Corporate Farm Law | Minnesota Business Attorney

What is Minnesota’s corporate farm law?

In general, Minnesota’s corporate farm law prohibits corporations, limited liability companies, pension or investment funds, trusts, and limited partnerships from engaging in farming or, directly or indirectly, obtaining any interest in agricultural land in Minnesota (Minn. Stat. § 500.24, subd. 3). The prohibition reaches ownership interests, not lending: it expressly excludes a bona fide encumbrance taken for purposes of security, so a lender may still take a mortgage on farmland (Minn. Stat. § 500.24, subd. 3).

The prohibition does not reach every business form. General partnerships are expressly outside it. So are Minnesota’s own family-farm structures: family farm corporations, authorized farm corporations, family farm trusts, family farm limited liability companies, and the other qualifying entities the statute defines are carved out, so long as each keeps a conservation plan for the land and files the required annual report (Minn. Stat. § 500.24, subd. 3(a)).

What is the history of the law?

The legislature enacted the corporate farm law, now codified at Minn. Stat. § 500.24, in 1973 (1973 Minn. Laws ch. 427, § 1). Subsequent legislatures have amended it more than 30 times (Minn. Stat. § 500.24, History), most recently in 2024 (2024 Minn. Laws ch. 101, art. 3, § 2), reflecting decades of legislative adjustment to Minnesota’s family-farm ownership restrictions.

Restrictions on corporate ownership of land in Minnesota predate the codification of Minnesota Statutes in 1939. The state began limiting the quantity of land corporations could acquire, hold, or own in 1887 (Laws 1887, ch. 204), roughly a half-century before the Revisor of Statutes was directed in 1939 to codify and publish Minnesota Statutes.

What is the purpose of the law?

The purpose is “to encourage and protect the family farm as a basic economic unit, to insure it as the most socially desirable mode of agricultural production, and to enhance and promote the stability and well-being of rural society in Minnesota and the nuclear family” (Minn. Stat. § 500.24, subd. 1).

What constitutes “farming” under the law?

Under the corporate farm law, “farming” means the production of agricultural products, livestock or livestock products, milk or milk products, or fruit or other horticultural products (Minn. Stat. § 500.24, subd. 2(a)).

The statute expressly excludes several activities from that definition:

• the processing, refining, or packaging of those products;
• the provision of spraying or harvesting services by a processor or distributor of farm products;
• the production of timber or forest products;
• the production of poultry or poultry products; and
• the feeding and caring for livestock that are delivered to a corporation for slaughter or processing for up to 20 days before slaughter or processing (Minn. Stat. § 500.24, subd. 2(a)).

Note the precise scope of that last exclusion. Raising livestock is itself “farming.” Only the feeding and caring for delivered livestock in the up-to-20-day window before slaughter or processing falls outside the definition (Minn. Stat. § 500.24, subd. 2(a)).

What are some allowable farm business structures?

Minnesota’s corporate farm law generally bars corporations, limited liability companies, pension or investment funds, trusts, and limited partnerships from farming or holding an interest in agricultural land, but it permits farming and farmland ownership or leasing through a family farm and several defined structures (Minn. Stat. § 500.24, subds. 2-3).

In addition to family farms and family-based structures such as the family farm corporation, family farm limited liability company, family farm partnership, and family farm trust, the law either implicitly or explicitly allows farming or farmland ownership or leasing by:

• sole proprietors: a “family farm” is an unincorporated farming unit owned by one or more persons residing on the farm or actively engaging in farming (Minn. Stat. § 500.24, subd. 2(b)), and because the prohibition reaches only corporations, limited liability companies, pension or investment funds, trusts, and limited partnerships, a natural person operating a farm is outside it (Minn. Stat. § 500.24, subd. 3(a));
• general partnerships, which are expressly exempt (Minn. Stat. § 500.24, subd. 3(a));
• the authorized farm corporation, a defined structure under the statute (Minn. Stat. § 500.24, subd. 2(e)) that the prohibition’s exemption reaches (Minn. Stat. § 500.24, subd. 3(a));
• qualifying nonprofit corporations (Minn. Stat. § 500.24, subd. 2(z)); and
• utility corporations, which may own agricultural land for the purposes described in chapter 216B, and electric generation or transmission cooperatives, which may own agricultural land for use in their business so long as the land is not used for farming except under lease to a family farm unit or other family-farm entity (Minn. Stat. § 500.24, subd. 2(t)).

Are there any additional exceptions?

Beyond the permitted structures, the corporate farm law exempts several categories of farmland holding from the entity prohibition. Most exemptions carry a common condition: qualifying under a statutory category is not enough on its own. The entity must also have a conservation plan prepared for the agricultural land (Minn. Stat. § 500.24, subd. 3(a)) and file the annual report required under the statute (Minn. Stat. § 500.24, subd. 4).

With that condition in mind, restricted business entities may own or operate farmland under the following exemptions:

• Development organizations: a corporation, limited partnership, limited liability company, or pension or investment fund may hold agricultural land where it has documented plans to use, and within six years of purchase does use, the land for a specific nonfarming purpose, or where the land is zoned nonagricultural or lies within an incorporated area (Minn. Stat. § 500.24, subd. 2(u)).
• “Exempt” (grandfathered) land: farmland an otherwise-restricted entity owned or leased before its entity-specific cutoff date (a corporation as of May 20, 1973; a pension or investment fund as of May 12, 1981; a limited partnership as of May 1, 1988; a trust as of the effective date of Laws 2000, chapter 477) may continue to be owned or leased (Minn. Stat. § 500.24, subd. 2(v)). Normal expansion of that grandfathered holding is capped at 20 percent, measured in acres, in any five-year period, plus additional ownership reasonably necessary to meet pollution-control rules (Minn. Stat. § 500.24, subd. 2(v)).
• Breeding stock farms: a corporation, limited partnership, or limited liability company that owns or operates agricultural land to raise breeding stock, or to grow seed, wild rice, nursery plants, or sod (Minn. Stat. § 500.24, subd. 2(q)).
• De minimis parcels: 40 acres or less generating less than $150 per acre in annual gross revenue from rental or agricultural production (Minn. Stat. § 500.24, subd. 2(bb)).
• Aquatic, religious, and research or experimental farms: these categories are defined in Minn. Stat. § 500.24, subd. 2(p), (r), and (s), and the prohibition does not apply to entities that meet those definitions (Minn. Stat. § 500.24, subd. 3(a)). The research or experimental farm exemption is not automatic: before operating, the entity must first submit to the commissioner a prospectus or proposal of the intended method of operation, including a copy of any operational contract with participants, and obtain the commissioner’s initial approval (Minn. Stat. § 500.24, subd. 2(p)).
• Gifted land, if disposed of within ten years of acquiring title (Minn. Stat. § 500.24, subd. 2(w)), and repossessed land, if disposed of within five years of acquiring title (Minn. Stat. § 500.24, subd. 2(x)). The acquiring entity generally may not farm repossessed land during the holding period, though a financial institution may continue to own it if it leases the land back to the immediately preceding former owner, in which case it gets an extended ten-year window to dispose of the land (Minn. Stat. § 500.24, subd. 2(x)).

An entity that does not meet any of these criteria may petition the commissioner of agriculture for a special exemption, which the commissioner may grant only if it would not contradict the statute’s purpose and the entity would not have a significant impact on the agriculture industry and the economy (Minn. Stat. § 500.24, subd. 3(b)). That exemption is not permanent: the commissioner reviews each one annually and must withdraw it, subjecting the entity to enforcement, if the entity no longer meets the criteria (Minn. Stat. § 500.24, subd. 3(b)).

Do other states have similar laws?

Several states besides Minnesota restrict corporate farming, but the landscape has shifted. Two states that once had the strongest bans, both adopted by constitutional amendment, no longer have those amendments in force. South Dakota’s voter-adopted constitutional anti-corporate-farming amendment was struck down as violating the dormant Commerce Clause (South Dakota Farm Bureau, Inc. v. Hazeltine, 340 F.3d 583 (8th Cir. 2003)), as was Nebraska’s (Jones v. Gale, 470 F.3d 1261 (8th Cir. 2006)).

Iowa (Iowa Code ch. 9H), Kansas, Missouri, North Dakota, Oklahoma, and Wisconsin retain corporate farming restrictions by statute. North Dakota narrowed its ban in 2023 (HB 1371) to permit a limited authorized livestock farm corporation (2023 N.D. Sess. Laws (HB 1371); N.D. Cent. Code ch. 10-06.1). In an earlier challenge to North Dakota’s corporate-farming law, a federal district court found in 2018 that although one section violated the dormant Commerce Clause, that section was severable, and the rest of the law could be left in place (North Dakota Farm Bureau, Inc. v. Stenehjem, 333 F. Supp. 3d 900 (D.N.D. 2018)).

Are these laws constitutional?

A common requirement of corporate farm laws is that the owner or at least one family member reside on or actively operate the farm to qualify for the family-farm exemption. Minnesota’s law is representative: a family farm corporation requires that at least one of the related persons reside on or actively operate the farm (Minn. Stat. § 500.24, subd. 2(c)), and an authorized farm corporation requires shareholders holding 51 percent or more to reside on the farm or be actively engaging in farming (Minn. Stat. § 500.24, subd. 2(e)).

That kind of residency requirement is also what made neighboring states’ laws vulnerable. Federal courts held the corporate-farming laws of South Dakota, Nebraska, and Iowa unconstitutional for discriminating against out-of-state interests in violation of the dormant Commerce Clause:

• South Dakota: In 2003, the Eighth Circuit held the voter-adopted Amendment E unconstitutional and “affirm[ed] the order of the District Court enjoining its enforcement,” finding the amendment was motivated by a discriminatory purpose to restrict in-state farming by out-of-state corporations (South Dakota Farm Bureau, Inc. v. Hazeltine, 340 F.3d 583 (8th Cir. 2003)).
• Nebraska: In December 2006, the Eighth Circuit affirmed that Nebraska’s Initiative 300 (Neb. Const. art. XII, § 8) “violates the dormant commerce clause both on its face and based on its discriminatory intent” (Jones v. Gale, 470 F.3d 1261 (8th Cir. 2006)). The U.S. Supreme Court denied review in 2007 (Jones v. Gale, cert. denied, 549 U.S. 1328 (2007)).
• Iowa: A federal district court held Iowa’s packer-ownership restriction (Iowa Code § 9H.2) unconstitutional in 2003 as economic protectionism (Smithfield Foods, Inc. v. Miller, 241 F. Supp. 2d 978 (S.D. Iowa 2003)). That ruling did not become final; while the appeal was pending, the Iowa Legislature amended section 9H.2, so the Eighth Circuit vacated the district court’s judgment and remanded “for consideration of the recently amended section 9H.2” (Smithfield Foods, Inc. v. Miller, 367 F.3d 1061 (8th Cir. 2004)). South Dakota’s Hazeltine remains the controlling, undisturbed 2003 holding.

No court has struck down Minnesota’s corporate farm law. It remains in force and was most recently amended in 2024 (Minn. Stat. § 500.24, as amended by 2024 Minn. Laws ch. 101, art. 3, § 2). South Dakota’s constitutional corporate-farming amendment, by contrast, was struck under the dormant Commerce Clause (South Dakota Farm Bureau, Inc. v. Hazeltine, 340 F.3d 583 (8th Cir. 2003)).