Making the Case

Why Wisconsin’s anti-foreign investment in real estate law should be repealed


 Tom Larson  |    May 02, 2013
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As part of the 2013-15 Wisconsin state budget, Gov. Walker included a provision that would repeal Wisconsin’s Anti-Foreign Investment in Real Estate Law (A-FIRE Law), which appears to prohibit foreign investors and corporations from owning more than 640 acres of Wisconsin land. This proposal has received a lot of media attention, and critics have inaccurately claimed that the repeal of this law will, among other things, allow foreign corporations to purchase large quantities of Wisconsin’s farmland. This article provides an overview of Wisconsin’s A-FIRE Law and some of the reasons why the WRA supports the proposed repeal.

Background

Wisconsin’s A-FIRE Law specifically exempts foreign investors whose rights are protected by a federal treaty. 

Originally adopted in 1887, Wisconsin’s A-FIRE Law, on its face, appears to prohibit foreign individuals and corporations from owning more than 640 acres of Wisconsin land. However, the law specifically exempts foreign governments and subjects of foreign governments whose rights are secured by the treaty. See Wis. Stat. § 710.02(2)(b). 

The federal GATS Treaty prohibits states from treating foreign investors and corporations differently than U.S. investors and corporations. 

In 1995, the U.S. joined other World Trade Organization members and signed the General Agreement on Trade in Services Treaty (the “federal GATS Treaty”) to remove barriers to trade and investment between countries. The federal GATS Treaty applies to over 150 countries, including China, Russia and most European countries, leaving very few countries’ citizens who are subject to the prohibition today. Among other things, the federal GATS Treaty prohibits countries from treating foreign citizens and corporations differently than their own citizens and corporations. See federal GATS Treaty, Article XVII, Section 1. 

Wisconsin’s A-FIRE Law creates confusion because most people are unaware of the federal GATS Treaty.

Although most foreign individuals and corporations are not subject to the 640 acre limit, Wisconsin’s A-FIRE Law continues to scare off many investors because:

  1. Wisconsin’s A-FIRE Law is still found in the current Wisconsin Statutes (see Wis. Stat. § 710.02).
  2. Most people are unaware of the federal GATS Treaty or how it relates to Wisconsin’s A-FIRE Law.
  3. The penalties for violating Wisconsin’s A-FIRE Law are stiff — ownership of land exceeding the 640 acre limit is subject to forfeiture. See Wis. Stat. § 710.02(6). 
  4. Despite numerous requests, Wisconsin state officials have been unwilling to issue a formal opinion indicating that the foreign countries and investors who are protected by the federal GATS Treaty are not subject to Wisconsin’s A-FIRE Law.

Reasons why the law should be repealed

Wisconsin’s A-FIRE Law is not enforceable against most foreign investors because of the federal GATS Treaty.

Since the U.S. entered into the federal GATS Treaty in 1995, Wisconsin has been prohibited from treating the vast majority of foreign citizens and corporations differently than U.S. citizens and corporations with respect to services and regulations. Moreover, Wisconsin’s A-FIRE Law specifically does not apply to foreign governments or subjects of foreign governments whose rights are secured by the treaty. Accordingly, most foreign investors are not subject to Wisconsin’s 640 acre limit.

Wisconsin’s A-FIRE Law applies to U.S. corporations with foreign investors too. 

While it applies to foreign individuals and corporations, Wisconsin’s A-FIRE Law also applies to U.S. companies that have more than 20 percent of their stock owned by foreign individuals or corporations, whether or not such foreign ownership is those companies’ own choice or the result of trades made on the stock market. Whether we like it or not, Wisconsin is part of the global economy with investors from Wisconsin and the U.S. owning stock in foreign companies, and foreign investors owning stock in
Wisconsin and U.S. companies.

Wisconsin’s A-FIRE Law is not being enforced. 

Despite being on the books for over 125 years, there is no recent record of any enforcement actions by the attorney general of Wisconsin, district attorneys or any law enforcement officials. However, according to the federal Farm Service Agency, foreign investors own over 118,000 acres of privately owned land in Wisconsin. 

Repealing Wisconsin’s A-FIRE Law will not allow foreign corporations to purchase large amounts of farmland in Wisconsin. 

Wisconsin has other laws that specifically prohibit U.S. and foreign corporations from owning farmland if the corporation has more than 15 shareholders and meets several other requirements. See Wis. Stat. § 182.001. Because it does not treat foreign corporations differently than U.S. corporations, Wis. Stat. § 182.001 does not violate the federal GATS Treaty and thus can be enforced to prohibit these foreign and domestic corporations from owing farmland. 

Repealing Wisconsin’s A-FIRE Law will help Wisconsin prosper in the global economy. 

Wisconsin’s law is outdated and incompatible with our global economy and projects us an unsophisticated place to do business. The law has a repelling effect on new foreign businesses looking to move to Wisconsin and create jobs here, because each such foreign business has to satisfy itself that the federal GATS Treaty overrides the law’s enforcement.

Removing barriers to investment

Even before the treaty was entered into, the law’s definition of foreign entities covered many venerable “Wisconsin” companies with sizable landholdings like Frigo Foods, Saputo Cheese, Stella Foods, Kikkoman Foods, Shell Oil Company, Northrup King Seed Company, Purina Mills, Appleton Papers, and Giddings & Lewis, just to name a few, which were listed in DATCP’s last report. 

Do we really want to prevent these and other “foreign companies” from investing in Wisconsin?

To help grow our state’s economy and encourage greater investment in Wisconsin real estate, the WRA will be working closely with legislators and others to repeal this law or seek clarity as to its application in light of the federal GATS Treaty. For additional information, please contact Tom Larson at tlarson@wra.org or at 608-240-8254.

Tom Larson is Vice President of Legal and Public Affairs for the WRA.

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