411 on the Final Rule in relation to ATF-41P

Last night around 11 PM, we broke the story of ATF’s publication of a new final rule in relation to ATF-41p.  As many of our viewers know, Firearms Industry Consulting Group, a division of Prince Law Offices, P.C., spearheaded the opposition to ATF-41p but what does the preamble to the final rule and the final rule say?

Well, in spanning 248 pages, with 236 pages of preamble and the actual final rule only spanning 12 pages, it says a lot, as there were a plethora of issues raised by the public comments for which ATF was required to respond. Boiled down to its most simplistic terms, this is what the final rule in ATF-41p provides:

  1. Effective Date: It will not take effect for 180 days after publication in the Federal Register. I checked the Federal Register this morning and there was no notice regarding ATF-41p. Hence, the exact effective date is still unknown.
  2. CLEO Signatures: ATF has replaced the CLEO signature requirement with a CLEO notification, which will be required for all transferees and makers of NFA firearms and their Responsible Persons (explained below). While clearly a CLEO notification requirement is far better than a CLEO signature requirement, as the CLEO signature requirement could be utilized as a defacto ban on NFA firearms, it is extremely concerning as the Government is mandating the disclosure of confidential tax information. Not to worry, ATF responded to that on page 84. Since it is requiring that YOU disclose the confidential tax information, no law is being broken, because it is YOU that is disclosing YOUR confidential tax information (did I mention the Government is forcing you to do so?). See also page 96, where ATF states that it is legally prohibited from disclosing that same tax information….
  3. Responsible Persons (RPs): Throughout the final rule, ATF seemingly proposes several different interpretations of what constitutes a Responsible Person based on the entity type. This results in serious questions, such as  whether the language is overly vague. Are now all employees who can possess a firearm of an LLC/Corp RPs? And  also, whether ATF is treating different fictitious entities differently in violation of the law. Are trustees who can possess firearms of the trust RPs, but employees who possess firearms of LLC/Corps not? Moreover, what is the basis for treating non-licensees and licensees differently?  The exact language for an RP can be found on page 238-239, which declares

    Responsible person. In the case of an unlicensed entity, including any trust, partnership, association, company (including any Limited Liability Company (LLC)), or corporation, any individual who possesses, directly or indirectly, the power or authority to direct the management and policies of the trust or entity to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust or legal entity. In the case of a trust, those persons with the power or authority to direct the management and policies of the trust include any person who has the capability to exercise such power and possesses, directly or indirectly, the power or authority under any trust instrument, or under State law, to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust.

  4. Impact of RPs: One of the largest impacts ATF-41P will have on fictitious entities is the requirement that all RPs will have to submit photographs, fingerprints, a CLEO notification and an NFA Responsible Person Questionnaire (Form 5320.23). See pages 232, 239-247. Further, based on page 96, individuals will be unable to roll their own fingerprints, as has been custom for some over the past decade.  However, the final rule includes an exception on page 242-243, where the if the applicant entity has been approved as a maker or transferee within the prior 24 months, there has been no change to the “documentation previously provided” and the entity certifies this by specifying the previously approved form by form type, serial number of the firearm and date of approval, it does not need to submit the photographs, fingerprints and Responsible Person Questionnaire. The final rule, pages 100 and 239, also states that generally speaking, a beneficiary will not be an RP.
  5. Changes to RPs: Another issue that ATF was considering was whether there would be an obligation on part of the fictitious entity to submit notification, within 30 days, of the change in those who constitute RPs for the entity. See pages 206 – 209. The final rule, on page 209, declares, “The Department is not requiring, in this final rule, that new responsible persons submit a Form 5320.23 within 30 days of any change of responsible persons at a trust or legal entity.” However, if a new application (Form 1 or Form 4) is filed, clearly the updated documentation must be filed with ATF for all RPs.
  6. Retroactive Effect: As stated on page 198, “The final rule is not retroactive and therefore the final rule will not apply to applications that are in ‘pending’ status, or to previously approved applications for existing legal entities and trusts holding NF A items.” Unfortunately, ATF failed to define what constitutes “pending status.”
  7. Estates: In relation to estates, ATF has clarified, on page 247, that an “executor, administrator, personal representative, or other person authorized under State law to dispose of property in an estate (collectively “executor”) may possess a firearm registered to a decedent during the term of probate without such possession being treated as a transfer” and that, as has been ATF’s practice, a transfer to a specific beneficiary, whether through a will or trust, will transfer tax-free.

The above are merely the key-aspects to ATF-41p. There are some very interesting statements, or lack thereof, by ATF in the final rule, such as in relation to an issue we raised with ATF’s prior practice of institutional perjury (page 195). ATF’s response, page 196, is merely that they did nothing wrong in this rulemaking. Also of interest, ATF acknowledges that it did not make the underlying information available and that it did not provide a 90 day comment period as required by the law and denies that it placed irrelevant materials into the docket (even though there was evidence submitted reflecting such) or precluded interested parties from obtaining the information (pages 185 – 193). As a side note, we submitted a FOIA almost three years ago for the information, and ATF has failed to produce anything in relation to it, but it is completely transparent….

In the next week, we will be taking a comprehensive review of all 248 pages and providing further insight into the final rule, ATF’s responses and a potential legal challenge to the final rule. In the meantime, we’re working on an Amicus Curiae brief in support of the United States Supreme Court granting certiorari in Bonidy, et al., v. United States Postal Service, et al, docket no. 15-746, which is due later this week.



Filed under ATF, Firearms Law, Gun Trusts

51 responses to “411 on the Final Rule in relation to ATF-41P

  1. Tom Smith

    Is there anything in the ruling that says we can optionally use the new process now, instead of in 6 months? As someone who has yet to form a trust or purchase any NFA items, buying them individually with the new forms and only a CLEO notification is easier than forming a trust and buying them that way.


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  4. Ryan

    Can I buy a lower today and file an eform to get it on my trust and still be excused from the fingerprint every 2 years crap?


  5. KW

    You raise an interesting point regarding federal tax information (FTI). I work for a federal agency with access to federal tax records for data analysis purposes (IRS records), which are covered under Title 26 of the US Code.

    To even work with those records requires an o Eros amount of “training” basically informing us of the proper handling of such records and very strict penalties (prison time, $250,000 fine) for misusing or disclosing those records.

    Under what statutes is FTI associated with ATF forms protected and can we be sure that CLEOs (and their agencies) have the proper protocols in place for dealing with information of that sensitivity? What accountability do they have if they misuse that information or make improper disclosures, which may be possible in jurisdictions particularly hostile to NFA or gun ownership in general?


    • KW

      After re-reading, it looks like you mentioned ATF’s follow-up addressing their use of FTI. That said, I am unable to disclose FTI even about myself (it would be a violation of Title 26), so I wonder how they will handle this.

      Thanks for your work on this issue (and others).


  6. Zak Smith


    Good work guys!

    One question that seems like it’s still up on the air. Does elimination of the CLEO signature apply to just Trusts (etc) or all transfers including individual transfers?


    • BS

      From page 224, “Individuals must only notify their local CLEOs under the
      final rule, whereas currently they are required to obtain certification from their local CLEOs.”

      From page 228, “The Department believes the incentive for makers and transferees to create corporations and trusts solely to avoid the CLEO certification requirement will decrease once the certification is no longer required.”


  7. “However, the final rule includes an exception on page 242-243, where the if the applicant entity has been approved as a maker or transferee within the prior 24 months, there has been no change to the “documentation previously provided” and the entity certifies this by specifying the previously approved form by form type, serial number of the firearm and date of approval, it does not need to submit the photographs, fingerprints and Responsible Person Questionnaire.”

    Hmm. The way I interpreted this was that exception c only got you out of 2(i), not 2 entirely. That may have been an overly narrow reading, but I think it’s worth clarifying.


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  9. hepp68

    Let me see if I have this right:
    1. ATF eliminates the need for gun trusts to purchase NFA items, to the benefit of everyone but gun trust lawyers
    2. Gun trust lawyer posts on his blog that he’s looking into a potential legal challenge to the final rule

    PLEASE tell me I’ve got that all wrong, and you’re not trying to block one of the greatest gifts to gun owners in a decade because it’ll kill your gun trust sales. Because that’s what it looks like to me.


    • For those of us who were using trusts to simplify life with sharing NFA items with our spouses, this wasn’t a really great outcome. Give him a little more credit.


    • Just One Man's Opinion

      Don’t be so quick to stereotype attorneys and jump to conclusions so fast there, Hepp.

      As an attorney who occasionally drafts gun trusts for my clients, I would think the author does not intend to challenge the CLEO notification change. Nor does this alteration to the 41p rule necessarily remove the need for gun trusts, though it may change the scope of why a client would want one. There are plenty of other reasons to have a gun trust, especially if their firearms/collection has any real monetary value. HINT — just in case you don’t know this: a trust allows property to pass OUTSIDE of probate. Meaning a court does not automatically get to pass judgment on how a grantor’s firearms are passed to his heirs (trust beneficiaries) after he dies. An NFA trust may also prevent a decedent’s creditors from forcing liquidation of the decedent’s firearms collection to satisfy his debts. I have seen creditors force liquidation where there is a Will and where there was not. I have yet to see that happen when a well-drafted trust was in play.

      Perhaps the precedential value of the ATF (or any agency, for that matter) not following the Administrative Procedures Act’s (APA) mandatory ninety (90) day commentary period requirements eludes you as well. Public comment is the only way that we (the public) get to participate in the agency rule-making process. After all, these administrative agencies (like ATF) are part of the executive branch of government yet are increasingly allowed to perform legislative functions (in spite of that old notion of the “separation of powers”) with no fear of losing their jobs as a result of their policy making decisions. At least legislators can be held accountable by their constituencies. A challenge is warranted, IMO, if for no other reason than to prevent the (ever increasing) erosion of the public’s ability to participate in government rule-making. Just given the fact that you’ve read this blog post, I suspect that you do actually care about whether the executive branch of our government has to at least consider what the public thinks before it acts in a legislative function by making decisions that control YOUR behavior…


    • kcgunesq

      Hepp68 –

      I am an attorney. I live in an area where CLEO signoff has not been an issue. Yet I still have and recommend Trusts for most people. Even those (few) for whom I’ve helped (at no charge).

      While the ATF made a brilliant move here, effectively splitting the opposition and throwing a huge bone to a big sector of the NFA crowd, it is still a very problematic rule made via a messy, problematic and possibly illegal process.


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  12. Zac Brown

    Is there anything that may hint at CLEO notification verification? As it is now apparently required by law, it seems that someone should let me know it wasn’t list in the mail… Or on the office floor. But, if verification by the CLEO is required, couldn’t they simply not provide it, and that would be basically the same as not signing off on it? Although, now, there is no way around it.


    • Coby snyder

      Send it return receipt with required signature at CLEO’s office. As soon as you get the singed receipt make a copy of it and include with your packet.


  13. R Gerdis

    Great job to everyone behind the scenes that help make this happen … Thank you for following this through . And God Bless


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  15. Jon

    So if you currently have people on your trust, after this takes effect, they will all have to provide prints photos etc. when I want to file a new form 1 or 4? Or does this only apply to newly formed trusts after this takes effect in 180 days? Basically do I have to go back and get prints etc. from everyone on the trust to continue using it?


    • plodder

      Please, Please get a bona fide answer to this one!


    • Zac Brown

      Yes, all trustees will have to be fingerprinted and have pictures taken of them for all new submissions once this takes effect. Only exception is, after your first approval under the new law, if you haven’t added or removed anyone from your trust and have a previous approval within 24 months, you can submit a “statement” (which seems vague) that nothing has changed on your trust and don’t have to submit all the fingerprints and pictures.

      This applies to existing trusts and new trusts.

      Yes, you will have to get your trustees fingerprinted and have pictures taken. Then, you have to alert your CLEO that you are getting an NFA item.

      Individual filing just got easier than Trust filing. And will probably become quicker. Although, trusts still have their merits.


      • Plodder

        But if I do not add any NFA items to my trust, and I make no changes to the trustees currently on the trust, can trustees still possess the NFA items currently in the trust after the ruling takes effect?


      • As we cited above, ATF stated “The Department is not requiring, in this final rule, that new responsible persons submit a Form 5320.23 within 30 days of any change of responsible persons at a trust or legal entity” and “The final rule is not retroactive and therefore the final rule will not apply to applications that are in ‘pending’ status, or to previously approved applications for existing legal entities and trusts holding NF A items.”


  16. Jet3

    The rule specifically states the change in regard to NFA Firearms. Does the photo/fingerprint requirement also apply to a suppressor?


  17. Paul

    Thank you for your effort. I have a revocable one-party living trust and have added nothing to it in the last 6 months. My cousin is named as a successor Trustee. He passed away several months ago. I have not done anything yet to my trust. What should my next step be and would this these new rules affect what I do and how quickly it should be done. Thank you


    • Merlot

      ianal, your trust likely has provisions of what to do in the event your successor beneficiary predeceases you. So you would “have” to do anything. The ruling does not require beneficiaries to submit background info as long as they are not also a responsible party.


  18. Merlot

    Regarding RPs, if an individual is a limited trustee with ONLY the ability to possess items in the trust but without any authority over the items or the entity, will they also be required to submit photos/fingerprints? Please clarify as the language seems to shift throughout the ruling. Thanks!!


    • As we stated, we are thoroughly reviewing the preamble and what is expected to be the final rule (although nothing has yet been published in the Federal Register); however, as reflected in the minor trustee example on page 124 and statements on page 125, as well as, several other locations throughout the preamble, a trustee’s possession of a firearm would seemingly trigger the individual constituting an RP.


      • Merlot

        Thanks for the quick response. I continued to chew the final ruling and would like your opinion regarding the following observation I have made.

        By the ATF noting trusts sampled had not given authority to direct the management and policies of the trust, to exercise the power of that authority, and receive, possess, ship, transport, deliver, transfer, or dispose of a firearm for the trust they provide a wordy explanation reducing who actually is a responsible person for a trust or entity. This means the structure of the entity or trust is crucial to who has to submit the photographs and pictures. Do I understand this correctly? This is from response cited on page 145/146 section IV.E.1.a.


  19. JohnS

    First off, I want to thank you for watching out for the rest of us. And I just started listening to the podcast you are on. Have a question, I have two suppressors that the dealer just got in and was going to get the trust completed and purchase. Can I go ahead and just submit paperwork as regular or should I go ahead and include pics/prints? thanks


    • As stated in the article, the regulation does not take effect for 180 days after they publish it in the Federal Register


      • Plodder .

        I think most understand that the new rules will not take effect until 180 days after they are officially published, however, I cannot seem to get a straight answer on what happens after that 180 days. If there are no photos & fingerprints submitted by me or anyone on my trust, can all RPs still possess and use the NFA items that are currently in the trust indefinitely? Or, after the 180 days must every RP in the trust have sent in their photos and fingerprints to possess and use the NFA items that are currently in the trust? (Assume that no new NFA items are transferred into the trust and no changes are made to the RPs (trustees) in the trust for eternity).

        On Thu, Jan 7, 2016 at 6:07 AM, Prince Law Offices, P.C. wrote:

        > Joshua Prince, Esq. commented: “As stated in the article, the regulation > does not take effect for 180 days after they publish it in the Federal > Register”


      • Merlot

        @Plodder, when reading the final rule, it states you do not have to do anything. You would simple require submitting fingerprints and photographs should a change to the NFA items in some form be initiated. There was comment and response on adding/removing RPs and the are not going to require forms/submissions if a RP is added/removed unless/until you are submitting a new form to take action regarding a NFA item.


    • Merlot

      Until it goes into effect, it would be as you say, “as regular”


      • Zac Brown

        so basically, this new ruling does nothing to curb the (non-existant) problem that Obama has with people using trusts as a loop-hole, because you can simply transfer an NFA firearm to a trust with only one person on it and when the transfer is approved, you can amend the trust to include all of the murderous thugs in your town. Good work, Democrats!


      • Merlot

        @Zac well, consider this, the New EO directs the ATF to ensure dealers are conducting background checks, and they are, but the ATF is supposedly going to be more aggressive in determining who is a dealer in the sale/purchase of a gun. The NFA 1934 designates this distinction BUT I can completely imagine that they would come after LLCs corporations and potentially trusts, especially if the trust is shown to be making profits and arbitrarily say these entities must be licensed FFLs as dealers even if they are primarily formed as a vehicle of possession or for estate planning.
        We shall only see.


  20. Brandon Tarr

    US Administrative Law has a provision for regulation review and overruling via the The Congressional Review Act (5 U.S.C. § 801-808). The Act gives Congress 60 legislative days to disapprove of the regulation. Contact your representatives now! Lets get some members of Congress on board ASAP and challenge this.


    • Actually . . . 5 U.S.C. section 801(a)(4) specifies that the procedure applies only to “major” rules which, generally speaking, are rules that have an annual economic impact of $100 million or more. ATF certainly has not treated the matter as a “major” rule, maintaining that it was not even responsible to analyze impacts on small businesses and local police. So, while Congress could use the ordinary legislative process (with Presidential signature or super-majorities in both houses to override a veto) the CRA review provision does not appear likely to afford any relief.


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  22. Despite posting on the ATF Website a draft of the Final Rule signed by the Attorney General on Monday, January 4, 2016, through the release of the Federal Register for Friday, January 8, 2016, the Final Rule still awaits “publication” and it is such publication that will start the clock running for the 180-day delayed effective date. Given the delay in publication, it will be prudent to comb the Federal Register version to identify any changes from the draft posted on the Website.


  23. Scott

    What about peoples ideas to keep adding and removing trustees with ammendments, or to make a new trust with each submission and add trustees with ammendments after approval? Is not this he “loophole” in this new ruling that can be ised to effectively circumvent it?


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