On April 25, 2023, the Texas State Senate Committee on State Affairs unanimously passed Senate Bill No. 2142 that would allow Texas to report any non-notified foreign investments of “concern” to the Committee on Foreign Investment in the United States “CFIUS.”  The pending bill will authorize the Texas Attorney General (“TAG”) to establish a process by which “local officials, state officials, or other persons” may “submit to the [TAG’s] office information or concerns regarding non-notified transactions in this state.”  Upon receipt of such information, the TAG “may” report the concern to CFIUS. 

CFIUS currently has a division, The Office of Investment Security Monitoring and Enforcement, devoted to monitoring non-notified transactions in sensitive areas that has a reporting line for “members of the public” to provide “tips, referrals, or other information.”  (Office of Investment Security Monitoring and Enforcement web page, visited May 12, 2023.)  However, the proposed Texas bill is the first of its kind creating a monitoring mechanism at the state level. 

State level opposition to foreign investments has been on the rise.  For example, earlier this year, local officials in Grand Forks, North Dakota, sought to block a proposed grain mill development project by Chinese investors.  (See Wall Street Journal, North Dakota Turns Against Chinese Corn Mill Project, Jan. 31 ,2023.) Because any person in Texas may report a “concern” with a foreign investment, the proposed Texas bill increases the risks that local politicization creates CFIUS obstacles to the transaction.  As such, both foreign investors and Texas businesses with foreign investment (directly or indirectly) should take such risk into account when formulating both a regulatory and policy strategy, at the federal and state level, for proposed investments, ideally as early as possible in the M&A timeline.

Please contact us with any questions.