Limitations on ownership of real property in this state by foreign persons. (FE)

Type of land subject to acreage limit Current law generally prohibits a covered foreign person (as defined below) from acquiring, owning, or holding more than 640 acres of land in this state. However, that limitation does not apply to any of the following activities:

1. An exploration mining lease and land used for certain mining and associated activities.

2. Certain manufacturing activities.

3. Certain mercantile activities.

4. A lease for exploration or production of oil, gas, coal, shale, and related hydrocarbons, including by-products of the production, and land used in connection with the exploration or production.

Those exceptions have been interpreted to be “extremely broad, embracing almost every conceivable business activity [other than a]ctivities relating to agriculture and forestry.” See Wis. Op. Att’y Gen. OAG 11-14, ¶5, available at https://www.doj.state.wi.us. In other words, under current law, foreign persons may acquire, own, and hold unlimited amounts of land for most nonagricultural and nonforestry purposes, but covered foreign persons may not acquire, own, or hold more than 640 acres of land for agricultural or forestry purposes.

The bill eliminates the current scheme under which the limitation applies to all land with extremely broad exceptions and replaces the scheme with a limitation that applies only to land that is classified, for property tax purposes, as agricultural (agricultural land). Under the bill, the limitation does not apply to forestry land.

Amount of land foreign persons may own The bill reduces the maximum amount of agricultural land that a covered foreign person may acquire, own, or hold from 640 acres to 50 acres (acreage limit).

Covered foreign persons Under current law, the following persons generally are subject to the acreage limit (covered foreign person):

1. An alien not a resident of a state of the United States (nonresident alien).

2. A corporation that is not created under federal law or the laws of any state (foreign entity).

3. A corporation, limited liability company, partnership, or association having more than 20 percent of its stock, securities, or other indicia of ownership held or owned by nonresident aliens or foreign entities (foreign-owned entity).

4. A trust having more than 20 percent of the value of its assets held for the benefit of nonresident aliens or foreign entities (foreign beneficiary trust).

The bill does all of the following:

1. Specifies that the acreage limit also applies to a foreign government.

2. Increases the percentage of an entity’s ownership held by nonresident aliens or foreign entities that is required for the entity to be considered a foreign-owned entity from 20 percent to 25 percent of its stock, securities, or other indicia of ownership.

3. Increases the percentage of a trust’s assets held for the benefit of nonresident aliens or foreign entities that is required for the trust to be considered a foreign beneficiary trust from 20 percent to 25 percent of the value of its assets.

4. Specifies that, for purposes of determining whether an entity is a foreign-owned entity or whether a trust is a foreign beneficiary trust, foreign government interests are included in calculating the relevant percentage amounts.

Exception for agricultural research leases Current law includes exceptions from the acreage limit for railroad and pipeline corporations and treaty rights, among other things. The bill provides that the acreage limit also does not apply to a lease that is exclusively for agricultural research purposes and encumbers no more than 50 acres of agricultural land.

Divestiture period Under current law, if a covered foreign person acquires an interest in land that causes the covered foreign person to exceed the acreage limit, the covered foreign person must divest itself of that interest. Specifically, the covered foreign person must divest itself within four years after:

1. Acquiring the interest, if the covered foreign person is a nonresident alien or foreign entity and the interest is acquired by devise or inheritance or in the good faith collection of debts by due process of law.

2. Acquiring the interest or becoming a foreign-owned entity or foreign beneficiary trust, whichever is later, if the covered foreign person is a foreign-owned entity or foreign beneficiary trust.

The bill reduces the divestiture period from four years to three years and specifies that the divestiture requirement described under item 1 applies to a foreign government.

Prohibiting ownership of real property near military installations The bill generally prohibits a covered foreign person from acquiring, owning, or holding any real property in this state that is located on or within 10 miles of a military installation, as defined in the bill (military property). Under the bill, the prohibition does not apply to 1) an interest used to secure repayment of a debt, 2) a person whose right to hold military property is secured by treaty, or 3) a railroad or pipeline corporation. The bill allows a covered foreign person to acquire an interest in military property that the covered foreign person would otherwise be prohibited from acquiring if the interest is acquired by devise or inheritance or in the good faith collection of debts by due process of law. However, if such an interest is acquired, the covered foreign person must divest itself of that interest within 18 months after acquiring the interest.

The bill specifies that, if a person becomes a foreign-owned entity or foreign beneficiary trust after the bill’s effective date, the person has 18 months to divest itself of any interest in military property the person is prohibited from owning or holding.

Finally, the bill provides that any interest in military property acquired, owned, or held in violation of the bill is forfeited to the state and that the attorney general is responsible for enforcement.

Prohibiting ownership of real property by foreign adversaries The bill prohibits a foreign adversary from acquiring, owning, or holding any interest in real property in this state. Under the bill, “foreign adversary” means a person determined by the U.S. Department of Commerce to be a foreign adversary of the United States. Those countries currently include China, Cuba, Iran, North Korea, Russia, and Venezuela under the regime of Nicolás Maduro. The bill provides that any interest acquired, owned, or held by a foreign adversary in violation of the bill is forfeited to the state and that the attorney general is responsible for enforcement.