On July 8, 2024, the U.S. Department of the Treasury issued a Notice of Proposed Rulemaking that would expand the geographical areas in which real estate transactions would be subject to Committee on Foreign Investment in the United States (CFIUS) review, a move that will affect developers throughout the country.
Pursuant to the Foreign Investment Risk Review Modernization Act of 2018, CFIUS has the authority to review certain real estate transactions located near military installations for foreign purchases that might be a threat to national security. CFIUS has the authority to review the purchase or lease by, or concession to, a foreign person of real estate in the United States that is in close proximity to a military installation or another facility or property of the United States Government that is sensitive for reasons relating to national security, could reasonably provide the foreign person the ability to collect intelligence on activities being conducted at such a facility or property, or could otherwise expose national security activities at such a facility or property to the risk of foreign surveillance.
The proposed rule would add over 50 military installations, across 30 states, to the existing list of installations around which CFIUS has jurisdiction, including over land purchases. It expands CFIUS’s jurisdiction to include real estate transactions:
- Within one-mile radius of 40 additional U.S. military installations
- Within a 100-mile radius of 19 additional sensitive installations
- Between one mile and 100 miles of eight existing national security areas
The rule would also update the names of 14 military installations and the locations of seven military installations already listed in the regulations to better assist the public in identifying the relevant sites. While the proposed rule would substantially expand the geographic scope of CFIUS’ jurisdiction over real estate transactions, the rule would change neither the voluntary nature of CFIUS real estate filings nor the national security-focused risk assessment that CFIUS conducts with respect to such transactions.
The proposed rule, which is subject to a 30-day comment period, is the latest move by President Biden’s administration to address national security concerns around military and other sensitive sites, in the wake of regulatory scrutiny and media coverage of certain agricultural and other real estate purchases by Chinese companies. This is the second time in the past year that the list of sites has been expanded, and the administration recently ordered divestment of property near a Wyoming military base that was owned by a Chinese firm.
According to U.S. Treasury Secretary Janet L. Yellen, CFIUS plays an integral role in U.S. national security.
“President Biden and I remain committed to using our strong investment screening tool to defend America’s national security, including actions that protect military installations from external threats,” she said.
Developers and others considering real estate transactions that might be subject to CFIUS review should consult an attorney and consider filing for CFIUS review to avoid the transaction being voided or changed.
