Key Takeaways

  • AFIDA reporting will expand to cover more land uses related to agriculture (including energy and infrastructure).
  • Short-term leases and easements may become reportable.
  • Ownership disclosure obligations will increase significantly (including upstream owners).
  • Enforcement risk will increase materially, with higher penalties and faster accrual.

Introduction

On June 25, 2026, the U.S. Department of Agriculture (USDA) issued a proposed rule that would significantly overhaul the Agricultural Foreign Investment Disclosure Act of 1978 (AFIDA). The proposal represents the most substantive update to AFIDA in decades and reflects a broader policy shift: the treatment of significant or substantial foreign ownership[1] of U.S. agricultural lands, including timberlands, as a legitimate national security issue and to bring it more in alignment with the U.S. Committee on Foreign Investment in the United States (CFIUS) framework.

For asset managers with significant investment in timberlands, farmlands and other natural capital assets (i.e., wind and solar renewable energy assets, carbon leases and easements, and more), the proposed rule has meaningful implications. It expands the scope of reportable interests, increases the granularity of required disclosures, and introduces a more aggressive enforcement regime. While still in proposed form, the rule warrants close attention now, particularly for investors with foreign investment, complex ownership structures, or portfolios that include mixed-use or evolving land uses.

Expanded Definitions of “Agricultural Land” and “Significant Interest or Substantial Control”

Timberlands and farmlands have always been within AFIDA’s scope, but the proposed rule significantly broadens the definition of “agricultural land” in ways that are particularly relevant to institutional investors.

Under the proposal, “agricultural land” would expressly include forestry and logging activities and would be tied to updated NAICS classifications rather than older SIC codes. More importantly, the definition would expand to capture adjacent and increasingly common uses of farmlands and timberlands, including renewable energy generation (solar and wind projects)[2], pipeline infrastructure, farm product supply chain facilities (including cold storage), aquaculture, and certain forms of agricultural research and development.

This shift reflects the reality that modern timberlands, farmlands and natural capital portfolios are often diversified across multiple revenue streams. However, it also means that land previously viewed as outside AFIDA’s practical scope, or only tangentially related to agriculture, may now trigger reporting obligations. Mixed-use timberlands, conservation tracts, and properties with embedded energy or infrastructure components should be evaluated carefully under the proposed definition.

The definition of “significant interest or substantial control” by a foreign person would be revised significantly. First, aggregate foreign ownership of 10 percent would be sufficient to trigger reporting under the proposed rule; under the current rule, single foreign person ownership must exceed 10 percent, or aggregate foreign ownership must exceed 50 percent. Second, the definition of “significant interest or substantial control” would include “beneficial owners”, defined as: “any foreign person who, directly or indirectly, through any contract, understanding, relationship, or other arrangement, exercises decision-making authority over the agricultural land or the legal entity holding the land, including but not limited to the power to direct the sale, lease, or use of the property. For the purposes of this definition, “indirectly” is inclusive of all intermediary tiers of ownership, including, but not limited to, circular ownership, shell corporations, trusts, and partnerships.”

These revisions are meant to expand reporting requirements on such direct and indirect foreign ownership interests, while also focusing on those foreign persons with decision-making authority or operational control.

Leases and Ancillary Rights Will Face Increased Scrutiny

One of the most impactful changes for landowners is the proposed narrowing of AFIDA’s lease exemption. Historically, leaseholds shorter than ten years have not been reportable. The proposed rule would reduce that threshold dramatically.

Under the new framework, leases shorter than one year would generally be exempt for non-adversary foreign persons, while leases of any duration involving foreign adversaries or their controlled entities would be reportable[3]. The proposed rule would also eliminate prior exemptions for certain shareholder interests, meaning foreign persons could no longer rely on those carveouts to avoid AFIDA reporting where their ownership or control otherwise falls within the statute’s expanded disclosure requirements.

For institutional timberland owners, this change has broad implications. Timberlands are frequently subject to a range of option and lease arrangements, with term periods in excess of one year. Such arrangements may now trigger reporting obligations. In addition, the rule proposes to bring holders of easements and rights-of-way into the fold, recognizing that these interests provide meaningful control or access to land and pose potential national security risks. Examples of this include pipelines, transmission lines, and access roads to, over, across, and through agricultural lands. Notably, interests in mineral rights only remain non-reportable under the proposed rule.

As a result, asset managers with foreign investment may be required to submit AFIDA filings in scenarios that would not have triggered reporting under the current rule.

Enhanced Ownership Transparency Requirements

The proposed rule would materially increase the level of detail and disclosure required in AFIDA filings, particularly for non-individual investors such as funds, partnerships, and REIT structures.

Filers would be required to disclose not only direct foreign ownership but also upstream interests, including beneficial owners and parties that exercise decision-making authority over the land or entity holding the interest in the land. The rule would require reporting of percentage interests by person and by country, as well as the submission of ownership diagrams depicting the full ownership chain.

For timberland funds with multi-tiered structures, co-investment vehicles, or foreign limited partners, these requirements may significantly increase the data collection and diligence burden associated with AFIDA compliance.

Online Reporting; Geospatial Operational Data

Another proposal is the elimination of paper filings in favor of moving towards the online AFIDA reporting system and the introduction of detailed, map-based reporting requirements, including, without limitation, the submission of geospatial data identifying property boundaries and categorizing land by use, including forest, crop, pasture, and non-agricultural activities.

In addition, reporting would extend beyond transfers in ownership of the land. Filers would need to disclose both current and intended use of the land and update filings if those uses or ownership structures change over time.

For owners, this requirement may require the disclosure of internal, proprietary datasets and internal GIS data. Other owners within the scope of AFIDA, if revised pursuant to the proposed rule, may need to begin generating, organizing and maintaining such information.

A Shift Toward Enforcement: Higher Penalties and Streamlined Process

The proposed rule also significantly increases the enforcement risk associated with non-compliance. The current penalty structure has historically been viewed as relatively modest (Late filings are currently subject to a one-tenth of one percent of the fair market value of the property fee, which accrues week by week, up to a twenty-five percent cap). Under the proposed rule, penalties would accrue at a much faster rate, beginning at one and one-half percent (and two and one-half percent for parties determined to be Foreign Adversaries) of the fair market value of the land on a recurring basis until compliance is achieved, up to a twenty-five percent cap.

In addition, the rule would streamline the penalty and appeals process, shorten deadlines for responding to notices, and eliminate certain procedural protections, such as formal hearing rights.

Taken together, these changes reflect an intent by USDA to move from a largely passive reporting framework to one of active enforcement.

Integration with National Security Review

A central theme of the proposed rule is enhanced coordination with CFIUS. The rule is designed to improve the quality and accessibility of AFIDA data so that it can be shared with CFIUS and other federal agencies.

While AFIDA itself does not provide a national security review mechanism, the improved data flow may increase the likelihood that certain transactions, particularly those involving sensitive locations, infrastructure, or foreign adversaries, receive additional scrutiny.

For owners, this underscores the importance of viewing AFIDA not as a compliance obligation, but as part of a broader regulatory scheme that includes national security review.

What You Should Do Now

Although the rule is still at the proposal stage, institutional investors would be well served to begin preparing for potential implementation.

First, owners should evaluate whether existing portfolios include assets that could become newly reportable under the expanded definition of agricultural land, particularly mixed-use properties and those with energy or infrastructure overlays.

Second, managers should assess their ability to collect and report detailed ownership information, including upstream investors and beneficial owners. This may require revisiting investor onboarding, data collection, and internal reporting processes.

Third, lease and easement portfolios should be reviewed to identify arrangements that may become reportable under the new framework.

Finally, market participants may consider submitting comments during the rulemaking process, particularly with respect to the operational burden of geospatial reporting, ownership tracing, and lease coverage.

Conclusion

The USDA’s proposed AFIDA rule represents a meaningful shift in the regulation of foreign investment in U.S. agricultural lands, including timberlands. By expanding reporting obligations, increasing transparency requirements, and strengthening enforcement, the proposal, if finalized as-is, would materially change the compliance landscape for institutional owners.

Even if modified prior to final adoption, the direction of policy is clear: greater visibility into foreign ownership, closer alignment with national security priorities, and more rigorous enforcement. Institutional timberland owners, natural capital asset managers, and investors in industries adjacent to agricultural lands should begin evaluating the potential impact now to ensure they are well-positioned when the final rule is issued.

Our firm continues to monitor this development. Timberland investment management organizations (TIMOs), asset managers, and limited partners alike should consult counsel regarding how the evolving AFIDA landscape may affect transactions, regulatory compliance, and long-term asset management.

Contacts:

Burke McDavid  I  214.745.5490  I  bmcdavid@winstead.com

Andrew Rosell   I  817.420.8261  I  arosell@winstead.com

Matthew Van Dyke  I  678.390.3079  I  mvandyke@winstead.com

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[1] As of December 31, 2024, foreign investors held an interest in approximately 46 million acres of U.S. agricultural lands. The countries with the largest landholdings are Canada, the Netherlands, Germany and the United Kingdom.

[2] As of December 31, 2024, the USDA determined approximately 10.6 million acres were held by foreign investors subject to long-term leases (greater than ten-years in length).

[3] As of June 29, 2026, “Foreign Adversary” includes China, North Korea, Russia, Iran or any other country determined to be a country of concern by the Secretary of State.