Texas Lassos Foreign Investment Regulation with Real Property Restrictions and Proposed “Texas Committee on Foreign Investment”

On June 20, 2025, Governor Greg Abbott signed into law a restriction on the purchase or lease of real property. Similar state laws (such as those in Florida and Arkansas) have been enjoined as potentially unconstitutional because they are impliedly preempted by federal law, including due to the Committee on Foreign Investment in the United States (CFIUS). These cases, however, are still working their way through the courts. We expect that if and when these Texas bills become law they will be challenged in court, as well.

Texas Senate Bill 17: Real Property Restrictions

Governor Abbott signed Senate Bill 17 into law on June 20, 2025. The law will be effective on September 1, 2025, and will prohibit individuals and entities with ownership from “designated countries” (currently China, Iran, North Korea, and Russia) from directly or indirectly owning real property in Texas, or from holding leases of one year or longer.

Restrictions on the Purchase of Real Property under Senate Bill 17

The law applies broadly to real property, including agricultural land, commercial property, industrial property, residential property, and water, ground water, and mineral rights. There are exceptions for U.S. citizens and lawful permanent residents.

The law is not retroactive, but it is not clear if lease renewals will be exempted from the restrictions. Accordingly, the law may restrict those currently leasing property in Texas from renewing their leases (if such renewal is for a term of one year or longer). This could potentially impact industrial companies with Chinese ownership that have made major investments in Texas real property that they have leased.

It also is not clear whether the law restricts ownership only at a certain threshold or whether it restricts even a de minimis indirect ownership interest. As written, the law appears to apply to any ownership interest, even a de minimis indirect ownership interest. As such, the law could impact U.S. funds and REITs with passive economic minority owners from certain countries (e.g., China). It is possible, however, that the language will be interpreted through regulation to apply only to entities majority-owned by individuals and entities from designated countries, or set some other ownership or control threshold.

Penalties for Violations

If an acquisition of real property is found to violate the law, the Attorney General can order divestiture through sale, termination of the lease, or other disposition of the real property. Under the law, proceeds from the sale go first to satisfy any liens on the property, then “to pay the reasonable costs incurred by the state in enforcing” the law, then to the individual or entity that made the purchase in violation of the law. If the purchase or acquisition concerns a leasehold interest, the lease is voided.

Purchasers that intentionally or knowingly violate the law are also subject to a fine equal to 50 percent of the market value of the interest in the real property that is the subject of the violation or $250,000, whichever is greater. The law does not appear to restrict landowners from selling or leasing to individuals from or entities with ownership from designated countries. The purchaser alone would bear the risk in a sale.

The Proposed “Texas Committee on Foreign Investment”

In early March 2025, the Texas Legislature introduced Senate Bill 2117 and companion House Bill 5007 to establish the Texas Committee on Foreign Investment (“TCFI”), which would have been the first state body responsible for reviewing foreign transactions for potential national security risks.

On April 28, 2025, S.B. 2117 passed the Texas Senate by a wide margin, signaling strong legislative support. H.B. 5007 was left pending in the State Affairs Committee, while the House referred the Senate Bill to the House Committee on State Affairs, which sent a substitute version of the bill to the full Texas House for a vote. However, the chamber failed to take up the bill before the Legislative Session ended on June 2, 2025.

If passed, the bill would have required pre-closing notice of certain transactions to the Texas Attorney General. The Texas Attorney General would have then initiated review and could have potentially imposed a mitigation agreement to address any security concerns identified.

Committee Composition

Modeled after CFIUS, the federal interagency body chaired by the Secretary of the Treasury, the TCFI would have been chaired by a representative from the office of the Governor and would have included the Texas Attorney General, the Land Commissioner, the Comptroller, the Commissioner of Agriculture, and the heads of the Department of Public Safety, the Public Utility Commission, the Department of Information Resources, and the Railroad Commission of Texas.

Scope of Committee Review

The TCFI’s review jurisdiction would have extended to a broad range of “covered transactions,” including mergers, acquisitions, leases, sales, or other transfers of the direct or indirect control of or interest in a business, real property, or other asset located in Texas. Transactions that must notify the TCFI would have involved “foreign entities,” met a minimum dollar value or ownership percentage threshold set by the Texas Governor, and affected the state’s critical infrastructure, agricultural land, the sensitive personal data of Texas residents, or a strategic industry or assets identified by the Governor.

“Foreign entities” would have included individuals who are not citizens or lawful permanent residents of the U.S.; foreign governments; and entities organized in, or that have a principal place of business in, a foreign country, or that are controlled by a foreign person, government, or business. The Senate bill would have exempted foreign entities from countries that are signatories to certain trade agreements with the United States.¹

The bill’s definition of “critical infrastructure” was expansive, and included not only energy, emergency services, and transportation systems, but also “commercial facilities” and “health care.”

Texas Committee on Foreign Investment Review Process

Parties to “covered transactions” would have been required to notify the Texas Attorney General of the transaction at least 90 days before the closing date. The Texas Attorney General would have then conducted an initial review to determine whether further investigation was warranted. If so, the Attorney General would have conducted a secondary investigation and submitted a report to the TCFI.

Under the bill, the Texas Attorney General could have, if deemed necessary, proposed to TCFI a mitigation agreement between the transacting parties and the state of Texas. Such agreements would have imposed conditions to mitigate identified security concerns, which could have included requiring data protection protocols, security clearance requirements, or restrictions on foreign access to assets that are the subject of the transaction, and compliance reporting. TCFI could have adopted or rejected a proposed mitigation agreement. If rejected, the Attorney General would have been required to create a new mitigation agreement that addressed TCFI’s concerns with the prior agreement. Parties to a transaction subject to a mitigation agreement approved by the TCFI would have been required to comply with the terms of that agreement.

Compliance and Violation

If the Attorney General would have determined that a covered transaction required a mitigation agreement, and the parties either proceeded with the covered transaction without entering into such an agreement or violated a provision of a mitigation agreement, the parties would have committed a violation. Violating persons could have accumulated civil penalties of up to $50,000 per violation (including the ability to recover reasonable attorney ’s fees and other reasonable expenses incurred in bringing the action). The Attorney General would have also been able to seek an injunction to prevent the transaction or compel divestment.

Looking Forward

Senate Bill 17 and Senate Bill 2117 are both part of a wave of restrictions on foreign investment and ownership in Texas. It is possible that growing anti-foreign-investment sentiment will drive forward similar bills in the next Legislative Session. The precursor bill to Senate Bill 17 was first introduced and failed in the 2023 Texas Legislature as Senate Bill 147. Thus, while Senate Bill 2117 did not pass this session, companies with any foreign ownership considering transactions in Texas should be aware of the potential restrictions and notification requirements that could be featured in future legislation of this type in Texas and in other U.S. states.

¹ While it is not entirely clear which countries would have been excluded under the Senate bill, at a minimum the Senate bill appears to have excluded investment from entities from the following countries: Australia; Bahrain; Canada; Chile; Colombia; Costa Rica; Dominican Republic; El Salvador; Guatemala; Honduras; Israel; Jordan; Korea; Mexico; Morocco; Nicaragua; Oman; Panama; Peru; and Singapore.