February 17, 2016
NFA Dealers: It’s time to get ready for 41-F!
If you are a dealer in National Firearms Act (NFA) firearms and accessories, you know that demand for those products, especially suppressors, is at an all-time high. You also know that ATF has revised NFA regulations in the recently published Rulemaking 41-F.
When the proposal was published in the Federal Register as Notice 41-P, ATF received more than 9,500 comments. Almost all opposed to the ruling. Why? The new proposed regulation would not only have imposed fingerprint, photograph and FBI background check requirements on persons associated with trusts, it would have also required the chief law enforcement officer (CLEO) where those associated with trusts and NFA transfers reside to “sign off” by certifying the NFA transfer documents. Now these are requirements that individual transferees of NFA products have followed for years, so it was the issue of those persons associated with trusts and NFA transfers that was central to the proposed rule 41-P.
Despite a considerable period of time analyzing the comments, the final rule (41-F) was published on January 4 and will become effective on July 13, 2016. The new rule also applies to ATF Forms 1, Application to Make and Register a Firearm. But the focus of this article is on the ATF Forms 4, Application for Tax Paid Transfer and Registration of a Firearm, that NFA dealers use in their retail operations.
Let’s look at the key provisions of the new revised regulations. They are as follows:
- Responsible Persons—In the case of trusts, as well as partnerships, associations and corporations that are not already FFLs, the regulations define “responsible persons” as those who possess the power to direct the policies and management of the trust or corporation with regards to the receipt, possession and disposition of NFA registered firearms.
- Under the revised regulations, each responsible person must complete ATF Form 5320.23, known as the National Firearms Act (NFA) Responsible Person Questionnaire, and two sets of fingerprint cards on FBI Form FD-258. Each responsible person must also provide a 2×2-inch passport photograph of themselves, that photograph being of a full front head portrait with head bare; that photo must have been taken within one year of the application being filed. Fingerprints, Form 5320.23 and the photograph will be filed with the copy of ATF Form 4 submitted by the transferor to ATF.
- CLEO Notification—In a key change from the proposed rule, the final revised regulations eliminated the CLEO certification requirement for all transferees. Now individual applicants will be required to notify the CLEO of the application by providing those CLEOs a copy of the ATF Form 4. Fingerprint cards and photos will not be submitted to the CLEO.
- In the cases of trusts, partnerships, associations and corporations, each responsible person will submit a copy of their ATF Form 5320.23 to the CLEO where they reside. In the case of partnerships, associations and corporations, the CLEO copy of Form 4 will be submitted to the CLEO located where the entity maintains its principal office or place of business as described on the form.
- In those cases where an FFL who has not qualified to engage in business under the NFA desires to obtain an NFA product for their own use, a Form 4 must be completed, but no Forms 5320.23 will be required. This is because the responsible persons for the FFL have already been the subject of an FBI fingerprint-based background check. The CLEO copy of the Form 4 will be submitted to the CLEO of that FFL’s residence at the time the application is filed.
It must be emphasized that trusts, partnerships, associations and corporations will continue to submit documentation proof of the existence and validity of the entity. All documents submitted with the Form 4 will need to be submitted in their entirety.
ATF Forms Being Revised
In addition to creating the new Form 5320.23, ATF is in the process of revising ATF Form 1, Form 4 and Form 5 to reflect the fact that the CLEO is now only being notified of the application being filed and is no longer required to certify or sign it. We believe that these forms, in draft, will be published in the Federal Register sometime in February or March of 2016. NSSF will post a link on its website to the Federal Register when the draft revised forms are published.
ATF will be accepting comments on the revised forms for 60 days after publication, and NSSF review the draft forms and offer comments, should they be a need to comment. NSSF recommends that dealers do so as well if they have any comments. Once the comment period expires, ATF will review the comments, revise the forms if needed and submit the revised final forms to the Office of Management and Budget (OMB) for approval. ATF hopes that the approved revised forms will be available to NFA dealers at least a month or more prior to the July 13 effective date. Once the new regulations are in effect, the old editions of Forms 1, 4 and 5 will be obsolete and cannot be used. Finally, in the event that the newly revised forms are available prior to July 13, dealers should not submit the revised form until July 13, 2016.
Applications Submitted Through July 12, 2016
Until the new regulations take effect, you may submit the current Form 4s for transferees using current procedures. Please note that ATF will use the postmark date of your submissions to determine when an application has been filed. If you have customers who cannot get their paperwork complete in time to file by July 13, they will have to file under the new procedures and with the new forms (when they become available).
Applications Submitted On and After July 13, 2016
ATF Form 5320.23 will be completed for all responsible persons where the transferee on Form 4 is not an individual. The one exception to this requirement extends to partnerships, associations or corporations that hold FFLs under the Gun Control Act and who wish to obtain an NFA firearm for their own use, but are not qualified by payment of Special Occupational Tax to deal in NFA firearms.
Beginning July 13, the CLEO of the applicant’s resident area will be notified of an application by either receiving a copy of the Form 4 in the case of either an individual transferee or an FFL transferee. In the case of trusts and corporations, the CLEO will be notified of an application by receiving a copy of Form 5320.23 from each responsible person listed on the trust.
Exception for Documentation on Repeat Registrations by Non-Individual Applicants
If an application for transfer on Form 4 for a non-individual applicant such as a trust or corporation is submitted to ATF within the 24 months following a previously approved transfer, and there have been no changes to the documentation provided in those applications, the entity will be able to certify to this on the subsequent Form 4 by identifying the previously approved application by form number, serial number and date approved. This exception does not apply to the submission of additional Forms 5320.23, fingerprint cards and photographs by responsible persons, as those items are and will be required from such persons on every NFA product transfer.
Returned Applications Filed Prior to July 13, 2016
If an application for NFA transfer that is submitted to ATF prior to July 13, 2016, cannot be approved and is returned to the transferor after July 13, 2016, the application will need to be resubmitted under the new procedures and with the new forms. Examples of this would include applications submitted without payment of tax, unsigned applications and applications submitted without trust or documents verifying partnership, LLC or corporate entity.
NFA Trust Transfers and ATF Form 4473
As all NFA dealers know, every NFA firearm or accessory is also regulated by the Gun Control Act, thus a Form 4473 must be completed for all transfers. Generally, background checks through the FBI or point of contact at the state level as part of the National Instant Criminal Background Check System (NICS) is required for all firearms transfers to non-FFL licensees. One exception to that requirement occurs when an NFA firearm is transferred. This is so because individual transferees undergo a fingerprint-based FBI background check every time they are a transferee on a Form 4.
While trusts are “persons” as defined under the NFA, they are not persons under the Gun Control Act. That is a key difference in the laws. ATF has opined that the person receiving a firearm on behalf of the trust must undergo a background check as part of the completion of the Form 4473. NSSF recommends to all dealers working with NFA transfers and trusts that a NICS check be performed. Still, it is important to understand that with the new regulations, the responsible persons of a trust or other non-individual transferees will be subjected to the same fingerprint-based background check that an individual transferee presently does. Therefore, while NSSF recommends a NICS check be performed, there will be no requirement to conduct one so long as a responsible person of the transferee (trust) receives the firearm.
The ATF NFA Branch intends to post questions and answers about rule 41-F on its website, www.atf.gov, in the near future. The NSSF website will post a link to those questions and answers as soon as they are available.