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:
- 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.
- 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….
- 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.
- 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.
- 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.
- 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.”
- 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.