I just got off the phone with one of the guys from the National Firearms Act Trade & Collector’s Association, who is a little concerned about all of the misinformation floating around the internet regarding the future of NFA trusts. This article in the New York Times makes it sound like the sky is falling for those who want to use a trust or corporation for NFA items. But the reality is that nothing is going to change right now . . .
As the law and practice currently stands, there are two ways to obtain NFA items (silencers, machine guns, etc). You can either apply as an individual (as I outlined here) or as a trust (as Jim nicely outlined here). The only difference between the two methods is that with the individual registration, you have to submit fingerprints, photos, get your chief law enforcement officer to sign off on your paperwork (to prove that you’re a good guy) and submit to a background check. With the trust, there’s nothing like that going on.
The reason that trusts skip the background check is that a trust is not a person. Well, it’s a person in a legal sense (hence why it can buy guns and silencers) but legal entities like trusts usually don’t have fingerprints and aren’t in the NICS system.
As the New York Times put it, this is a “loophole.” People buying machine guns without a background check? OMG! But as alarmist as the NYT is, and as much as they’d no doubt like trusts to go away altogether, the reality is that there’s no way that is happening.
Trusts are in the same category as corporations and LLCs. And those entities, like movie studios and private security firms, need to be able to purchase NFA items. So from a practical standpoint, there will always be a way to get a silencer or machine gun through a non-corporeal entity of some sort. The only thing that might change is the background check requirement.
According to the guys in the know, what’s on the table now is the idea of adding a “responsible party” to trusts. Just as an FFL/store owner needs to put their personal information down for the background check to get the license, the ATF might want you to list a “responsible person” on your NFA application to provide fingerprints and such. Whether they will require everyone on the trust to submit their information or certain trustees remains to be seen.
In fact, right now this isn’t even a proposed rule. The ATF has merely sent out feelers, indicating that it might look into this kind of change. There’s no fixed proposal, and certainly no set-in-stone ruling. And any such ruling would still be months away — plenty of time for us to agitate to get our voices heard.
In short, trusts are here to stay. What might be on the way out, however, is the CLEO sign-off requirement. Stay tuned.
I never for a second thought trusts were going away, nor did I hear anyone (not just anyone credible, but anyone) suggest that they were. The question has always seemed to be just how much fingerprinting would be required, and would they try to prohibit adding people to the trust after the fact without another background check.
Agreed. Trusts serve an entirely legitimate purpose for those of us who would like to have our spouses able to use our NFA items without legal issues. There’s no reason the ATF would want to get rid of them… and I am sympathetic to the idea that background checks are reasonable.
The trouble with trusts is almost every oneself- terminates after the beneficiaries achieve the age where the grant executes and the grantor(s) have all passed.
I would much rather put a collection in a LLC which is perpetual. Single member LLCs can be set up as pass-thru “disregarded entities” for tax purposes so you file their return as a Schedule C on your personal tax return. You govern the passing of control of the LLC through estate succession or it can pass to a trust. When your estate is settled, the beneficiaries may not want the responsibility of owning the LLC and the firearms so the LLC can be sold without changing the registration of the firearms. Just try that with a trust.
Realistically, a LLC can also have a larger number of responsible parties than a trust can have trustees. The small overhead of filing the boilerplate annual report in my state is trivial. You can do it from a browser and I think it costs $10.
Get rid of the cleo approval requirement and you solve a lot of problems.
Get rid of the NFA and you solve a lot of problems.
FTFY
In all seriousness they need to get their shit into this century. I’m 5 stamps deep as it is with a MG and another SBR in the works. I should be able to walk in and out with no more hassle or time than a 4473 takes.
Why should you have to fill out a 4473, for that matter?
Free people should be able to purchase small arms freely.
Take suppressors and SBRs out of the NFA and life would be simpler all around.
Agreed- that is a good first step.
If we are going to eliminate the CLEO requirement is there anyway to replace it with a CLEO prohibition? Meaning not only is it not required but restrict states and lower polities from establishing such a requirement?
Better yet, repeal the NFA and the GCA.
Sure, no problem…..tell me when we will have a pro-gun House and Senate at the Federal level. Otherwise, keep dreaming.
“…as much as they’d no doubt like trusts to go away altogether, the reality is that there’s no way that is happening.”
“The ATF has merely sent out feelers, indicating that it might look into this kind of change. ”
Ok, so trusts aren’t going away and the ATF is exploring possible ways of dealing with this so-called “loop-hole”. So what else could possibly go wrong? How about an outright ban on trusts acquiring these various “weapons of mass destruction” and their highly regulated accoutrements such as suppressors. Every time I hear somebody on either side of the gun issue say “don’t worry about it”, I’m reminded of the predictions before the election that there was no way Obama would come after our guns. I’m a gun guy that doesn’t think suppressors should be so regulated and when I read the accounts here about these trusts I thought this sounded like a huge “loop-hole” that was waiting for someone on the other side to realize “needed” closing. So don’t expect me to join the chorus of “Don’t Worry, Be Happy” when it comes to this issue.
Thanks for the good work on this website.
Can anyone tell me the potential problems with getting a NFA trust set up for a suppressor (I’m in Texas), and then changing addresses?
I’m an apartment dweller, and likely won’t stay in the same location for more than 2 years or so.
Interstate, you fill out a 5320.20 (pdf warning), and in box 5, you put Permanent Change of Address.
Intrastate, I don’t believe they care, but I’m researching to back that up.
Could be a minor issue if you changed address during the 6+ month waiting period. Other than that scenario you simply mail a change of address form to the ATF…assuming you remain in TX.
Nick,
Very nice article, although there is one misstatement. There are other ways to obtain and own NFA firearms, other than the individual and trust route. Specifically, 27 CFR 479.11 defines a “person” for purposes of owning NFA firearms as “A partnership, company, association, trust, estate, or corporation, as well as a natural person.” All of these entities can obtain and own NFA firearm and other than a “natural person,” none of these entities have criminal backgrounds, fingerprints or photos.
Also, one important issue that most overlook and no one reports on is the issue of constructive possession. Many do not realize that if an NFA firearm is owned by a “natural person,” only that person can be in possession of it. Hence, if a spouse knows where the key is kept or what the combination is for the safe where the NFA firearm is kept, that spouse is in constructive possession and could face a maximum of $250,000 in fines, 10 years in jail and forfeiture of the vehicle or entity that is housing the NFA firearm. With a trust or other entity, this can be remedied so that all household member, who are not prohibited, can be protected. For example, in the trust context, if the spouse was made a trustee, he/she could then be in legal possession of the NFA firearm and not subject to constructive possession.
Lastly, a properly prepared trust or other entity will deal with prohibited persons. For instance, in our trust, we have specific provisions informing the trustees of what constitutes a prohibited person and we automatically remove a trustee, if he/she becomes prohibited. Furthermore, all trustees sign a declaration page stating that they are not currently prohibited from possessing firearms and that they will not allow any person, whether a trust member or otherwise, to possess any of the trust firearms if they have reason to believe the person is prohibited.
http://lmgtfy.com/?q=changing+address+on+NFA+trust
Boggles me how people get all hyped up about something without first applying a little common sense and critical thinking. Like how some folks actually believed every AR would become NFA items.
If the CLEO will sign, what the hell do I need a trust for?
Three posts up, Joshua Prince sums up some of the more popular reasons, such as friends and family members and estate planning.
Yes, there are multiple reasons for utilizing a trust. Even absent needing to submit fingerprints, photos or a CLEO signature, the benefits are:
1. Multiple people able to possess, without violating the law;
2. Faster application times, because ATF doesn’t have to wait for FBI to get back to it with a results of the fingerprint check;
3. The trust is an estate planning device, so you wouldn’t list any of the assets held by the trust in any other estate planning device, such as your will; and
4. A trust, generally speaking, is a private entity that skips probate. So, unlike your will that must be filed with the court and becomes a public document, a trust skips probate and remains a private document where only the trustees and beneficiaries are aware of it.
With regard to your #2, with the 6+ month wait times we are experiencing now, and have been for quite a while, there is no effective difference in speed between trust and individual applications.
That’s because the FBI is not currently the bottleneck.
This hasn’t always been the case though, and if budget issues force the FBI to divert resources away from processing NFA-related work, or the increased ATF examiner staff works through the backlog, it is likely to become a concern again.
Right, and this is illustrated by the trend data at nfatracker.com
Trust applications to make or transfer NFA firearms are processed just a few days faster, and given the self-reported nature of data used to generate these charts, it is not clear that the difference is statistically significant.
Here is their proposed rule change http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201210&RIN=1140-AA43
This is much more destructive to trusts than you understand. “responsible person” will be any trustee so what they are now proposing is to “require each responsible person of a corporation, trust or legal entity to complete a specified form, and to submit photographs and fingerprints”. The last part is the most onerous of this proposed rule; “require that a copy of all applications to make or transfer a firearm be forwarded to the chief law enforcement officer (CLEO) of the locality in which the maker or transferee is located”…there is zero reason why this application should be sent to the CLEO in any locality. There is no protection on the local level from “databasing” and I fully expect anti-rights LE organizations (yes they definitely do exist) will use this information for “increased interest” on these individuals. Take it even further, state and federal LE could simply make a request of locals for this information at any time and thereby bypass current federal restrictions on databasing of firearm ownership.
Those that consistently tout these new rules as “great news” are doing all of us a disservice. They are more than willing to sacrifice more rights for the removal of the CLEO sign off, when they should be opposing the current rule proposal as unacceptable.
Remove the CLEO sign off, nothing else needs to be added. Play a negative game, subtraction of laws/rules only. No addition, no substitution.
Abstract: 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. 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; (3) require that a copy of all applications to make or transfer a firearm be forwarded to the chief law enforcement officer (CLEO) of the locality in which the maker or transferee is located; and (4) eliminate the requirement for a certification signed by the CLEO.
Yeah, your version doesn’t sound quite as peaches and cream a Nick’s. Very interested to see what happens here as I have three cans on the way to be added to a recently formed nfa trust.
I’m impressed that you think that the definition of responsible person has already been created. It has not in this context.
There is also no “negotiation” going on to obtain the removal of the CLEO signature requirement. The 4 items were submitted as an omnibus notice of intent to file an NPRM. 1, 2, 3, all or none of these items may or may not get to the NPRM point. 1, 2, 3, all or none may become law.
At this point, they are all very broad brush strokes. The actual DATE of the OMB publication is listed as 07/00/2013… it doesn’t even exist!
Before you jump to conclusions, you may want to see what the actual proposals are, as opposed to just the subject matter.
Trustee (or the holding of a Trusteeship) is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another.[1] Black’s Law Dictionary, Fifth Edition (1979), p. 1357, ISBN 0-8299-2041-2. Pretty sure that “responsible person” is going to be any trustee listed…plenty of precedence considering the definition of a trustee in most states…remember, least common denominator.
Their own abstract has these four points. NPRM or not, they have show exactly what they want to do. It is incumbent on us, the people, to insure that the only one that moves forward is #4. The rest of them need to strongly opposed for what they are, an attempt to “close the loophole” and make trust ownership a huge burden and thus reduce their use via attrition. The only proposal that should even be moving forward at all should be to remove the CLEO affirmation as a necessary function of the Form 1 and 4.
This is government, it is all negotiation all the time. Simple playbook, propose draconian measure with lots of stuff that can be given up in order to advance the true agenda and give cover to everyone involved “we tried our hardest and got a good compromise we can live with”.
And look, exactly as I said it yesterday, we already see the “bypass” going on http://www.thetruthaboutguns.com/2013/03/robert-farago/missouri-lt-gov-fights-dhs-gun-registration/
Better plan – fight within your state to force CLEOs to sign these forms when presented. Don’t let the federal government monkey with anything, especially not now when they are so hell bent on “fixing” our so called gun violence problem.
@Imortal Arms says:
“Take it even further, state and federal LE could simply make a request of locals for this information at any time and thereby bypass current federal restrictions on databasing of firearm ownership.”
Just what makes you think NFA firearms aren’t databased? They have been in one form or another since 1934. Look up NFRTR. Sheesh!
I know they are databased, and I also know just how hard it is to get info out of that database without warrant due to tax code issues. Now create a local database that has S/N and owner data in it. That is not protected under current tax code because the data was transmitted to local LE by the ATF for law enforcement information purposes. What stops other LE agencies from accessing that data, since it is not protected? What stops them from using that data to create yet another “registry” outside of the official “protected” one? Nothing at all, thus granting a backdoor to information in violation of 4th Amendment protections.
Some good news very welcomed N.L.!!!
Plenty of time to comment on proposes rules. Braawwaahhhhaaa. Like the ATF or any agency of the Fedzilla gives a crap about what we say.
You do have protection against databasing… In tax codes it prohibits any sort of disclosure of tax information to parties not involved, hence why your dealer must circle the “I do” authorize disclosure of the status…. Thing. Any such database would be an illegal act under tax regulations as well as GCA and other federal laws. Sure this doesn’t stop it from actually happening (still waiting for someone to challenge states which require special licensing, registration to be challenged in court on this issue) but does offer some protection for it ever happening. Also the NFA registry can only be used for taxation reasons and any other use of it (except in the case of criminal prosecution for illicit possession etc. Of NFA items, and even then its accuracy is highly inadequate for such in many cases) is against federal law. Thus the local creation of a NFA registry would be a violation of tax codes and other laws.
And trusts have been removed and are gone
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