minor restrictions oncorporate landholdings. Kentucky does not permit anycorporation to hold any property, except property that isproper and necessary for carrying out its legitimatebusiness, for longer than 5 years. South Carolina does notpermit an alien-controlled corporation to own more than500,000 acres of land. Texas permits a corporation to acquireland if it is necessary to enable it to do business or tosecure payment of a debt, and the corporation must conveyaway all excess land within 15 years of aquisition. Texasdoes not permit a corporation to carry out, as its mainpurpose, the acquisition or ownership of land, but arcrporation may, if authorized by its charter, buy andsell land within 2 miles of incorporated towns, cities, orvillages. West Virginia requires corporations whichacquire more than 10,000 acres cf land in the State toobtain a license and pay a tax on the amount of land inexcess of 10,000 acres.

PROPOSED STATE LEGISLATION

Ten States (Alabama, California, Georgia, Illinois,Iowa, Kansas, Nebraska, Ohio, Oklahoma, and Wisconsin)told us of proposed legislation that would place new oradditional constraints on foreign ownership of their landor would require periodic reporting of such landholdings.Most of these States already have laws containing somerestrictions on foreign ownership of land.

Alabama has no law restricting aliens from owningreal estate but its legislature was consideringa bill that would require certain informationto be reported annually by corporations, limitedpartnerships, fiduciaries, nonresident aliens,and nonresident alien corporations that own, leaseor farm agricultural lands. Such informationwould enable identification of alien owners orbeneficial oners and the acreage involved.

California has no law restricting aliens from owningland. Since February 1978, two bills have beenintroduced (and referred to committees) to dis-courage or place restrictions on foreign owner-ship of farmland in the State. One bill isdesigned to provide for a disclosure of alieninterests in limited partnerships and thepartnerships' involvement in agricultural landpurchases. The other bill would prohibit thepurchase or lease of land used for farming byaliens and by corporations which are not

11


incorporated in California or which are at least33 percent owned or controlled by aliens.

Georgia law provides that aliens have the same rightsas U.S. citizens as long as their government is atpeace with the United States. During the 3session of the Georgia General Assembly, separatebills dealing with nonresident alien ownership ofland were introduced in the House and Senate. TheHouse bill would have required all alien ownersof land in the State, including partnerships,corporations, or other entities in which one-halfof the voting stock or ownership interest belongedto noncitizens, to file written reports on landholdings and any future land purchases. TheSenate bill would have placed restrictions onalien land inheritance end would have restrictedthe acreage and location of land purchases bynonresident aliens, foreign corporations, andcorporations in which nonresident aliens ownedor controlled one-half or more of the stock.Neither bill was enacted nor will they be carriedover to the next assembly. Also during the 1978session, a resolution was introduced to establisha special study committee to assess the impact ofpurchases of Georgia land by aliens and torecommend appropriate legislation on the subject.We were told that the resolution was rejectedin the Senate by a vote of nearly 4 to 1.

Illinois law states that aliens have full rights toacquire land, either by purchase, inheritance, orother means, but must dispose of it within 6years. At the time of our review, legislationhad been introduced to (1) place limits on theownership and size of partnerships and corporationsauthorized to purchase agricultural land and (2)prohibit both nonresident aliens and businessentities that have nonresident aliens as partnersor stockholders from purchasing agricultural landafter a certain date. The bill would requirecorporations, partnerships, and nonresident aliensto annually report on all their agricultural land-holdings. Also, each county assessor would berequired to identify and report to the State allbusiness organizations and nonresident aliensowning farmland in that county.

L2

APPENDIX I APPENDIX II

Iowa law limits the amount of farmland that may beowned by nonresident aliens and places certainrestrictions on the rights of nonresidentaliens to inherit land. With some exceptions, italso prohibits foreign corporations andcorporations controlled by nonresident aliensfrom acquiring real estate, and requires aliens,ccrporations, and limited partnerships to fileannual reports on their landholdings. We weretold that a bill had been introduced in thelegislature to prohibit nonresident aliensfrom owning farmland but that the outlook forthe bill was uncertain.

Kansas currently has legislation, discussed inearlier sections, which affects alien ownershipof farmland. Additional legislation was beingconsidered to prohibit aliens and businessentities in which noncitizens hold an interestfrom owning or leasing land for more than50 years--subject to certain exceptions. TheGovernor told us that this legislation wouldnot be acted on in this session and that theKansas Attorney General had determined that theproposed prohibition of ownership of land bynoncitizen aliens would violate the U.S.Constitution.

Nebraska law, as discussed in earlier sections,contains various restrictions on alien landholdings. A State official told us that therehad been much debate recently on foreig.n invest-ment in Nebraska farmland. He said that twobills had been introduced to further limitforeign and corporate ownership of agriculturalland. These bills would specifically prohibitaliens and corporations that have any aliens asstockholders from purchasing any agriculturalland. Violation of this provision would constitutea felony.

Ohio does not restrict alien ownership of land. Atthe time of our review, legislation had beenintroduced to place limits on ownership of farm-land by nonresident aliens. According to Stateofficials, there had been no progress on the'billin recent months.

13


Okl a law, as discussed in earlier sections,restricts alien ownership of land and providesthat corporations may not engage in farming orranching, except in special circumstances. Atthe time of our review, two bills were pendingin the legislature to prohibit all out-of-Statecorporations from farming or ranching in theState. The proposed legislation would alsofurther limit farming and ranching b Oklahomacorporations.

Wisconsin law, as discussed earlier, provides thatcorporations must meet certain specificrequirements to own land for farming purposes,and may not acquire or hold more than 640acres of land if 20 percent of the stock isheld by nonresident aliens. A State officialtold us that bills had been introduced in thelegislature to require corporations involvedin agriculture to report on their landholdings.

We did not independently determine the likelihoodof enactment of the proposed legislation describedabove. The status information or other opinions thatare included in the ' discussion were furnished bythe States.

DATA COLLECTED BY STATES NFOREIGN OWNERSHIP OF FARMLAND

The States have collected very little data on foreignownership of farmland. Where some is available, such asfor Iowa, Minnesota, and Vermont, the data does notindicate extensive foreign holdings of farmland norsignificant trends in that direction. There is no basisfor concluding whether such data provides a good clueas to the nationwide situation.

Seven States (Iowa, Kansas, Minnesota, Missouri,Nebraska, Oregon, and South Dakota) have laws thatrequire all corporations that farm or hold agriculturalland in those States to file an annual report with adesignated State office describing the nature and useof their landholdings. Such reports generallyidentify a corporation's place of incorporation, thenames and addresses of its directors and officers, andhow much acreage it owns and leases. Iowa, Minnesota,and Nebraska also require that such reports identifythe names and addresses of alien shareholders who ownmore than a specified percentage (ranging from 5 to20 percent) of the corporation's stock. In addition,

14


Iowa and Minnesota require nonresident aliens and variousbusiness entities that are controlled by nonresident aliensto file similar annual reports on their agricultural land-holdings.

In our letters to the State Governors, we asked themto provide us with ny specific data that might be availableto the State on the magnitude or trend of foreign investmentin the State's farmland, especially any data generated asa result of legislative reporting requirements. Most ofthe.States advised us that they did not have any specificdata on this subject.

Iowa and Minnesota provided us with information reportedto them on landholdings by aliens ad by corporations partlyowned by aliens. A Nebraska official told us that nosuch holdings weLr reported in that State. We als¢! receivedsome information from Vermont on the amount of farmlandpurchased by nonresident aliens in certain counties.

Iowa

Iowa has generally been regarded as the State havingthe most advanced reporting procedure foL obtaining dataon foreign ownership of farmland. The State legislaturepassed a law in 1975 requiring all corporations, limitedpartnerships, and nonresident aliens owning or leasingagricultural land or engaged in farming in Iowa toreport annually to the Iowa Secretary of State.

Corporations are required to identify the number ofacres and location of such landholdings; the name,address, residence, and citizenship of any nonresidentalien shareholder holding 5 percent of more of anyclass of the corporation's stock; and the number of suchshares held by nonresident aliens. Limited partnershipsare required to identify the number of acres and locationof their land holdings; the name, residence, and principaloccupation of each member of the organization; and thecitizenship of any nonresident alien partner. Each non-resident alien is required to report his name, address,residence, and citizenship, and identify the number ofacres and location of his landholdings.

According to annual reports issued by the officeof Iowa's Secretary of State, 18 nonresident aliensreported in 1976 that they owned about 6,000 acres ofIowa farmland; in 1977 a total of 23 reported that theyowned about 7,000 acres. The 1977 annual report alsoshowed that about 3,100 corporations and 64 limitedpartnerships had filed reports with the Secretary of

15

APPENDIX II APFPENDIX II

State indicating that they owned about 1.16 million acresand 27,00C acres, respectively, of agricultural land. Noneof the limited partnerships reported that they had anynonresident alien partners. Thirteen of the corporationsreported that nonresident alien shareholders owned 5percent or more of some class of their stock. Iowa'sannual report did not identify how many acres of landthese 13 corporatiors owned.

We asked about obtaining acreage data for the 13corporations, but were told that complete information onthis was not readily available and would require asearch through the files of the more than 3,000 reportingcorporations. However, a representative of theSecretary of State's office told us that 6 of the 13corporations had reported that they owned a total ofabout 2,100 acres of farmland in the State.

Iowa has a total of about 34 million acres offarmland. The total of 9,100 acres previously mentioned(7,000 + 2,100) represents 0.03 percent of Iowa's farmlandacreage. A representative of the Secretary of State'soffice told us that it was possible that some foreigninvestors had not filed their required reports, but thaton the basis of discussions with persons who are in closecontact with agricultural-related matters throughout theState, it was believed that few, if any, nonresidentalien landowners failed to comply.

Minnesota

Minnesota requires nonresident aliens and corporationsand other business entities to report on their agriculturallandholdings. The office of the State Commissioner ofAgriculture informed us that about 28,200 acres ofMinnesota's farmland were reported in 1976 to be owned orleased by nonresident aliens and business entities withat least 10-percent alien ownership. This represents about0.09 percent of the State's 30.6 million acres of agriculturalland. Other data provided us showed that 1,139 corporationsreported in 1976 that they owned or leased about 1.17 millionacres of Minnesota farmland. Most of this land was held byfamily farm corporations. Nonfamily farm corporationsreported owning about 221,300 acres, or less than 1 percentof Minnesota's total farmland.

Nebraska

Nebraska began requiring corporations to report ontheir agricultural landholdings in 1976. Corporations arerequired to identify the ercentage of the members of the

16


board of directors who are aliens, the names and addressesof the executive officers and managers who are aliens, andthe name and address of each alien owning 10 percent ormore of the corporation's voting stock.

Nebraska provided us data which showed that 2,399corporations reported in 1976 that they controlled 5.7million acres of agricultural land. However, the datadid not show that any of this land was controlled bycorporations with nonresident alien officers, directors,and/or shareholders. A Nebraska official said that shesuspected that this may not present an accurate picture ofthe situation in the State but had no basis for estimatingthe extent to which the State's reporting requirement mayhave been overlooked or ignored. Nebraska has about 68million acres of farmland.

Vermont

Vermont's Department of Agriculture provided us someinformation that it had developed on foreign purchases ofVermont farmland. The information covered 4 of Vermont's14 counties and was compiled from property transfer taxreturns filed with the State Department of Taxes. Itshowed that, of the 4,746 acres of farmland sold in thefour counties during 1976 and 1977, 951 acres (20 percent)were sold to nonresident aliens. An official said thatadditional sales had been made to foreign investors inthe northern part of the State since the informationfurnished us was collected. He said that foreign in-vestors have not changed the use of the land and havegenerally allowed the persons from whom they purchased thefarmland to continue operating the farms.

HOW FOREIGN INVESTMENT IN U.S. FARMLAND ISPERCEIVED BY STATE GOVERNMENTS

In our letters to the State Governors, we asked whethertheir State considers foreign investment in farmland to bean actual or potential problem and the reasons for thisbelief. The results of this survey are summarized below.

17


Numberof States

Not an actual or potential problem 18(Alaska, Hawaii, Idaho, Iowa, Maine,Massachusetts, New Hampshire,New Jersey, New Mexico, NorthCarolina, Pennsylvania, Rhode Island,South Carolina, Tennessee, Vermont,Washington, West Virginia, andWisconsin)

Could become a problem in future 10(Alabama, Delaware, Florida,Georgia, Illinois, Nebraska,Texas, Utah, Virginia, andWyoming)

Is a problem (or limited problem) at 2this time(Minnesota and Missouri)

No official position--but some 7legislators and citizens areconcerned (Kansas, Louisiana,Maryland, Montana, New York, Ohio,and South Dakota)

Mixed views 2(California and Oklahoma)

Not enough information for opinion--or 11no response(Arkansas, Arizona, Colorado,Connecticut, Indiana, Kentucky,Michigan, Mississippi, Nevada,North Dakota, and Oregon)

Total 50

States that viewed foreign investment in their farmlandas a potential problem generally cited one or more of thefollowing reasons.

-- Foreign investors might drive up the price of farmlandbeyond the reach of local residents.

-- Too much foreign investment could eventually enableforeign interests to gain some control of theavailable farmland, especially prime agricultural

18


lands. They could then gain some control over foodproduction and possibly food prices.

-- Too much foreign investment could adversely affectthe continuation and expansion of small familyfarms.

Most of the States that did not consider foreigninvestment to be a current or potential problem did notprovide any insight into the reasons for their belief.Iowa, Alaska, and Hawaii, however, mentioned the following.

-- Iowa noted that data it had accumulated as aresult of its legislatively required reportingsystem indicated that not much land was onedby nonresident aliens. (See p. 15.)

--Alaska indicated that more foreign investment inits farmland could be desirable. It said thatpossible future expansion of agriculture in theState could benefit from the investment of foreigncapital--such investment could be as valuable anasset to farmland development as it has been to thedevelopment of the timber and fisheries industries,assuming that the investment is politicallyacceptable.

-- Hawaii said that foreign investment may contributeto higher cost of agricultural lands, especiallyif held for future residential development, butthat higher land costs are caused by many factors,not necessarily foreign investment.

We visited agricultural authorities in six States toobtain additional views on whether they considered foreigninvestment to be a problem with respect to their State'sfarmland. Some of their views are presented below.

The Deputy Director of the California Department ofFood and Agriculture said that alien investment in farmlandwas somewhat of a minor problem in California because itcreates a competitive atmosphere which affects localresidents who are t-ying to get into farming and localfarmers who are trying to expand their operations. Amember of the California State legislature, who hadrecently introduced legislation to restrict foreigninvestment, said that farm prices had increased becauseof the influx of foreign capital into the real estatemarket. He characterized foreign investment in farmlandas a problem that could become worse in the future.

19

APPENDIX ii APPENDIX II

Neither of these authorities had data to show how much ofthe State's farmland was owned by aliens.

Several other California State officials said thatthey did not believe that foreign investment was aproblem in California. Some said that local residents,as well as foreigners, were driving up the price of farmlandand the cost of property taxes by paying higher than normalprices to obtain good land. Everyone agreed that harddata was lacking on the subject.

The Georgia Commissioner of Agriculture said that hedid not have any specific details as to the magnitude ortrend of foreign investments in Georgia farmland. He saidthat he had heard about some purchases by foreign interestsbut did not have any information on such purchases. Hebelieved that the publicity about some sales to nonresidentaliens had generated rumors about other sales that maynot have actually taken place. He said that his office didnot consider the issue to be a proLlem at this time, butrecognized that it could become a problem if the amountof foreign purchases should increase.

The Illinois Director of Agriculture said that hisdepartment was interested in the foreign investment questionas a matter of policy. The department does not considersuch investment to be bad in general but is concerned withthe consequences, especially as they relate to the familyfarm system. e emphasized that his department favorsmaintaining the family farm system in Illinois and thatforeign investment in Illinois farmland is considered apotential problem at this time for the following reasons.

-- Large scale foreign investment would changedramatically the economic structure of thefamily farm system that American agricultureis built on. This system is one of the mostefficient in the world and any changes in itsfundamental make up should be viewed withcaution.

-- Foreign ownership of farmland has no positiveconnotation, other than it might slightlyinflate the price received by the seller of land.No new jobs would be created, the community wouldreceive no benefits not afforded by local owner-ship, and no additional tax rever. as would becreated. In fact, a foreign investor mightactually by paying less taxes.

20


--Foreign investors may be applying different criteriato their investment decisions than domestic in-vestors. The owner/operator--the key to the familyfarm system--rarely benefits from operating ata loss to achieve tax advantages against otherinvestments. The foreign investor might.

--Production of agricultural goods is essential tothe U.S. economy, and control of the land (themeans of producing these goods) should not bevested with those who might be more interested intax shelters or land appreciation than in maxim;-ingproductivity. The State Department of Agricul edoes not favor any investment scheme which givesunfair advantages to those whom a farmer mustcompete against in purchasing land.

The Governor of Kansas said that there was no dataavailable on the maanitude or trend of foreign investmentin Kansas farmland and that it therefore was difficult topinpoint whether such investment is an actual problem.He said the only information his office had was hearsayor individual citizen comments about foreigners buying landin their area. He mentioned that State legislators, whosponsored some proposed legislation in this area (p. 13),have had reports of foreigners investing in their districtsand believe this to be a problem.

According to the Governor, State legislators areconcerned that foreign investors are buying large tractsof land and removing them from use by State residents andthat absentee foreign owners may not maintain their land-holdings by following good conservation practices. We wereinformed, however, that the main reason for such concerncentered around the probable loss of revenue to othercountries. The Governor said that, although the State maycollect taxes, it would probably not receive the benefit oflocal investment of the profits.

The Kansas Secretary of Agriculture said that he wasnot concerned about foreign investment in Kansas farmlandat the present time and did not believe that much of thefarmland was owned by nonresident aliens. He believed thatsuch sales might be on the increase. He said he had heardrumors that foreign purchasers were driving up the priceof land but believed that competition among local farmersto expand their operations was also a relevant factor infarm price increases. He explained that Kansas farmersdisliked the idea of having business entities and indivi-duals from outside the State, especially nonresidentaliens, purchase Kansas farmland.

21


The Governor of Missouri said that he had recentlysigned into law a bill which prohibits nonresident aliensfrom purchasing more than 5 acres of agricultural landfor farming. He said that this new law addresses thewidespread concern in Missouri that farmland be preservedfrom foreign ownership--a concern that had been expressedto him in meetings held throughout the State.

The Governor pointed out that, at the bill signingceremony, he had emphasized that foreign ownership of Missourifarmland is perceived as a threat to the continued survivalof the family farm. He said that long and continued debateon the subject had been a highly visible part of the pastsession of the Missouri legislature, and that the final billversion cf this debate was sent to him for signature byoverwhelming votes of both houses.

The Governor said that his office had no specific dataon the magnitude of foreign investment n Missouri farmlandat this time, but that the State Department of Agriculturewas formulating methodology to monitor such investments.He emphasized that the lack of precise and refined data inno way detracted from the need for the recently enactedlegislation.

According to the Governor, the consensus feeling ofMissourians is that foreign ownership of farmland in theState bids up land prices and gives foreign interestscontrol of a vital resource that should remain with U.S.citizens. The Governor said he shared that feeling.

Missouri's Director of Agriculture said that it wasdifficult to estimate the amount of foreign-owned farmland inMissouri because of the lack of hard data on the subject. Hesaid that he favored legislation that would contain a strictreporting requirement and enable the State to determine howmuch farmland is foreign owned. In his opinion, nonresidentalien investors as well as investors from other States bidup the price of Missouri farmland because they can affordto pay more for farmland than local people who have to make aliving from their farms. He pointed out, however, that in-vestments by nonresident aliens is a more emotional issuewith Missouri farmers than investments by persons fromother parts of the United Sates.

During our earlier preliminary inquiries (see app. VI),Iowa's Secretary of Agriculture told us that foreign invest-ment in Iowa was more of an emotional issue than a real pro-blem. He believed that Iowa farmland prices were being drivenup by neighbors bidding against each other, rather than by theinflux of foreign money into the State's real estate market.

22

APPENDIX III APPENDIX III

THE DIFFICULTY OF FINDING OUT

WHAT IS HAPPENING IN THE COUNTIES

We visited 25 counties in 5 States (see app. I) tosee what kind of information was available on foreign landpurchases and to try to get a line on the extent of suchpurchases i.n those counties since January 1976. We cameaway with the opinion that, generally, county publicrecords are not a useful source of information on foreigninvestment in county farmland. We were able to obtain someinformation on the subject from other sources and check itout through various means; however, the completeness of theinformation is uncertain and its collection dependedlargely on the knowledge and cooperation of various privateand public firms, agencies, and officials.

PROBLEMS IN USING PUBLIC RECORDS TO IDENTIFYNONRESIDENT ALIEN OWNERSHIP OF COUNTY FARMLAND

It is very difficult to identify parcels of county farm-land owned by nonresident aliens. Initially, we thought thatseveral ources could reveal this information but, as we ex-plored each source, it became clear that its usefulness asa data source on foreign investment in land was minimal.

County land records

Although the aws of most States do not require thatland transfers be recorded, we were told that nearlyall purchasers record them to protect their interest inthe property. Thus, each county we visited maintainedofficial records on land transactions in that county.Because various types of land transactions are recorded, therecords included many different types of documents--normallywarranty deeds, security deeds, quit claim deeds, deeds oftrust, sales contracts, and land plats. Many land trans-actions had occurred since January 1976--making the countyrecords rather voluminous. Because of this and becausenone of the documents called for the nationality of thepurchaser to be identified, we found that a scanning ofcounty files to identify parcels of land that appeared tobe owned by nonresident aliens was not a feasible or pro-ductive approach.

The first level of information in county land recordsis usually an alphabetical listing of persons or entitiesthat have been parties to land transfers. The listing iscoded to identify the location of the official filesdocumenting the transactions. However, it is almost always

23


necessary to have a prior lead in order to quickly locaterecords that may have some indication of purchases byforeign interests.

Because county land records do not require thatpurchasers reveal their citizenship, such information wasnot included in the records in most of the cases we checked.In the counties we visited, land transfer documents usuallyprovided a space for the names and addresses of the currentand previous owners of the land, but the addresses were notalways shown. In some cases where the current owner'saddress was not shown, an agent's name and address waslisted. Although foreign addresses do not conclusivelyidentify foreign purchasers, such addresses often providethe only indication that the purchaser may be a non-resident alien or a corporation, partnership, or trust withsome foreign ownership or beneficial interest. The countyland documents we looked at did not show the names,addresses, or residences of stockholders or beneficiaries.

We were told that local land records could be misleadingas to the owner of a particular parcel of land if the landwas owned by a corporation that had been taken over byanother entity. Those maintaining the records would haveno reason or means to identify and record such changesunless they were specifically notified to do so.

In addition to checking local land records maintainedby county governments, we contacted a number of othersources, including those discussed below, to try to identifyfarmland owned by nonresident aliens.

Registration of corporations

In most States, each corporation doing business withinthe State must register with a State agency. Such registra-tion is a matter of public record and usually requires thenames and addresses of the corporation's board of directors--but not those of the principal stockholders. If any directorslisted addresses in foreign countries, we assumed there wasa good possibility that some foreign ownership interestswere involved, and therefore we classified the corporationas a foreign investor for purposes of this report.

Tax assessor records

County tax assessor offices are responsible for sendingcit real property tax statements on all real estate in thecounty. In many cases, however, their records containedthe names and addresses of agents who pay the taxes on theparcels of land, rather than the addresses of the owners.

24


We were told that the primary concern was to get the taxbill paid, regardless of who owned the land.

Agricultural Stabilization andConservation Service county office records

At some locations, ASCS county offices maintained acard file on all farms that participate, or indicate anintention to participate, in the Federal programs the agencyadministers. Nothing on these cards indicated whether theowners of the farms were nonresident aliens. ASCS employees(and also Soil Conservation Service employees) told us that,through their contacts with farmers in the area, theypersonally knew of cases where it was rumored that afarm was owned by nonresident aliens. However, they couldnot provide any documents to substan:tiate these cases.

Federal land banks

Federal land banks, operated under the supervision ofthe Farm Credit Administration, make loans to farmers andranchers to buy farmland. Some bank employees we interviewedsaid that they had heard of sales to nonresident aliens,but that their banks had not made loans to such purchasers.From what we were told, these banks do not seem to be a goodsource for identifying purchases made by foreign investorsbecause such investors simply do not apply for loans there.

IDENTIFICATION OF FARMLAND OWNED BYNONRESIDENT ALIENS IN SELECTED COUNTIES

As part of our work to fulfill the Senate Committee'srequest, we tried to obtain information about recentpurchases of farmland by nonresident aliens in severalcounties in each of five States. (See app. I.) Our firststep was to talk with people who, because of their jobsor positions, we thought would be knowledgeable about theircounty in general and farmland transactions within that countyin particular, These people included county court clerksand tax assessors; members of county committees involved withASCS activities; real estate agents, brokers, and appraisers;bankers and employees of other types of lending institutions;title insurance companies; local farmers; and others.

We asked these people for any information they had onspecific instances of farmland purchases within theirrespective counties by nonresident aliens since January 1976.We tried to verify any information obtained by reviewingavailable public records.

25


The following sections discuss the results of our efforts.We have identified some land purchases by foreign interestsbut do not know what proportion of all purchases or allforeign purchases in these counties these transactions re-present. Also, because of the criteria we used in classifyingbusiness entities as having some foreign ownership orbeneficiaries, we are not completely certain that the land wehave classified as being owned by foreign interests is, infact, so owned. A summary of our findings is presented belowand discussed in the following sections.


Number of Total farmland Number Percent ofState counties acres in counties of acres total acres

California 3 7,367,730 8,786 0.1

Georgia 11 1,611,010 24,239 1.5

Kansas 3 771,000 2,678 0.3

Missouri 3 1,055,143 9,013 0.8

Oklahoma 5 5,342,872 0 0.0

25 16,147,755 44,716 0.3

Some information on additional scattered land transactions inthese States is also included in the following sections.

California

We visited three contiguous counties in the San JoaquinValley to obtain information on foreign owned farmland. Thesewere three of the State's largest agricultural counties. Wefound indications that at least 8,786 acres of farmland wereowned by corporations with nonresident alien affiliations, asshown in the following table.

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Total farmland . Number Percent ofCounties acres in county of acres total acres

Fresno 2,208,070 960 0.04

Kern 3,822,604 6,884 0.2

Tulare 1,337,056 942 0.07

Total 7,367,730 8,786 0.!

Of the 8,786 acres of farmland classified as foreignowned, 7,617 acres (87 percent) were owned by corporationsincorporated in the Netherlands Antilles--two groups ofislands in the West Indies. These islands are part of theKingdom of the Netherlands and have an income tax treatywith the United States under which Netherlands Antillescorporations and business entities are entitled to certaintax benefits on income derived from sources within theUnited States. Because stockholders of these corporationswere not identified, we cannot say for certain whether thebeneficial owners of the corporations were nonresidentaliens or investors from the United States taking advantageof tax benefits. For purposes of this report, however, weconsidered the corporations to be foreign owned becauseof their incorporation in the Netherlands Antilles.

We learned of three purchases by Netherlands Antillescorporations in Fresno County. A county ASCS official toldus of one purchase of 640 acres. We learned of the othertwo purchases of 160 acres each at the county land recordoffice. The property deeds for all three transactionsshowed that the owners of record were Netherlands Antillescorporations.

We learned of three purchases by Netherlands Antillescorporations and one purchase by a Bahamian corporation inKern County. Two of these purchases for 1,060 and 601acres were brought to our attention by officials at thelocal office of the Department of the Interior's Bureau ofReclamation. A representative of the California FederalLand Bank Association and officers of lending institutionsprovided us information on another purchase of 5,103 acres.We learned of the fourth purchase of 120 acres from anappraiser in the county assessor's office. The county landrecords confirmed that owners in three cases were NetherlandsAntilles corporations and that the owner in the other casewas a Bahamian corporation.

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Of the three purchases that we learned of in TulareCounty, one for 518 acres was mentioned to us by a realestate broker who specializes in farm sales; another for315 acres was referred to us by a consultant for a landmanagement company; and the other for 109 acres wasbrought to our attention by a Bureau of Reclamation official.County land records showed that two of the purchases hadbeen made by Netherlands Antilles corporations and thatthe 109-acre purchase had been made by a Hong Kongcorporation.

Georgia

We visited 11 counties in Georgia--six in the eastcentral part of the State (selected primarily on the basisof information provided by a group of farmers whichindicated that foreigners were buying farmland in thatarea) and five in southwestern Georgia (selected on thebasis of discussions with various persons who seemed tobe knowledgeable of recent purchases in that area). Atleast 24,239 acres of farmland appeared to be owned bynonresident aliens or business entities with nonresidentalien affiliations. Details by counties are shown in thefollowing table.


Total farmland Number Percent of'Counties acres in counties of acres total acres

East central:

Emanuel 189,245 1,024 0.5

Jefferson 181,067 3,285 1.8

Jenkins 126,066 2,116 1.7

Johnson 97,558 6,118 6.3

McDuffie 48,415 931 1.9

Washington 165,382 4,839 2.9

Subtotal 807,733 18,313 2.2

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Total farmland Number Percent ofCounties acres in counties of acres total acres

Southwest:

Dougherty 146,662 3,147 2.1

Baker 157,224 1,287 0.8

Sumter 201,841 0 0.0

Seminole 105,235 1,492 1.4

Decatur 192,315 0 0.0

Subtotal 8035277 5,926 0.7

Total 1,611,010 24,239 1.5

In analyzing the information provided by a group offarmers and discussing the subject of foreign owned farmlandwith various people in east central Georgia, we noted thatone individual seemed to be involved, in different capacities,in a number of the sales transactions. This individual toldus that he was the president of a land management companythat, among other things, manages farms in Georgia forcorporations that are owned by foreign shareholders. Heidentified 12 such farms that his company manages in thesix east central counties we visited. But he did not provideany documentation to show the alien status of the beneficialowners. The 12 farms comprised 16,658 acres of the total18,313 acres identified in the six east central counties.

We reviewed county land records and determined that,in 11 transactions, the buyers were corporations organizedin Georgia. The land records did not identify any of thecorporations' shareholders.

We reviewed the reports that each of these 11 corpora-tions was required (by State law) to file with the GeorgiaSecretary of State, and found that, in eight cases, one ormore of the directors listed addresses in foreign countries.In 6 of the 12 cases, the president of the land managementcompany who identified the purchases for us was listed as oneof the principal officers of the corporation. The corporationsinvolved in the land purchases had French, German, andSwedish connections.

29


In our efforts to identify foreign owned farmland insouthwestern Georgia, we contacted ASCS officials andagricultural extension agents in a number of counties andasked if they had any information on specific recentpurchases of farmland by foreigners. We also talkedwith a member of the State legislature, a representativeof a farm group, and two real estate appraisers. Someof these individuals identified farms in eight countiesthat they believed were foreign owned, but they were notcertain of this and could not provide any hard evidence tosupport their beliefs. They suggested that we visit thecounty courts and tax assessors' offices to obtainadditional information on these purchases which wereestimated to amount to about 10,000 acres.

About 9,000 of the 10,000 acres were located infive counties, and we vis 2 ?d these counties and reviewedland records for the pur -es. The records showed that3,147 acres in Dougherty Cou.ity and 1,287 acres in BakerCounty were owned by Netherlands Antilles corporations.The records for the purchases in the other three counties(Sumter, Seminole, and Decatur) showed that the land wasowned by corporations incorporated in Georgia.

However, by reviewing corporation registration filesin the Secretary of State's office, we found that a1,492-acre farm in Seminole County had been bought bya corporation which listed a West Germany address for oneof its directors. The files for the corporations that hadpurchased 3,074 acres in Sumter and Decatur counties listedU.S. addresses for their officers and directors. We there-fore did not consider the 3,074 acres to be foreign ownedfor purposes of this report because the records did notindicate it and the individuals who gave us the informationwere not parties to the transactions.

We also obtained some additional information aboutpurchases by foreign investors in counties that we did notvisit. The president of the land management company thatgave us information on purchases in east central Georgia(discussed earlier) told us that he managed a 3,000-acrefarm in Macon County and a 1,064-acre farm in BleckleyCounty that had been purchased in 1976 by corporationscontrolled by foreign investors. (A director of onecorporation listed a West German address; records for theother corporation did not list any foreign address.) Alsoa land brokerage company told us that it had handled a2,870-acre purchase in Screven County for a NetherlandsAntilles corporation, and a real estate company told usabout a 785-acre purchase by European investors in MitchellCounty. The files at the Secretary of State's office

30


showed that this latter parcel was also owned by aNetherlands Antilles corporation.

Kansas

We visited three contiguous counties in the northeastcorner of Kansas. We selected this area because we weretold that several foreign purchases of farmland had beenmade in one of the counties. It appears that at least2,678 acres of farmland in Doniphan County are owned bynonresident aliens or corporations with nonresidentalien affiliations, as shown in the following table. Wedid not identify any foreign owned farmland in the othertwo counties.



Doniphan 246,000 2,678 1.1

Leavenworth 277,000 0 0.0

Atchison 248,000 0 0.0

Total 771,000 2,678 0.3

Representatives of a land brokerage company thatspecializes in agricultural sales told us about four salesthat their company had made to foreign investors inDoniphan County. However, they did not provide us anydocumentation of the alien status of the buyers.

We attempted to obtain additional information on tnesepurchases by reviewing county land records. The recordsshowed that three of the purchases had been made bycorporations incorporated in Kansas, but did not indicatewhether the corporations had any nonresident alien officers,directors, or shareholders. A county ASCS official and thecounty register of deeds told us that all three purchasesinvolved foreigners, but they could not provide us anydocumentation. A person who was managing one of theproperties (consisting of 125 acres) told us that a Swissbanker owned 50 percent of the corporation that had boughtthat property.

County land records for the fourth purchase (consistingof 60 acres) showed that the property had been purchased byseveral individuals from the Kingdom of Belgium and had

31


later been transferred to a Kansas corporation in exchangefor stock in the corporation.

Missouri

We visited three contiguous counties in the southeasternpart of Missouri known as the "bootheel" area. We selectedthat area because of indications from the news media andvarious other sources that farmland purchases by nonresidentaliens was more significant there than in other parts ofthe State. More than 80 percent of the total land area inthe three counties is farmland. As shown below, we foundindications that at least 9,013 acres are owned bynonresident aliens or business entities with nonresidentalien affiliations.



Mississippi 242,644 3,832 1.6

New Madrid 377,149 368 0.1

Stoddard 435,350 4,813 1.1

Total 1,055,143 9,013 0.8

In Mississippi County 3,553 acres' of farmland had beenpurchased by a limited partnership (certified under Illinoislaws) whose general partner was a Texas corporation andwhose limited partner was a Canadian corporation. Welearned of this through discussions with the MissouriAttorney General's office which had initiated court actionagainst the partnership for violating the State's corporatefarm law. County land records covering this purchaseidentified the limited partnership as the purchaser ofthe farmland but contained no information on the ownershipstructure of the partnership.

The remaining 5,460 acres of foreign owned farmlandidentified in the three counties involved five purchases thatwere brought to our attention by representatives of two landbrokerage companies that had handled the transactions. Theysaid that the buyers were foreigners but 'd not provideus any documentation.

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We were able to verify from county land records thatthree of the five purchasers were foreigners. The recordsfor a 279-acre purchase in Mississippi County showed thatthe buyer was from West Germany. The records for a 368-acre purchase in New Madrid County and a 1,063-acrepurchase in Stoddard County showed that the buyers werefrom the Netherlands and Germany, respectively.

The other two purchases were in Stoddard County. Therecords for one (involving 2,750 acres) identified thepurchaser as a Missouri corporation but did not indicatewhether the corporation had any nonresident officers,directors, or shareholders. There was no deed on file atthe county land record office for the other transactioninvolving 1,000 acres. A county ASCS official told usthat he believed the owner was a nonresident alien but hecould not provide any documentation.

We also obtained some fragmentary information onrecent purchases of farmland made in other parts ofMissouri by aliens or business entities with foreignaffiliations. Several real estate brokers told us aboutsales to nonresident aliens that they knew about in fiveother counties. They identified specific sales, totaling4,109 acres, that they had been involved with. We didnot visit these counties to determine whether the landrecords indicated that tihe owners were foreigners.

We also scanned more than 1,600 corporate farmregistration files maintained by the State Department ofAgriculture and identified three foreign corporations thatreported owning 3,973 acres of farmland.

Oklahoma

Oklahoma law restricts nonresident aliens from owningfarmland in the State. However, during some of ourearly discussions of the issue of foreign investment inU.S. farmland with various Federal, State, and countyofficials; farmers; and businessmen, we were told thatforeign investors were purchasing land in fve Oklahomacounties (Cimarron, Beaver, Lclcre, McCurtan and Texas).We visited the five counties and talked with the countyassessors, treasurers, and recorders of deeds. We discussedthe subject of land sales to foreign interests with localASCS officials, Chamber of Commerce representatives, andlocal real estate brokers. We again were told that alienshad purchased farmland in these counties. However, we wereunable to substantiate the statements made to us.

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In one case, we were told by a county official thatItalians had purchased 5,000 acres of farmland in LeFloreCounty. County land records showed that the land wassold to an Oklahoma Farming and Ranching Corporation.Other information obtained at the Secretary of State'soffice disclosed that officers of the corporation werethree Oklahoma City attorneys. Shareholders were notidentified. None of the information on the documents wechecked indicated that aliens purchased the land. Aspreviously explained, however, this does rot provide completeassurance that aliens do not have an interest in thecorporation.

IMPACT OF NONRESIDENT ALIEN OWNERSHIP OFFARMLAND IN SELECTED COUNTIES

We were not able to accurately measure the extent offarmland ownership by nonresident aliens in the countieswe visited because, as explained earlier, the recordsmaintained by State and local governments do not lend them-selves to such determinations. Since information is notavailable for determining whether the above data isrepresentative of foreign investments in the countiesvisited, the information we were able to gather could beonly the "tip of the iceberg"; on the other hand, it couldrepresent a conservative approximation of the situation inthe counties involved.

Impact on land prices

Farmland prices can be very difficult to comparebecause they are dependent on many factors, such asthe topography, amount of clear land, value of existingtimber, soil condition, and value of crop allotments,cattle. and improvements included in the sales price.

We acquired or developed some data on the pricesnonresident aliers paid for farmland in several counties,but we could not determine to our satisfaction whetherthese prices were on target or were considerably higher orlower than prevailing market prices for comparableproperty in those locations. Sales prices generally werenot recorded on the property deeds we checked. For somesales in Georgia, we estimated sales prices on thebasis of the transfer tax and other information shown onproperty deeds.

For example, the estimated prices paid by nonresidentaliens for 17,400 of the acres we 4Ientified in six countiesin east central Georgia ranged from $305 to $717 an acre.According to county sources, the average price of farmland

34


in these counties ranged from $300 to $500 per acre--thebetter land costing more. Also, in three southwest Georgiacounties, prices paid for about 6,000 acres purchased bynonresident aliens ranged from $925 to $3,155 an acre. Theaverage pice of farmland in these counties, according tocounty sources, ranged from $600 to $1,000 an acre. One taxassessor in Georgia provided us with examples showing domesticinvestors buying farmland at about $150 an acre less than aforeigner who acquired what was described to us as comparableland.

Local people we talked to in Georgia generallybelieved that foreign investors are buying some of thebest tracts of available farmland at prices higher thanaverage--prices too steep for local people who dependon farming as their primary source of income.

In one county in Kansas, we could determine the price offoreign owned farmland in only one instance. In that case,the price per acre was about $40 less than the average pricepaid by domestic purchasers in eight sales of generallycomparable land in that county. However, we can draw noconclusions based on this very limited amount of information.

A lawyer who'handles real estate sales in that Kansascounty said he felt that foreigners were overpaying by atleast $200 an acre on the property they bought. He pointedout, however, that he knew of no land sold to foreignersthat local farmers really wanted. As an example., hereferred to a 637 acre farm that was sold to a fore.gn ownedcorporation. He said that the property was up for salefor over a year and no local persons would pay the askingprice. It had even been offered at an auction but no oneoffered enough. A county official said that it might notbe fair to compare prices paid by local farmers with thosepaid by foreigners, because the farms differed in qualityand because some of the local sales involve transactionsbetween family members and the prices paid may notreflect full value.

Several of the county officials, lenders, and realtorsthat we talked with in California said that farm prices haveincreased in the past 2 or 3 years. Some said that foreignerssometimes purchased property at prices that were $300 to $400above the market value. Others said that local residentsand residents from other parts of California had also paidpremium prices for good farmland.

35


Opinions of local authorities and othersregarding foreign ownership of farmland

Local authorities and others expressed differing viewsabout the implications of nonresident aliens purchasingfarmland. Some were concerned that foreign purchases mightpose a potential problem, some believed that problems alreadyhave surfaced, and others said that such investment wasbeneficial. Nearly all of the persons we talked with hadheard rumors about nonresident aliens purchasing farmland,either in their areas or elsewhere, but none of them knewthe extent of such investment in their particular localities.

Some individuals were concerned that the presence offoreign investors in the local real estate market had causedfarmland prices to increase--in some cases beyond the reachof local residents and farmers. Several persons said thatthe high prices foreigners were paying for farmland willeventually cause an increase in property values andproperty taxes in their areas. However, we were providedlittle data documenting that foreigners were payingsignificantly more than the Prevailing market prices forfarmland. Some authorities noted that local residents andresidents from other parts of the State had paid premiumprices for farmland and that this had helped cause farm-land prices to rise.

Some persons told us that foreign investment threatenedthe continued viability of the family farm concept becauseit made it more difficult for local residents to get intofarming and for small farmers to expand their operations.Some were concerned about the likely increase in absenteeownership. We also were told that many farmers simply didnot like the idea of nonresident aliens owning farmland intheir counties.

Not all of the views expressed to us at the local levelwere negative. Some said that struggling farmers who wantto get out of farming have a better opportunity to do soif foreigners are willing to pay them higher prices fortheir farmland or if their property value increases as aresult of foreigners paying higher prices for other farmlandin their area. We were also told that any influx of foreignmoney to purchase farmland could be viewed as a boost to theNation's economy. Some told us they believed that foreignerscontrolled only a small amount of farmland, and they couldnot understand why people were upset over this. Others saidthat local residents and farmers were just as much a factorin causing farmland prices to increase as foreigners.

36


Through our discussions, we found no indications thatforeign owners are farming or marketing crops in otherthan the usual manner. There are some indications thatin some places they are making the farms more productiveby clearing additional land and installing additionalequipment, such as irrigation systems.

Possible motives for foreign investmentin U.S. farmland

Various people we talked with expressed opinions as towhat the major motives are for foreign investment in U.S.land. These included:

-- hedge against inflation;

--stability of the U.S. Government (compared with therelative instability of certain foreign governments);

-- tax advantages (resulting from such things as thetax treaty with the Netherlands Antilles);

--security (U.S. farmland is a good investmentbecause of advanced technology and a steady supplyof labor); ai.]

-- attractiveness of investment (given the currentdollar situation, farmland may be priced lower inthe United States than in some foreign countries).

Although these reasons seem to make sense we have not talkeddirectly to any foreign owners to ascertain their motives.

37

APPENDIX IV APPENDIX IV

OBSERVATIONS ON CURRENT

EFFORTS AND ALTERNATIVE INITIATIVES

There is virtually unanimous agreement among people atall levels of government and in the private sector that,currently, there is no reliable data on the amount of U.S.farmland owned hy nonresident aliens or on recent trendsof such ownership. Such information would be very helpfulto the Congress if it wishes to formulate and implement anational policy on nonresident aliens owning farmland inthe United States. Clearly, efforts need to be started nowto produce useful and meaningful information.

FEDERAL EFFORTS--ONGOING OR PLANNED

Several Federal efforts touching on this subject havebeen started or planned in recent years but, as discussed inappendix VI, their results have been limited and future pro-spects are not encouraging.

-- The Department of Agriculture was to report to theCongress in October 1978 on the results of afeasibility study of ways to obtain nationwide landownership data but, as of May 1978, the study hadnot begun because of funding problems.

--Agriculture is currently conducting a questionnaire-type survey designed to obtain a better data baseon the characteristics of landowners and the usesbeing made of different types of land. One questionasks individual landowners to identify their citizen-ship and place of residence and corporations toidentify their home offices. A Department officialsaid that projections of the amount of foreign-ownedfarmland, using the results of this survey, wouldprobably be unreliable.

-- The Department of Commerce's Office of ForeignInvestment in the United States is trying toidentify all types of foreign investments in theUnited States, including those in the agriculturearea. The Office has had difficulty identifyingreal estate purchases (especially farmland) becauseit has relied on reports filed with various Federalregulatory agencies for the majority of its informa-tion--a source that the Office has found to beinadequate for identifying real estate transactions.Consequently, the Office is trying alternative sourcesand will be using, for example, stories in the news

38


media as major sources or leads on farmlandpurchases. A Commerce official said that a reporton 1977 foreign investment activity was expectedto be available in the fall of 1978 but wouldcontain very little data on farmland purchases.

--Commerce's Bureau of Economic Analysis plans torequire all nonresident alien firms and individualsowning or leasing at least 200 acres of real estateto report the particulars of such landholdings. Aswe understand it, Commerce will tabulate and reportto the Congress the total acreage owned and leasedby nonresident aliens; however, Commerce does notplan to separately identify the amount of farmlandacres included in the total. We suggested to Commerc-officials that such a breakout of data would beuseful to the Congress, but the officials told usthat they do not plan to act on our suggestion.

-- Another Federal effort which could provide some in-formation on nonresident alien owners of farmlandis being carried out by the Bureau of the Censusthrough the 1979 Agriculture Census. A preliminarytest of a questionnaire for gathering the data hasraised some doubts as to the completeness andreliability of the information received.

ALTERNATIVE APPROACHES TOFILLING THE DATA VOID

Following are some observations on the data problem andon various approaches--that surfaced from our discussions withvarious persons during our review--that might be used toobtain information on nonresident alien investment in U.S.farmland. Before any system is instituted, a number of legal,procedural, and coordination issues need to be addressed.Some of these are discussed later in this appendix.

1. As a condition for any individual or entity receivingany benefits trough Federal rural/agricultural programs,including cost-sharing, technical advice, loans, price support,crop allotments, grazing leases, etc., they could be requiredto first register their alien status and the acreage theyown or lease at the county Agricultural Stabilization andConservation Service (ASCS) office. Such information couldbe provided on a standard card suitable for data pro-cessing, checked for completeness and consistency by ASCSemployees, and forwarded to some central point in Agriculture,Commerce, or elsewhere for tabulation and annual reporting.

39


This approach has the advantage of being an all-Federalsystem, which should reduce legal and coordinationdifficulties. It also has a built-in compliance factor forthose benefiting or planning to benefit from such programs.A disadvantage would be that all foreign owners of farmlandmay not participate in, ad some may choose to disassociatethemselves from, such Federal programs.

2. As part of a mandatory process of recording landtransfer transactions at the county level, new landownersor their agents could be required to identify on a dataprocessing card the alien status and acreage of suchownership. After checking for completeness and consistency,county employees would forward the data to a State focalpoint for subsequent transmitting to a central Federal pointfor tabulation and annual reporting.

Such an approach would not provide data on existingland ownership. It would require the close cooperation ofall States and counties, changes in State laws and countyordinances, and the establishment of uniform data collectionand reporting systems at State and county levels. Addi-tionally, establishing and operating a system based onthis approach would be complex and burdensome to local andState governments. A major advantage would be that, if man-datory recording of land transfers was universally required,information would automatically be generated on all purchasesby foreigners.

3. Another approach would be to require, possibly asa condition to obtaining or renewing a State license or thelike, that all parties who customarily are involved in realestate transfers, such as real estate brokers, attorneys,agents, notaries, and banking and other lending institutions,currently record and report to a State office specifiedinformation on any land acquisitions in which they participateand which involve foreign interests. Data accumulated at theState office could then be forwarded to a central Federalpoint for tabulation and reporting.

Major drawbacks to this approach would include the un-certainty that all foreign acquisitions of land have beenidentified, the large number of data collection points, theprobability of much duplicate reporting on the same trans-action, and the probable strong opposition from nearly every-one concerned in collecting the data. Further, it wouldnot provide information on existing ownerships but onlyon new acquisitions by foreigners. An advantage would bethat the initial reporting would be current and wouldcome from parties close to the transaction.

40


4. Periodic and extensive surveys, using scientificsampling techniques and centralized controls, might providedata that could be projected on a nationwide basis. How-ever, because of the numerous problems involved, the resultsmay not be entirely satisfactory. Some of the problems wouldinvolve determining the proper universe to sample (forexample, should the survey be directed at local land records,at specific land tracts in various geographical locations, atreal estate brokers and agents, or at some other universe?),identifying all the members of the selected universe, anddeciding how to design aspects of the sample (for example,if information is going to be obtained from real estate firms,should small independent firms have the same chance of beingselected in the sample as large nationwide firms?). Also,some of the sources to be sampled may not have enough infor-mation to verify that the owners of specific farms areforeigners. Further, such surveys depend on complete andaccurate information being provided by the respondents. Thedata obtained might be difficult to validate.

5. Another approach, which we believe may be the mostfeasible and simplest of the approaches considered, wouldbe to federally legislate a nationwide registration systemfor foreign owners of U.S. land. Such a system could begenerally similar to the alien rident registration systemcurrently used by the Department of Justice's Immigrationand Naturalization Service, which requires card-type reportsto be submitted annually by resident aliens through postoffices to a central Federal point.

Such a system would put the reporting burden on thelandowners (or, in the case of absentee or nonresidentowners, on'their agents), would require relatively littleinvolvement by State or county governments, and would beconceptually simple. A further advantage of this approachis that it would provide data on current ownership, ratherthan be limited to obtaining information on only those farm-land transfers occurring after the system is instituted. Arequirement of this nature could be publicized on a nationwidebasis and reinforced at State and county levels as part ofthe rules and regulations covering land transactions. Theusefulness of such a system would depend on the completenessof the information reported by foreign owners of land ortheir agents.

Any system used would require the resolution of anyproblems caused by constitutional and legal issues, suchas State and individual rights, the Freedom of InformationAct requirements and protection under Privacy Laws,

41


international treaties, and tax laws and policies. Toinsure that all required parties comply and that the in-formation obtained is timely, accurate, and complete, thesystem must include the following.

--Standard definitions of terms and clear criteriaas to who would be affected, particularly in thecase of business entities partially owned byforeign interests.

--Stipulations that only data on foreign investmentsin farmland would be collected.

-- Criteria as to the minimum number of acres thatwould require registration and reporting.

-- Use of a standard card-type form that wouldfacilitate data processing of the information.

--Meaningful incentives or penalties to help insuresubmission of full and accurate data.

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APPENDIX V APPENDIX V

STATE LAWS ON ALIEN OWNERSHIP

OF REAL ESTATE

This appendix summarizes State laws relating to alienn-nership of real estate. It also includes informationon restrictions on corporate ownership of land. Fordetailed provisions, the reader should consult the lawsof the particular State.

Much of the material on alien ownership was originallyincluded in an April 1976 Department of Commerce reportentitled "Foreign Direct Investment In The United States".It has been updated to April 30, 1978, for purposes of ourreport on the basis f information provided by StateGovernors' offices and other sources.

Statutory citations are provided where applicable. Astatutory citation next to the entry "no restrictions"indicates an affirmative statement in the relevant code.No citation next to the entry "no restrictions" indicatesthe absence of any statutory provision on the question.

ALABAMA

No restrictions. (Ala. Const., art. I, sec. 34; Ala. Code,title 47, sec. 1.

ALASKA

No restrictions on alien ownership of farmland.

Mining rights in State-owned lands may be acquired only byadult citizens (or their guardians or trustees), adult alienswho have declared their intention to become U.S. citizens,adult aliens whose home country grants reciprocal treatment,associations of the above persons, and qualified corporations.To be qualified, a corporation must be organized under thelaws of a State or territory of the United States, and no morethan 50 percent of its stock may be owned or controlled byaliens who could not own directly. (Alaska Stats., sec.38.05.190.)

ARIZONA

Aliens "eligible for citizenship" have the same rights asc'tizens. Aliens not "eligible for citizenship" have onlyrights provided by Federal treaties. (Ariz. Rev. Stats.Ann., secs. 33-1201 through 33-1207.)

43


Sale, lease, and sublease of State lands is limited tocitizens, aliens who have declared their intention tobecome U.S. citizens, and corporations qualified to dobusiness in the State. No person may purchase more than640 acres of grazing land or more than 160 acres of landsusceptible of immediate use for agricultural purposes.(Ariz. Const. art. X, sec. 11; Ariz. Rev. Stats. Ann., sec.37-240.)

ARKANSAS

No restrictions.

CALIFORNIA

No restrictions. (Calif. Civil Code, sec. 671.)

COLORADO

No restrictions.

CONNECTICUT

Aliens resident in the United States may purchase, hold,inherit, or transmit real estate. Citizens of France mayalso own real estate, even though not residents in theUnited States. The spouse and lineal descendants of analien owner may inhe it and hold the real estate of thealien. Nonresident aliens may own real estate for thepurposes of mining or quarrying activities. (Conn. Gen.Stats. Rev., secs. 47-57 and 47-58.)

DELAWARE

No restrictions.

FLORIDA

No restrictions.

GEORGIA

Aliens have equal rights with citizens, so long as theirgovernment is at peace with the United States. (Ga. CodeAnn., sec. 79-303.)

HAWAII


44


Persons seeking to purchase certain residential lots mustbe citizens or aliens who have declared their intent to becomeU.S. citizens and have resided in the State for 5 years ormore. (Hawaii Rev. Stats., sec. 206-9.)

IDAHO

State lands may be sold only to citizens and to those who havedeclared their intention to become citizens. (Idaho Code,sec. 58-313.)

ILLINOIS

Aliens have full rights to acquire and hold land, either .ypurchase or inheritance or otherwise, but must dispose of twithin 6 years. (Ill. Rev. Stats., c. 6, secs. 1 and 2

INDIANA

All aliens residing in Indiana who have declared thei:intention to become U.S. citizens may acquire and holde egestate in the same manner as citizens of the State. Allother aliens may only take and hold land by devise anddescent and must dispose of it within 5 years. Any alien,whether or not he resides in Indiana may take real estateas security for a loan and may, in the same manner as acitizen of the State, take and hold title to real estatein collection of a debt. (Burns Ind. Stats. Ann., secs,32-1-7-1 and 32-1-7-2.)

All aliens must dispose of land in excess of 320 acreswithin 5 years of acquisition. (Burns Ind. Stats. Ann.,sec. 32-1-8-2.)

IOWA

Aliens resident in Iowa have the same ights as citizens.Nonresident aliens may acquire and hold property withincity or town limits and also may acquire and hold up to640 acres outside of municipal limits. (Iowa Const.,art. 1, sec. 22; Iowa Code sec. 567.1.)

The right of an alien who resides outside the United Statesto inherit property depends on the existence of areciprocal right for U.S. citizens to inherit in the alien'shome country. (Iowa Code, sec. 567.8.)

Corporations incorporated outside the United States andall other corporations in which half or more of the stockis owned by nonresident aliens may enforce a lien orjudgment for any debt or liability and may be a purchaser

45


at a sale of real estate by virtue of such lien, liability,or judgment if all real estate acquired by such method issold within 10 years after the title was perfected in saidcorporation. In all other instances the above corporationsare prohibited from acquiring title to or holding realestate. (Iowa Code, secs. 491.67, 567.1, and 567.2.)

Aliens, corporations, and limited partnerships are requiredto register land holdings and make certain annual dis-closures. (Iowa Code, c. 172A and section 567.9.)

KANSAS

Aliens may own property. Aliens eligible for citizenshipmay inherit in the same manner as citizens. Other aliensmay inherit only as provided in a treaty between the UnitedStates and the country of the alien's citizenship. (Kans.Stats. Ann., sec. 59-511.)

There are substantial restrictions on corporations owningfarm land. (Kans. Stats. Ann., sec. 17-5901.)

All corporations are required to report annually to theSecretary of State.

KENTUCKY

An alien, not an enemy, who has declared his intentionto become a citizen of the United States may aquire or in-herit land as if he were a citizen. If he has not becomea citizen within 8 years of acquisition, the property mayescheat to the State. (Ky. Rev. Stats. Ann. 381.290, and381.300.)

An alien who is a resident of the State may take and holdlands for a residence, or for a business, trade, or manu-facture, for not more than 20 years. (Ky. Rev. Stats.Ann. 381.320.)

Special rules apply for the alien wife or child of a U.S.citizen. (Ky. Rev. Stats. Ann. 381.310.)

Aliens who reside in the State but who have not declarea theirintention to become citizens and nonresident aliens are onlyentitled to inherit property, but they must dispose of itwithin 8 years. (Ky. Rev. Stats. Ann. 381.300 and 381.330.)

No corporation may hold any property, except that property"proper and necessary for carrying on its legitimatebusiness," for longer than 5 years. (Ky. Rev. Stats. Ann.271A.705(1).)

46


LOUISIANA

No restrictions.

MAINE

No restrictions.

MARYLAND

All aliens, except enemy aliens, have the same rights ascitizens. (Ann. Code of Md., Real Property, sec. 14-101.)

MASSACHUSETTS

No restrictions. (Chap. 184 sec. 1.)

MICHIGAN

No restrictions.

MINNESOTA

Only U.S. citizens or permanent resident aliens can acquireany future interest in agricultural land (with se excep-tions). The legislation does not affect the rig.,ts ofaliens to inherit land, or the rights of citizens of foreign country to hold land in cases where their rhts aresecured by treaty. The legislation permits aliens toretain title to any agricultural land acquired beforeMay 27, 1977.

Corporations (with certain exceptions) are prohibited fromfarming or acquirfng real estate used for farming or realestate capable of being used for farming. (Minn. Stat.sec. 500.24.)

Nonresident aliens, corporations and other business entitiesmust report annually on their agricultural landholdings tothe State Department of Agriculture.

MISSISSIPPI

Resident aliens are treated on the same basis as citizens.Nonresident aliens may not acquire or hold land, exceptthat they may hold a lien on land and take title to theland by foreclosing on the lien but must dispose of it within20 years. Citizens of Syria and Lebanon may inherit land,despite the fact that they are not residents. (Miss. Code.Ann., sec. 89-1-23.)

47


MISSOURI

On May 5, 1978 Missouri passed a law which prohibits non-resident aliens from acquiring more than 5 acres ofagricultural land in Missouri for the purpose of farming.The law does not affect agricultural land that non-resident aliens already own, as long as the land is held bythe present owner. Nonresident aliens may acquire and holdother types of real estate as if they were U.S. citizens andresidents.

Corporations not engaged in farming before September 28, 1975are prohibited from farming. As of this same date corpora-tions are prohibited from acquiring an interest in anytitle to agricultural land in Missouri subject to certainexceptions.

Corporations are required to report annually.

MONTANA

The right of a alien to inherit real estate is dependent onthe existence of a reciprocal right for U.S. citizens toinherit real estate in the country where the alien resides.(Rev. Codes of Mont. sec. 91A-2-111.)

NEBRASKA

Aliens .nay hold real estate within city or village limitsand within 3 miles of those limits. They may also holdleases in other lands for up to 5 years. Other alien landownership is prohibited. (Nebr. Rev. Stats., secs. 76-402and 76-414.)

Resident aliens may acquire property by inheritance, butmust sell it within 5 years. An alien not resident in theUnited States may inherit only if reciprocal inheritancerights are afforded U.S. citizens in the nation of the alien'sresidence and must dispose of it in 5 years. Nebr. Rev.Stats., secs. 76-405, 76-402 and 4-107.)

Corporations organized outside Nebraska may hold landwithin city or village limits and within 3 miles of thoselimits. They may also hold land necessary for theirbusiness as common carriers or public utilities, or formanufacturing plants, petroleum service stations, orbulk stations. Subject to the above exceptions, nocorporation (whether organized in Nebraska, another State,or in a foreign country) may hold land if a majority ofits directors are aliens, if its executive officers ormanagers are aliens, or if a majority of its stock is

48


owned by aliens. (Nebr. Rev. Stats. secs. 76-402 through76-414.) Corporations must make annual reports of landholdings. aws, 1975, L.B. 203.)

NEVADA

No restrictions.

NEW HAMPSHIRE

An alien resident in the State has the same rights as acitizen. A nonresident alien may not hold real estate.(N.H. Rev. Stats. Ann., sec. 477.20.)

NEW JERSEY

"Alien friends" have the same rights as citizens withresgct to real estate. (N.J. Stats. Ann., sec. 46:3-18.)

NEW MEXICO

No restrictions. (N.M. Stats. Ann., sec. 70-1-24.)

NEW YORK

No restrictions. (McKinneys Consolidated Laws of N.Y.Ann., Real Property sec. 10.)

NORTH CAROLINA

Aliens may hold real estate on the same basis as citizens.(N.C. Gen. Stats. sec. 64-1.)

The right of a nonresident alien to inherit real estatedepends on the existence of a reciprocal right for U.S.citizens to inherit real estate in the alien's homecountry. (N.C. Gen. Stats., sec. 64-3.)

NORTH DAKOTA


Corporations are prohibited from engaging in farming oragriculture. (N.D. Century Code 10-06-01.)

OHIO

No restrictions.

49


OKLAHOMA

No alien may hold land unless he is a bona fide residentof the State. If an alien who is not -resTe-nt of theState acquires land (e.g., by inheritance) or if aresident alien leaves the State, he must dispose of theland within 5 years. (Okla. Const. art. 22, sec. 1;Okla. Stats. Ann. Title 60 secs. 121 through 123.)

Aliens may inherit land -and may acquire title to landby foreclosing a lien in their favor, but if notresidents of Oklahoma, they must dispose of it within5 years. (Okla. Const. art. 22, sec. 1. Okla. Stats.,Ann. Title 60 sec. 123, Title 84 sec. 229.)

No corporations may hold land outside of municipal limitsexcept to the extent necessary for other businesspurposes. (Okla. Const., art. 22, sec. 2; Okla. Stats.,Ann. Title 1 sec. 1.20.) Corporations may not engage infarming or ranching, except in special circumstances.(Okla. Stats. Ann. Title 18 sec. 951.)

OREGON

Aliens may not buy State land nor establish mineral claimson public lands unless they have declared their intention tobecome citizens. (Oreg. Rev. Stats. secs. 273.255, 517.010,and 517.044.)

In 1977 a law was passed requiring all corporations thatown or lease farmland in the State to report to theState Corporation Commission certain data.

PENNSYLVANIA

Aliens may purchase and hold real estate up to 5,000 acresor a net annual income of $20,000. Certain other statutesgive special exceptions. (Pa. Stats. 68, secs. 21 through32.)

RHODE ISLAND

No restrictions.

50


SOUTH CAROLINA

No alien nor alien-controlled corporation may own more than500,000 acres of land. (Code of Laws of South Carolina27-13-30.)

SOUTH DAKOTA


Corporate ownership of farm land is restricted. (SouthDakota Constitution, article XVII, sec. 7 and SouthDakota Compiled Laws chapter 47-9A.)

Every corporation engaged in farming must file annually withthe Secretary of State.

TENNESSEE

No restrictions.

TEXAS


A corporation may acquire land only if it is necessary andproper for its business. It must convey away all excessland within 15 years of acquisition. A corporation may nothave real estate holding as one of its urposes, except a"town lot" corporation, operating in or near a city.(Vernon's Ann. Tex. Stats., arts. 1302-4.01 through1302-4.04.)

UTAH

No restrictions.

VIRGINIA

Any nonenemy alien may acquire and hold land on the same

basis as a citizen. (Va. Code. Ann., sec. 55-1.)

VERMONT

No restrictions.

WASHINGTON

No restrictions. (Wash. Rev. Code, sec. 64.16.005.)

51


WEST VIRGINIA


Corporations which acquire more than 10,000 acres of landin the State must obtain a license. A tax at the rate of5 cents for each acre in excess of 10,000 is charged forthe license. (W. Va. Code Ann., sec. 11-12-75.)

WISCONSIN

Resident aliens have the same rights as citizens. Aliensresident outside the United States may not acquire orhold more than 640 acres, except by inheritance. (Wis.Const., art. 1, sec. 15; Wis. Stats., secs. 710.01 and710.02.)

Certain Corporations are restricted from owning farm land.(Wis, Code, sec. 182.001.) In addition, no corporationin which more than 20 percent of the stock is held bynonresident aliens may acquire or hold more than 640acres. (Wis, Stats., sec. 710.02.)

WYOMING

Resident aliens have the same rights as citizens. Wyo.Const. art. 1, sec. 29; Wyo. Stats. Ann., sec. 34-15 .)

A nonresident alien may inherit property only if areciprocal right exists for a U.S. citizen to inherit inthe nation of the alien's citizenship. (Wyo. Stats. Ann.,sec. 2-43.1.)

52

APPENDIX VI APPENDIX VI

U.S. GENERAL ACCOUNTING OFFICE

RESULTS OF PRELIMINARY INQUIRIES INTOFOREIGN OWNERSHIP OF U.S. FARMLAND

(MARCH 1978)

Recently the news media has given considerable coverageto stories which indicate that large tracts of U.S. farmlandare being purchased by citizens of other countries. Membersof Congress, State legislators, and landowners from farmingStates have expressed concern about the increase in absenteeforeign landowners' holdings in their States. We made somepreliminary inquiries to obtain insight into the availabilityand depth of information on this subject and to identifythe legislative, executive, and/or State actions that havebeen taken, or are underway or planned, to improve the database on farmland ownership. As we read it, the concern aboutthe potential problem of foreign ownership of U.S. farmlandrelates to nonresident foreign owners, rather than to residentforeign owners who make their homes in this country. Con-sequently, the following discussion of the results of ourinquiries essentially deals with nonresident foreign owner-ship.

DATA LACKING ON LAND OWNERSHIP

There is presently no national system which aggregatesinformation on the owners of U.S. real estate, regardlessof whether those owners are resident or nonresident aliensor U.S. citizens. Consequently, adequate information onforeign investment in U.S. farmland is not readily available.We have been told that establishing such as system could bevery difficult and costly. A study of the feasibility ofdeveloping a national information system for all real estate,including farmland, has been authorized by the InternationalInvestment Survey Act of 1976, which is discussed in a sub-sequent section.

Most States do not have a system that provides much in-formation on the citizenship and residence of landowners.Studies have shown that State land title ecordation systemsgenerally reveal little information about the alien status ofpersons recorded as title holders. Many States do not r-quire aliens who purchase land to report their alien statusat the time of purchase. Some States do not een requirethat the title to a deed be recorded at the timie of transfer.The problem of identification is particularly difficult whenartificial entities, such as partnerships, corporations, ortrusts, holding legal title to land obscure the identity and

53


possible alien status of persons or parties holding beneficialinterest in the land. Accordingly, it may not be enough tohave a system that attempts to monitor the alien status ofparties holding legal title to U.S. farmland without alsodealing with the possible alien status of beneficial owners.

In this regard, however, available information indicatesthat secrecy might be a major factor in foreign interestsdeciding to invest in U.S. real estate, including farmland.We were told that, if someone really wants to obtain ormaintain control over U.S. land in secrecy, it would be ex-tremely ifficult and time-consuming, and perhaps virtuallyimpossibie within the context of a nationwide information-gathering system, to uncover this.

From what we could learn, much of the information innews stories on foreign investments in U.S. farmland seemsto be based on statements made by individual real estatebrokers and bankers and local residents about particulartransactions of which they have knowledge. There are varyingopinions about the seriousness of the situation nationwideand about current nationwide trends, but there is virtuallyno argument about the lack of hard data supporting suchopinions.

STATE EFFORTS TO OBTAIN BETTER DATAON FOREIGN OWNERSHIP OF U.S. FARMLAND

Information we obtained indicates that 29 States havelaws that place constraints on alien landholdings in theUnited States. Although these laws apparently vary inseverity and effectiveness, their existence can be viewedas evidence of citizen and State concern about and oppositionto foreign ownership of U.S. land. There are indicationsthat several of these States require alien landowners toreport their alien status in some fashion.

Iowa has generally been identified as the State withthe most advanced reporting procedure for obtaining data onforeign ownership of farmland. The State legislature passeda law in 1975 (House File 215) which requires all nonresidentaliens owning or leasing agricultural land for frming toreport annually to the Iowa Secretary of State. The require-ment provides for the identification of beneficial owners incases where the land is owned by corporations, partne: ipsor trusts.

54


We visited Iowa and made some inquiries about themagnitude of alien investments in Iowa farmland. Accordingto annual reports issued by the office of Iowa's Secretaryof State, 18 nonresident aliens reported in 1976 that theyowned about 6,000 acres of Iowa farmland; in 1977 a totalof 23 reported that they owned about 7,000 acres. Iowahas a total of about 34 million acres of farmland. A rep-resentative of that office told us that it is possible thatsome foreign investors had not filed their required reportsbut that, based on discussions with persons who are in closecontact with agricultural-related matters throughout theState, it was believed that few, if any, nonresident alienlandowners failed 'o comply.

We also discussed foreign ownership of land with Iowa'sSecretary of Agriculture who said that he did not considerthis to be a problem in Iowa. He said that he viewed it asmore of an emotional issue than a real one. With regard torecent increases in the price of farmland in Iowa, theSecretary said that he believed the prices were being drivenup by neighbors bidding against each other, rather than bythe influx of foreign money into the State's real estatemarket.

A great deal of study into the foreign investmentissue has been made in the past several years at Iowa StateUniversity. We met with three members of the faculty, allof whom were involved in a study of foreign investments inU.S. real estate--required by section 5(6) of the Forei.Investment Study Act of 1974. (The act and related studare discussed in the following section of this paper.) Theseauthorities believed that the issue had been exaggeratedrecently, but they all agreed that a system was needed tomonitor land purchases by aliens to identify developingtrends.

They pointed out that land recording has always beena State and local responsibility and should continue to beso. They believed, however, that an effective systemfor monitoring foreign ownership of U.S. land will requiresome Federal involvement to assure consistency in datareporting format and content. They suggested that con-sideration be given to establishing a system which wouldrequire land ownership to be identified and recorded inlocal records, reported to an appropriate State agency, and

55


collected by an appropriate Federal agency. They said thatsuch a system could be costly and that Federal money wouldprobably be needed to provide the in'entive for Stateand local governments to gather and report the necessaryinformation.

These authorities also emphasized that, from theirviewpoint as economnists, they believed that investment infarmland would not be a very effective way for foreigninterests to control sectors of the U.S. food system. Theysaid that, from the standpoint of the economics of the U.S.food system, they would be more concerned about foreigninterests investing in such things as agricultural productprocessing plants, fertilizer plants, and financial in-stitutions.

We have not looked into the requirements and resultsof laws in other States on alien landholdings and landpurchases. Further work in this area will be done in re-sponse to the concerns of the Senate Committee on Agriculture,Nutrition, and Forestry and the Senate Appropriations Com-mittee's Subcommittee on Agriculture, Rural Development andRelated Agencies.

FEDERAL EFFORTS TO OBTAIN BETTER DATA ONFOREIGN OWNERSHIP OF U.S. FARMLAND

The Federal Government has taken several steos to obtainbetter information about foreign investments in the UnitedStates, including investments in U.S. farmland.

Foreign Investment Study Act of 1974

This act (Public Law 93-479, 88 Stat. 1450) was passedbecause of growing congressional and public concern aboutforeign investment in the United States. Its ourpose wasto assess the situation and obtain basic information on suchinvestment. The act required the Deoartments of Commerceand the Treasury to conduct comprehensive studies and tosubmit reports to the Congress on direct and portfolio foreigninvestments in the United States. Comlrerce was responsiblefor studies relating to direct investments and Treasury forstudies relating to portfolio investments. The act calledfor the identification, investigation, and analysis of foreigninvestments, as well as for appropriate recommendations aimed

56


at keeping information and statistics on the subject up-to-date.

Section 5(6) of the act called for an analysis of foreigndirect investments in U.S. real property holdings. Thiseffort was carried out by the Department of Agriculture'sEconomic Research Service (ERS) 1/, through an agreement withCommerce, and consisted mostly o a compilation of 20 researchpapers on various aspects of the alien investment issue.Parts of the compilation were included in Volume Number 8 ofCommerce's final report to the Congress, issued in April 1976.

In its report, Commerce cited some data it had obtainedfrom U.S. affiliates of foreign firms. (Such affiliates weredefined as those being at least 10 percent foreign-owned.)The data showed that, as of the end of 1974, 4.9 millionacres of U.S. real estate were owned by such affiliates. Ofthis amount, 1 million acres was reported to be land ownedby affiliates classified as being in the agriculturalsector.

According to the Commerce report, this data providedan incomplete national picture for several reasons, in-cluding the following.

-- The Commerce study did not obtain data on propertyheld exclusively for personal use and not for profit-making purposes.

--Information was not requested on holdings of 20acres or less, and those held by business enterpriseswith both total assets and total revenues of lessthan $100,000.

The Commerce report included data which indicatedthat about 63 million acres of land were leased by U.S.enterprises that were at least 10 percent foreign-owned. Thereport pointed out, however, that about half of this land was

1/In October 1977 ERS was consolidated with the Departmentof Agriculture's Statistical Reporting Service, FarmerCooperative Service, and Economic Management SupportCenter to form a new agency called the Economics, Statistics,and Cooperatives Service.

57


located abroad and that much of the remainder consisted ofoffshore mineral rights. A Commerce official who had con-tributed to the study told us that he did not believe anyU.S. farmland was included in the 63-million-acre figure.

The Commerce report also included information onState laws that place constraints on alien landholdings inthe United States.

The complete results of the ERS effort under section 5(6)of the act were issued in June 1976 as a separate report en-titled Foreign Investment in U.S. Real Estate". (This reportwas not distributed to the Congress but is available from theNational Technical Information Service, Springfield, Virginia.)Some of the research papers included in the ERS report con-tained scattered pieces of information on alien land invest-ment, but they were primarily academic discussions of variouspolicy issues surrounding the topic of real estate andforeign investments and the political, social, legal, andeconomic implications and impacts of such investments. Be-cause of the nature of these papers, they added little byway of an overall data base on the amount of foreign-ownedU.S. land. According to the report's preface, little or nobetter quantitative information was obtained than was avail-able in articles in newspapers, news magazines, and tradejournals. Instead of compiling fragments of available in-formation, the report is described as stressing policy issuesexamined from a detached, academic point of view.

ERS's report confirmed that national data on real estateownership is extremely limited--that such information is frag-mentary and scattered among local government offices, privateindustry files, or individual landowners. The report alsostated that ownership is easily disguised and informationeasily controlled, and that the ethics and conduct of industryand commerce generally, and real estate institutions partic-ularly, encourage confidentiality because market advantageruns with secrecy.

The ERS report concluded that the foreign investmentissue actually boiled down to an information problem, andmade the following recommendations, which were also includedin a draft of the report provided to Commerce for its con-sideration in developing its final report to the Congress.

58


--Continue the current Federal policy regardingalien ownership of land, pending te completion ofa comprehensive empirical study of long-run economic,social, and political impacts of foreign purchases.

--Develop sources and procedures for reporting to aFederal agency or agencies the amount, location,value, and use of all land held by foreign individualsand entities in terms of both nominal and beneficialowners.

-- Encourage States to adopt legislation requiring localofficials to identify alien interests in land, andsystematically report the information to the State.Such information could then be collected and analyzedby the appropriate agency or agencies of the FederalGovernment.

-- Promote the design of more efficient landownershipinformation collection and handling systems. Createa commission with representation from the Congress,selected Federal agencies, State and localorganizations, professional societies, and privateindustry to recommend system standards.

These specific recommendations were not included inCommerce's report. Commerce's recommendations were muchbroader in that they were generalized to address all modesof foreign direct investment in the United States. Thebasic message was consistent, however, in pointing out theneed for the Government to collect more and better data onforeign investment.

Some congressional and executive actions which appear tobe consistent with the Commerce and ERS recommendations arediscussed below.

International Investment Survey Act of 1976

This act (Public Law 94-472, 90 Stat. 2059) was passed bythe Congress in October 1976 to supplement the authority ofthe President to collect regular and periodic information oninternational investment, both in the United States by foreigninvestors and in foreign countries by U.S. interests. Section4(d) of the act directed the President to conduct a study

59


of the feasibility of establishing a system to monitor foreigndirect investment in agricultural, rural, and urban realproperty.

The Department of Agriculture has been assigned re-sponsibility, by the Office cf Management and Budget, tocarry out the feasibility study. A report on its findingsand conclusions is to be submitted to the Congress in October1978. As of early ebruary 1978, however, the study wasstill in the planning stage and funds had not been made avail-able to carry out the effort.

The Department of Commerce's Office of Foreign Investmentin the United States has been assigned responsibility forcarrying out all otaer provisions of the 1976 act. ThisOffice is also charged with crrying out Commerce'sresponsibilities under two Executive Orders on foreign invest-ment. Executive Order 11858, dated May 7, 1975, charged theSecretary of Commerce with the responsibility of closelyobserving, collecting, and developing data on foreign in-vestments in the United States and preparing analyses andreports to assist in policy development and for the in-formation of the Congress and the gneral public.Executive Order 11961, dated January 19, 1977, requires theSecretary to conduct studies and prepare reports onsignificant aspects of international investment. Accordingto a Commerce official, these responsibilities include ob-taining information on foreign investment in U.S. farmland.

In December 1977 Commerce issued a report entitled"Foreign Direct Investment in the United States", whichincluded summary information on various modes of such in-vestments in 1976 and on transactions dealing with acquisi-tions, mergers, and equity increases for the 3-year period,1974 through 1976. Commerce considers this report to be apartial fulfillment of its responsibilities under the 1976act and the Executive Orders. The information in the report,derived primarily from published material and from the publicfiles of Federal regulatory agencies, includes very littledata on agricultural investments.

According to a Commerce official, the December 1977report was deficient in the area of real estate in generalbecause the sources used to accumulate the data, as a rule,did not contain real estate investment information. We weretold that Commerce has taken steps to get more real estate

60


data and that its 1978 reports (the first of which is to beissued sometime this spring) will contain a separate sectionon foreign investment in U.S. real estate, including a dis-cussion on purchases of farmland. The extent to which thisdiscussion will contain hard nationwide data on foreign in-vestment in U.S. farmland is not known.

Other Federa2 efforts

The Department of griculture also has an effortunderway to obtain better information on land ownership.The Department is planning a nationwide land ownershipsurvey in April 1978 which will involve the mailing of40,000 to 50,000n uestionnaires to the owners of a randomsample of non-Federal land. A Department official saidthat the survey's primary purpose is to obtain a better database on the characteristics of landowners and the usesbeing made of different types of land (including farmland).One question will sk individual landowners to identifytheir citizenship and place of res 'il(, and corporationsto identify their home offices,

The official said tha. the questionnair i;being pretested and that it will take the DepaLrment about3 to 6 months after the final questionnaires are mailed totabulate and analyze the results. He also said that someof the data results may be projected on a State basis butthat any projections on the amount of foreign-owned farmlandwould probably not e very reliable.

CONCLUSIONS

Adequate nationwide information on the magnitude offoreign investment in U.S. farmland is not radily available.We were advised that it could be very difficult and costly todevelop. Despite some Federal and State initiatives to obtainmore and better quantifiable data on this subject, the dataproduced to date is still too fragmentary and limited to be ofmuch use in determining whether foreign investment is, or isbecoming, a potential national problem. The extent to whichmore reliable data may become available depends on how suc-cessful the Department of Commerce is in its efforts to im-prove its data collection processes and how successful theDepartment of Agriculture is in carrying out its land owner-ship survey and its study of the feasibility of establishing

61


a system to monitor foreign direct investment in agriculturalland.

Because Federal efforts to date have not been partic-uiarly roductive in providing nationwide data on foreignownership of U.S. farmland, perhaps more pronounced andsystematic monitoring by congressional committees and sub-committees c the progress being made could leza to betterresults.

62

APPENDIX VII APPENDIX VII

RMIAN .TALMAD. GA,, CHAINMaNJAMBS .K O . MISS. Ma eOLE. KANS.lOSORE Me COVEN, N. A. . ILTON . YoUN1, . DoK.

JAME S. ALL . ALA. CARL T. CUTIS, NER.WALTER D. H4JOLESTON, KY. HEN RY LLMON. OKLA.DICK CLA. IOWA JESE YLMS, N.C.IMC14AND II. mm FIL. S. .MAYAKAWA, ·AUPPAYm . jLMV, ̂ K iUCntueb fatfes z,,enaeBDIWD ZOmN4JKY NMR.Jam MaLCHI. MO4.JON lEI MONT. COMMITTiE ON

NO" l DR ,Jn, &A.. OAGRICULTURE. NUTRITION. AND FORETfyMICHAI N. MC 500

GWKML LCOUWNEL AM StAff DGMU WASHINGTON, D.C. 20510

February 28, 1978

The Honorable Elmer B. StaatsComptroller General of the United StatesUnited States General Accounting OfficeWashington, D. C.20548

Dear Mr. F' iats:

In our talks with farmers concerning the current crisis in the Americanfarn. economy, the Committee on Agriculture, Nutrition, and Forestryhas received reports that foreign investors have become quite active inpurchasing prime American farmland. Often, we understand, .; -epurchases are made at prices that are beyond the reach of ou farmers.

As far as I can determine, there has been no accurate and documentedassessment of this reported development to date.

Because of the serious ramifications our farm economy if thesereports are true, I believe it is imperative that we obtain a c] _ipicture of the actual situation as quickly as possible.

Accordingly, staff from the Committee recently et with representativesof your office to discuss the results of some preliminary inquiriesyour office ad already made into this subject in response to your ownconc:.Lns.

This letter is to confirm the understanding reached at that meetingregarding additional information that wovld be useful to the Ccmmittee.Essentially, your representatives agreed to provide the Committee with --

--information on the various State laws that placeconstraints or reporting requirements on non-resident alien ownership of U. S. 'farmland;

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APPENDIX VII APPENDIX VII

--a summary of data available from any reports onor analyses of the results of these laws; and

--any suggestions that might surface regardingpossible approaches for obtaining nationwidedata on purchases of U. S. farmland byforeigners.

I would appreciate this information by the end of May, 1978.

It was also agreed that, to the extent time is available, your staffwould select agricultural counties in several States and make inquiriesto determine if there is any information available (and from whatsources) indicating the magnitude of foreign investment in farmland inthe selected counties. It was suggested at the meeting that this phaseof the work be based primarily on interviews with knowledgeable countyauthorities.

I also would request that you furnish the Committee with a copy of anyreport your staff may prepare for you on the results of the inquiriesmade thus far on the matter of foreign investment in U S. farmland.

Any information furnished this Committee on this subject should also befurnished the Subcommittee on Agriculture and Related Agencies, SenateCommittee on Appropriations.

Your assistance in is matter will be appreciated.

With every good wish, I am

Sincerely,

HRMAN E. TALMADGEChairmanSenate Committee on Agriculture,Nutrition, and Forestry

cc: The Honorable Thomas F. Eagleton, Chairman,Senate Subcommittee on Agriculture and Related Agencies,Senate Committee on Appropriations.

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APPENDIX VIII APPENDIX VIII

JOHN L. MCCLELLAN, AnK., CHAIRMANWARREN O. MAGNUSON. WASH. MAILTON . YOUNG. N. OAK.JOHN C. ;;TENNIS. MISS. CLIFFORD P. CASE. N.J.IROSRT C. BYRD. w. VA. DOWARD W. NROOKE. MASS.WILLIAM PROYMIfE. WIS. MARK O. HATFIELD. ORIO.DANIEL K. INOUYE. HAWAII TED STEVENS. ALASKAERNEST F. NOLLINGS. S.C. CHARLES MCC. MATHIAS. J.. MD.

IsCH AYN,. IND. RICHARD . SCHWEIKE, PA. THOMAS F. rAGLETON. MO. HENRY ELLMON. OKLA.LAWTON CHILES, FLA. LOWELL . WEICKER, JR., CONN. COMMTTEE ON APPROPRIATIONSJ. ENNETT JOHNSTON. LA.WALtEr D. HUDDLESTON, KY. WASHINGTON, D.C. 20510QUENTIN N. NIJICH. N. DAK.PATRICK J. LEAHY. VT.JAMES . AS$SEN, TINNDENN.IS QECCOCINI. ARIZ.

JAMES . CALLOWAY

CHIEF COUNSEL AND STAFF DIRECTOR January 25, 1978

Mr. Elmer B. StaatsComptroller General of

the United StatesGeneral Accounting Offi,:e441 G StreetWashington, D. C. 20548

Dear Mr. Staats:

Senator Talmadge has advised me that he has requestedtne General Accounting Office to investigate reportedforeign investvment in farm land in tine United States.

The Subcommittee on Agriculture, Rural Development andRelated Agencies is lso quite interested in thismatter. We would appreciate being kept advised peri-odically of he progress of the report, and we wouldalso like to eceive a copy of the final report wnenit is availa..Le.

Yours very truly,

THOMAS F. EAgLETON, ChairmanSubcommittee on Agriculture,

Ru.al Development sndRelated Agencies

TFE:dli

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CED-78-132 Foreign Ownership of U.S. Farmland: Much Concern,...

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