(Download above or read below) On August 29, 2013, Vice President Biden announced a new executive action, building on the comprehensive gun violence reduction plan he and the President laid out on January 16, 2013. The White House stated that the ATF is closing a so-called loophole “that has allowed machine guns and other particularly dangerous weapons to get into the wrong hands. This loophole allows prospective buyers to license these weapons to shell corporations, which lets them bypass a required background check.” “However, felons, domestic abusers, and others prohibited from having guns can easily evade the required background check and gain access to machineguns or other particularly dangerous weapons by registering the weapon to a trust or corporation.  At present, when the weapon is registered to a trust or corporation, no background check is run. “  ATF is proposing a rule to change that, requiring anyone associated with those corporations or trusts to go through the same background check process as individuals.  Last year alone, according to ATF, there were more than 39,000 requests for transfers of these restricted firearms to trusts or corporations. ATF’s Proposal The Department of Justice is proposing to amend the regulations of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) regarding the making or transferring of a firearm under the National Firearms Act (NFA). The proposed regulations would (1) add a definition for the term “responsible person”; (2) require each responsible person of a corporation, trust or legal entity to complete a specified form, and to submit photographs and fingerprints; and (3) modify the requirements regarding the certificate of the chief law enforcement officer (CLEO). The full document can be found here: https://www.regulations.gov/#!documentDetail;D=ATF-2013-0001-0001 NFA Forms are processed by ATF Examiners who are assigned by state. After an application to transfer or make an NFA item is received, the Examiner checks the form for errors and conducts a background check. If everything is in order, a Tax Stamp is affixed to the Form and returned to the applicant. Although the average turn-around time for most Tax Stamps was 3 to 6 months, it has recently increased to 9 to 12 months in some cases. ATF cites the reason for this as the influx of corporations and trusts as applicants. Although less than a handful of crimes have ever been committed with a legally owned NFA item in its nearly 80-year history, ATF is taking the position that prohibited persons may be able to acquire such items via the trust or corporate route. ATF is asking that all officers of a corporation or members of a trust are held to the same requirements that individuals are held including fingerprints, photographs, background check and CLEO signature. This is not a law, merely a proposed rule change. Prior to this proposed rule change, it was rumored that ATF would eliminate CLEO signoff completely. This does not appear to be the case now, but ATF has indicated that the language in this section of the form may undergo a change in the future, releasing the CLEO from liability. From a compliance standpoint this would mean that a SOT or NFA dealer would process the transaction of an NFA form for one of these entities as it would for an individual including all the information on each trustee or corporate stakeholder. NFA items owned by Trusts and Corporations Incorrectly referred to as a loophole, ownership of NFA items by corporations and trusts has been a part of the National Firearms Act since its inception in 1934: “any individual, corporation, company, association, firm, partnership, society, or joint stock company.” NFA items include machineguns, silencers, short barreled rifles and shotguns, destructive devices such as grenades and flamethrowers and firearms designed to look like innocuous items or do not otherwise fit the category of a Title 1 firearm referred to as “Any Other Weapon” (AOW). As the first incarnation of gun control in the United States, the National Firearms Act (NFA) was passed in 1934 in response to Prohibition-era gangsters illegally using machineguns and sawed-off shotguns. The original language of the law was to include handguns as well. These items were to be registered with the federal government after the owner paid a $200 tax (or $5 in the case of an AOW) and was issued a Tax Stamp. The Tax Stamp was issued after a federal form and background check by the federal government was completed and the transferee submitted photographs, fingerprints and a signature from their local chief law enforcement officer (CLEO). The exception to the federal background check, fingerprints, photographs and CLEO signoff was in the case of corporate entities, associations, estates and trusts. The original language of the NFA included trusts and corporations as legal entities that could possess NFA items. In the past 20 years, the use of a trust to acquire NFA items grew to prominence for a number of reasons: ·       Inability to obtain CLEO signoff. ·       Bypassing the need for fingerprints and photographs ·       Expense of NFA items such as machineguns and destructive           devices. ·       Allowing multiple users access to NFA items. ·       Estate planning purposes. Inability to obtain CLEO signoff The requirement for an applicant’s chief law enforcement officer to sign the federal tax stamp form is a holdover from the 1930s. There were no databases kept of known criminals or prohibited persons, there was no NICS system nor were there background checks of any kind required for the purchase of any firearms at the time. The logical step for the technology of 1934 was to have local law enforcement attest to the character and nature of the individual applicant. The dilemma presented in modern times with this requirement is that CLEO signoff can be unattainable in some states were possession of NFA items is otherwise legal. Usually this is dictated by the personal or political beliefs of the CLEO regarding such items. In other cases it comes down to the CLEO not wanting to take the time to complete the paperwork. Section 179.85 of the NFA requires the CLEO signature portion of the form to be completed for identification of an individual, but not for a trust, corporation or joint stock company. Fingerprints and photographs Another vestige of the 1930s is the requirement of photographs and fingerprints of the applicant on an NFA form. As the trust or corporation is the legal owner of the NFA item as opposed to an individual, there are no fingerprints or photographs to take of this entity. Expense of NFA items The third issue pertains to the expense of certain NFA items, specifically machineguns due to the passage of the Firearm Owners Protection Act (FOPA) of 1986 which prohibited the manufacture of new machineguns after May of 1986 except for military or law enforcement use. As with any commodity when their demand exceeds their supply, prices increase well beyond normal inflation. Prices of transferable machineguns have increased anywhere between 500% and 1000% of their actual value. Some individuals formed trusts and LLCs to make group purchases of such items. The machinegun becomes the property of the trust and each stakeholder owns a percentage of it. Multiple user access In a similar vein to the expense associated with machineguns, individual ownership of an NFA item is specific to the applicant. Unlike a Title 1 firearm which may be loaned to another person, NFA regulations state that the owner of the tax stamp must be in possession of the NFA item whenever it is brought out of secure storage. Most trusts were started so family members could have equal access to the NFA items, without a single owner needing to be present at all times. Each member of the trust has an equal share in responsibility. Estate planning The final reason has to do with estate planning as transferrable machineguns are an appreciable asset. Possession by a corporation or a trust prevents the estate from being charged an estate tax in the event of the owner’s death. However, this has been misrepresented by certain individuals as the transfer of any NFA item may be made to an immediate family member upon the death of the owner by completing a tax-free ATF Form 5. On Monday September 9, the Bureau of Alcohol Tobacco and Firearms opened a request for comment on these proposed changes, which will remain active for 90 days. Concerned individuals may submit a comment at the following link: https://www.regulations.gov/#!submitComment;D=ATF-2013-0001-0001