CURRENT LAW – THE LSIPA (2021)
In 2021, the the Eighty-seventh Texas Legislature adopted the Lone Star Infrastructure Protection Act in order to prohibit “contracts or other agreements with certain foreign-owned companies in connection with critical infrastructure in this state.” The legislation that became the Act (SB 2116) was filed for the purpose of blocking “foreign power access to our critical infrastructure.”
The LSIPA was passed unanimously and became law on June 8, 2023. It was intended to protect critical infrastructure against contracts or doing business with certain countries, specifically Russia, North Korea, China and Iran because of national security issues.
The law has been controversial and is currently facing a federal court challenge from a Chinese billionaire Sun Guangxin who spent $110 million buying up land in Val Verde County. Sun owns 140,000 of the total 162,000 acres of Chinese-owned land in Texas. Fifteen thousand acres of the land he owns is/was intended for use by his company GH America Energy to construct a wind farm that could feed into the Texas electricity grid.
NOTE: There also exists a similarly-intended federal law – the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) which expands the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS) to address growing national security concerns over foreign exploitation of certain investment structures. There are also limited federal protections concerning agricultural land.
DOUBLE DOWN EFFORT TO RESTRICT LAND OWNERSHIP (2023)
In 2023 Texas lawmakers sought to expand efforts to limit activities of foreign adversaries in Texas. The Eighty-eighth Legislature’s double down was encapsulated in SB 147 by Sen. Kolkhorst (R – Brenham) (with multiple co-authors) which called for addition of a new Subchapter H to the Property Code. The proposed law was designed to “prevent private property rights from being controlled by entities from adversarial nations.”
The Bill contains numerous exceptions including an exemption on homesteads. It also would not apply to U.S. citizens, U.S. residents or dual-citizens.
The following is the relevant text of SB 147:
SECTION 3. Chapter 5, Property Code, is amended by adding Subchapter H to read as follows:
SUBCHAPTER H. PURCHASE OF OR ACQUISITION OF TITLE TO REAL PROPERTY BY CERTAIN FOREIGN INDIVIDUALS OR ENTITIES
Sec. 5.251. DEFINITIONS. In this subchapter:
(1) “Agricultural land” means land that is located in this state and that is suitable for:
(A) use in production of plants and fruits grown for human or animal consumption, or plants grown for the production of fibers, floriculture, viticulture, horticulture, or planting seed; or
(B) domestic or native farm or ranch animals kept for use or profit.
(2) “Control” means ownership of at least 50 percent of the voting ownership interest of an organization necessary to elect a governing person or governing authority of an organization.
(3) “Designated country” means a country identified by the United States Director of National Intelligence as a country that poses a risk to the national security of the United States in each of the three most recent Annual Threat Assessments of the U.S. Intelligence Community issued pursuant to Section 108B, National Security Act of 1947 (50 U.S.C. Section 3043b).
(4) “Governing authority,” “governing person,” and “organization” have the meanings assigned by Section 1.002, Business Organizations Code.
(5) “Real property” means:
(A) agricultural land;
(B) an improvement located on agricultural land;
(C) a mine or quarry;
(D) a mineral in place; or
(E) standing timber.
Sec. 5.252. EXCEPTIONS: UNITED STATES CITIZENS AND LAWFUL PERMANENT RESIDENTS; RESIDENCE HOMESTEAD PROPERTY. (a) This subchapter does not apply to:
(1) an individual who is a citizen or lawful permanent resident of the United States, including an individual who is a citizen of a foreign country; or
(2) a company or other entity that is owned by or under the control of one or more individuals described by Subdivision (1).
(b) This subchapter does not apply to real property that is an individual’s residence homestead, as defined by Section 11.13(j), Tax Code.
(c) This subchapter does not apply to a leasehold interest in land or improvements constructed upon a leasehold.
Sec. 5.253. PROHIBITION ON PURCHASE OF OR ACQUISITION OF TITLE TO REAL PROPERTY. Except as provided by Section 5.252 and notwithstanding any other law, the following may not purchase or otherwise acquire title to real property in this state:
(1) a governmental entity of a designated country;
(2) a company or other entity that is:
(A) headquartered in a designated country;
(B) directly or indirectly under the control of the government of a designated country; or
(C) owned by or under the control of one or more individuals who are citizens of a designated country;
(3) a company or other entity that is owned by or under the control of a company or entity described by Subdivision (2); or
(4) an individual who is a citizen of a designated country.
Sec. 5.254. ATTORNEY GENERAL ENFORCEMENT. If the attorney general has a reasonable suspicion that the purchase of or acquisition of title to real property in this state by an individual or entity in violation of this subchapter creates a risk to the health, safety, and welfare of the public, the attorney general may bring an action to enforce this subchapter in a district court in the county where all or part of the real property that is the subject of the violation is located.
Sec. 5.255. DISCOVERY; SECRETARY OF STATE INTERROGATORIES AND RECORDS. (a) The attorney general may conduct discovery in an action brought under Section 5.254.
(b) The secretary of state shall on request by the attorney general:
(1) serve interrogatories on an individual or entity as necessary to determine the ownership or control of a company or other entity that is the subject of an action by the attorney general under Section 5.254; and
(2) provide to the attorney general all records held by the secretary relating to the ownership or control of a company or other entity that is the subject of an action by the attorney general under Section 5.254.
Sec. 5.256. DIVESTITURE; APPOINTMENT OF RECEIVER. (a) If the district court finds that the real property subject to an action brought under Section 5.254 was purchased or otherwise acquired by an individual or entity in violation of Section 5.253, the court shall enter an order that:
(1) states the court’s finding;
(2) divests the individual’s or entity’s interest in the real property; and
(3) appoints a receiver to manage and control the real property pending the sale or other disposition of the real property.
(b) On appointment and qualification, a receiver appointed under this section has the powers and duties of a receiver under Chapter 64, Civil Practice and Remedies Code.
SECTION 4. As soon as practicable after the effective date of this Act, the attorney general shall adopt rules for the implementation of Subchapter H, Chapter 5, Property Code, as added by this Act.
SECTION 5. The changes in law made by this Act apply only to the purchase of or other acquisition of title to real property on or after the effective date of this Act. The purchase of or other acquisition of title to real property before the effective date of this Act is governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.
SECTION 6. This Act takes effect September 1, 2023.
The Bill, as amended, passed the Senate 19-12 and was read on the House Floor.
However it ran out of time and died in the House State Affairs Committee. It is not the law.
Yet, the negative sentiment toward foreign ownership of Texas land has not subsided. If anything, the threat from China and Iran are more pronounced in 2025 than in 2023. Russia and North Korea haven’t gotten any friendlier either. This means we should expect additional efforts to restrict land ownership in Texas.
WHAT’s NEXT? WILL THEY TRY AGAIN IN 2025? YOU BETCHA!
Short answer: “Yes” — especially with the anti-China rhetoric coming from the incoming Trump Administration.
In fact, even prior to commencement of the 89th Session on January 14, 2025, SB 103 was filed by Sen. Hall (R – Edgewood) on 11/12/2024.
On the second day of the new Session (today January 15, 2025) HB 1849 was filed by Rep. Heffner (R-Mount Pleasant) was filed in the House.
Both are substantially-similar to the 2023 initiative. We should expect the same arguments in favor and against the initiative during what promises to be a contentious Session.
Seeing how this plays out should be fun! Someone grab the popcorn…
