UPDATE: ATF Has Issued A Final Rulemaking. Get the details here.
Answers in a Nutshell
The answer to your first question is, “Yes, NFA Gun Trusts are still legal.” However, their future usefulness in bypassing the CLEO signature requirement for Forms 1 and 4 filed after the regulations go into effect could be at risk. Trusts in existence before the regulations go into effect will almost certainly be unaffected. There is a lot of uncertainty about how the process will look after the regulations go into effect because we don’t know yet what the final regulations will say. If you have been thinking about using a trust to buy NFA items, now is the time! Shoot us an email or give us a call to get started.
The Full Story
Things have been abuzz the last few days since news broke that President Obama is pushing for changes to the Bureau of Alcohol, Tobacco, Firearms, and Explosives (BATFE or just ATF) regulations that govern the transfer of NFA items. An NFA item (referred to also as a Title II or Class 3 weapon) is one that is regulated by the National Firearms Act (NFA), which is Title II of the federal gun control laws. The most common NFA items are suppressors (also known as silencers, despite the fact that a suppressed gunshot is still very loud in real life), short-barrel shotguns and short-barrel rifles. Machine guns and many explosives are also considered NFA items. Just wanted to give you guys a very quick look at what they’re trying to do and what it means for would-be NFA owners now and in the future.
The proposed changes have the potential to really shake things up in the NFA world, especially for those who want to buy or sell NFA items in the future. It is possible that the proposed regulations could seriously impede the ability to buy, sell, or otherwise transfer NFA items in the future. Not surprising, considering that’s probably the real purpose behind the proposal. That means that people who have plans to buy NFA items may want to consider acting sooner rather than later, because this really is a situation where later may be too late.
Here are some of the most important things to know about the proposed changes:
1. Current owners of NFA items, whether owned in a trust or in their personal names, should not be affected. The changes will almost certainly apply only to new transfers.
2. Perhaps most important to remember, these are just proposals at present. Once a proposed rulemaking is published for public comment, the public has a minimum of 90 days to comment on the rule (for more on how you can get involved in this process, see below). At that point, the ATF will read and process the comments and either abandon the rulemaking, revise it, or publish it as a final regulation. Because the changes will almost certainly be prospective, they shouldn’t affect existing Forms 1 and 4 that have already been submitted by the date the regulation becomes final. You can still buy NFA items using trusts without needing a CLEO signature until this proposed rulemaking goes through (if it ever does). That means you still have an absolute minimum of 90 days Realistically, you probably have at least 6 months, but there are no guarantees. If you’ve been toying with the idea of getting a suppressor, short barrel, or other NFA item, depending on where you live, you could be running out of time.
3. The proposed changes do not outlaw or eliminate gun trusts. Trusts are recognized as a legitimate method of owning NFA items by the NFA statute itself, which is not changing, and which neither the President, the Attorney General, nor ATF can change. The statute can only be changed by Congress.
What Are the Proposed Changes To The ATF Regulations Implementing the National Firearms Act (NFA)?
The proposal contains two primary changes that will interest NFA collectors.
First, the Obama administration is proposing that basically every person named in the trust, including the grantor, the trustees, and the beneficiaries, will need to submit a photograph and fingerprints and submit to an FBI background check. While this is a major inconvenience, not to mention a major privacy issue, it won’t stop you from being able to get NFA items by using a trust. There is a question that I haven’t seen raised elsewhere yet, much less answered, about whether beneficiaries who are minors and who only have a future interest in the trust will have to submit finger prints and a photo. And what about beneficiaries who haven’t even been born yet (such as when you list your “descendants” as beneficiaries? Perhaps they will have to submit the photo and prints when they reach the age of majority. Nobody knows yet.
Second, and more alarming, is that the Obama administration proposes to expand of the CLEO (Chief Law Enforcement Officer) certification requirement to non-human persons (usually trusts and corporations).
Currently, the only way to transfer NFA items in a great many jurisdictions, including every urbanized county in North Carolina and many of the rural ones, is to use an entity like a trust or corporation to bypass the CLEO signature requirement. The Obama administration and many in the media have characterized this as a “loophole” in the law, which implies that it was an oversight that shifty, ill-intentioned individuals who can’t pass a background check have used to obtain these highly regulated NFA firearms.
The truth is that law-abiding citizens have been forced to use trusts and corporations because CLEOs have abused their discretion to sign the certification, many of them instituting blanket policies that they will not sign the form for anyone under any circumstances. For the vast majority of NFA owners who use trusts, the lack of a background check is just an added privacy bonus, not a reason to spend hundreds of dollars for a trust.
Obviously, if the current CLEO signature requirement were expanded to apply to grantors, trustees, and beneficiaries of trusts, it would be practically impossible to obtain NFA items in most of North Carolina.
Surprisingly, the proposed rulemaking addresses this in a somewhat positive way. The Obama administration is attempting to alter the language that the CLEO signs, removing the certification that the CLEO has no knowledge indicating that the transferee will use the firearm for other than lawful purposes and replacing it with language stating that the CLEO is satisfied that the photo and fingerprints provided are those of the applicant. The reasoning for eliminating the language is to actually encourage CLEOs to sign off on the certification where appropriate and to eliminate the pervasive fear among CLEOs that signing the certification will subject them to liability if the person ends up doing something unlawful with the NFA item.
For somewhat complicated legal reasons, ATF and the AG are practically required to make this change and the accompanying argument that it will free up CLEOs to sign off on the certifications. On constitutional grounds, when an act of Congress delegates rulemaking authority to an executive branch agency, the agency has to use its rulemaking authority in a way that accomplishes the purpose of the statute. Applied to this case, what that means is that ATF would be on very shaky ground if it promulgated a rulemaking that would basically make it impossible for most Americans to transfer NFA items despite the fact that the NFA statute allows such transfers. ATF has to make an argument that the rule fits within the authority given it by the NFA itself.
Of course, in reality it’s hard to imagine that such a small change will make any difference at all in a CLEO’s willingness to sign the certification. ATF is asking the CLEOs to do even more than they were asking before (e.g. to verify that the fingerprints and photo are actually those of the applicant) and have not removed the statement that the CLEO certifies that the transfer would not violate state or local law. Interestingly, the Attorney General’s statement explaining the proposed changes shows that that latter language contemplates CLEOs around the country running their own background checks on NFA applicants in addition to the FBI background check that is already run on individuals and would now be required on grantors, trustees, and beneficiaries of trusts as well.
The small plus side for collectors and enthusiasts is that, if the CLEO change actually does convince CLEOs to start signing the new version of the certifications, then trusts may no longer be necessary (although they still offer great benefits and protections for NFA owners’ families by providing built-in estate planning and by helping to ensure that friends or family members don’t unwittingly commit a felony by illegally possessing or transferring the NFA items).
You can read the AG’s proposal for the new rulemaking, which includes the actual language proposed, here: ATF Proposed Rulemaking On NFA Firearms.
If you’re the pro-active type, you can get involved in the comment process. The Prince Law Offices has a great guide on how to create an effective comment, which can be found here: Preparing Effective Comments on Proposed Regulations. The most helpful thing at this point would be to contact your local CLEO’s office (your county sheriff, chief of police, and/or district attorney) and ask them if the changed language would make them more likely to start signing off on NFA transfers. Ask them if the presence or absence of a trust makes a difference one way or the other. You can then present their responses to your inquiries in your comment to the proposed rulemaking. If there is strong evidence that the CLEO certificate change will not prompt more CLEOs to sign off, then they will either have to try a different change or just scrap the expansion of the CLEO requirement altogether.
Any questions or input are more than welcome.