Navigating CFIUS: Current Landscape and Key Takeaways
03.03.25
The U.S. Department of the Treasury has recently engaged in a series of rulemaking in its capacity as the Chair of the Committee on Foreign Investment in the United States (CFIUS), finalizing two new rules (the Final Rules) that expanded CFIUS’ investigation, enforcement and subpoena authorities for any transaction that was not filed with CFIUS (each a non-notified transaction), added set timeframes for risk mitigation negotiations, increased the maximum civil, monetary penalties for non-compliance, and expanded CFIUS coverage of real estate transactions with respect to nearly 60 military installations, among other changes.
CFIUS, which already had the authority to review certain transactions involving foreign investment in the U.S., including certain real estate transactions by foreign persons, in order to determine the effect of such transactions on the national security of the U.S., now has the authority under the Final Rules to:
- Impose civil, monetary penalties for violations of CFIUS regulations (including material omissions or misstatements) of the greater of up to $5 million per violation, or the value of the transaction, which represents a significant increase from the prior maximum penalty of $250,000 per violation.
- Request information from any persons to determine if a non-notified transaction meets the criteria for a mandatory declaration and/or may threaten national security, which goes beyond the prior scope that limited information requests to only transaction parties if that information was “necessary” to determine if a transaction was a “covered transaction.”
- Use subpoena authority to obtain information from third parties not directly involved in a transaction and evaluate national security risks for non-notified transactions when it is deemed “appropriate” by CFIUS, which goes beyond the prior scope that allowed CFIUS to request such information from the parties directly involved in the transaction if CFIUS deemed it “necessary.”
- Require a substantive response to proposed mitigation terms within three business days or longer in CFIUS’ discretion, which goes beyond the prior scope that did not have any set timeframe which transaction parties had to respond to proposals within, but which is more limited in scope than the proposed rule which applied this deadline in all cases.
- Review additional real estate locations under CFIUS’ jurisdiction, with 40 new military installations having been added to the one-mile list, 19 locations having been added to the 100-mile list and eight existing locations on the one-mile list being moved to the 100-mile list. The full lists can be found online.
Following the Final Rules going into effect, a bill (the Protecting Military Instillations and Rangers Act) was recently reintroduced in the Senate which would require a review by federal authorities before entities with foreign investment by China, Russia, Iran or North Korea could purchase land within 100 miles of any armed forces installation and 50 miles of training ranges or special operations areas. This bill would significantly expand CFIUS’ authority with respect to these foreign countries, as the current review authority relates primarily to a one-mile radius in most cases (excluding the 100-mile list). No timetable has been set for hearings or committee votes on the legislation.
Further, on February 21, 2025, President Trump refined the current approach on foreign investment with a presidential memorandum, the “America First Investment Policy” (the Memo), which directs CFIUS to further restrict investment by “foreign adversaries” in critical sectors, while easing foreign investments by allied countries. In particular, the Memo instructs CFIUS to create clearer guidelines that distinguish between national security threats and investments that pose limited threats such that the review process for allied nations, especially “NATO plus” countries, is streamlined. At the same time, the Memo signals a continued governmental focus on restricting investments by “foreign adversaries”, in particular, China. The Memo, among other restrictions, emphasizes the protection of U.S. farmland and properties near sensitive facilities, and expands CFIUS’ authority over “greenfield” investments to prevent foreign adversaries, like China, from gaining control over essential U.S. assets.
Overall, these developments highlight the growing role of CFIUS, especially in respect of non-allied countries, in overseeing and regulating foreign investment in the U.S., including certain real estate transactions. These developments, along with the doubled size of CFIUS’ monitoring team, signal that it plans to expand its efforts to enforce compliance with mandatory filing rules. As a result of this ever-increasing focus, and the increase in both the scope of CFIUS’ authority and costs of non-compliance, transaction parties, including real estate parties, should carefully pay attention to CFIUS considerations when evaluating transactions involving foreign investors.
If you have any questions, please contact the authors.
Co-author Alexandra Hill is a partner in the Real Estate & Finance Department. Co-authors Nicole Haiem and Madison Mueller are associates in the Corporate & Securities Department.