Analyzing the Impact of Obama’s Proposed Changes to NFA Trusts

A few hours ago, President Obama announced proposals to change the way the ATF handles NFA trusts. While the news is still fresh, I wanted to take a moment to discuss NFA trusts and the impact the proposed changes would have on the process of obtaining NFA-regulated items . . .

The National Firearms Act identified a number of different configurations of firearms that are classified as “restricted.” That means that you can still own them, but you need to pay a tax and pass a more rigorous background check to do so. The list of items includes short barreled shotguns, short barreled rifles, silencers and machine guns.

In order to get your hands on these items, you need to send in either a “Form 4” to buy such an item or a “Form 1” to make one yourself. On the form you need to answer the same old questions as you get on the 4473 (the “over the counter” transfer form). But the requirements differ depending on how you want to transfer the gun.

For individuals, you need to submit a set of fingerprints along with two passport-sized photos so that the FBI can do a background check on you. In addition, your chief law enforcement officer (or “CLEO”) needs to sign the form indicating that you aren’t a bad guy. The issue here is that some CLEOs, like the former San Antonio sheriff, refused to sign off on any NFA paperwork. Any, no matter who you were. This was in effect a ban on NFA items for individuals in that area, no matter what the state law says.

The way around that blockade is the NFA trust. By registering your NFA item to a corporation or trust, there is no longer an actual individual to fingerprint or run a background check on. Therefore no fingerprints are required, no photos are required, and no CLEO sign-off. It’s a much simpler way of doing the paperwork.

We have been discussing the proposed rule changes for months now, with the NFATCA back in March telling TTAG (well, me) that the sky is not actually falling and that trusts are here to stay. And now, with the outline of the proposal out in the public, their reading of the tea leaves appears to be right on the money.

The proposed changes appear to require all individuals associated with a trust to submit fingerprints and photos with every new form to the ATF, which is what we have been expecting for months. Still unknown is the extent to which documentation is required. For example, I’d assume that as the trustee I would need to submit fingerprints. But I list my sister as the beneficiary should I kick the bucket. Does she need to be fingerprinted as well? Hopefully we’ll know more once the ATF releases the proposal for public review.

However, conspicuously absent from that proposal is any mention of the CLEO sign-off. Whether that means that trusts will still skirt the sign-off, or if the sign-off is going away for good for all transfers, is still to be seen. The ATF was discussing removing all CLEO sign-off requirements with the NFATCA earlier this year, so hopefully that will lead to some progress on that front. If the alternative happens — that CLEO sign-off is required on all NFA applications both trust and individual — that would be “game over” for NFA ownership. The powers that be would no longer need to legislate changes to the ATF’s rules, they could simply block any and all transfers at the local level.

Overall, while this change seems big from a political standpoint, the impact on gun owners should be minimal. Assuming that the CLEO sign-off stays off the plate for trusts, everything should be more or less business as usual. Some additional headaches will be involved for those who have enjoyed skipping the fingerprinting line at the local sheriff’s office, but in the grand scheme of things these changes will not have a major impact on the ability for the average citizen to purchase a silencer or chop down their barrel to a more manageable length.

[UPDATE] The ATF has just released their proposed rule changes, and would require every single person listed on a trust to individually submit a CLEO sign-off. This is far worse than anyone had expected, and has the potential to deny hundreds of thousands of people their right to own NFA firearms.

That being said, the entire NFA system is broken and bloated and needs some drastic reform if not complete dissolution. But if this is the worst that President Obama can muster against gun owners then I’m quietly optimistic that things might be about to turn the corner for gun rights on the national level.

comments

  1. avatar William Burke says:

    WHOA! First post I could connect to in two days! It’s MIRACULOUS!

    1. avatar Matt in FL says:

      You’ve got some catching up to do.

      1. avatar Mark N. says:

        Me too. It’s been TWO WHOLE DAYS!!!

    2. avatar keith edwards says:

      vote vote vote 2014 vote the anti gun congressmen and senators out vote .

  2. avatar Matt in FL says:

    Thanks for the writeup, Nick. “Cautiously optimistic” seems to be the most appropriate state of mind right now.

    1. avatar AK says:

      Cautiously optimistic about what? Making a broken system worse? Optimistic that they aren’t reaching further? If you give an inch at a time, eventually they have the whole mile.

      1. avatar Jason says:

        That the anti-gun tide has slowed…and will soon reverse.

  3. avatar Chris says:

    So I set the trust up, submit to my masters, get my stuff and then I can add people to the trust after?

    Praying the Montana Firearm Freedom Act goes to the Supreme Court, is upheld and Palmetto State Armory in SC can sell me suppressors to help protect my kids hearing.

    1. avatar B says:

      I wouldn’t count on the supreme court to be on our side, Cali already has district rulings that even if pot if grown legally for medicinal personal consumption it affects black market prices and therefore falls under interstate commerce. It actually overruled a previous decision in like 2002 that made in state machine gun legal. They don’t read the law, they twist and butcher it to say what the federal government needs it to say. Tax on not buying a service that can’t be bought across state lines? Done, constitutional. A limit to federal powers? Just a truism, the fed has all powers it hasn’t surrendered. The administration must have dirt on Roberts to get that ruling. The alternative to that is possibly more disturbing that the dirt required to blackmail a supreme court justice.

      1. avatar C says:

        “They don’t read the law, they twist and butcher it to say what the federal government needs it to say.”

        dead on.

    2. avatar Jason says:

      The supreme court’s main function is to give the appearance of independent overview. These were the same guys who said obamacare is okay, because it’s a tax.

  4. avatar Prebident B-dumb-da says:

    Look ma! No legislature!

    1. avatar In Memphis says:

      More like, “Look Ma, SHAL BE infringed!”

  5. avatar Geoff says:

    “the entire NFA system is broken and bloated and needs some drastic reform if not complete dissolution.”
    I agree. It’s stupid. Nobody uses a suppressor to go out and wreak havoc or mindless killing. Great for hunting, though. WHY can’t we have select fire modern firearms? Machines guns don’t get used for mass murder. Besides, the cost of a pre-1986 full auto firearm is through the roof. I would love to have a M-16 ever since having shot one in the Military back in the ’70s. But $15K to $20K for just a lower receiver? More for a complete rifle, north of $20K. OK, so a select fire AK goes for around $10K. I want to have the same stuff the Military has, and my Son got to use in Afghanistan.

    1. avatar Jeremy S. says:

      “Great for hunting, though.”

      Apparently that’s why suppressors are on the NFA in the first place, and why they’re illegal for hunting in many states that otherwise allow them. Poachers. They were popular among poachers & the gov’t wanted to crack down on it. Find a person in the forest with a silencer and the gov’t can assume that you’re poaching game — BUT… it could’t technically prove that and prosecute for it, so now you require their registration and the gov’t has something new to prosecute for (NFA violation).

      1. avatar Geoff says:

        North Carolina became the 40th State to legalize suppressors for hunting. Guess which 10 don’t.

        1. avatar JT says:

          I know Ohio doesn’t allow them for hunting.

      2. avatar andarm16 says:

        Exactly. The entire point of the NFA, according to former Attorney General Homer Cummings (one of the principals behind passing it) is to allow the federal government to charge people that they thought were criminals, but couldn’t find any other evidence of wrong doing.

        to quote Cummings:
        “Therefore when we capture one of these people, we have a
        plain question to propound to him – where is your license; where is your permit. If he cannot show it, we have got him and his weapons and we don’t have to go through an elaborate trial…” (National Firearms Act: Hearings before the Committe on Ways and Means of the House of Representatives. Washington, DC: United States Government Printing Office, 1934: 10)

  6. avatar Jeremy S. says:

    Before I got my stamp back, I didn’t realize that CLEO signature actually meant a physical signature from the chief law enforcement officer in your area (for me, it was my county sheriff) him/herself. Like, not from “the office of ___” or a secretary or a registered signature stamp or whatever. Actual pen on actual paper by THE person. From what my FFL told me, my county sheriff here actually signs a significant number of these every week. I think I can understand why a CLEO would refuse to do it, even if they aren’t specifically against NFA stuff at all but just don’t want to sign an additional X number of forms constantly. Luckily my sheriff actually believes in it so he takes the time to do it, but I think if you’re anywhere more wishy-washy on the NFA subject you wouldn’t be so enthused at the inconvenience.

    ALSO, I completely and totally agree it should go. It’s a relic from 1934 when the CLEO probably knew many of the people in the community. The form asks if they have any reason to suspect that the person is a danger or shouldn’t own an NFA item, or whatever. It’s asking, really, if they have personal knowledge or hesitations about the applicant. Okay… well… there are 500,000 people in this county and I’m afraid that the sheriff doesn’t know me from Adam (the original one).

  7. avatar Vendetta says:

    How are we cautiously optimistic when the other side of this 2 part series on ridiculous proposals is such a mess? Most gun owners dont care about/ cant afford nfa stuff. Where is the response on the ban of milsurps? I guess it doesnt matter since it isnt a suppressed 300 blackout plastic junk gun.

    1. avatar Jeremy S. says:

      I think the reason this post exists is because the impact of this proposal on NFA trusts is not clear. It’s a bit confusing and requires further explanation and digging. Some questions are still up in the air, such as the very important question of CLEO sign-off. Conversely, the impact of the proposal on milsurp items is pretty clear. No more importing guns that were originally exported from the U.S. to foreign countries. No additional post is needed to explain that. There are no apparent intricacies to it. There has already been a post talking about how it sucks.

    2. avatar CharlieKilo says:

      Really? You seem to know so much about NFA items…. A stamp is either $5 or $200, that isn’t much, considering just about every firearm exceeds the greater stamp value. Cans can be as cheap as a $75 adapter or a $125 suppressor. Getting a barrel trimmed is relatively cheap. All in all, the only item of significant cost are the automatic fun things. But honestly, if you can afford the ammo to feed one of those beasts, I’m sure you can afford the high sticker cost. In the end, a sizable amount of NFA items can be had, out the door, for $300-$500. That doesn’t seem prohibitively expensive to me….

      1. avatar Rob1285 says:

        The cost of the tax stamp isn’t what is upsetting about this. I agree that if you can afford a several hundred dollar short barrel (or the cost to get a barrel shortened properly), or a thousand dollar can, and the ammo to shoot enough for it to make sense to buy one, then a $200 (max) stamp isn’t cost prohibitive. But even if the stamp was only a symbolic $1.00, we are still having to pay the government in order to be allowed to exercise a Constitutionally protected right.

        While Eric Holder is all fine and dandy with Wash state and CO legalizing mary jane, he is going after states that are affirming Constitutionally protected rights. As much as I hate it when other people say this…it isn’t the dollar ammount, it is the principle of the matter.

    3. avatar Matt in FL says:

      “Where is the response on the ban of milsurps?”

      Hold that thought, and watch this space.

  8. avatar Soccerchainsaw says:

    “…shall not be infringed.” What more needs to be said?

    There’s a great article in the National Review that discusses what arms we as citizens should have access to. I was linked to it by the NRA ILA site, look for “Pride of ignorance on firearms”.

    1. avatar Jim Barrett says:

      “…shall not be infringed.” What more needs to be said?”

      Unfortunately, this is a tired argument that has as much value in today’s discussion as insisting the earth is flat. There is sufficient ambiguity in the 2A that it can be read in different ways. Current legal philosophy is predicated on the D.C. vs. Heller case where SCOTUS found that while “weapons in common use” can not be restricted, it also went out of its way to state that the right is not unlimited. You may not agree with it. You may not like it. Unfortunately though, barring a major opinion change in this country, it is not going to change. If you want to stay in society, you have to follow its rules. If you don’t like it, you can either go out into the wilderness where no one will likely bother you, or you can try to violently oppose it at which point you will be shot like a dog at a SWAT bust.

      1. avatar CharlieKilo says:

        You are under the presumption that only one, or a few, believe the 2A to be absolute and “shall not be infringed” actually means something. I’d argue that there are plenty that think this way, rather than your line of thinking, of acquiescing to whatever the ruling elite deem appropriate. In case you haven’t noticed, plenty seem to be vociferous on the subject.

        1. avatar Jim Barrett says:

          Yet never enough to actually get the laws changed. Most of those vociferous people would agree the whole NFA Morass is ridiculous, yet we’ve been stuck with it for nearly 80 years. Most would agree that the ban on many foreign rifles is stupid, but that’s been the law of the land for 45 years. Others would suggest the ban on post 1986 machine guns stupid, but we’ve had that law for nearly 30 years. I’ll give you that concealed carry is on the rise and victories have been won in Illinois, yet that was a victory through the courts, not through the actions of the vociferous electorate. I would offer the ludicrous laws passed in NY, CO, and some of the stuff going down on the East Coast and in California as examples of movement in the wrong direction.

          I’ve said it once and I’ll say it again. If we had a clear pro-gun majority, these laws would fall by the wayside. We don’t and the politicians know it. Without the threat of filibuster, Manchin-Toomey would have gone through the Senate, as the pro-gun forces could not muster up 51 Senators to oppose it. For the moment we have air cover in the House, but in 2014, that could change. If Obama were to get a couple more seats in the Senate and a majority in the House come the next election cycle, you just wait and see how bad things could get for pro-gun folks. Unless/until we can turn a majority of our fellow citizens to our side, our rights will be forever at risk.

  9. avatar Jim Barrett says:

    Nick, I’m going to have to go ahead and disagree with you. First of all, this is a big deal. The whole basis for corporations and trusts in law is that they are by themselves considered “persons” and able to enter into agreements as “persons.” The reason many new businesses form themselves into corporations is so that there is a level of legal protection. In the event of a business default, the owners are only on the hook up to the amount of their investment in the company. Creditors can’t come after stockholders for more than that (unless those stockholders agreed to stand as guarantors for a particular loan).

    By changing the rules to require a “responsible party” be fingerprinted, there are a couple of issues. First of all, should a trust or corporation owned weapon be misused, the responsible party can be held to account criminally and civilly. Right now, such a misuse would likely result charges for the trustee or corporate officer who committed the crime, not a designated “responsible party.” The would have a chilling effect on trusts in that if me and a few buddies wanted to create a gun trust to jointly own NFA weapons, whoever is required to sign as “responsible party” now has liability for whatever any of us do.
    Really bad plan.

    Secondly, one advantage of trust and/or corporation ownership is that I can amend the list list of trustees or authorized corporate officers any time without getting the ATFE’s permission. If they require finger prints and photos from an authorized party, then what is to stop them from requiring notification and fingerprints/photos from each new person who is added to the trust or corporation BEFORE that person is allowed to posses or use the NFA weapons? This might be barely tolerable if the ATF could turn forms around quickly, but with the current 8-12 month lead time, no way is this a good thing.

    The basic problem we all face of course is that Joe and Jane citizen don’t see the problem with the new restrictions. After all, technically there is nothing to stop someone who might otherwise not be allowed weapons from forming a trust and using it to procure something they should not have. I did have to fill out a 4473 when I picked up my suppressors, but the FFL did not have to call the 4473 in for approval before I walked out with my suppressors since the NFA process should already have pre-approved me. Even though it really didn’t – it approved a legal construct with no record to be checked. For this reason, they see no problem with requiring checks on the purchase or transfer of NFA devices.

    The real irony here is that the other alternative would be to abolish the NFA registry and have everything revert to 4473 checks. This would guarantee that transfers happened with background checks and would make a lot of people happy. If they wanted to, the ATF could still retain a registry and even charge a fee to handle the transfer – that way they could keep track of those evil NFA weapons. However, this way, we could eliminate a lot of the NFA processing as the transfer would simply be a bookkeeping entry in a database rather than having one of a limited number of people do a background check.

    The whole idea of the NFA is doubly stupid today when you consider that back in 1934, you could order any gun you wanted mail order and have it show up on your door. The NFA put in a control regime to prevent bad people from getting guns. In today’s world of mandatory background check on most sales, the NFA check is simply redundant and unnecessary.

    1. avatar Matt in FL says:

      Jim, you make several good points here, and I hope that you make them known to the ATF when the “public comment” period opens. Your words may seem no more impactful to them than a fart in a hurricane, but every little bit (theoretically) helps, and it’s better than not saying it at all.

    2. avatar Rob1285 says:

      Troofiness here. Normally I agree with most of Nick’s stuff, but not here. Saying “well, it could have been worse” with these newest EOs is like getting hit in the face with a baseball bat, then saying, well, I could have been hit twice so I guess its ok.

  10. avatar And1 says:

    We are losing this game of inches. Nick, optimism shows your lack of ability to see the bigger picture.

    1. avatar Soccerchainsaw says:

      +1

      The big picture is “we’re” still on the defensive, “they” should be the ones on the defensive.

      1. avatar Jim Barrett says:

        The only way to change this is to turn more of “them” into “us”. NSSF, NRA, SAF, all need to band together to work on making firearms more friendly. Maybe we need more competitions, more machine gun shoots, more “guns are fun” activities to lure more people into the fold and demystify those evil killing machines.

    2. avatar Not a Fudd says:

      The usual defeatist drivel from the usual Elmer Fudds.

  11. avatar Andy says:

    Well off the course of this article,but just to let ya’ll know that the Mississippi Supreme Court decided that the open carry law is Constitutional and is passed into law.We are glad to add our state to the rank of other states that have open carry.Be prepared and ready.Keep your powder dry.

  12. avatar JP in Tennessee says:

    My county sheriff told me he gets 150-175 Form 4s per week to sign and that he’s only ever refused to sign one, and that was for a guy he personally knew to be unstable.

  13. avatar Shawn says:

    Don’t forget that another reason people go the trust route is to be able to share items. My son and I build and share guns together, A trust is the only way to do that when you are talking sbr’s and suppressors.

  14. avatar Out_Fang_Thief says:

    Say it isn’t so Nick. Rolling over for he who wants to dictate what the law means?
    The incrementalism of statists like Obama is what has brought us to the brink as it is.
    The executive branch does not have the power to legislate law, or in this case, do an
    end-run around the Constitutions expressed limits and requirements for amending it.
    The reason we have our form of government is to prevent such discriminatory and
    capricious acts of lawlessness from the Executive branch, or either of the other two.
    Obama already believes he is the “unum” in e pluribus unum – out of many, “the one.”
    What are all the business-suited, Ivy Leagued lawyers going to say about all of this?
    Can Obama now rewrite any, or all trust law by executive fiat? You best think this over.
    Congress needs to rebuke the president in no uncertain terms, and remind him of the
    Constitutional function of the Legislative branch, AND the Executive branch as well.
    There are defined processes to changing the law or amending the Constitution, and
    issuing an Executive Order is not one of those ways. Constitutional scholar my ass!

    Think about this: If Obama wasn’t the president, he could not pass a Secret Service
    background check to attend any function held at the White House. Obama is the last
    person in this country to be offering edicts concerning who gets a background check.
    We are where we are, because the MSM didn’t do a background check on Obama.
    Now this man is telling everyone who will be required to have a background check?
    Plain and simple, this absolutely needs to end up in a court room. One more thing.

    Where the Hell was the NRA? Did they get caught with their holsters around their
    ankles, or what? What are they doing with all those millions of dollars of fees from
    new member registrations? Did they really think Obama was just going to sit back
    and do nothing after the Di-Fi “assault weapons” ban failed to pass Congress?
    Maybe it’s time for some leadership changes at the NRA.

    1. avatar JT says:

      “Where the Hell was the NRA? Did they get caught with their holsters around their
      ankles, or what?”

      On the blocking of Garand importation, I think everyone got blindsided by that. We can only hope the CMP is one of their unlisted “exceptions”. With the NFA stuff, supposedly the compromise will be that CLEO sign off is no longer needed. I haven’t seen a final version of the report to confirm it is there but I saw it in something the DoJ released a week or two ago.

      “What are they doing with all those millions of dollars of fees from
      new member registrations?”

      Membership fees don’t go towards Lobbying. The go towards things like education programs, publications, and NRA events as far as I am aware. Lobbying money comes from donations to the NRA-ILA.

      “Did they really think Obama was just going to sit back
      and do nothing after the Di-Fi “assault weapons” ban failed to pass Congress?”

      The got side tracked by Bloomberg who has been the loudest voice in the room opposing them since the AWB failed.

      “Maybe it’s time for some leadership changes at the NRA.”

      That has been needed for years. No argument there. They need to get rid of all the OFWGs.

  15. avatar Ben says:

    I agree that this piece is a little too optimistic. Although the details of the proposal aren’t known, if any new trustee/beneficiary/member/director is considered a “responsible person” and is required to submit photos/prints/background checks to the the ATF, this would severely impact the efficacy of trusts and other entities for NFA ownership. I’m confident that we gun lawyers can put in place language/procedures to streamline the process, but the NFA owners will ultimately pay a pretty steep price in compliance.

  16. avatar Rich says:

    So the people with unlimited firepower(sheriffs) can limit their employers firepower(citizens). Why that seem fair right? For the 2nd Amendment to mean what it was intended we need to redeem fully auto weapons just like police(civilians) and the infantry soldiers. All other talk is BS. May 19th of 1986 we lost them due to Regan excutive orders.

    1. avatar Jim Barrett says:

      Actually it was the Hughes amendment that slammed the door shut on post 1986 machine guns, not a Presidential EO.

  17. Here are some example letters you can send to the right folks

    http://blog.princelaw.com/2013/09/01/national-firearms-act-day-of-reckoning-information/

    Robert: I sent you this link earlier…i think if you review it, it should be worth a post, especially in preparation of the public comment period.

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