NFA RULE CHANGES – CONFUSED YET?

Author: admin Category:Website Blog

With the new Bureau of Alcohol Tobacco, Firearms and Explosives (“ATF”) decision regarding 41P (actually it is 41F but read on) being handed down a few days ago, a lot of our current and potential clients are wondering how this will affect their existing NFA Trust, or how it will impact their desire to obtain a trust and NFA items in the future. We have fielded phone calls, text messages, emails, walk-ins, and Facebook posts/messages since the decision was announced on an almost constant basis from people concerned about what this all means. The concerns we have heard are valid and understandably confusing; there is already a lot of conflicting information out there about what this means for NFA ownership. We at the Alvarez Legal Group have read the new rule, consulted with attorneys involved in the fight and are here to try and offer some explanation as to what exactly ATF Rule 41P means for the gun community.

SIlencer

Here are the big key points:

  • Chief Law Enforcement Officer (“CLEO”) Certifications are gone and replaced with CLEO Notifications. This now pertains to individuals, trusts and corporations.
  • When a trust grantor passes away, the person/people in charge of the estate are not “transferee’s” during the probate phase (this is a positive change).
  • The rule will “grandfather” anyone who has a pending application on the date the rule goes into effect.
  • The rule will not go into effect for 180 days AFTER it has been officially published in the Federal Register (as of January 8, 2016, it has not been published).

This is the bulk of the information that will have an impact on the majority of NFA owners or potential owners.  ATF published Rule 41F (changed from 41P) on 15 January 2016. The name has changed but the rule is the same. This means that the new rule will go in to effect on 13 July 2016 (+/- a day for adding errors). Any application under ATF Form 1, Form 3, and Form 4, as it pertains to trusts and other methods of NFA acquisition, will be under the current rules up through the 12th of July, 2016. On the effective date of 41F, all applications filed will have the requirements laid out in the Rule and outlined below (photos, fingerprints, CLEO notification, and background checks of all responsible parties to the trust or corporation). Until then, all current NFA rules are in effect as they have been for years.

While we all love the 2nd Amendment and hold our Constitution and its many Rights close to our hearts, the new changes to the rule are not as negative as many people think or as bad as the rumor mill would have you all believe.  Below we will offer further clarification for the bulleted information above.

Individuals

Individuals have always been legally allowed to own NFA items, however it was mandated that each individual applying for a tax stamp must submit a photo and fingerprints along with their ATF Form 4 and they had to have the “blessing” of the CLEO in their jurisdiction. To ALG’s knowledge, there are VERY few CLEO’s in the the State of Florida who would sign off on an individual application. This was essentially a de facto gun control measure. No signature meant no NFA items regardless of the individual’s qualification to own them with little recourse to force a CLEO’s pen.

Rule 41F has changed this for the better. Now, an individual person may apply for an NFA tax stamp, as they would have before, but instead of getting a CLEO certification, which was all but impossible, now a person merely needs to notify the CLEO that she/he is applying. The same requirement for photo and fingerprints applies, as it always has.  We have spoken with legal counsel for a major, nationally recognized law enforcement area and they are not prepared for this additional mandate which caught them completely off guard.

So what does this really mean? Now you can get your NFA items easier because you will go through the same process as before, just without the need for the CLEO to grant you permission.

A deeper look . . . while many people will benefit from the individualized route to NFA ownership now that the CLEO cannot tell them “no” when applying as an individual, this opens a person up to legal complications down the road that other methods of NFA ownership will protect from.

When an individual owns an NFA item, that person MUST safeguard the item to an obscene level to avoid any issues with constructive possession. People often overlook this, but it is no small point. One of the scariest things about NFA ownership is constructive possession and the ATF definition of “transfer.”[1] If any other person lives in the home the item is kept and it is not in a locked safe wherein that person does not know how to access the item, they may be in constructive possession of the item, and therefore possibly guilty of illegally possessing, and possibly holding as a transfer, the item in question.

Let’s say you’re married and have a family and as a shooting enthusiast you have suppressors and SBR’s. You are a responsible owner, with a safe to keep your firearms in so your kids do not get to them. However, your spouse, has the code to the safe just in case he/she ever needs access to something (important documents, a weapon, etc). Your spouse knows the combination and there is an individually owned NFA item in the safe.  Your spouse may now be guilty of constructive possession and may be charged with a federal gun crime. Do not minimize this. The Federal Government and the ATF did not come up with a complex tax scheme to try and minimize NFA ownership to simply overlook the possibility of a constructive possession incident.

If you don’t think there is a scenario where you could put someone close to you at risk for violating federal law, applying individually is the cheapest and most direct way to go. For those who have a concern, a Trust may be the best answer.

Trusts

Trusts took the biggest hit, as far as it goes for changes under ATF Rule 41F, and while some are annoying and in our opinion, an overstep by the government to further infringe on the 2nd Amendment, not much has changed, and some things are actually positive changes.

The biggest negative to the current rule is that now, “Responsible Persons” in an NFA Trust will be subject to background checks and will need to submit a photograph and fingerprints with the application for the NFA item(s).

So what does this really mean? Currently, when you begin a trust, the trust owns the items you add to it; not you as an individual. As the grantor, the person who starts the trust, you name a trustee or a successor trustee at a minimum. The trustee(s) are the people who will run and manage your wishes as the grantor. You also name beneficiaries, the people who have the benefit of the items held in trust and they must comply with the decisions of the trustees, as dictated by the grantor.

At present, no photo or fingerprints are necessary for a trust because a trust is a stand-alone entity. Now, you will have to submit both a photo and fingerprints as the grantor along with your application.

Further, anyone who is named as a “responsible person,” basically anyone who has the power to manage, alter, enforce, etc. the trust, will have to submit these items as well. This may make the decision process more complex as to whom you choose as a trustee since now they will have to comply with the law as well. Beneficiaries, according to ATF Rule 41F/41P page 118-119, will not be considered “responsible persons” unless they meet the criteria of power for management of the trust document.

Rumor Mill – There are rumors going around that now people in a trust will have to submit to a background check, contrary to the current rules. THIS IS ONLY PARTIALLY TRUE.

Yes, the grantor/trustee and the co-trustee(s) will have to go through background checks when purchasing an NFA item. However the ONLY change is that the co-trustee(s) will also have to submit.

Currently, even though the trust owns the items, not the grantor, and the name of the trust is what goes in all the “names” blanks on the forms, before you will be able to take possession of your NFA item(s), the Class III dealer WILL perform a 4473 background check. If you are approved at that point, the dealer will release the item to you, and your trust then applies. However, if you did not pass the 4473 check, you will be denied transfer of the item. This is where people thought trusts were a “loophole” because they believed that a person was buying NFA items through a trust and never submitting to a personal background check. This couldn’t be further from the truth, as EVERYONE who ever attempts to take possession, legally, of any firearm, to include NFA items to be held in trust, WILL submit to a federal background check of their person before being granted possession of the item. In fact, even after this rule goes into affect, the Trustee receiving the item from the FFL will have to submit to a background check again. Nothing changes there.

OTHER TRUST IMPLICATIONS

The other major change to the trust side of NFA ownership is the issue of transfer when a grantor passes away. At ALG, our trusts protect the people who will run your estate by listing a successor trustee (or a line of successors in the case of a complex trust). This assures you, and the successor, protections from federal prosecution for the possession of an illegal NFA item. By being listed in the trust, these people are known to have the rights of possession after the grantors passing, thus cloaking them in a shield while the items are either disposed of by transfer out of the trust to another entity via ATF Form 4, or held for the benefit of the beneficiaries or transferred to a beneficiary therein.

It is now, and will continue to be the rule, that beneficiaries of the estate will enjoy tax-exempt status on NFA items. What does this mean? Instead of having to pay for a new tax stamp and endure the application process, the items will simply pass from the grantor to the beneficiary, as the trust corpus is still a living document.

What if the person who ultimately executes the estate is not in the trust (due to deaths of the trustees listed or their refusal or inability to serve)? This is where the ATF got it right . . . where a person in possession of an NFA item would normally be charged with constructive or actual possession, the estate is now protected so that the person not listed is not held liable for the possession of the NFA items. However, during the probate period, the executor must determine who will ultimately receive the item(s) in trust. If they will be going to a person listed as a beneficiary, then there is no issue provided the beneficiary can legally possess the item. If, however, the items will be leaving the estate, then an ATF Form 4 must accompany any transfer to a lawful transferee who has gone through the standard purchasing path for an NFA item.

 

SO WHENS IT ALL GOING TO HAPPEN?

The ATF published Rule 41F (changed from 41P) on 15 January 2016. This means that the new rule will likely go in to effect on 15 July 2016 (+/- a day for adding errors). Until then, all current NFA rules are in effect as they have been for years.

So what does that really mean? Go about your business as you would for now. If you’d like a trust, or decide a corporation/company would be best for you, contact our office at 813-498-5695 or email Chris Knight at cknight@alvarezlegal.com for further assistance. The Alvarez Legal Group is fully capable of assisting with estate tools like NFA Trusts as well as business law to help you set up your business entity, if you choose to follow that path.

For now, nothing changes, and anything accomplished within this interim period will fall under current laws and rules. If you choose to wait until after the 180th day after publication, we will still be here to assist you in your NFA needs and other legal assistance you may have for the myriad of services we offer to our clients.

It has been no secret that the Alvarez Legal Group abhors the NFA and the “need” for a trust, a business, or permission from the CLEO to obtain NFA items. If it were up to us, you’d never need any of that. Until that day comes, we are dedicated to making sure anyone who wishes to own an NFA item and meets the requirements to do so, can.

The best way to show the federal government that you don’t want these controls is to abide by them and flood them with applications. Utilizing a Right demonstrates that we, as citizens of the United States of America, protected by the Constitution, do in fact enjoy the freedoms afforded to us and we will not be hindered from enjoying those Rights by any attempt to overstep the Founders’ dream for us. Call your representatives and tell them how you feel. Show them that “. . . the right of the people, to keep and bear arms shall not be infringed” no matter what they try to do to stop you.

 God bless you, God bless Florida and may God bless the United States.

 [1] 26 U.S.C § 5845(j) – The term “transfer” and the various derivatives of such word, shall include selling, assigning, pledging, leasing, loaning, giving away, or otherwise disposing of. 

  

No Comments

Leave a Comment