Did ATF’s Determination on NICS Checks Open the Door for Manufacture of New Machineguns for Trusts?

It isn’t often that I find myself giving advice that is more restrictive than ATF’s interpretations but it appears that ATF recently changed that dynamic when it held that an “unincorporated trust” was not a “person” under the Gun Control Act. Before I give you the answer to the question you’re pondering, let’s first review the background, issues and the law.

On June 21 2013, Dakota Silencer submitted a request to ATF seeking clarification, because of conflicting information it was being provided from different field offices (as they have multiple FFLs in multiple states), as to whether a National Instant Check System (NICS) check was required on the transfer of National Firearms Act (NFA) firearm registered to a trust on a Form 4. The specific question, as ATF framed it, was whether “a NICS check must be conducted on the person picking up the firearm on behalf of the trust.”

On March 17, 2014 (yes, almost a year later), Helen L. Koppe, Chief, Firearms Industry Programs Branch, responded. You can find a copy of the response here. ATF determined that “Unlike individuals, corporations, partnerships, and associations; unincorporated trusts do not fall within the definition of “person” in the GCA.” And therefore, as a result,

Because unincorporated trusts are not “persons” under the GCA, a Federal firearms licensee (FFL) cannot transfer firearms to them without complying with the GCA. Thus, when an FFL transfers an NFA firearm to a trustee or other person acting on behalf of a trust, the transfer is made to this person as an individual (i.e., not as a trust). As the trustee or other person acting on behalf of the trust is not the approved transferee under the NFA, 18 U.S.C. 5812, the trustee or other person acting on behalf of a trust must undergo a NICS check. The individual must also be a resident of the same State as the FFL when receiving the firearm.

So, ATF, trying to be cute and find a way to require NICS checks without Congressional action, declared trusts not to fit the definition of a “person” under the GCA. No big deal, especially for us in Pennsylvania, as Pennsylvania Instant Check System (PICS) checks are already required for all NFA firearms, except silencers. But, not so quick…let’s look at Section 922(o) of the Gun Control Act…

Section 922(o) provides:

(1) Except as provided in paragraph (2), it shall be unlawful for any person to transfer or possess a machinegun.
(2) This subsection does not apply with respect to–
(A) a transfer to or by, or possession by or under the authority of, the United States or any department or agency thereof or a State, or a department, agency, or political subdivision thereof; or
(B) any lawful transfer or lawful possession of a machinegun that was lawfully possessed before the date this subsection takes effect.

So, we have a prohibition on any “person” transferring or possessing a machinegun which was not lawfully registered before May 19, 1986. BUT, an unincorporated trust is not a “person” under the GCA, so this provision cannot apply to it.

In turning to the National Firearms Act, as amended, 26 U.S.C. 5801, et seq., we find that a “person” is defined as including a trust, pursuant to 26 U.S.C. 7701. Yet, there exists no 922(o)esque provision in Section 5801, et seq.

Therefore, pursuant to 26 U.S.C. 5812 and 5822, an unincorporated trust may lawfully transfer and make machineguns, as it is not a “person” for purposes of the GCA and Section 922 only applies to “persons” as defined by the GCA. And yes, this opens up a lot more issues for ATF in relation to the purchase of firearms by trusts under the GCA. Someone isn’t likely to be employed much longer…

I will continue to update our viewers, as I have already submitted a Form 1 Application for a minigun…oh hell yeah I did…

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80 Comments

Filed under ATF, Firearms Law, Gun Trusts

80 responses to “Did ATF’s Determination on NICS Checks Open the Door for Manufacture of New Machineguns for Trusts?

  1. Bobby Dempsey

    Great review! So, the question is can I buy a select fire AR post NFA Act production with my trust?

  2. Paul Hurst

    Not only that, but if trust is not a person then under 478.124 no 4473 is needed either, and under 478.102 No NICS check is required, so the letter contradicts the CFR on NICS.

  3. Craig G

    I’ll be keeping and eye on this. I would very much like a select fire MP5 that is not 20K.

  4. And three minutes after the first ATF clerk looks at the first form for this, another clarification will be issued. Of course, it’s fun to make them chase their rhetorical tail.

    • Brooks

      And then they are taken to court so a judge can decide whether their first or second determination/clarification is applicable. Potentially opening up an enormous loophole in the GCA.

  5. Michael D. Ricketts, Esq.

    If what this letter says is true, how can a trust ever legally take possession of an NFA item? First, ATF states “the trustee or other person acting on behalf of the trust is not the approved transferee under the NFA.” Then, they state, with respect to the trustee filling out the 4473, “Item 11a “Are you the actual transferee/buyer of the firearm(s) listed on this form?” should be answered “YES”.” So ATF is either advising people to lie on a 4473, or ATF is admitting that every time a trustee picks up an NFA item that was approved for transfer to a trust, an unapproved transfer of an NFA item is taking place. I understand that, logically, the trustee is picking up the item on behalf of the trust. But ATF clearly says that the item is transferred to the trustee as an individual, not to the trust. And this is supposed to be a clarification letter?!

    • over-educated economist

      Under the GCA, it’s a firearm being transferred to an individual.
      Under the NFA, it’s a MG being transferred to the trust.
      You just gotta keep both thoughts in your head at the same time.
      And, yes, it was an extremely dumb opinion as they go. :-P

  6. The Shocker

    Someone needs to submit a Form 1, using a cheap AR lower, expressing their desire to make it into a machinegun. Include the relevent Law.

    Also, I give THE FINGER to the asshole who sent the ATF a letter asking for “clarification” in the first damn place! Item 22 of the 4473 has always applied until some dickhead wants “clarification”. It’s the way it was always done before some busybody needed “helping” and of course the baby-burners at the the ATF are always willing “help” find new ways to apply the law to us.

  7. Mark

    the issue at hand is letter of the law vs. spirit of the law and until you find a federal judge high enough up the food chain to make a legitimate ruling, you’re going to get bitch-slapped by this rogue agency. NFA ’34, GCA ’68, AWB ’93 ad nauseum are all illegal under the 2nd Amendment of the Constitution; the more power and control they can claim over citizens, the further they can advance themselves. Power corrupts; absolute power corrupts absolutely.

    • No 2A required

      the Justices ruled that the Second Amendment only restricts the power of the national government in taking away rights and that the right to keep and bear arms exists apart from the Constitution, not because of it, stating “This is not a right granted by the Constitution. Neither is it in any manner dependent upon that instrument for its existence” – 92 US 542

  8. chris

    So what would the process be?

  9. Hey, Nick Leghorn from TTAG here. Mind if we re-print your article, with attribution of course?

  10. Give that guy a promotion!

  11. nash

    FYI I also asked the FTB about NICS checks on NFA regulated items, they told me it doesnt require a NICS check. See Question 32 http://imgur.com/a/vt2Qz

  12. CS

    Question, would you still be required to submit a $200 tax stamp before manufacturing a machine gun? And wouldn’t one also have to make sure they don’t run afoul of any state laws prohibiting the manufacture of a machine gun?

  13. pman5k

    Hell I’ll submit a form 1 on a trust to build an M240B… now when they reject we will need to sue, though sadly we know judges are likely to claim intent of the law…

  14. Chip Saunders

    But while the trust is not a person,…the person taking delivery of an NFA item for the trust IS a person,…and would themselves be in violation, would they not?

  15. Entities can only act through individuals in the end, so I doubt the ATF would allow this little loophole. An individual would still be possessing the machine gun (and owning it since legal/equitable title is still in individuals) authorized for manufacturer/transfer by the entity without regard to authority under government or age of the gun (the 922(o) exceptions).

    But does this now allow straw purchases (if Abramski comes out the wrong way…). The uncle could create a trust with the gun purchase money with himself and nephew as trustees. Nephew could purchase and legally put yes as actual buyer. Then nephew gives possession to uncle and all trustee/beneficiary agree to dissolve the trust with uncle getting the ownership of the gun.

    But I digress. Seeing as how the actual buyer rule was created illegally by the ATF, they’ll just modify their rules to get their desired outcome anyways.

  16. Entities can only act through individuals in the end, so I doubt the ATF would allow this little loophole. An individual would still be possessing the machine gun (and owning it since legal/equitable title is still in individuals) authorized for manufacturer/transfer by the entity without regard to authority under government or age of the gun (the 922(o) exceptions).

    But does this now allow straw purchases (if Abramski comes out the wrong way…). The uncle could create a trust with the gun purchase money with himself and nephew as trustees. Nephew could purchase and legally put yes as actual buyer. Then nephew gives possession to uncle and all trustee/beneficiary agree to dissolve the trust with uncle getting the ownership of the gun.

    But I digress. Seeing as how the actual buyer rule was created illegally by the ATF, they’ll just modify their rules to get their desired outcome anyways.

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  18. Huh. Using BAFTE’s “logic” how would a trust lawfully acquire an NFA item? It seems that every transfer would be a straw purchase of sorts.

    “I will continue to update our viewers, as I have already submitted a Form 1 Application for a minigun…oh hell yeah I did…”

    Hah! I’m sure you will provide an NFA examiner a few laughs.

  19. Whatever you do, dont call or email the ATF Technical branch to ask this question directly. You might get an answer. I suspect this issue will be the same as the Sig Arm Brace ; it will take Johnny Neckbeard months of speculating on the internet before he decides to simply ask.

  20. Reblogged this on The New Rifleman and commented:
    Interesting legal loophole but the test of logic may fail to make any impact with the ATF’s history of hypocritical rulings. Good on Prince Law for submitting a form 1 for a minigun.

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  24. Michael E. Stora, Ph.D.

    Does this ruling have any implication for “transfers” between trustees, esp. trustees who reside in different states? One could argue lex specialis for NFA items requiring a form 5320, but what about NFA items not requiring a 5320 or even Title 1 firearms held in a trust.

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  26. Michael E. Stora, Ph.D.

    Any possibility that this is not a mistake by one employee but that the definition of person for GCA purposes may be part of an effort to implement 41P in some form? An effort that may have backfired?

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  29. David Green

    I read this letter in a far more troubling way.

    Put simply, BATFE seeks to achieve same result as ATF41P via this letter to Dakota Silencer (i.e., requiring at least one person who is a member of a corporation, company, association, firm, partnership, society, or joint stock company undergo a NICS check,), while simultaneously ending the ability of unincorporated “NFA trusts” to legally “own” firearms of any kind, including NFA-taxed firearms.

    Currently, all forms of trusts or other legal entities (e.g., corporations) (TOOLEs) can own firearms, including NFA-taxed firearms. These TOOLEs can do so without any actual human involved undergoing a National Instant Criminal Background Check System (NICS) firearm-related background check. This is because TOOLEs were legally a “person” and legally are the owner of the firearms. Being an artificial entity, there is no point to doing a background check, and no requirement for submission of fingerprint cards, photographs, or for obtaining the Chief Law Enforcement Officer’s (CLEO) signature on each BATFE Form 1, 4, or 5 application (“F1/4/5”) submitted.

    This is now upended by this letter, at least as far as unincorporated trusts go.

    This letter makes all unincorporated “trusts” (as is the case for most NFA trusts) have no legal standing as a “person” under the Gun Control Act (GCA) (i.e., the statements that “The term ‘person’ is defined by the GCA at 18 U.S.C. § 921(a)(1), to include ‘any individual, corporation, company, association, firm, partnership, society, or joint stock company.’” and “Unlike individuals, corporations, partnerships, and associations; unincorporated trusts do not fall within the definition of “person” in the GCA.”)

    Thus, unincorporated trusts cannot legally be “transferred” any firearm, including an NFA-taxed firearm, and then “own” that firearm. Recall, both the NFA, the GCA, Form 4, and Form 4473 all use the term “transfer,” “transferee,” and “transferor.”

    Instead, per this letter there is now a “person” (legally and in common parlance) who is the actual transferee of the firearm (per letter and the terminology on Forms 4 and 4473). This person is accepting the transfer “on behalf of” the unincorporated trust. It is not the unincorporated trust accepting the transfer because an unincorporated trust is not legally a person under the GCA.

    Whether this person acting on behalf of the trust can then transfer possession of the NFA-taxed firearm to another actual person listed in the unincorporated trust is unclear, since the unincorporated trust has no standing as a “person” under the GCA.

    If anyone reads this differently, please provide an explanation as to why this is not the case.

    • Your statement is incorrect that “Thus, unincorporated trusts cannot legally be ‘transferred’ any firearm, including an NFA-taxed firearm, and then ‘own’ that firearm.” As this matter may end up litigation, I am not going to disclose everything here, but if you review the NFA (and the hints provided in my article), you will see that unincorporated trusts can make and be transferred NFA firearms. Furthermore, if you read Section 922, with the definition that ATF has proposed (and which is statutorily correct), the implications are far more reaching for trusts. If you need a hint, every place where “person” or “whoever” is listed, replace it with the definition, excluding trusts. I’ll leave it at that for now….

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  31. Edward

    Would love to see a guide on how to submit a form 1 like this. I’d submit one!

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  37. Robert Nelson

    I’m eager to see how this plays out. Being able to own a select-fire MP-5 without the 5 figure price would be great.

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  40. David Lowrey

    How long would it take for the ATF to respond to his form 1?

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  44. Mark

    My most important question…Have they cashed your check on the form 1 for the minigun, please post if they do.

  45. alex

    ok, not sure if this has been mentioned but wouldnt it have been less “gun-nutty” (i made that up) to file something less obnoxious? say a 10\22 trigger pack? i mean im all for personal cannon ownership (whoops, wyandotte ok, need a bigger berm!) but lets take baby steps before battleships (made that up too!) no?

  46. William

    So by now you should have gotten a response to your form 1.. any news?

  47. russell

    There has not been an update on this in a while, and with so many e-filed Form 1’s getting approved in 4-6 weeks or less and the check already cashed in June I would expect to see a decision of some type by now. What is the current status of the application? Pending?

    I know and you know that a machine gun is a machine gun but it seems like they might have been more likely to approve a drop in auto sear over a minigun.

    I am positive there has never been a crime committed with a registered mini gun as crime with registered machine guns has been incredibly low. There have only been two murders ever committed with registered machine guns and they were both m11/380 “mac 11″ guns. One was done by a dirty cop to shoot an informant and the other by a doctor who shot another doctor he was harassing and stalking . Both of these happened after the Hughes Amendment was passed. Both would have killed using other means I believe and the automatic weapon did not have anything to do with the ability or desire to kill.

    • eFiling a Form 1 was not available when I originally submitted my Form 1 in paper. By all accounts, paper Forms are still taking 6+ months to process. Since it was only submitted in May, it will be a while….

  48. rUSSELL

    Oh, sorry. I thought it was efiled. I have seen so many e-file approvals go so fast I was wondering why there was no decision by now. A large portion of the firearms community are watching this with their fingers crossed hoping you get your stamp.

    Have you considered e-filing a F1 for a machine gun of another type just to see how it goes? It is only $200 and if they say no, you get your $200 back; I would try one, but since I did my trust myself using quicken will maker I am afraid I could have an issue at some point if everything is not perfect.

    A guy on weapons guild just got his form 1 to build a suppressor in just 40 days from submission to the stamp in his inbox. How about making one for a registered Hk trigger pack.

    I just want to see this go through. Props to you for trying!

  49. FormerNavy

    Mr. Prince – any complications for your efforts if I submitted a Form 1 for an AR style fully automatic? I am considering it seriously via e-file although am having issues figuring out how I would build it from a practical standpoint since all modern receivers aren’t milled to accept full auto fire control groups.

    • Go for it, but I think you’d want to provide a cover letter with an explanation for why you believe you are authorized under the law to manufacture it.

      • FormerNavy

        Well yes that goes without saying. I fully expect a denial but with the timing of e-filing, I figure to find out fairly quickly I think.

      • thomas

        What reply have you gotten from the ATF if any?

      • FormerNavy

        Not sure if this was directed to me or Mr Prince. I haven’t submitted anything yet, and on August 17th Mr. Prince said he paper filed his and expects it to be at least late this year (6+mos from May).

  50. Jason

    Mr. Prince, did you provide a cover letter in your submission? Any examples? As soon as my AR lower comes back from engraving, I will be submitting my Form 1 for a machine gun build….and hoping for the best.

    Polling the audience here: Let’s say our Form 1’s get approved for machine gun builds…would sear packs be looked at the same? Engraving the receiver is one thing for a SBR, but a swappable sear pack between host guns might have some legality issues. Thoughts???

    • FormerNavy

      My understanding is that for registered drop-in auto sears (RDIAS) they can be freely moved between receivers as it is the RDIAS that is the registered “machine gun.” I am figuring out right now whether I want to try to Form 1 a DIAS or a receiver. I think it goes without saying that you will need to include a legal argument with your Form 1 filing – and I’m not talking about a few sentences that say you changed “x” so now “y” is possible. I fully expect the ATF to deny all these, although an explanation as to why ought to be interesting considering the changes to a definition of “person” mentioned in this article.

      If the ATF does actually concede to approving these, I expect them to very quickly close that door.

      • FormerNavy

        I should clarify about the RDIAS – as I understand it, the ATF did register some DIAS on the registry pre-1986 as the ban date was coming up and they were grandfathering stuff.

  51. Jason

    Looking over the Form 1
    “18 U.S.C. § 922(o) provides that machineguns may be made only for government use or export. An application will be denied unless the making meets these criteria.”
    I’m not a lawyer, but in my attempt to read over and understand the information, how does a trust qualify?

    • FormerNavy

      That’s what the Form 1 says, but not what the actual statute says in total. Here’s the actual statute:

      (o)
      (1) Except as provided in paragraph (2), it shall be unlawful for any person to transfer or possess a machinegun.
      (2) This subsection does not apply with respect to—
      (A) a transfer to or by, or possession by or under the authority of, the United States or any department or agency thereof or a State, or a department, agency, or political subdivision thereof; or
      (B) any lawful transfer or lawful possession of a machinegun that was lawfully possessed before the date this subsection takes effect.

      Re-read Mr. Prince’s original blog post above and all should become apparent.

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  54. Heard that Sean Cody, a NFA attorney in Houston got his tax stamp back for his Form 1 SMG today….

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