By Tom Odom, Esq.
I previously shared the results of my review of the first batch of public comments that the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) posted to the electronic docket at www.regulations.gov. The first batch consists of the ninety-six comments posted September 12. As of midnight September 15, a total of 435 comments (including the 96) had been received at http://www.regulations.gov/#!docketDetail;D=ATF-2013-0001
Please note that each comment is assigned a unique identification number (distinct from the “tracking number”) that begins with the prefix ATF-2013-0001-. As with my prior summary, I will use the four digits that follow that prefix in the following discussion to invite your attention to points raised in specific comments.
My first review addressed several of the major false premises that seem to underlie ATF’s proposed rule including (1) the mistaken view that registered NFA firearms are used in crime to any significant degree, (2) the failure to acknowledge the legitimate purposes served by legal entities such as trusts, corporations, and LLCs, on the one hand, and the absence of misuse of legal entities by prohibited persons for purposes of obtaining NFA firearms to any significant degree, on the other hand, (3) the failure to consider that there are existing criminal penalties for transfer of a firearm to, and possession of a firearm by, a prohibited person, (4) excluding consideration of the legitimate uses for NFA firearms by law-abiding citizens, whether through the use of suppressors to mitigate hearing loss, or otherwise, and (5) ATF’s mistaken impression as to the reason many Chief Law Enforcement Officers (“CLEOs”) refuse to sign forms as stated in the Notice of Proposed Rulemaking (“NPR”). The first review contained a very cursory overview of ATF’s cost/benefit analysis, a matter considered here in greater detail.
A. ATF’s Cost/Benefit Analysis is Flawed
Many of the comments point out that the cost/benefit analysis ATF published in the NPR seems woefully inadequate.
1. ATF Quantifies No Benefits
The NPR quantifies no benefits whatsoever from its proposed rule: “This rule offers no benefit to public safety, but will greatly frustrate and impede upon a process which is already functional and effective.” ’; see also, 0129, 0132, 0135, 0136,0143, 0159, 0165, 0190, 0193, 0210, 0232, 0254, 0259, 0279. 0290, 0297, 0299, 0304, 0305, 0318, 0325, 0343, 0345, 0353, 0374, 0382, 0392, 0406, 0407, 0412, 0443, 0455, 0473, 0476 (requesting documents relied upon in the determination of a problem), 0480, 0491 (comparing to existing Straw Purchase statutes), 0507, 0515, 0524. As one comment noted, the mere possibility that “bad things could happen is insufficient grounds for adding this rule.” . “This document doesn’t even list any statistics on crimes committed with the registered devices under these categories.” . It would be rather difficult for ATF to do so as federal law already criminalizes possession of a firearm by a prohibited person whether using a legal entity or otherwise. 18 U.S.C. § 922(g). And it is already a violation of federal criminal law for a trustee (or any other “responsible person” associated with a legal entity) to permit a prohibited person to possess a firearm if he has even “reasonable cause” to believe the person is prohibited. 18 U.S.C. § 922(d). In that event, any benefit from the proposed rule would seem to be limited to the marginal increase in compliance with law projected from the imposition of a redundant prohibition.
It is understandable that ATF would not include a quantifying benefit, however: with only two possible examples of legal NFA weapons having been used in crime and only one attempt to obtain an NFA weapon illegally through a trust, any costs would be skewed against a non-benefit. “Yet somehow, the government has chosen to expend massive resources, man hours, and paperwork expenses to target . . . completely legal firearms enthusiasts which will have not one single effect on the possession of illegal weapons or the use of those illegal weapons in criminal activity.” . ATF’s own analysis shows that the “CLEO certification currently adds a drag on the economy of $1,953,384 . . . for no corresponding safety benefit.” .
2. Omitted Costs
Some comments pointed out that by extending the CLEO certification requirement to trusts it would effectively become impossible to obtain suppressors despite Federal and State policy permitting their use by private citizens. E.g., 0053, 0153, 0156. Such added obstacles to obtaining suppressors for use in hunting and in shooting events would lead to increased hearing loss. E.g., 0003, 0017, 0062, 0126, 0160. The same would be true with respect to use of a firearm in a confined space in a self-defense situation. E.g., 0017.
Even Great Britain with their overzealous firearms regulations openly want their firearms owners to use suppressors for noise reduction and they are legally purchased over the counter with no background check whatsoever. Shooters shouldn’t have to jump through the hoops necessary to obtain suppressors as more and more states allow suppressors to be used during regular hunting seasons. 
Perhaps individuals familiar with measuring the cost of hearing loss could quantify this item. What do juries award in cases of hearing loss? What level of benefits are available under workers’ compensation and other schedules? And how much more likely is it that a shooter would suffer hearing loss due to the unavailability of a suppressor?
Some comments noted that the lost sales of suppressors would, in turn, impose significant costs on suppressor manufacturers, distributors, and dealers. E.g., 0021, 0030 “[T]his will kill the industry and take more money out of the pockets of business owners that are already having a hard time in this economy.” , 0127, 0129, 0138, 0152, 0281, 0355, 0359, 0372, 0467 . As another small NFA dealer commented: “This proposed ATF 41P rule . . . would kill my silencer business.” . One FFL wrote:
As a Federal Firearms Licensee small business that profits from the sale of suppressors, this proposed rule would negatively impact my income. The problem, if amended, is the extreme difficulty in obtaining the CLEO certification. Many CLEO’s will not sign the Form 4’s for numerous reasons, and are not required by law to sign them. Therefore, the transfer process would be stopped and there would be no other path for the customer to obtain their purchased item. I notice there is quite a bit of research on additional costs involved in the proposal, but I couldn’t find the research on how much profit will be lost of all the businesses across the nation . . . 
Furthermore, “[d]ue to existing import restrictions, title 2 weapons for private citizens must be made in the United States” and subject to a transfer tax. Thus, any restrictions on the ability to purchase them (read: CLEO signature requirement) will “eliminate approximately $54 million dollars of lawful tax generating commerce and have a corresponding impact on jobs.” .
The lost revenue would also undercut innovation in suppressor technologies. E.g., 0050. Perhaps FFLs can provide some information on the number of jobs that would be lost as a result of the proposed rule.
Other comments observed that ATF failed to account for additional significant costs such as the lost taxes from fewer NFA transfers and on the income lost on the sale of NFA firearms. E.g., 0002, 0030, 0034, 0058, 0061, 0236. ATF estimated it received 40,565 ATF Forms 1 or 4 submitted in 2012 for non-FFL legal entities. See 78 Fed. Reg. at 55,021. If even half that number of applications would not be submitted due to the added processing burdens of the proposed regulations, that would seem to represent an annual loss of more than $8 million per year in stamp tax alone, in addition to the lost income taxes on manufacturers, distributors, and dealers. See also, 0290, 0355. Perhaps FFLs can provide some information on the sales tax and income tax revenues generated from the manufacture, distribution, and sale of NFA firearms that would be lost a result of the proposed rule.
Some comments wondered about the cost to ATF (and, hence, taxpayers) to store all the added information ATF would collect under the proposed rule, such as the documentation on the existence and validity of legal entities. Others pointed out that it seemed ATF was unreasonably shifting some of that cost back to applicants to the extent ATF required repeated submission of identical information.
[T]he information of the responsible parties needs to be stored on record that way they don’t have to keep sending it in if they are already approved. Forcing individuals to keep providing fingerprints and photo identification after the first time is asinine. 
The burden of collecting redundant information was supposed to be minimized by the Paperwork Reduction Act (“PRA”) and, perhaps, if ATF had performed a thorough PRA analysis some of these costs may have been reflected in the cost/benefit discussion. See, 0111, 0146, 0306, 0394. “End result: the ATF already knows the name of the Trust Guarantor and anyone who may be authorized to use items held by the trust.” .
3. Under-Stated Costs
Comments pointed out that virtually every direct cost on persons seeking approval to make or transfer a NFA firearm were higher than ATF assumed. “The estimates of time needed, and costs associated with getting fingerprints and photos are wildly inaccurate, and the time to process all that information is off as well.” ; see also, 0451.
Some comments expressed concern with the costs the proposed rule would place on CLEOs. E.g., 0002, 0012, 0030, 0061, 0143, 0187, 0191, 0194, 0221, 0222, 0223. 0224, 0378, 0467. For CLEOs to “even attempt to process the volume of applications by responsible parties, seeking to purchase a suppressor for example which is legal for hunting in the State of Texas, they would be neglecting their primary duties of law enforcement and the pursuit of criminals.”  One comment worried about the ability of some rural CLEOs’ ability to fund a database in order to maintain the required information for a signature. . Perhaps some CLEOs would care to explain the problems that would result if they faced a significant increase in the number of applications they received.
One astute commenter noticed that ATF’s Proposed Rule will not only require more paperwork and financial resources from CLEOs in order to process the applications, it “will take [the] little resources they have to fight crime” and transfer them to working on “forms for the law abiding citizens.” ; see also 0223.
One comment addressed the cost to ATF and, indirectly to the public in terms of further delays in processing times.
This proposed rule is pointless. It will only serve to further increase the workload of the already-overworked and understaffed NFA branch. The wait time for approval of Forms 4 and 1 is already over 9 months. Multiplying their workload with a horde of additional paperwork will increase it exponentially. If anything, we need to find ways to simplify and streamline the NFA process, not further complicate it. ; see also 0172, 0206, 0223, 0231, 0316, 0448, 0510.
Other comments made the point in terms of direct costs to applicants waiting for approval. “[A]s of now the approval process is 9 months to a year and that is way too long to propose adding additional hurdles and requirements to it. A right delayed is a right denied. Speed up the current process before adding more rules and regulations.” ; see also, 0151, 0187, 0207, 0483, 0486.
Other comments pointed out that ATF’s estimate of two responsible persons per legal entity was rather low, e.g., 0019 (six); 0128 (five); 0456 (four to eight), so that ATF counted only a fraction of the costs per legal entity. E.g., 0062. Perhaps some attorneys who draft the documents forming such legal entities can provide information regarding whether ATF’s estimate is low. Or, if you use a legal entity and have more than two responsible persons, perhaps you would care to tell ATF directly. As presently drafted, the proposed rule is worded so broadly that it may be construed to reach a large number of individuals.
4. Transitional Costs
Additionally, ATF failed to consider the costs in creating a trust through an attorney. See, 0129. Other attorney costs included the costs to the attorneys, themselves, in attended further training and revising forms. See, 0129.
Costs to the firearms industry as a whole were not considered, either, such as costs of revising publications, websites, brochures, and other informational and advertising tools. See, 0129.
B. ATF’s Proposed Rule is Unworkable
Some comments pointed out problems with ATF’s definition of a “responsible person” and the absurd results that would follow. See, 0456.
“Responsible person” under proposed § 479.11 is defined very broadly, and much more broadly for trusts than for other entities. There is quite a difference in how the proposed regs treat trusts versus other entities. In addition to the grantors that set up the trust, successor trustees, distribution trustees, special trustees, lifetime beneficiaries, death beneficiaries, remote contingent beneficiaries, trust protectors, those who may hold a power of appointment, or frankly anyone that can fog a mirror, if possession includes constructive possession — all of these may be “responsible persons” based on having “direct or indirect” right of possession. [
With the other entity types the scope of “responsible person” stops at the manager level, with those having authority to direct the management and policies of the entity relating to the firearm. 
To the extent such observations fairly demonstrate the scope of individuals associated with a trust who would be subject to ATF’s proposed rule, it is difficult to imagine how the average number of responsible persons per legal entity is only two. Either the cost of the proposed rule is dramatically understated or the language defining a “responsible person” would seem to require serious reworking.
I share the role of co-trustee with my wife. Two of my soon to be three children have been setup as successor trustees along with my Mother. The proposed rule change would require that all soon to be six individuals be finger printed, have photos taken, and receive CLEO sign off. My youngest child is not even born, you would ask me to fingerprint a newborn once she arrives? You would ask me to finger print my other children who are aged two and five years? You would have my finger print their elderly grandmother? I dare say that I feel insulted. My children are only on the trust as a method of inheritance. My mother acts a successor trustee to hold the items until my children reach the age of 21 and can act as trustees. Surely the ridiculousness of the idea of fingerprinting an infant, a two year old, and a five year old for a criminal background cannot be lost upon you. ; see also, 0132, 0143, 0156, 0476 (concerning active, deployed military), 0523.
Another comment concurred:
[I]f a trust is used, it is often used to transfer possession of a weapon in the event of a death to a beneficiary. When trusts are formed, most of the beneficiaries are minors. They will (one day) be responsible parties, but now are underage. If beneficiaries are considered a responsible party, how do you do a NICS check and fingerprint a very young minor? .
At most, “acting Trustees, not successor trustees or any other member, be required to send in fingerprints, passport photos, and receive a CLEO signature.” . See also, 0111, 0113.
Other comments observed that the proposed regulations in connection with the long processing times would create a potential endless cycle of applications. See, 0114, 0148.
This requirement creates an undue burden on trusts and corporations in that they now have to submit photos and fingerprints of responsible persons, when those responsible persons could change during the lengthy NFA approval process causing the entire thing to have to start over again and again in that you have to submit identification for everyone involved. 
Some comments pointed out that the delays are often even longer because of a series of transfers, each needing to be approved by ATF one at a time, may required to complete a transaction. In such circumstances added regulatory obstacles may frustrate completion of the transaction.
Last week I purchased a machine gun from a dealer out of state and now am waiting on the approval of Form 3 to transfer to my dealer in state. How is that going to work if my CLEO refuses to sign on my gun trust? Am I supposed to just lose the thousands of dollars spent on that item? It takes a few months before I can even get my Form 4’s sent in. 
Neither purchasers nor sellers may be able to predict, months in advance, whether a CLEO signature may be available, not just to the settlor of the trust but to each and every responsible person associated with the trust. The result would be to ossify the legal market for sales while doing nothing about the underground market.
Additionally, comments indicate that requiring the CLEO signature for all Responsible Persons, as defined in the proposed rule, would effectively halt the creation of trusts, as different jurisdictions are more or less amenable to NFA weapons. A single CLEO opposed to the private ownership of NFA weapons can derail the creation of a trust and frustrate the intent of the state legislature. See, 0122, 0123, 0128, 0130, 0145.
C. Transition Period
Whether considered as an understated element of the cost/benefit analysis or an issue going directly to the workability of the proposed rule, ATF has failed to explain in its NPR how it would transition to any new regulation it adopted.
Joshua Prince, in his September 2 letter on this point, noted that although ATF had orally indicated that any new rule would not apply to previously approved applications or to applications pending at the time any new rule became effective.  He requested that ATF clarify its proposal with respect to such transition issues prior to publication of the NPR in the Federal Register. ATF failed to provide any clarification to the public notice on how it proposes to handle these matters by leaving the NPR unchanged in that respect. Moreover, rather than even provide written confirmation to Mr. Price, as his letter requested, ATF simply posted his letter in the docket as a public comment.
Other comments shared the concern. “I would want to insure that applications already submitted are grandfathered.” ; see also, 0130.
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Look for forthcoming posts to this blog examining some of the other issues raised by the comments as I next turn my attention to the wide range of alternatives that have been suggested in lieu of ATF’s proposal.