The US Department of the Treasury, which chairs the interagency Committee on Foreign Investment in the United States ("CFIUS"), has proposed regulatory changes that would expand its jurisdiction to include certain transactions involving real estate located near eight additional military installations. CFIUS is accepting comments on the proposed rules through June 5, 2023.

Broadly speaking, CFIUS has jurisdiction over three types of transactions involving foreign investment in the US:

  • "Covered control transactions," in which a foreign person gains control (as defined by CFIUS) over a US business;
  • "Covered investments," i.e. small, non-controlling investments in which a foreign person is afforded certain rights with respect to per se sensitive "TID U.S. businesses," which are businesses that deal in Critical Technology, Covered Investment Critical Infrastructure and Sensitive Personal Data (each as defined by CFIUS); and
  • "Covered real estate transactions," which provide foreign persons with certain rights with respect to "covered real estate" located in proximity to designated ports and military or government facilities.

With respect to covered real estate transactions, CFIUS has published a list of the designated military and government facilities at Part 802 of the CFIUS regulations. This list is broken into several parts; for example, real estate located in a one-mile radius of certain designated facilities is considered "covered real estate," while real estate located within 99 miles of other facilities is also considered "covered real estate." The proposed rule would add the following eight facilities to the "99 mile" list:

  • Air Force Plant 42 (Palmdale, California)
  • Dyess Air Force Base (Abilene, Texas)
  • Ellsworth Air Force Base (Box Elder, South Dakota)
  • Grand Forks Air Force Base (Grand Forks, North Dakota)
  • Iowa National Guard Joint Force Headquarters (Des Moines, Iowa)
  • Lackland Air Force Base (San Antonio, Texas)
  • Laughlin Air Force Base (Del Rio, Texas)
  • Luke Air Force Base (Glendale, Arizona)

As a result, qualifying real estate transactions located within 99 miles of these facilities would be subject to CFIUS's jurisdiction, and parties to these transactions could submit voluntary filings to CFIUS (although covered real estate filings are voluntary, submitting them and receiving clearance from CFIUS is the only way to receive a legal guarantee that CFIUS will not require changes to the transaction, or force a divestment, post-closing).

The proposed additions come just a few months after CFIUS determined that it did not have jurisdiction over Fufeng Group Limited's (a Chinese company) proposed purchase of a 370-acre site in Grand Forks, North Dakota-approximately 12 miles from Grand Forks Air Force Base-to build a wet corn mill (see our Legal Update regarding that development). It appears that CFIUS determined it did not have jurisdiction over the transaction because it was a "greenfield" investment and exempt from CFIUS's jurisdiction over US businesses, and, although the land was located near Grand Forks Air Force Base, the base was not designated as a sensitive military or government installation.

The CFIUS regulations state that the Department of Defense will "continue on an ongoing basis to assess its military installations and the geographic scope set under the rules . in light of national security considerations." CFIUS's proposed rule appears to be part of this effort, and we expect that CFIUS will continue to refine the list as time goes on. Parties to potential transactions should monitor these changes and any future ones, as well.

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