BILL ANALYSIS

 

 

Senate Research Center	C.S.S.B. 147
88R21599 DRS-F	By: Kolkhorst
	State Affairs
	4/11/2023
	Committee Report (Substituted)

 

 

 

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

 

S.B. 147 builds on S.B. 2116 (87th Regular Session), which passed unanimously in 2021. S.B. 2116 protects critical infrastructure against contracts or doing business with certain countries, specifically Russia, North Korea, China, and Iran, because of national security issues. These four nations are specifically listed as the only named threats to national security in the Annual Threat Assessment report prepared by the Director of National Intelligence. 

 

Many countries around the world and other states restrict ownership of land by certain foreign entities and individuals. Currently, the only federal law regarding foreign investment is the Agricultural Foreign Investment Disclosure Act of 1978 which only aims to regulate foreign investment through disclosure of self-reported data. Texans have raised concerns of national security ranging from energy security to food security. Preventing private property rights from being controlled by entities from adversarial nations is key to ensuring national security. Many Texas landowner groups have expressed support for S.B. 147 as well those groups concerned about energy security.

 

The committee substitute:

 

• Makes clear that the prohibitions do not apply to United States citizens and lawful permanent residents, including dual citizens.

 

• States that prohibited real estate holdings will not include a residence homestead owned by individuals, so as to address concerns of those who have fled the authoritarian regimes and seek homes in Texas.

 

• Clarifies the definition of real estate as: land, an improvement, a mine or quarry, a mineral in place, or standing timber. This makes it clear that the bill ensures food, energy, and national security are protected.

 

• Specifies that majority control of an entity means 50 percent or more voting control.

 

�         Spells out the enforcement mechanism for removing prohibited entities ownership of a real estate title. The attorney general is given authority to investigate potential violations and then bring a divestment proceeding before a court of law. The secretary of state is required to cooperate with the attorney general in using the secretary of state�s investigatory powers of entities in Texas.  Once a judge finds the entity in violation, they order the real estate into receivership under existing receivership procedures under Chapter 64, Civil Practice and Remedies Code.

 

C.S.S.B. 147 amends current law relating to the purchase of or acquisition of title to real property by certain aliens or foreign entities.

 

RULEMAKING AUTHORITY

 

Rulemaking authority is expressly granted to the Attorney General of Texas in SECTION 4 of this bill.

 

 

SECTION BY SECTION ANALYSIS

 

SECTION 1. Amends Section 64.001(a), Civil Practice and Remedies Code, as follows:

 

(a) Authorizes a court of competent jurisdiction to appoint a receiver in certain circumstances, including in an action by the attorney general under Subchapter H, Chapter 5, Property Code. Makes nonsubstantive changes.

 

SECTION 2. Amends Section 5.005, Property Code, as follows:

 

Sec. 5.005. ALIENS. Creates an exception under Subchapter H.

 

SECTION 3. Amends Chapter 5, Property Code, by adding Subchapter H, as follows:

 

SUBCHAPTER H. PURCHASE OF OR ACQUISITION OF TITLE TO REAL PROPERTY BY CERTAIN FOREIGN INDIVIDUALS OR ENTITIES

 

Sec. 5.251. DEFINITIONS. Defines "control," "designated country," and "real property."

 

Sec. 5.252. EXCEPTIONS: UNITED STATES CITIZENS AND LAWFUL PERMANENT RESIDENTS; RESIDENCE HOMESTEAD PROPERTY. (a) Provides that 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) Provides that this subchapter does not apply to real property that is an individual's residence homestead, as defined by Section 11.13(j) (relating to the definitions of "residence homestead," "trustor," and "qualifying trust"), Tax Code.

 

Sec. 5.253. PROHIBITION ON PURCHASE OF OR ACQUISITION OF TITLE TO REAL PROPERTY. Prohibits the following from purchasing or otherwise acquiring title to real property in this state, except as provided by Section 5.252 and notwithstanding any other law:

 

(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. Authorizes the attorney general to 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 if the attorney general has reason to believe 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.

 

Sec. 5.255. DISCOVERY; SECRETARY OF STATE INTERROGATORIES AND RECORDS. (a) Authorizes the attorney general to conduct discovery in an action brought under Section 5.254.

 

(b) Requires the secretary of state (SOS), on request by the attorney general, to:

(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 SOS 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) Requires the district court, if the court finds that the real property subject to an action under Section 5.254 was purchased or otherwise acquired by an individual or entity in violation of Section 5.253, to 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 disposition of the real property.

 

(b) Provides that a receiver appointed under this section, on appointment and qualification, has the powers and duties of a receiver under Chapter 64 (Receivership), Civil Practice and Remedies Code.

 

SECTION 4. Requires the attorney general to adopt rules for the implementation of Subchapter H, Chapter 5, Property Code, as added by this Act, as soon as practicable after the effective date of this Act.

 

SECTION 5. Makes application of this Act prospective.

 

SECTION 6. Effective date: September 1, 2023.