Rule2024-07838
Definition of “Engaged in the Business” as a Dealer in Firearms
Primary source
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Published
April 19, 2024
Effective
May 20, 2024
Issuing agencies
Justice DepartmentAlcohol, Tobacco, Firearms, and Explosives Bureau
Abstract
The Department of Justice ("Department") is amending Bureau of Alcohol, Tobacco, Firearms, and Explosives ("ATF") regulations to implement the provisions of the Bipartisan Safer Communities Act that broaden the definition of when a person is considered "engaged in the business" ("EIB") as a dealer in firearms other than a gunsmith or pawnbroker. This final rule incorporates the BSCA's definitions of "predominantly earn a profit" ("PEP") and "terrorism," and amends the regulatory definitions of "principal objective of livelihood and profit" and "engaged in the business" to ensure each conforms with the BSCA's statutory changes and can be relied upon by the public. The rule also clarifies what it means for a person to be "engaged in the business" of dealing in firearms and to have the intent to "predominantly earn a profit" from the sale or disposition of firearms. In addition, it clarifies the term "dealer" and defines the term "responsible person." These clarifications and definitions assist persons in understanding when they are required to have a license to deal in firearms. Consistent with the Gun Control Act ("GCA") and existing regulations, the rule also defines the term "personal collection" to clarify when persons are not "engaged in the business" because they make only occasional sales to enhance a personal collection or for a hobby, or if the firearms they sell are all or part of a personal collection. This rule further addresses the procedures that former licensees, and responsible persons acting on behalf of such licensees, must follow when they liquidate business inventory upon revocation or other termination of their license. Finally, the rule clarifies that a licensee transferring a firearm to another licensee must do so by following the verification and recordkeeping procedures in the regulations, rather than by using a Firearms Transaction Record, ATF Form 4473.
Full Text
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<title>Federal Register, Volume 89 Issue 77 (Friday, April 19, 2024)</title>
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[Federal Register Volume 89, Number 77 (Friday, April 19, 2024)]
[Rules and Regulations]
[Pages 28968-29093]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-07838]
[[Page 28967]]
Vol. 89
Friday,
No. 77
April 19, 2024
Part III
Department of Justice
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Bureau of Alcohol, Tobacco, Firearms, and Explosives
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27 CFR Part 478
Definition of ``Engaged in the Business'' as a Dealer in Firearms;
Final Rule
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules
and Regulations
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DEPARTMENT OF JUSTICE
Bureau of Alcohol, Tobacco, Firearms, and Explosives
27 CFR Part 478
[Docket No. ATF 2022R-17; AG Order No. 5920-2024]
RIN 1140-AA58
Definition of ``Engaged in the Business'' as a Dealer in Firearms
AGENCY: Bureau of Alcohol, Tobacco, Firearms, and Explosives,
Department of Justice.
ACTION: Final rule.
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SUMMARY: The Department of Justice (``Department'') is amending Bureau
of Alcohol, Tobacco, Firearms, and Explosives (``ATF'') regulations to
implement the provisions of the Bipartisan Safer Communities Act that
broaden the definition of when a person is considered ``engaged in the
business'' (``EIB'') as a dealer in firearms other than a gunsmith or
pawnbroker. This final rule incorporates the BSCA's definitions of
``predominantly earn a profit'' (``PEP'') and ``terrorism,'' and amends
the regulatory definitions of ``principal objective of livelihood and
profit'' and ``engaged in the business'' to ensure each conforms with
the BSCA's statutory changes and can be relied upon by the public. The
rule also clarifies what it means for a person to be ``engaged in the
business'' of dealing in firearms and to have the intent to
``predominantly earn a profit'' from the sale or disposition of
firearms. In addition, it clarifies the term ``dealer'' and defines the
term ``responsible person.'' These clarifications and definitions
assist persons in understanding when they are required to have a
license to deal in firearms. Consistent with the Gun Control Act
(``GCA'') and existing regulations, the rule also defines the term
``personal collection'' to clarify when persons are not ``engaged in
the business'' because they make only occasional sales to enhance a
personal collection or for a hobby, or if the firearms they sell are
all or part of a personal collection. This rule further addresses the
procedures that former licensees, and responsible persons acting on
behalf of such licensees, must follow when they liquidate business
inventory upon revocation or other termination of their license.
Finally, the rule clarifies that a licensee transferring a firearm to
another licensee must do so by following the verification and
recordkeeping procedures in the regulations, rather than by using a
Firearms Transaction Record, ATF Form 4473.
DATES: This rule is effective May 20, 2024.
FOR FURTHER INFORMATION CONTACT: Helen Koppe, Office of Regulatory
Affairs, Enforcement Programs and Services, Bureau of Alcohol, Tobacco,
Firearms, and Explosives, U.S. Department of Justice, 99 New York Ave.
NE, Washington DC 20226; telephone: (202) 648-7070 (this is not a toll-
free number).
SUPPLEMENTARY INFORMATION:
I. Executive Summary
II. Background
III. Notice of Proposed Rulemaking
IV. Analysis of Comments and Department Responses
V. Final Rule
VI. Statutory and Executive Order Review
I. Executive Summary
This rulemaking finalizes the proposed rule implementing the
provisions of the Bipartisan Safer Communities Act, Public Law 117-159,
sec. 12002, 136 Stat. 1313, 1324 (2022) (``BSCA''), that amended the
definition of ``engaged in the business'' in the GCA at 18 U.S.C.
921(a)(21)(C), as well as the Department's plan in response to
Executive Order 14092 of March 14, 2023 (Reducing Gun Violence and
Making Our Communities Safer), 88 FR 16527 (Mar. 17, 2023). Section
12002 of the BSCA broadened the definition of ``engaged in the
business'' under 18 U.S.C. 921(a)(21)(C) by eliminating the requirement
that a person's ``principal objective'' of purchasing and reselling
firearms must include both ``livelihood and profit'' and replacing it
with a requirement that the person must intend ``to predominantly earn
a profit.'' The BSCA therefore removed the requirement to consider
income for ``livelihood'' when determining that a person is ``engaged
in the business'' of dealing in firearms at wholesale or retail. The
definition of ``to predominantly earn a profit'' now focuses only on
whether the intent underlying the sale or disposition of firearms is
predominantly one of obtaining pecuniary gain. These regulations
implement this statutory change and provide clarity to persons who
remain unsure of whether they are engaged in the business as a dealer
in firearms with the predominant intent of obtaining pecuniary gain.
This rulemaking will result in more persons who are already engaged in
the business of dealing in firearms becoming licensed and deter others
from engaging in the business of dealing in firearms without a license.
As more persons become licensed under this rule, those licensees will
conduct more background checks to prevent prohibited persons from
purchasing or receiving firearms, consistent with the longstanding
requirements of the GCA for persons who are engaged in the business of
dealing in firearms. Those additional licensees will also respond to
trace requests when those firearms are later found at a crime scene. At
the same time, neither the BSCA nor this rule purports to require every
private sale of a firearm to be processed through a licensed dealer.
Individuals may continue to engage in intrastate private sales without
a license, provided that such individuals are not ``engaged in the
business'' and the transactions are otherwise compliant with law.
This final rule accomplishes these important public safety goals of
the GCA, as amended by the BSCA, in several ways. First, the rule
finalizes an amendment to the regulatory definition of ``dealer'' to
clarify that firearms dealing may occur wherever, or through whatever
medium, qualifying domestic or international activities are conducted.
Second, the rule finalizes an amendment to the regulatory
definition of ``engaged in the business'' to define the terms
``purchase'' and ``sale'' as they apply to dealers to include any
method of payment or medium of exchange for a firearm, including
services or illicit forms of payment (e.g., controlled substances). For
further clarity, this final rule defines the term ``resale'' to mean
``selling a firearm, including a stolen firearm, after it was
previously sold by the original manufacturer or any other person.''
This change aligns the regulatory text with the intent element in 18
U.S.C. 921(a)(21)(C) and makes clear that the term ``resale'' refers to
the sale of a firearm, including a stolen firearm, any time after any
prior sale has occurred.
Third, because performing services can also be a medium of exchange
for firearms, the rule finalizes an amendment to existing regulations
that codifies ATF's historical exclusion for auctioneers who provide
only auction services on commission to assist in liquidating firearms
at an ``estate-type'' auction.
Fourth, the rule clarifies who is required to be licensed as a
wholesale or retail firearms dealer by finalizing a list of specific
activities demonstrating when an unlicensed person's buying and
reselling of firearms presumptively rises to the level of being
``engaged in the business'' as a dealer. It also finalizes a separate
set of presumptions indicating when a person has the intent ``to
predominantly earn a profit''
[[Page 28969]]
through the repetitive purchase and resale of firearms. The activities
described in these presumptions are not an exclusive list of activities
that may indicate that someone is ``engaged in the business'' or
intends ``to predominantly earn a profit.'' These presumptions will
provide clarification and guidance to persons who are potentially
subject to the license requirement and will apply in administrative and
civil proceedings. The presumptions will be used, for example, to help
a fact finder determine in civil asset forfeiture proceedings whether
seized firearms should be forfeited to the Government and in
administrative licensing proceedings to determine whether to deny or
revoke a Federal firearms license. These presumptions do not apply in
any criminal proceedings but may be useful to judges in such
proceedings when, for example, they decide how to instruct juries
regarding permissible inferences.
At the same time, the final rule expressly recognizes that
individuals who purchase firearms for the enhancement of a personal
collection or a legitimate hobby are permitted by the GCA to
occasionally buy and sell firearms for those purposes, or occasionally
resell to a licensee or to a family member for lawful purposes, without
the need to obtain a license. It also makes clear that persons may
liquidate all or part of a personal collection, liquidate firearms that
are inherited, or liquidate pursuant to a court order, without the need
to obtain a license. Evidence of these activities may also be used to
rebut the presumptions discussed above in a civil or administrative
proceeding. Relatedly, the rule finalizes the proposed definition of
the term ``personal collection'' (or ``personal collection of
firearms'' or ``personal firearms collection'') to reflect common
definitions of the terms ``collection'' and ``hobby.'' While firearms
accumulated primarily for personal protection are not included in the
definition of ``personal collection,'' the final rule makes clear that
nothing in this rule shall be construed as precluding a person from
lawfully acquiring a firearm for self-protection or other lawful
personal use.
Finally, to help address the problem of licensees who improperly
liquidate their business inventory of firearms without performing
required background checks or maintaining required records after their
license is terminated (e.g., revocation, denial of renewal, expiration,
or voluntary surrender), the rule finalizes the proposed regulations on
discontinuing business. These regulations clarify the statutory
requirements under 18 U.S.C. 923(c) regarding ``former licensee
inventory''--a new term defined to mean those firearms that remain in
the possession of a former licensee (or a ``responsible person'' of the
former licensee, as also defined in the rule) at the time the license
is terminated. The rule also finalizes an amendment to the regulations
that makes clear that a licensee who transfers a firearm to another
licensee is required to do so by following the licensee verification
and recordkeeping procedures in the regulations, rather than by using a
Firearms Transaction Record, ATF Form 4473 (``Form 4473'').
II. Background
Subsections in Section II
A. Advance Notice of Proposed Rulemaking (1979)
B. Firearms Owners' Protection Act of 1986
C. Executive Action To Reduce Gun Violence (2016)
D. Bipartisan Safer Communities Act (2022)
E. Executive Order 14092 (2023)
The Attorney General is responsible for enforcing the GCA. This
responsibility includes the authority to promulgate regulations
necessary to enforce the provisions of the GCA. See 18 U.S.C. 926(a).
Congress and the Attorney General have delegated the responsibility for
administering and enforcing the GCA to the Director of ATF
(``Director''), subject to the direction of the Attorney General and
the Deputy Attorney General. See 28 U.S.C. 599A(b)(1), (c)(1); 28 CFR
0.130(a)(1)-(2); Treasury Department Order No. 221, sec. (1), (2)(d),
37 FR 11696, 11696-97 (June 10, 1972). Accordingly, the Department and
ATF have promulgated regulations necessary to implement the GCA. See 27
CFR part 478.
The GCA, at 18 U.S.C. 922(a)(1)(A), makes it unlawful for any
person, except a licensed dealer, to ``engage in the business'' of
dealing in firearms.\1\ The GCA further provides that no person shall
engage in the business of dealing in firearms until the person has
filed an application with ATF and received a license to do so. 18
U.S.C. 923(a). The required application must contain information
necessary to determine eligibility for licensing and must include a
photograph, fingerprints of the applicant, and a license fee for each
place in which the applicant is to do business. 18 U.S.C. 923(a). The
fee for dealers in firearms other than destructive devices is currently
set by the GCA at $200 for the first three-year period and $90 for a
renewal period of three years. 18 U.S.C. 923(a)(3)(B); 27 CFR
478.42(c)(2). Among other items, the Application for Federal Firearms
License, ATF Form 7 (5310.12)/7CR (5310.16) (``Form 7''), requires the
applicant to include a completed Federal Bureau of Investigation
(``FBI'') Form FD-258 (``Fingerprint Card'') and a photograph for all
responsible persons, including sole proprietors. See ATF Form 7,
Instruction 6.
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\1\ Persons who engage in the business of manufacturing or
importing firearms must also be licensed. 18 U.S.C. 922(a)(1)(A),
923(a). Once licensed, importers and manufacturers may also engage
in the business of dealing, but only at their licensed premises and
only in the same type of firearms their license authorizes them to
import or manufacture. See 27 CFR 478.41(b).
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Significantly, under the GCA since 1998, once licensed, firearms
dealers have been required to conduct background checks on prospective
firearm recipients through the FBI's National Instant Criminal
Background Check System (``NICS'') to prevent prohibited persons from
receiving firearms. See 18 U.S.C. 922(t). They have also been required
to maintain firearms transaction records for crime gun tracing
purposes. See 18 U.S.C. 922(b)(5); 923(g)(1)(A). Persons who willfully
engage in the business of dealing in firearms without a license are
subject to a term of imprisonment of up to five years, a fine of up to
$250,000, or both. 18 U.S.C. 922(a)(1)(A); 924(a)(1)(D); 3571(b)(3).
Any firearms involved or used in any such willful violation may be
subject to administrative or civil seizure and forfeiture. See 18
U.S.C. 924(d)(1). In addition, ATF may deny license applications
submitted by persons who have willfully engaged in the business of
dealing in firearms without a license, 18 U.S.C. 923(d)(1)(C), and ATF
may revoke or deny renewal of a license if a licensee has aided and
abetted others in willfully engaging in the business of dealing in
firearms without a license, 18 U.S.C. 923(e)-(f).
A. Advance Notice of Proposed Rulemaking (1979)
The term ``dealer'' is defined by the GCA, 18 U.S.C. 921(a)(11)(A),
and 27 CFR 478.11, and includes ``any person engaged in the business of
selling firearms at wholesale or retail.'' However, as originally
enacted, Congress did not define the term ``engaged in the business''
in the GCA.\2\ Nor did ATF define the term ``engaged in the business''
in the original GCA implementing regulations.\3\ ATF published an
Advance Notice of Proposed Rulemaking (``ANPRM'') in
[[Page 28970]]
the Federal Register in 1979 in an effort to ``develop a workable,
commonly understood definition of [`engaged in the business'].'' See 44
FR 75186, 75186-87 (Dec. 19, 1979) (``1979 ANPRM''); 45 FR 20930 (Mar.
31, 1980) (extending the comment period for 30 more days). The ANPRM
specifically referenced the lack of a common understanding of ``engaged
in the business'' by the courts and requested comments from the public
and industry on how the term should be defined and the feasibility and
desirability of defining it. 1979 ANPRM at 75186-87.
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\2\ See generally Public Law 90-618, 82 Stat. 1213 (1968).
\3\ 33 FR 18555 (Dec. 14, 1968).
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ATF received 844 comments in response, of which approximately 551,
or 65.3 percent, were in favor of ATF defining ``engaged in the
business.'' \4\ This included approximately 324 firearms dealers in
favor of defining the term. However, at the time, ATF believed that
none of the suggested definitions appeared ``to be broad enough to
cover all possible circumstances and still be narrow enough to be of
real benefit in any particular case.'' \5\ One possible definition ATF
considered would have established a threshold number of firearms sales
per year to serve as a baseline for when a person would qualify as a
dealer. The suggested threshold numbers ranged from ``more than one''
to ``more than 100'' per year. ATF did not adopt a numerical threshold
because it would have potentially interfered with tracing firearms by
persons who avoided obtaining a license (and therefore kept no records)
by selling firearms under the minimum threshold.\6\ Ultimately, ATF
decided not to proceed further with rulemaking at that time. Congress
also had not yet acted on then-proposed legislation--the McClure-
Volkmer bill (discussed below)--which, among other provisions, would
have defined ``engaged in the business.'' \7\ For additional reasons
why the Department has not adopted a minimum number of sales, see
Section III.D of this preamble.
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\4\ Memorandum for Assistant Director, Regulatory Enforcement,
ATF, from Chief, Regulations and Procedures Division, ATF, Re:
Evaluation of Comments Received Concerning a Definition of the
Phrase ``Engaged in the Business,'' Notice No. 331, at 1-2 (June 9,
1980); id. at attach. 1.
\5\ Id. at 2.
\6\ See id..
\7\ Id. at 4.
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B. Firearms Owners' Protection Act of 1986
Approximately six years later, the McClure-Volkmer bill was enacted
as part of the Firearms Owners' Protection Act (``FOPA''), Public Law
99-308, 100 Stat. 449 (1986). FOPA added a statutory definition of
``engaged in the business'' to the GCA. As applied to a person selling
firearms at wholesale or retail, it defined the term ``engaged in the
business'' in 18 U.S.C. 921(a)(21)(C) as ``a person who devotes time,
attention, and labor to dealing in firearms as a regular course of
trade or business with the principal objective of livelihood and profit
through the repetitive purchase and resale of firearms.'' \8\ The term
excluded ``a person who makes occasional sales, exchanges, or purchases
of firearms for the enhancement of a personal collection or for a
hobby, or who sells all or part of his personal collection of
firearms.'' \9\ FOPA further defined the term ``with the principal
objective of livelihood and profit'' to mean ``that the intent
underlying the sale or disposition of firearms is predominantly one of
obtaining livelihood and pecuniary gain, as opposed to other intents,
such as improving or liquidating a personal firearms collection.'' \10\
Congress amended FOPA's definition of ``with the principal objective of
livelihood and profit'' a few months later, clarifying that ``proof of
profit shall not be required as to a person who engages in the regular
and repetitive purchase and disposition of firearms for criminal
purposes or terrorism.'' \11\
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\8\ Public Law 99-308, sec. 101, 100 Stat. at 450.
\9\ Id.
\10\ Id.
\11\ Public Law 99-360, sec. 1(b), 100 Stat. 766, 766 (1986).
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The legislative history of FOPA reflects that the statutory
definitions' purposes were to clarify that individuals who make only
occasional firearms sales for a hobby to enhance their personal
collection are not required to obtain a license and to benefit law
enforcement ``by establishing clearer standards for investigative
officers and assisting in the prosecution of persons truly intending to
flout the law.'' \12\ The legislative history also reveals that
Congress did not intend to limit the licensing requirement only to
persons for whom selling or disposing of firearms is a principal source
of income or a principal business activity. The Committee Report stated
that ``this provision would not remove the necessity for licensing from
part-time businesses or individuals whose principal income comes from
sources other than firearms, but whose main objective with regard to
firearm transfers is profit, rather than hobby.'' \13\ Thus, for
example, ``[a] sporting goods or retail store which derived only a part
of its income from firearm sales, but handled such sales for the
`principal objective of livelihood and profit,' would still require a
license.'' \14\
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\12\ S. Rep. No. 98-583, at 8 (1984).
\13\ Id. The Committee Report further explained that a statutory
reference to pawnbrokers in the definition of ``engaged in the
business'' was deleted because ``all pawnbrokers whose business
includes the taking of any firearm as security for the repayment of
money would automatically be a `dealer.' '' Id. at 9.
\14\ Id. at 8.
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Two years after its enactment, FOPA's definition of ``engaged in
the business'' was incorporated into ATF's implementing regulations at
27 CFR 178.11 (now Sec. 478.11) in defining the term ``Dealer in
firearms other than a gunsmith or a pawnbroker.'' \15\ At the same
time, consistent with the statutory text and legislative history, ATF
amended the regulatory definition of ``dealer'' to clarify that the
term includes ``any person who engages in such business or occupation
on a part-time basis.'' \16\
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\15\ 27 CFR 178.11 (1988).
\16\ Id.
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With respect to ``personal collections,'' FOPA included a
provision, codified at 18 U.S.C. 923(c), that expressly authorized
licensees to maintain and dispose of private firearms collections
separately from their business operations. However, under FOPA, as
amended, the ``personal collection'' provision was and remains subject
to three limitations.
First, if a licensee records the disposition (i.e., transfer) of
any firearm from their business inventory into a personal collection,
that firearm legally remains part of the licensee's business inventory
until one year has elapsed after the transfer date. Should the licensee
wish to sell or otherwise dispose of any such ``personal'' firearm
during that one-year period, the licensee must re-transfer the
applicable firearm back into the business inventory.\17\ A subsequent
transfer from the business inventory would then be subject to the
recordkeeping and background check requirements of the GCA applicable
to all other firearms in the business inventory. See 27 CFR 478.125(e);
478.102(a).
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\17\ 27 CFR 478.125a(a); see also S. Rep. No. 98-583, at 13.
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Second, if a licensee acquires a firearm for, or disposes of any
firearm from, a personal collection for the purpose of willfully
evading the restrictions placed upon licensees under the GCA, that
firearm is deemed part of the business inventory. Thus, as explained in
FOPA's legislative history, ``circuitous transfers are not exempt from
otherwise applicable licensee requirements.'' \18\
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\18\ S. Rep. No. 98-583, at 13.
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[[Page 28971]]
Third, even when a licensee has made a bona fide transfer of a
firearm from their personal collection, section 923(c) requires the
licensee to record the description of the firearm in a bound volume
along with the name, place of residence, and date of birth of an
individual transferee, or if a corporation or other business entity,
the transferee's identity and principal and local places of
business.\19\ ATF incorporated these statutory provisions into its FOPA
implementing regulations in 1988.\20\
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\19\ See 18 U.S.C. 923(c).
\20\ See 53 FR 10480 (Mar. 31, 1988); 27 CFR 178.125a (1988)
(now Sec. 478.125a). The existing regulations, 27 CFR 478.125(e)
and 478.125a, which require dealers to record the purchase of all
firearms in their business bound books, record the transfer of
firearms to their personal collection, and demonstrate that personal
firearms obtained before licensing have been held at least one year
prior to their disposition as personal firearms, were upheld by the
Fourth Circuit in National Rifle Ass'n v. Brady, 914 F.2d 475, 482-
83 (4th Cir. 1990).
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As explained in the NPRM, courts interpreting the FOPA definition
of ``engaged in the business'' found a number of factors relevant to
assessing whether a person met that definition. 88 FR 61995. For
example, in one leading case, the U.S. Court of Appeals for the Third
Circuit listed the following nonexclusive factors for consideration to
determine whether the defendant's principal objective was livelihood
and profit (i.e., economic): (1) quantity and frequency of the sales;
(2) location of the sales; (3) conditions under which the sales
occurred; (4) defendant's behavior before, during, and after the sales;
(5) price charged for the weapons and the characteristics of the
firearms sold; and (6) intent of the seller at the time of the sales.
United States v. Tyson, 653 F.3d 192, 200-01 (3d Cir. 2011). In a
separate case, the Third Circuit stated, ``[a]lthough the definition
explicitly refers to economic interests as the principal purpose, and
repetitiveness as the modus operandi, it does not establish a specific
quantity or frequency requirement. In determining whether one is
engaged in the business of dealing in firearms, the finder of fact must
examine the intent of the actor and all circumstances surrounding the
acts alleged to constitute engaging in business. This inquiry is not
limited to the number of weapons sold or the timing of the sales.''
United States v. Palmieri, 21 F.3d 1265, 1268 (3d Cir.), vacated on
other grounds, 513 U.S. 957 (1994).\21\
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\21\ See also United States v. Brenner, 481 F. App'x 124, 127
(5th Cir. 2012) (``Needless to say, in determining the character and
intent of firearms transactions, the jury must examine all
circumstances surrounding the transaction, without the aid of a
`bright-line rule.''' (quoting Palmieri, 21 F.3d at 1269)); United
States v. Bailey, 123 F.3d 1381, 1392 (11th Cir. 1997) (``In
determining whether one is engaged in the business of dealing in
firearms, the finder of fact must examine the intent of the actor
and all circumstances surrounding the acts alleged to constitute
engaging in business.'' (quoting Palmieri, 21 F.3d at 1268)); United
States v. Nadirashvili, 655 F.3d 114, 119 (2d Cir. 2011) (``[T]he
government need not prove that dealing in firearms was the
defendant's primary business. Nor is there a `magic number' of sales
that need be specifically proven. Rather, the statute reaches those
who hold themselves out as a source of firearms. Consequently, the
government need only prove that the defendant has guns on hand or is
ready and able to procure them for the purpose of selling them from
[time] to time to such persons as might be accepted as customers.''
(quoting United States v. Carter, 801 F.2d 78, 81-82 (2d Cir.
1986))).
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C. Executive Action To Reduce Gun Violence (2016)
On January 4, 2016, President Obama announced several executive
actions to reduce gun violence and to make communities across the
United States safer. Those actions included two clarifications by ATF
of ``principles'' relating to licensees, consistent with relevant court
rulings: (1) that a person can be engaged in the business of dealing in
firearms regardless of the location in which firearm transactions are
conducted, and (2) that there is no specific threshold number of
firearms purchased or sold that triggers the licensure requirement.\22\
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\22\ See Press Release, The White House FACT SHEET: New
Executive Actions to Reduce Gun Violence and Make Our Communities
Safer (Jan. 4, 2016), <a href="https://obamawhitehouse.archives.gov/the-press-office/2016/01/04/fact-sheet-new-executive-actions-reduce-gun-violence-and-make-our">https://obamawhitehouse.archives.gov/the-press-office/2016/01/04/fact-sheet-new-executive-actions-reduce-gun-violence-and-make-our</a>.
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To provide this clarification, ATF published in 2016, and updated
in 2023, a guidance document entitled Do I Need a License to Buy and
Sell Firearms?, ATF Publication 5310.2.\23\ The guidance assists
unlicensed persons in understanding whether they will likely need to
obtain a license as a dealer in firearms. Since its original
publication in 2016, the guidance has explained that ``there is no
specific threshold number of firearms purchased or sold that triggers
the licensure requirement.'' \24\ ATF intends to further update the
guidance once it issues this final rule.
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\23\ See generally ATF, Do I Need a License to Buy and Sell
Firearms? (Jan. 2016), <a href="https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf">https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf</a>; ATF, Do I Need
a License to Buy and Sell Firearms? (Aug. 2023), <a href="https://www.atf.gov/file/100871/download">https://www.atf.gov/file/100871/download</a>.
\24\ ATF, Do I Need a License to Buy and Sell Firearms? 5 (Jan.
2016), <a href="https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf">https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf</a>.
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D. Bipartisan Safer Communities Act (2022)
Over 35 years after FOPA's enactment, and 29 years after passage of
the Brady Handgun Violence Protection Act of 1993 (Brady Act),\25\ on
June 25, 2022, President Biden signed into law the BSCA. Section 12002
of the BSCA broadened the definition of ``engaged in the business''
under 18 U.S.C. 921(a)(21)(C) by eliminating the requirement that a
person's ``principal objective'' of purchasing and reselling firearms
must include both ``livelihood and profit'' and replacing it with a
requirement that the person must deal in firearms ``to predominantly
earn a profit.'' The GCA now provides that, as applied to a wholesale
or retail dealer in firearms, the term ``engaged in the business''
means ``a person who devotes time, attention, and labor to dealing in
firearms as a regular course of trade or business to predominantly earn
a profit through the repetitive purchase and resale of firearms.''
However, the BSCA definition did not alter the longstanding FOPA
exclusions for ``a person who makes occasional sales, exchanges, or
purchases of firearms for the enhancement of a personal collection or
for a hobby, or who sells all or part of his personal collection of
firearms.'' 18 U.S.C. 921(a)(21)(C).
---------------------------------------------------------------------------
\25\ Public Law 103-159, 107 Stat. 1536 (1993). The Brady Act
created NICS, which became operational on November 30, 1998.
---------------------------------------------------------------------------
These BSCA amendments were enacted after tragic mass shootings at a
grocery store in Buffalo, New York; at an elementary school in Uvalde,
Texas; and between Midland and Odessa, Texas.\26\ In the third
incident, the perpetrator had previously been adjudicated by a court as
a mental defective and was prohibited from possessing firearms under 18
U.S.C. 922(g)(4).\27\ After being denied a firearm from a licensed
sporting goods store, he circumvented the NICS background check process
by purchasing the AR-15 variant rifle he used in the shooting from an
unlicensed individual without having to undergo a
[[Page 28972]]
background check.\28\ The private seller later pled guilty to dealing
in firearms without a license and to filing a false tax return due to
his failure to report that major source of income.\29\
---------------------------------------------------------------------------
\26\ Buffalo Supermarket Shooting Gunman Kills 10 at Buffalo
Supermarket in Racist Attack, N.Y. Times (May 14, 2022), <a href="https://www.nytimes.com/live/2022/05/14/nyregion/buffalo-shooting">https://www.nytimes.com/live/2022/05/14/nyregion/buffalo-shooting</a>; Mark
Osborne et al., At Least 19 Children, 2 Teachers Dead After Shooting
at Texas Elementary School, ABC News (May 25, 2022), <a href="https://abcnews.go.com/US/texas-elementary-school-reports-active-shooter-campus/story?id=84940951">https://abcnews.go.com/US/texas-elementary-school-reports-active-shooter-campus/story?id=84940951</a>; Acacia Coronado & Alex Samuels, Death Toll
in Midland-Odessa Mass Shooting Climbs to Eight, Including the
Shooter, Texas Tribune (Aug. 31, 2019), <a href="https://www.texastribune.org/2019/08/31/odessa-and-midland-shooting-30-victims-reports-say/">https://www.texastribune.org/2019/08/31/odessa-and-midland-shooting-30-victims-reports-say/</a>.
\27\ Press Release, DOJ, Man Who Sold Midland/Odessa Shooter AR-
15 Used in Massacre Sentenced for Unlicensed Firearms Dealing (Jan.
7, 2021), <a href="https://www.justice.gov/usao-ndtx/pr/man-who-sold-midlandodessa-shooter-ar-15-used-massacre-sentenced-unlicensed-firearms">https://www.justice.gov/usao-ndtx/pr/man-who-sold-midlandodessa-shooter-ar-15-used-massacre-sentenced-unlicensed-firearms</a>; Prison for Man Who Sold Texas Shooter Seth Ator AR-15 Used
in Midland-Odessa Massacre, CBS News (Jan. 7, 2021), <a href="https://www.cbsnews.com/texas/news/prison-for-man-sold-texas-shooter-seth-ator-ar-15-midland-odessa-massacre/">https://www.cbsnews.com/texas/news/prison-for-man-sold-texas-shooter-seth-ator-ar-15-midland-odessa-massacre/</a>.
\28\ Press Release, DOJ, Man Who Sold Midland/Odessa Shooter AR-
15 Used in Massacre Sentenced for Unlicensed Firearms Dealing (Jan.
7, 2021), <a href="https://www.justice.gov/usao-ndtx/pr/man-who-sold-midlandodessa-shooter-ar-15-used-massacre-sentenced-unlicensed-firearms">https://www.justice.gov/usao-ndtx/pr/man-who-sold-midlandodessa-shooter-ar-15-used-massacre-sentenced-unlicensed-firearms</a>.
\29\ Id.
---------------------------------------------------------------------------
According to the Congressional Research Service (``CRS''), the
BSCA's sponsors believed that ``there was confusion about the GCA's
definition of `engaged in the business,' as it pertained to individuals
who bought and resold firearms repetitively for profit, but possibly
not as the principal source of their livelihood.'' \30\ CRS has
explained that the sponsors ``maintain[ed] that [the BSCA's] changes
clarify who should be licensed, eliminating a `gray' area in the law,
ensuring that one aspect of firearms commerce is more adequately
regulated.'' \31\
---------------------------------------------------------------------------
\30\ William J. Krouse, Cong. Rsch. Serv., IF12197, Firearms
Dealers ``Engaged in the Business'' 2 (2022), <a href="https://crsreports.congress.gov/product/pdf/IF/IF12197">https://crsreports.congress.gov/product/pdf/IF/IF12197</a>.
\31\ Id.; see also 168 Cong. Rec. H5906 (daily ed. June 24,
2022) (statement of Rep. Jackson Lee) (``[O]ur bill would . . .
further strengthen the background check process by clarifying who is
engaged in the business of selling firearms and, as a result, is
required to run background checks.''); 168 Cong. Rec. S3055 (daily
ed. June 22, 2022) (statement of Sen. Murphy) (``We clarify in this
bill the definition of a federally licensed gun dealer to make sure
that everybody who should be licensed as a gun owner is. In one of
the mass shootings in Texas, the individual who carried out the
crime was mentally ill. He was a prohibited purchaser. He shouldn't
have been able to buy a gun. He was actually denied a sale when he
went to a bricks-and-mortar gun store, but he found a way around the
background check system because he went online and found a seller
there who would transfer a gun to him without a background check. It
turned out that seller was, in fact, engaged in the business, but
didn't believe the definition applied to him because the definition
is admittedly confusing. So we simplified that definition and hope
that will result--and I believe it will result--in more of these
frequent online gun sellers registering, as they should, as
federally licensed gun dealers which then requires them to perform
background checks.''); Letter for Director, ATF, et al., from Sens.
John Cornyn and Thom Tillis at 2-3 (Nov. 1, 2022) (``Cornyn/Tillis
Letter'') (``The BSCA provides more clarity to the industry for when
someone must obtain a federal firearms dealers license. In Midland
and Odessa, Texas, for example, the shooter--who at the time was
prohibited from possessing or owning a firearm under federal law--
purchased a firearm from an unlicensed firearms dealer.''); Comments
on the Rule from 17 U.S. Senators and 149 Representatives, p.4 (Nov.
30 and Dec. 1, 2023).
---------------------------------------------------------------------------
As now defined by the BSCA, the term ``to predominantly earn a
profit'' means that ``the intent underlying the sale or disposition of
firearms is predominantly one of obtaining pecuniary gain, as opposed
to other intents, such as improving or liquidating a personal firearms
collection.'' 18 U.S.C. 921(a)(22). The statutory definition further
provides that ``proof of profit shall not be required as to a person
who engages in the regular and repetitive purchase and disposition of
firearms for criminal purposes or terrorism.'' Id. In the BSCA,
Congress amended ``engaged in the business'' only with respect to
dealers in firearms; it did not amend the various definitions of
``engaged in the business'' in 18 U.S.C. 921(a)(21) with respect to
licensed gunsmiths, manufacturers, or importers.\32\
---------------------------------------------------------------------------
\32\ The BSCA retained the existing term ``with the principal
objective of livelihood and profit,'' which still applies to persons
engaged in the business as manufacturers, gunsmiths, and importers.
That definition became 18 U.S.C. 921(a)(23), and Congress renumbered
other definitions in section 921 accordingly.
---------------------------------------------------------------------------
E. Executive Order 14092 (2023)
On March 14, 2023, President Biden issued Executive Order 14092,
``Reducing Gun Violence and Making Our Communities Safer.'' That order
requires the Attorney General to submit a report to the President
describing actions taken to implement the BSCA and to ``develop and
implement a plan to: (i) clarify the definition of who is engaged in
the business of dealing in firearms, and thus required to become
Federal firearms licensees (FFLs), in order to increase compliance with
the Federal background check requirement for firearm sales, including
by considering a rulemaking, as appropriate and consistent with
applicable law; [and] (ii) prevent former FFLs whose licenses have been
revoked or surrendered from continuing to engage in the business of
dealing in firearms.'' \33\
---------------------------------------------------------------------------
\33\ Reducing Gun Violence and Making Our Communities Safer,
E.O. 14092, secs. 2, 3(a)(i)-(ii), 88 FR 16527, 16527-28 (Mar. 14,
2023).
---------------------------------------------------------------------------
III. Notice of Proposed Rulemaking
Subsections in Section III
A. Definition of ``Dealer''
B. Definition of ``Engaged in the Business''--``Purchase'' and
``Sale''
C. Definition of ``Engaged in the Business'' as Applied to
Auctioneers
D. Presumptions That a Person is ``Engaged in the Business''
E. Definition of ``Personal Collection,'' ``Personal Collection
of Firearms,'' and ``Personal Firearms Collection''
F. Definition of ``Responsible Person''
G. Definition of ``Predominantly Earn a Profit''
H. Disposition of Business Inventory After Termination of
License
I. Transfer of Firearms Between FFLs and Form 4473
On September 8, 2023, the Department published in the Federal
Register a notice of proposed rulemaking (``NPRM'') entitled
``Definition of `Engaged in the Business' as a Dealer in Firearms,'' 88
FR 61993, proposing changes to various regulations in 27 CFR part 478.
The comment period for the proposed rule concluded on December 7, 2023.
To implement the new statutory language in the BSCA, the NPRM
proposed to amend paragraph (c) of the regulatory definition of
``engaged in the business,'' 27 CFR 478.11 (now paragraph (3) of Sec.
478.11 and cross-referenced definition in Sec. 478.13), pertaining to
a ``dealer in firearms other than a gunsmith or pawnbroker,'' to
conform with 18 U.S.C. 921(a)(21)(C) by removing the phrase ``with the
principal objective of livelihood and profit'' and replacing it with
the phrase ``to predominantly earn a profit.'' The rule also proposed
to amend Sec. 478.11 to conform with new 18 U.S.C. 921(a)(22) by
adding the statutory definition of ``predominantly earn a profit'' as a
new regulatory definition. Additionally, the rule proposed to move the
regulatory definition of ``terrorism,'' which currently exists in the
regulations under the definition of ``principal objective of livelihood
and profit,'' to a new location. This is because the statutory
definitions of ``to predominantly earn a profit'' (18 U.S.C.
921(a)(22)) and ``with the principal objective of livelihood and
profit'' (18 U.S.C. 921(a)(23)) both provide that ``proof of profit
shall not be required as to a person who engages in the regular and
repetitive purchase and disposition of firearms for criminal purposes
or terrorism'' and include identical definitions of ``terrorism.''
To further implement the BSCA's changes to the GCA, the rule
proposed to clarify when a person is ``engaged in the business'' as a
dealer in firearms at wholesale or retail by: (a) clarifying the
definition of ``dealer''; (b) defining the terms ``purchase'' and
``sale'' as they apply to dealers; (c) clarifying when a person would
not be engaged in the business of dealing in firearms as an auctioneer;
(d) clarifying when a person is purchasing firearms for, and selling
firearms from, a personal collection; (e) setting forth conduct that is
presumed to constitute ``engaging in the business'' of dealing in
firearms and presumed to demonstrate the intent to ``predominantly earn
a profit'' from the sale or disposition of firearms, absent reliable
evidence to the contrary; (f) adding a single definition for the terms
``personal collection,'' ``personal firearms collection,'' and
``personal collection of firearms''; (g) adding a definition for the
term ``responsible person''; (h) clarifying that the intent to
[[Page 28973]]
``predominantly earn a profit'' does not require the person to have
received pecuniary gain, and that intent does not have to be shown when
a person purchases or sells a firearm for criminal or terrorism
purposes; (i) addressing how former licensees, and responsible persons
acting on behalf of former licensees, must lawfully liquidate business
inventory upon revocation or other termination of their license; and
(j) clarifying that licensees must follow the verification and
recordkeeping procedures in 27 CFR 478.94 and subpart H of 27 CFR part
478, rather than using a Form 4473 when firearms are transferred to
other licensees, including transfers by a licensed sole proprietor to
that person's personal collection.
A. Definition of ``Dealer''
The NPRM noted that, in enacting the BSCA, Congress expanded the
definition of ``engaged in the business'' ``as applied to a dealer in
firearms,'' as noted above. 18 U.S.C. 921(a)(21)(C). Consistent with
the text and purpose of the GCA, ATF regulations have long defined the
term ``dealer'' to include persons engaged in the business of selling
firearms at wholesale or retail, or as a gunsmith or pawnbroker, on a
part-time basis. 27 CFR 478.11 (definition of ``dealer''). The NPRM
explained that, due to the BSCA amendments, as well as continual
confusion and non-compliance before and after the BSCA was passed, the
Department has further considered what it means to be a ``dealer''
engaged in the firearms business in light of new technologies, mediums
of exchange, and forums in which firearms are bought and sold with the
predominant intent of obtaining pecuniary gain.
The NPRM further stated that, since 1968, advancements in
manufacturing (e.g., 3D printing) and distribution technology (e.g.,
internet sales) and changes in the marketplace for firearms and related
products (e.g., large-scale gun shows) have changed the various ways
individuals shop for firearms, and therefore have created a need for
further clarity in the regulatory definition of ``dealer.'' \34\ The
proliferation of new communications technologies and e-commerce has
made it simple for persons intending to make a profit to advertise and
sell firearms to a large potential market at minimal cost and with
minimal effort, using a variety of means, and often as a part-time
activity. The proliferation of sales at larger-scale gun shows, flea
markets, similar events, and online has also altered the marketplace
since the GCA was enacted in 1968.
---------------------------------------------------------------------------
\34\ See Cornyn/Tillis Letter at 3 (``Our legislation aims at
preventing someone who is disqualified from owning or possessing a
firearm from shopping around for an unlicensed firearm dealer.'').
---------------------------------------------------------------------------
Therefore, in light of the BSCA's changes to the GCA and to provide
additional guidance on what it means to be engaged in the business as a
``dealer'' within the diverse modern marketplace for firearms, the NPRM
proposed to amend the regulatory definition of ``dealer'' in 27 CFR
478.11 to clarify that firearms dealing may occur wherever, or through
whatever medium, qualifying activities are conducted. This includes at
any domestic or international public or private marketplace or
premises. The proposed definition would provide nonexclusive examples
of such existing marketplaces: a gun show \35\ or event,\36\ flea
market,\37\ auction house,\38\ or gun range or club; at one's home; by
mail order; \39\ over the internet; \40\ through the use of other
electronic means (e.g., an online broker,\41\ online auction,\42\ text
messaging service,\43\ social media
[[Page 28974]]
raffle,\44\ or website \45\); or at any other domestic or international
public or private marketplace or premises. Many of these examples were
referenced by courts, even before the BSCA expansion, as well as in ATF
regulatory materials and common, publicly available sources. These
examples in the NPRM were designed to clarify that firearms dealing
requires a license in whatever place or through whatever medium the
firearms are purchased and sold, including the internet and locations
other than a traditional brick and mortar store.\46\ However,
regardless of the medium through or location at which a dealer buys and
sells firearms, to obtain a license under the GCA, the dealer must
still have a fixed premises in a State from which to conduct business
subject to the license and comply with all applicable State and local
laws regarding the conduct of such business.\47\ 18 U.S.C. 922(b)(2);
923(d)(1)(E)-(F).
---------------------------------------------------------------------------
\35\ See ATF, FFL Newsletter: Federal Firearms Licensee
Information Service 9 (July 2017), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-newsletter-july-2017/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-newsletter-july-2017/download</a> (gun
show guidelines); ATF, Important Notice to Dealers and Other
Participants at This Gun Show, ATF Information 5300.23A 1 (Sept.
2021) <a href="https://www.atf.gov/firearms/docs/guide/important-notice-dealers-and-other-participants-gun-shows-atf-i-530023a/download">https://www.atf.gov/firearms/docs/guide/important-notice-dealers-and-other-participants-gun-shows-atf-i-530023a/download</a>
(licensees may only sell firearms at qualifying gun shows within the
State in which their licensed business premises is located); Rev.
Rul. 69-59 (IRS RRU), 1969-1 C.B. 360, 1969 WL 18703 (``[A] licensee
may not sell firearms or ammunition at a gun show held on premises
other than those covered by his license. He may, however, have a
booth or table at such a gun show at which he displays his wares and
takes orders for them, provided that the sale and delivery of the
firearms or ammunition are to be lawfully effected from his licensed
business premises only and his records properly reflect such
transactions.'').
\36\ See, e.g., ATF, How May a Licensee Participate in the
Raffling of Firearms by an Unlicensed Organization?, <a href="https://www.atf.gov/firearms/qa/how-may-licensee-participate-raffling-firearms-unlicensed-organization">https://www.atf.gov/firearms/qa/how-may-licensee-participate-raffling-firearms-unlicensed-organization</a> (last reviewed May 22, 2020); ATF,
FFL Newsletter: Federal Firearms Licensee Information Service 8-9
(June 2021), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensee-ffl-newsletter-june-2021/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensee-ffl-newsletter-june-2021/download</a> (addressing
conduct of business at firearm raffles); Letter for Pheasants
Forever, from Acting Chief, Firearms Programs Division, ATF at 1-2
(July 9, 1999) (addressing nonprofit fundraising banquets); ATF, FFL
Newsletter 4-5 (Feb. 1999), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-february-1999/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-february-1999/download</a> (addressing dinner banquets).
\37\ See ATF, FFL Newsletter: Federal Firearms Licensee
Information Service 5-6 (June 2010), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-june-2010">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-june-2010</a>
(flea market guidelines); see also United States v. Allman, 119 F.
App'x. 751, 754 (6th Cir. 2005) (``Illegal gun transactions at flea
markets are not atypical.''); United States v. Orum, 106 F. App'x
972 (6th Cir. 2004) (defendant illegally displayed and sold firearms
at flea markets and gun shows).
\38\ See Selling Firearms--Legally: A Q&A with the ATF,
Auctioneer, June 2010, at 22-27.
\39\ See, e.g., United States v. Buss, 461 F. Supp. 1016 (W.D.
Pa. 1978) (upholding jury verdict that defendant engaged in the
business of dealing in firearms without a license through mail order
sales).
\40\ See ATF, FFL Newsletter: Federal Firearms Licensee
Information Service 8 (June 2021), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensee-ffl-newsletter-june-2021/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensee-ffl-newsletter-june-2021/download</a> (addressing internet sales of firearms); ATF Intelligence
Assessment, Firearms and internet Transactions (Feb. 9, 2016);
Mayors Against Illegal Guns, Felon Seeks Firearm, No Strings
Attached: How Dangerous People Evade Background Checks and Buy
Illegal Guns Online 14 (Sept. 2013), <a href="https://www.nyc.gov/html/om/pdf/2013/felon_seeks_firearm.pdf">https://www.nyc.gov/html/om/pdf/2013/felon_seeks_firearm.pdf</a>; Mayor Michael Bloomberg, City of
New York, Point, Click, Fire: An Investigation of Illegal Online Gun
Sales 2 (Dec. 2011); United States v. Focia, 869 F.3d 1269, 1274
(11th Cir. 2017) (affirming defendant's conviction for engaging in
the business without a license by dealing firearms through the
``Dark Web'').
\41\ A broker who actually purchases the firearms from the
manufacturer, importer, or distributor, accepts payment for the
firearms from the buyer, and has them shipped to the buyer from a
licensee, must be licensed as a dealer because they are repetitively
purchasing and reselling their firearms to predominantly earn a
profit. Although individual dealers may sell firearms through online
services sometimes called ``brokers,'' like a magazine or catalog
company that only advertises firearms listed by known sellers and
processes orders for them for direct shipment from the distributor
to their buyers, these ``brokers'' are not themselves considered
``dealers.'' This is because these online ``brokers'' do not
purchase the firearms for consideration, but only collect a
commission or fee for providing contracted services to market and
process the transaction for the seller. See ATF, FFL Newsletter:
Federal Firearms Licensee Information Service 3 (Sept. 2016),
<a href="https://www.atf.gov/firearms/docs/newsletter/ffl-newsletter-september-2016/download">https://www.atf.gov/firearms/docs/newsletter/ffl-newsletter-september-2016/download</a>; ATF, 2 FFL Newsletter: Federal Firearms
Licensee Information Service 6-7 (Mar. 2013), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-march-2013-volume-2/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-march-2013-volume-2/download</a>; see also Fulkerson v. Lynch, 261 F.
Supp. 3d 779, 783-86, 788-89 (W.D. Ky. 2017) (denying summary
judgment to applicant whose license was denied by ATF for previously
willfully engaging in the business of dealing without a license as
an online broker and granting summary judgement to the Government).
\42\ See, e.g., Press Release, DOJ, Minnesota Man Indicted for
Dealing Firearms Without a License (Feb. 18, 2016), <a href="https://www.justice.gov/opa/pr/minnesota-man-indicted-dealing-firearms-without-license">https://www.justice.gov/opa/pr/minnesota-man-indicted-dealing-firearms-without-license</a> (defendant dealt in firearms through websites such
as <a href="http://GunBroker.com">GunBroker.com</a>, an online auction website).
\43\ See, e.g., Press Release, DOJ, Odenton, Maryland Man Exiled
to 8 Years in Prison for Firearms Trafficking Conspiracy (Apr. 27,
2017), <a href="https://www.justice.gov/usao-md/pr/odenton-maryland-man-exiled-8-years-prison-firearms-trafficking-conspiracy">https://www.justice.gov/usao-md/pr/odenton-maryland-man-exiled-8-years-prison-firearms-trafficking-conspiracy</a> (defendant
texted photos of firearms for sale to his customer and discussed
prices).
\44\ See ATF, FFL Newsletter: Federal Firearms Licensee
Information Service 9 (June 2021), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensee-ffl-newsletter-june-2021/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensee-ffl-newsletter-june-2021/download</a> (``Social media gun raffles are gaining popularity on the
internet. In most instances, the sponsor of the event is not a
Federal firearms licensee, but will enlist the aid of a licensee to
facilitate the transfer of the firearm to the raffle winner. Often,
the sponsoring organization arranges to have the firearm shipped
from a distributor to a licensed third party and never takes
physical possession of the firearm. If the organization's practice
of raffling firearms rises to the level of being engaged in the
business of dealing in firearms, the organization must obtain a
Federal firearms license.'').
\45\ See, e.g., Press Release, DOJ, Snapchat Gun Dealer
Convicted of Unlawfully Manufacturing and Selling Firearms (Oct. 4,
2022), <a href="https://www.justice.gov/usao-edca/pr/snapchat-gun-dealer-convicted-unlawfully-manufacturing-and-selling-firearms">https://www.justice.gov/usao-edca/pr/snapchat-gun-dealer-convicted-unlawfully-manufacturing-and-selling-firearms</a>; Press
Release, DOJ, Sebring Resident Sentenced to Prison for Unlawfully
Dealing Firearms on Facebook (Nov. 7, 2016), <a href="https://www.justice.gov/usao-sdfl/pr/sebring-resident-sentenced-prison-unlawfully-dealing-firearms-facebook">https://www.justice.gov/usao-sdfl/pr/sebring-resident-sentenced-prison-unlawfully-dealing-firearms-facebook</a>.
\46\ See Letter for Outside Counsel to National Association of
Arms Shows, from Chief, Firearms and Explosives Division, ATF, Re:
Request for Advisory Opinion on Licensing for Certain Gun Show
Sellers at 1 (Feb. 17, 2017) (``Anyone who is engaged in the
business of buying and selling firearms, regardless of the
location(s) at which those transactions occur is required to have a
Federal firearms license. ATF will issue a license to persons who
intend to conduct their business primarily at gun shows, over the
internet, or by mail order, so long as they otherwise meet the
eligibility criteria established by law. This includes the
requirement that they maintain a business premises at which ATF can
inspect their records and inventory, and that otherwise complies
with local zoning restrictions.''); Letter for Dan Coats, U.S.
Senator, from Deputy Director, ATF, at 1-2 (Aug. 22, 1990) (an FFL
cannot be issued at a table or booth at a temporary flea market);
ATF Internal Memorandum #23264 (June 15, 1983) (same).
\47\ See Abramski v. United States, 573 U.S. 169, 172 (2014)
(``The statute establishes a detailed scheme to enable the dealer to
verify, at the point of sale, whether a potential buyer may lawfully
own a gun. Section 922(c) brings the would-be purchaser onto the
dealer's `business premises' by prohibiting, except in limited
circumstances, the sale of a firearm `to a person who does not
appear in person' at that location.''); National Rifle Ass'n, 914 F.
2d at 480 (explaining that FOPA did not eliminate the requirement
that a licensee have a business premises from which to conduct
business ``which exists so that regulatory authorities will know
where the inventory and records of a licensee can be found'');
Meester v. Bowers, No. 12CV86, 2013 WL 3872946 (D. Neb. July 25,
2013) (upholding ATF's denial of license in part because the
applicant failed to ``have `premises from which he conducts business
subject to license,''' in violation of 18 U.S.C. 923(d)(1)(E)).
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The NPRM explained that, even though an applicant must have a
business premises in a particular State to obtain a license, under the
GCA, firearms purchases or sales requiring a license in the United
States may involve conduct outside of the United States. Specifically,
18 U.S.C. 922(a)(1)(A) has long prohibited any person without a license
from shipping, transporting, or receiving any firearm in foreign
commerce while in the course of being engaged in the business of
dealing in firearms,\48\ and 18 U.S.C. 924(n) prohibits travelling from
a foreign country to a State in furtherance of conduct that constitutes
a violation of section 922(a)(1)(A).
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\48\ See, e.g., United States v. Baptiste, 607 F. App'x 950, 953
(11th Cir. 2015) (upholding section 922(a)(1) conviction where
firearms purchased in the United States were to be resold in Haiti);
United States v. Murphy, 852 F.2d 1, 7-8 (1st Cir. 1988) (same with
firearms to be resold in Ireland); United States v. Hernandez, 662
F.2d 289, 291 (5th Cir. 1981) (same with firearms to be resold in
Mexico). But see United States v. Mowad, 641 F.2d 1067 (2d Cir.
1981) (reversing conviction for purchasing firearms for resale in
Lebanon on the basis that there was no mention of exporting firearms
in the GCA or any suggestion of congressional concern about firearm
violence in other countries).
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The NPRM further noted that, as recently amended by the BSCA, the
GCA now expressly prohibits a person from smuggling or knowingly taking
a firearm out of the United States with intent to engage in conduct
that would constitute a felony for which the person may be prosecuted
in a court in the United States if the conduct had occurred within the
United States. 18 U.S.C. 924(k)(2). Willfully engaging in the business
of dealing in firearms without a license is an offense punishable by
more than one year in prison, see 18 U.S.C. 924(a)(1)(D), and
constitutes a felony. Therefore, unlicensed persons who purchase
firearms in the United States and smuggle or take them out of the
United States (or conspire or attempt to do so) for resale in another
country are now engaging in conduct that is unlawful under the GCA.
Consistent with the BSCA's new prohibition, 18 U.S.C. 924(k)(2), and
the longstanding prohibition on ``ship[ping], transport[ing], or
receiv[ing] any firearm in interstate or foreign commerce'' without a
license, 18 U.S.C. 922(a)(1)(A), the rule proposed to clarify in the
definition of ``dealer'' that purchases or sales of firearms as a
wholesale or retail dealer may occur either domestically or
internationally.
B. Definition of Engaged in the Business--``Purchase'' and ``Sale''
To further clarify the regulatory definition of a dealer ``engaged
in the business'' with the predominant intent of earning a profit
through the repetitive purchase and resale of firearms in 27 CFR
478.11, the NPRM also proposed to define, based on common dictionary
definitions and relevant case law, the terms ``purchase'' and ``sale''
(and derivative terms thereof, such as ``purchases,'' ``purchasing,''
``purchased,'' and ``sells,'' ``selling,'' or ``sold''). Specifically,
the rule proposed to define ``purchase'' (and derivative terms thereof)
as ``the act of obtaining a firearm in exchange for something of
value,'' \49\ and the term ``sale'' (and derivative terms thereof,
including ``resale'') as ``the act of providing a firearm in exchange
for something of value.'' \50\ The term ``something of value'' was
proposed to include money, credit, personal property (e.g., another
firearm \51\ or ammunition \52\), a service,\53\ a controlled
substance,\54\ or any other
[[Page 28975]]
medium of exchange \55\ or valuable consideration.\56\
---------------------------------------------------------------------------
\49\ This definition is consistent with the common meaning of
``purchase,'' which is ``to obtain (as merchandise) by paying money
or its equivalent.'' Webster's Third New International Dictionary
1844 (1971); see also Purchase, Black's Law Dictionary 1491 (11th
ed. 2019) (``Webster's Third'') (``The acquisition of an interest in
real or personal property by sale, discount, negotiation, mortgage,
pledge, lien, issue, reissue, gift, or any other voluntary
transaction.'').
\50\ This definition is consistent with the common meaning of
``sale,'' which is ``a contract transferring the absolute or general
ownership of property from one person or corporate body to another
for a price (as a sum of money or any other consideration).''
Webster's Third at 2003. The related term ``resale'' means ``the act
of selling again.'' Id. at 1929.
\51\ See, e.g., United States v. Brenner, 481 F. App'x, 125-26
(5th Cir. 2012) (defendant unlicensed dealer sold a stolen firearm
traded to him for another firearm); United States v. Gross, 451 F.2d
1355, 1356, 1360 (7th Cir. 1971) (defendant ``had traded firearms
[for other firearms] with the object of profit in mind'').
\52\ See, e.g., United States v. Huffman, 518 F.2d 80, 81 (4th
Cir. 1975) (defendant traded large quantities of ammunition in
exchange for firearms).
\53\ See, e.g., United States v. 57 Miscellaneous Firearms, 422
F. Supp. 1066, 1070-71 (W.D. Mo. 1976) (defendant obtained the
firearms he sold or offered for sale in exchange for carpentry work
he performed).
\54\ See, e.g., United States v. Schaal, 340 F.3d 196, 197 (4th
Cir. 2003) (defendants traded many of their stolen firearms for
drugs); Johnson v. Johns, No. 10-CV-904(SJF), 2013 WL 504446, at *1
(E.D.N.Y. Feb. 5, 2013) (on at least one occasion, petitioner, who
was engaged in the unlicensed dealing in firearms through straw
purchasers, compensated a straw purchaser with cocaine base).
\55\ See, e.g., Focia, 869 F.3d at 1274 (defendant sold pistol
online to undercover ATF agent for 15 bitcoins).
\56\ The term ``medium of exchange'' generally means ``something
commonly accepted in exchange for goods and services and recognized
as representing a standard of value,'' Webster's Third at 1403, and
``valuable consideration'' is ``an equivalent or compensation having
value that is given for something (as money, marriage, services)
acquired or promised and that may consist either in some right,
interest, profit, or benefit accruing to one party or some
responsibility, forbearance, detriment, or loss exercised by or
falling upon the other party,'' id. at 2530. See, e.g., United
States v. Berry, 644 F.2d 1034, 1036 (5th Cir. 1981) (defendant sold
firearms in exchange for large industrial batteries to operate his
demolition business); United States v. Reminga, 493 F. Supp. 1351,
1357 (W.D. Mich. 1980) (defendant traded his car for three guns that
he later sold or traded).
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Defining these terms to include any method of payment for a firearm
would clarify that persons cannot avoid the licensing requirement by,
for instance, bartering or providing or receiving services in exchange
for firearms with the predominant intent to earn pecuniary gain even
where no money is exchanged. It would also clarify that a person must
have a license to engage in the business of dealing in firearms even
when the medium of payment or consideration is unlawful, such as
exchanging illicit drugs or performing illegal acts for firearms, and
that it is a distinct crime to do so without a license.
C. Definition of Engaged in the Business as Applied to Auctioneers
Because the definitions of ``purchase'' and ``sale'' broadly
include services provided in exchange for firearms, both as defined by
common dictionaries and as proposed in the NPRM, the Department further
proposed to make clear that certain persons who provide auctioneer
services are not required to be licensed as dealers. ATF has long
interpreted the statutory definition of ``engaged in the business'' as
excluding auctioneers who provide only auction services on commission
by assisting in liquidating firearms at an ``estate-type'' auction.\57\
The new definition in the BSCA does not alter that interpretation. The
Department proposed to incorporate this longstanding interpretation
into the regulations while otherwise clarifying the regulatory
definition of ``engaged in the business.''
---------------------------------------------------------------------------
\57\ See ATF, Does an Auctioneer Who Is Involved in Firearms
Sales Need a Dealer's License?, <a href="https://www.atf.gov/firearms/qa/does-auctioneer-who-involved-firearms-sales-need-dealer-license">https://www.atf.gov/firearms/qa/does-auctioneer-who-involved-firearms-sales-need-dealer-license</a>
(last reviewed July 10, 2020); ATF, ATF Federal Firearms Regulations
Reference Guide, ATF Publication 5300.4, Q&A L1, at 207-08 (2014),
<a href="https://www.atf.gov/firearms/docs/guide/federal-firearms-regulations-reference-guide-2014-edition-atf-p-53004/download">https://www.atf.gov/firearms/docs/guide/federal-firearms-regulations-reference-guide-2014-edition-atf-p-53004/download</a>; ATF,
FFL Newsletter 3 (May 2001), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-may-2001/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-may-2001/download</a>;
ATF Ruling 96-2, Engaging in the Business of Dealing in Firearms
(Auctioneers) (Sept. 1996), <a href="https://www.atf.gov/file/55456/download">https://www.atf.gov/file/55456/download</a>;
ATF, FFL Newsletter 7 (1990), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-1990-volume-1/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-1990-volume-1/download</a>; Letter for Editor, CarPac Publishing Company, from Acting
Assistant Director (Regulatory Enforcement), ATF, at 1-2 (July 26,
1979).
---------------------------------------------------------------------------
As the NPRM explained, in this context, the auctioneer is generally
providing services only as an agent of the owner or individual executor
of an estate who is liquidating a personal collection. The firearms are
within the estate's control and the sales are made on the estate's
behalf. This limited exclusion from the definition of ``engaged in the
business'' as a dealer is conditioned on the auctioneer not purchasing
the firearms or taking them on consignment such that the auctioneer has
the exclusive right and authority to sell the firearms at a location,
time, and date to be selected by the auctioneer. If the auctioneer were
to regularly engage in any of that conduct, the auctioneer would need
to have a dealer's license because that person would be engaged in the
business of purchasing and reselling firearms to earn a profit. An
``estate-type'' auction as described above differs from liquidating
firearms by means of a ``consignment-type'' auction, in which the
auctioneer is paid to accept firearms into a business inventory and
then resells them in lots or over a period of time. In this
``consignment-type'' auction, the auctioneer generally inventories,
evaluates, and tags the firearms for identification.\58\ Therefore,
under ``consignment-type'' auctions, an auctioneer would need to be
licensed.
---------------------------------------------------------------------------
\58\ ATF Rul. 96-2 at 1.
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D. Presumptions That a Person Is Engaged in the Business
The NPRM pointed out that the Department has observed through its
enforcement efforts, regulatory functions, knowledge of existing case
law, and subject-matter expertise that persons who are engaged in
certain firearms purchase-and-sale activities are more likely than not
to be ``engaged in the business'' of dealing in firearms at wholesale
or retail. These activities have been observed through a variety of
criminal, civil, and administrative enforcement actions and proceedings
brought by the Department, including: (1) ATF inspections of
prospective and existing wholesale and retail dealers of firearms who
are, or intend to be, engaged in the business; \59\ (2) criminal
investigations and the resulting prosecutions (i.e., cases) of persons
who engaged in the business of dealing in firearms without a license;
\60\ (3) civil and administrative actions under 18 U.S.C. 924(d) to
seize and forfeit firearms intended to be sold by persons engaged in
the business without a license; \61\ (4) ATF cease and desist letters
issued to prevent section 922(a)(1)(A) violations; \62\ and (5) ATF
administrative proceedings under 18 U.S.C. 923 to deny licenses to
persons who willfully engaged in the business of dealing in firearms
without a license, or to revoke or deny renewal of existing licenses
held by licensees who aided and abetted that misconduct.\63\ In
addition, numerous courts have identified certain activities or factors
that are relevant to determining whether a person is ``engaged in the
business''.\64\ The rule, therefore, proposed to establish rebuttable
presumptions in
[[Page 28976]]
certain contexts to help unlicensed persons, industry operations
personnel, and others determine when a person is likely ``engaged in
the business'' requiring a dealer's license.\65\
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\59\ In Fiscal Year 2022, for example, ATF conducted 11,156
qualification inspections of new applicants for a license, and 6,979
compliance inspections of active licensees. See ATF, Fact Sheet-
Facts and Figures for Fiscal Year 2022 (Jan. 2023), <a href="https://www.atf.gov/resource-center/fact-sheet/fact-sheet-facts-and-figures-fiscal-year-2022">https://www.atf.gov/resource-center/fact-sheet/fact-sheet-facts-and-figures-fiscal-year-2022</a>.
\60\ See footnotes 67 through 80 and 82 through 83, infra. The
Department reviewed criminal cases from FY18 to FY23 that it
investigated (closed), or is currently investigating (open/pending),
involving violations of 18 U.S.C. 922(a)(1)(A) and 923(a).
\61\ See, e.g., United States v. Four Hundred Seventy Seven
(477) Firearms, 698 F. Supp. 2d 890, 890-91 (E.D. Mich. 2010) (civil
forfeiture of firearms intended to be sold from an unlicensed gun
store); United States v. One Bushmaster, Model XM15-E2 Rifle, No.
06-CV-156 (WDO), 2006 WL 3497899, at *1 (M.D. Ga. Dec. 5, 2006)
(civil forfeiture of firearms intended to be sold by an unlicensed
person who acquired an unusually large amount of firearms quickly
for the purpose of selling or trading them); United States v. Twenty
Seven (27) Assorted Firearms, No. SA-05-CA-407-XR, 2005 WL 2645010,
at *1 (W.D. Tex. Oct. 13, 2005) (civil forfeiture of firearms
intended to be sold at gun shows without a license).
\62\ Over the years, ATF has issued numerous letters warning
unlicensed persons not to continue to engage in the business of
dealing in firearms without a license, also called ``cease and
desist'' letters. See, e.g., United States v. Kubowski, 85 F. App'x
686, 687 (10th Cir. 2003) (defendant served cease and desist letter
after selling five handguns and one rifle to undercover ATF agents).
\63\ See, e.g., In the Matter of Scott, Application Nos. 9-93-
019-01-PA-05780 and 05781 (Seattle Field Division, Apr. 3, 2018)
(denied applicant for license to person who purchased and sold
numerous handguns within one month); In the Matter of SEL.L.
Antiques, Application No. 9-87-035-01-PA-00725 (Phoenix Field
Division, July 14, 2006) (denied applicant who repetitively sold
modern firearms from unlicensed storefront).
\64\ See footnote 21, supra, and accompanying text. These
cases--like the investigations, administrative actions, letters, and
other examples cited in this paragraph--predate the BSCA's enactment
but continue to be relevant to determining whether a person is
``engaged in the business'' because the BSCA expanded the definition
of that term to cover additional conduct.
\65\ The GCA and implementing regulations already incorporate
rebuttable presumptions in other contexts. See 18 U.S.C. 922(b)(3)
(A ``licensed manufacturer, importer or dealer shall be presumed,
for purposes of [selling to out of state residents], in the absence
of evidence to the contrary, to have had actual knowledge of the
States laws and published ordinances of both States''); 27 CFR
478.96(c)(2) (same); see also 27 CFR 478.12(d) (``The modular
subpart(s) identified in accordance with 478.92 with an importer's
or manufacturer's serial number shall be presumed, absent an
official determination by the Director or other reliable evidence to
the contrary, to be part of the frame or receiver of a weapon or
device.''); 478.12(f)(1) (``Any such part [previously classified by
the Director] that is identified with an importer's or
manufacturer's serial number shall be presumed, absent an official
determination by the Director or other reliable evidence to the
contrary, to be the frame or receiver of the weapon.'');
478.92(a)(1)(vi) (``firearms awaiting materials, parts, or equipment
repair to be completed are presumed, absent reliable evidence to the
contrary, to be in the manufacturing process'').
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These rebuttable presumptions would not shift the burden of
persuasion in any proceeding from the Government. In addition, while
the criteria set forth in the proposed rule may be useful to a court in
a criminal proceeding--for example, to inform appropriate jury
instructions regarding permissible inferences \66\--the proposed
regulatory text made clear that the presumptions do not apply to
criminal proceedings.
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\66\ Courts determine which jury instructions are appropriate in
the criminal cases before them. While rebuttable presumptions may
not be presented to a jury in a criminal case, jury instructions may
include, for example, reasonable permissive inferences. See Francis
v. Franklin, 471 U.S. 307, 314 (1985) (``A permissive inference
suggests to the jury a possible conclusion to be drawn if the
[Government] proves predicate facts, but does not require the jury
to draw that conclusion.''); County Court of Ulster County v. Allen,
442 U.S. 140, 166-67 (1979) (upholding jury instruction that gave
rise to a permissive inference available only in certain
circumstances, rather than a mandatory conclusion); Baghdad v. Att'y
Gen. of the U.S., 50 F.4th 386, 390 (3d Cir. 2022) (``Unlike
mandatory presumptions, permissive inferences . . . do not shift the
burden of proof or require any outcome. They are just an
`evidentiary device . . . [that] allows--but does not require--the
trier of fact to infer' that an element of a crime is met once basic
facts have been proven beyond a reasonable doubt.''); Patton v.
Mullin, 425 F.3d 788, 803-07 (10th Cir. 2005) (upholding jury
instruction that created a permissive inference rather than a
rebuttable presumption); United States v. Warren, 25 F.3d 890, 897
(9th Cir. 1994) (same); United States v. Washington, 819 F.2d 221,
225-26 (9th Cir. 1987) (same); Lannon v. Hogan, 719 F.2d 518, 520-25
(1st Cir. 1983) (same); United States v. Gaines, 690 F.2d 849 (11th
Cir. 1982) (same); cf., e.g., United States v. Antonoff, 424 F.
App'x 846, 848 (11th Cir. 2011) (recognizing the permissive
inference of current drug use in ATF's definition of ``unlawful
user'' in 27 CFR 478.11 as support for affirming the district
court's finding that the defendant's drug use was ``contemporaneous
and ongoing'' for sentencing purposes); United States v. McCowan,
469 F.3d 386, 392 (5th Cir. 2006) (upholding application of a
sentencing enhancement based on the permissive inference of current
drug use in 27 CFR 478.11); United States v. Stanford, No. 11-10211-
01-EFM, 2012 WL 1313503 (D. Kan. Apr. 16, 2012) (holding that
evidence of defendant's arrest was admissible by relying, in part,
on the definition of ``unlawful user'' in 27 CFR 478.11).
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The Department considered, but did not propose in the NPRM, an
alternative that would have set a minimum numerical threshold of
firearms sold by a person within a certain period. That approach was
not proposed for several reasons. First, while selling large numbers of
firearms or engaging or offering to engage in frequent transactions may
be highly indicative of business activity, neither the courts nor the
Department have recognized a set minimum number of firearms purchased
or resold that triggers the licensing requirement. Similarly, there is
no minimum number of transactions that determines whether a person is
``engaged in the business'' of dealing in firearms. Even a single
firearm transaction, or offer to engage in a transaction, when combined
with other evidence, may be sufficient to require a license. For
example, even under the previous statutory definition, courts have
upheld convictions for dealing without a license when few firearms, if
any, were actually sold, when other factors were also present, such as
the person representing to others a willingness and ability to
repetitively purchase firearms for resale. See, e.g., United States v.
King, 735 F.3d 1098, 1107 n.8 (9th Cir. 2013) (upholding conviction
where defendant attempted to sell one firearm and represented that he
could purchase more for resale and noting that ``Section 922(a)(1)(A)
does not require an actual sale of firearms'').\67\ On the other hand,
courts have stated that an isolated firearm transaction would not
require a license when other factors were not present.\68\ Second, in
addition to the tracing concerns expressed by ATF in response to
comments on the 1979 ANPRM, a person could structure their transactions
to avoid a minimum threshold by spreading out their sales over time.
Finally, the Department does not believe there is currently a
sufficient evidentiary basis, without consideration of additional
factors, to support a specific minimum number of firearms bought or
sold for a person to be considered ``engaged in the business.''
---------------------------------------------------------------------------
\67\ See also ATF Publication 5310.2, Do I Need a License to Buy
and Sell Firearms?, <a href="https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf">https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf</a> (Jan. 2016),
<a href="https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf">https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf</a>; Nadirashvili, 655 F.3d at 120-21
(holding that, despite defendants' knowledge of only a single
firearms transaction, there was sufficient evidence to prove they
had aided and abetted unlawfully dealing in firearms without a
license because they knew that their co-defendant ``held himself
`out generally as a source of firearms' and was ready to procure
them for his customer''); United States v. Kevin Shan, 361 F. App'x
182, 183 (2d Cir. 2010) (holding that evidence that defendant sold
two firearms within roughly a month and acknowledged he had a source
of supply for other weapons was sufficient to affirm conviction for
dealing firearms without a license); United States v. Zheng Jian
Shan, 80 F. App'x 31 (9th Cir. 2003) (holding that evidence of sale
of weapons in one transaction where the defendant was willing and
able to find more weapons for resale was sufficient to affirm
conviction); Murphy, 852 F.2d at 8 (``[T]his single transaction was
sufficiently large in quantity, price and length of negotiation to
constitute dealing in firearms.'').
\68\ United States v. Carter, 203 F.3d 187, 191 (2d Cir. 2000)
(``A conviction under 18 U.S.C. 922(a) ordinarily contemplates more
than one isolated gun sale.''); United States v. Swinton, 521 F.2d
1255, 1259 (10th Cir. 1975) (``Swinton's sale [of one firearm] to
Agent Knopp, standing alone, without more, would not have been
sufficient to establish a violation of Section 922(a)(1). That sale,
however, when considered in conjunction with other facts and
circumstances related herein, established that Swinton was engaged
in the business of dealing in firearms. The unrebutted evidence of
the Government established not only that Swinton considered himself
to be and held himself out as a dealer, but that, most importantly,
he was actively engaged in the business of dealing in guns.''
(internal citation omitted)).
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Rather than establishing a minimum threshold number of firearms
purchased or sold, the NPRM proposed to clarify that, absent reliable
evidence to the contrary, a person would be presumed to be engaged in
the business of dealing in firearms when the person: (1) sells or
offers for sale firearms, and also represents to potential buyers or
otherwise demonstrates a willingness and ability to purchase and sell
additional firearms; (2) spends more money or its equivalent on
purchases of firearms for the purpose of resale than the person's
reported taxable gross income during the applicable period of time; (3)
repetitively purchases for the purpose of resale, or sells or offers
for sale firearms--(A) through straw or sham businesses, or individual
straw purchasers or sellers; or (B) that cannot lawfully be purchased
or possessed, including: (i) stolen firearms (18 U.S.C. 922(j)); (ii)
firearms with the licensee's serial number removed, obliterated, or
altered (18 U.S.C. 922(k); 26 U.S.C. 5861(i)); (iii) firearms imported
in violation of law (18 U.S.C. 922(l), 22 U.S.C. 2778, or 26 U.S.C.
5844, 5861(k)); or (iv) machineguns or other weapons defined as
firearms under 26 U.S.C. 5845(a) that were not properly registered in
the National Firearms Registration and Transfer Record (18 U.S.C.
922(o); 26 U.S.C. 5861(d)); (4) repetitively sells or offers for sale
firearms--(A) within 30 days after they were purchased; (B) that are
new, or like
[[Page 28977]]
new in their original packaging; or (C) that are of the same or similar
kind (i.e., make/manufacturer, model, caliber/gauge, and action) and
type (i.e., the classification of a firearm as a rifle, shotgun,
revolver, pistol, frame, receiver, machinegun, silencer, destructive
device, or other firearm); (5) as a former licensee (or responsible
person acting on behalf of the former licensee), sells or offers for
sale firearms that were in the business inventory of such licensee at
the time the license was terminated (i.e., license revocation, denial
of license renewal, license expiration, or surrender of license), and
were not transferred to a personal collection in accordance with 18
U.S.C. 923(c) and 27 CFR 478.125a; or (6) as a former licensee (or
responsible person acting on behalf of a former licensee), sells or
offers for sale firearms that were transferred to a personal collection
of such former licensee or responsible person prior to the time the
license was terminated, unless: (A) the firearms were received and
transferred without any intent to willfully evade the restrictions
placed on licensees by chapter 44, title 18, of the United States Code;
and (B) one year has passed from the date of transfer to the personal
collection.
The proposed rule provided that any one circumstance or a
combination of the circumstances set forth above would give rise to a
rebuttable presumption that the person is engaged in the business of
dealing in firearms and would need to be licensed under the GCA. The
activities set forth in these proposed rebuttable presumptions would
not be exhaustive of the conduct that may show that, or be considered
in determining whether, a person is engaged in the business of dealing
in firearms. Further, as previously noted, while the criteria may be
useful to courts in criminal prosecutions when instructing juries
regarding permissible inferences, the presumptions outlined above would
not be applicable to such criminal cases.
At the same time, the Department recognized in the NPRM that
certain transactions were not likely to be sufficient to support a
presumption that a person is engaging in the business of dealing in
firearms. For this reason, the proposed rule also included examples of
when a person would not be presumed to be engaged in the business of
dealing in firearms. Specifically, under the proposed rule, a person
would not be presumed to be engaged in the business when the person
transfers firearms only as bona fide gifts \69\ or occasionally \70\
sells firearms only to obtain more valuable, desirable, or useful
firearms for their personal collection or hobby--unless their conduct
also demonstrates a predominant intent to earn a profit.
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\69\ The Department interprets the term ``bona fide gift'' to
mean a firearm given in good faith to another person without
expecting any item, service, or anything of value in return. See
Form 4473, at 4, Instructions to Question 21.a. (Actual Transferee/
Buyer) (``A gift is not bona fide if another person offered or gave
the person . . . money, service(s), or item(s) of value to acquire
the firearm for him/her, or if the other person is prohibited by law
from receiving or possessing the firearm.''); ATF, FFL Newsletter:
Federal Firearms Licensee Information Service 2 (June 2021), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensee-ffl-newsletter-june-2021/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensee-ffl-newsletter-june-2021/download</a> (same).
\70\ While the GCA does not define the term ``occasional,'' that
term is commonly understood to mean ``of irregular occurrence;
happening now and then, infrequent.'' Occasional, Collins English
Dictionary, <a href="https://www.collinsdictionary.com/us/dictionary/english/occasional">https://www.collinsdictionary.com/us/dictionary/english/occasional</a> (last visited Apr. 4, 2024) (defining ``occasional'' in
``American English'').
---------------------------------------------------------------------------
The NPRM noted that the rebuttable presumptions are supported by
the Department's investigative, regulatory, and enforcement
experience,\71\ as well as conduct that the courts have found to
require a license even before the BSCA expanded the definition of
``engaged in the business.'' Moreover, these proposed presumptions are
consistent with the case-by-case analytical framework long applied by
the courts in determining whether a person has violated 18 U.S.C.
922(a)(1)(A) and 923(a) by engaging in the business of dealing in
firearms without a license. The Department observed in the NPRM that
the fundamental purposes of the GCA would be severely undermined if
persons were allowed to repetitively purchase and resell firearms to
predominantly earn a profit without conducting background checks,
keeping records, and otherwise complying with the license requirements
of the GCA. The Department therefore proposed criteria for when a
person is presumed to be ``engaged in the business'' to strike an
appropriate balance that captures persons who should be licensed under
the GCA, as amended, without limiting or regulating activity that is
truly a hobby or enhancement of a personal collection.
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\71\ See the discussion at the beginning of Section III.D,
``Presumptions that a Person is `Engaged in the Business.' ''
---------------------------------------------------------------------------
The first proposed presumption--that a person would be presumed to
be engaged in the business when the person sells or offers for sale
firearms, and also represents to potential buyers or otherwise
demonstrates a willingness and ability to purchase and sell additional
firearms--reflects that the definition of ``engaged in the business''
in 18 U.S.C. 921(a)(21)(C) does not require that a firearm actually be
sold by a person so long as the person is holding themself out as a
dealer. This is because the relevant definition of ``engaged in the
business,'' 18 U.S.C. 921(a)(21)(C), defines the phrase by reference to
the intent ``to predominantly earn a profit through the repetitive
purchase and resale of firearms'' even if those firearms are not
actually repetitively purchased and resold.\72\
---------------------------------------------------------------------------
\72\ See United States v. Ochoa, 726 F. App'x 651, 652 (9th Cir.
2018) (``[section] 922(a)(1)(A) reaches those who hold themselves
out as sources of firearms.''); United States v. Mulholland, 702 F.
App'x 7, 12 (2d Cir. 2017) (``The definition does not extend to a
person who makes occasional sales for a personal collection or
hobby, id., and the government need only prove that a person was
`ready and able to procure [firearms] for the purpose of selling
them from time to time.''' (quoting Nadirashvili, 655 F.3d at 199));
King, 735 F.3d at 1107 (defendant attempted to sell one of the 19
firearms he had ordered, and represented to the buyer that he was
buying, selling, and trading in firearms and could procure any item
in a gun publication at a cheaper price); Shan, 361 F. App'x at 183
(``[D]efendant sold two firearms within roughly one month and . . .
Shan acknowledged on tape that he had a source of supply for other
weapons.''); Shan, 80 F. App'x at 32 (``[T]he evidence leaves little
doubt as to Shan's ability to seek and find weapons for resale'');
Carter, 801 F.2d at 82 (``[T]he statute reaches `those who hold
themselves out as a source of firearms.' '' (quoting United States
v. Wilmoth, 636 F.2d 123, 125 (5th Cir. 1981)).
---------------------------------------------------------------------------
The second presumption proposed--that a person is engaged in the
business when spending more money or its equivalent on purchases of
firearms for the purpose of resale than the person's reported taxable
gross income during the applicable period of time--reflects that
persons who spend more money or its equivalent on purchases of firearms
for resale than their reported gross income are likely to be primarily
earning their income from those sales, which is even stronger evidence
of an intent to profit than merely supplementing one's income.\73\
Alternatively, such persons may be using funds derived from criminal
[[Page 28978]]
activities to purchase firearms, for example, including funds provided
by a co-conspirator to repetitively purchase and resell the firearms
without a license or for other criminal purposes, or funds that were
laundered from past illicit firearms transactions. Such illicit and
repetitive firearm purchase and sale activities do not require proof of
profit for the Government to prove the requisite intent under 18 U.S.C.
921(a)(22), which states that proof of profit is not required as to a
person who engages in the regular and repetitive purchase and
disposition of firearms for criminal purposes or terrorism.
---------------------------------------------------------------------------
\73\ See, e.g., Focia, 869 F.3d at 1282 (``And finally, despite
efforts to obtain Focia's tax returns and Social Security
information, agents found no evidence that Focia enjoyed any source
of income other than his firearms sales. This evidence
overwhelmingly demonstrates that Focia's sales of firearms were no
more a hobby than working at Burger King for a living could be
described that way.''); United States v. Valdes, 681 F. App'x 874,
879 (11th Cir. 2017) (defendant who engaged in the business of
dealing in firearms without a license did not report income on tax
returns from firearms sales online and at gun shows); Press Release,
DOJ, Man Who Sold Midland/Odessa Shooter AR-15 Used in Massacre
Sentenced for Unlicensed Firearms Dealing (Jan. 7, 2021), <a href="https://www.justice.gov/usao-ndtx/pr/man-who-sold-midlandodessa-shooter-ar-15-used-massacre-sentenced-unlicensed-firearms">https://www.justice.gov/usao-ndtx/pr/man-who-sold-midlandodessa-shooter-ar-15-used-massacre-sentenced-unlicensed-firearms</a> (defendant convicted
of filing a false tax return that concealed his income from firearms
sales).
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The first presumption proposed within the third category listed
above--that a person would be presumed to be engaged in the business
when repetitively purchasing, reselling, or offering to sell firearms
through straw or sham businesses or individual straw purchasers or
sellers--reflects that persons who conceal their transactions by
setting up straw or sham businesses or hiring ``middlemen'' to conduct
transactions on their behalf are often engaged in the business of
dealing in firearms without a license.\74\
---------------------------------------------------------------------------
\74\ See Abramski, 573 U.S. at 180 (``[C]onsider what happens in
a typical straw purchase. A felon or other person who cannot buy or
own a gun still wants to obtain one. (Or, alternatively, a person
who could legally buy a firearm wants to conceal his purchase, maybe
so he can use the gun for criminal purposes without fear that police
officers will later trace it to him.''); Bryan v. United States, 524
U.S. 184, 189 (1998) (defendant used straw purchasers to buy pistols
in Ohio for resale in New York); Ochoa, 726 F. App'x at 652
(``[W]hile the evidence demonstrated that Ochoa did not purchase and
sell the firearms himself, it was sufficient to demonstrate that he
had the princip[al] objective of making a profit through the
repetitive purchase and sale of firearms, even if those purchases
and sales were carried out by others.''); United States v. Hosford,
843 F.3d 161, 163 (4th Cir. 2016) (defendant purchased firearms
through a straw purchaser who bought them at gun shows); MEW
Sporting Goods, LLC. v. Johansen, 992 F. Supp. 2d 665, 674-75
(N.D.W.V. 2014), aff'd, 594 F. App'x 143 (4th Cir. 2015) (corporate
entity disregarded where it was formed to circumvent firearms
licensing requirement); King, 735 F.3d at 1106 (defendant felon
could not ``immunize himself from prosecution'' for dealing without
a license by ``hiding behind a corporate charter'' (quotation marks
omitted)); United States v. Fleischli, 305 F.3d 643, 652 (7th Cir.
2002) (``In short, a convicted felon who could not have legitimately
obtained a manufacturer's or dealer's license may not obtain access
to machine guns by setting up a sham corporation.''); National
Lending Group, L.L.C. v. Mukasey, No. CV 07-0024, 2008 WL 5329888,
at *10-11 (D. Ariz. Dec. 19, 2008), aff'd, 365 F. App'x 747 (9th
Cir. 2010) (straw ownership of corporate pawn shops); United States
v. Paye, 129 F. App'x 567, 570 (11th Cir. 2005) (defendant paid
straw purchaser to buy firearms for him to sell); Casanova Guns,
Inc. v. Connally, 454 F.2d 1320, 1322 (7th Cir. 1972) (``[I]t is
well settled that the fiction of a corporate entity must be
disregarded whenever it has been adopted or used to circumvent the
provisions of a statute.''); XVP Sports, LLC v. Bangs, No.
2:11CV379, 2012 WL 4329258, at *5 (E.D. Va. Sept. 17, 2012) (``unity
of interest'' existed between firearm companies controlled by the
same person); Virlow LLC v. Bureau of Alcohol, Tobacco, Firearms &
Explosives, No. 1:06-CV-375, 2008 WL 835828, *3-7 (W.D. Mich. Mar.
28, 2008) (corporate form disregarded where a substantial purpose of
the formation of the company was to circumvent the statute
restricting issuance of firearms licenses to convicted felons);
Press Release, DOJ, Utah Business Owner Convicted of Dealing in
Firearms Without a License and Filing False Tax Returns (Sept. 23,
2016), <a href="https://www.justice.gov/opa/pr/utah-business-owner-convicted-dealing-firearms-without-license-and-filing-false-tax-returns">https://www.justice.gov/opa/pr/utah-business-owner-convicted-dealing-firearms-without-license-and-filing-false-tax-returns</a>
(defendant illegally sold firearms under the auspices of a company
owned by another Utah resident).
---------------------------------------------------------------------------
The second presumption proposed under the third category--that a
person would be presumed to be engaged in the business when
repetitively purchasing, reselling, or offering to sell firearms that
cannot lawfully be possessed--reflects that such firearms are actively
sought by criminals and earn higher profits for the illicit dealer. The
dealer is therefore taking on additional labor and risk with the intent
of increasing profits. Such dealers will often buy and sell stolen
firearms \75\ and firearms with obliterated serial numbers \76\ because
such firearms are preferred by both sellers and buyers to avoid
background checks and crime gun tracing.\77\ They sometimes sell
unregistered National Firearms Act (``NFA'') weapons \78\ and
unlawfully imported firearms because those firearms are more difficult
to obtain, cannot be traced through the National Firearms Registration
and Transfer Record, and may sell for a substantial profit.\79\
Although these presumptions addressing repetitive straw purchase
transactions and contraband firearms sales are intended to establish
when persons are most likely to have the requisite intent to
``predominantly earn a profit'' under 18 U.S.C. 921(a)(21)(C), such
cases are also supported by 18 U.S.C. 921(a)(22), which does not
require the Government to prove an intent to profit where a person
repetitively purchases and disposes of firearms for criminal purposes.
These presumptions are also implicitly supported by 18 U.S.C. 923(c),
which deems any firearm acquired or disposed of with the purpose of
willfully evading the restrictions placed on licensed dealers under the
GCA to be business inventory, not part of a personal collection.
Indeed, concealing the identity of the seller or buyer of a firearm, or
the identification of the firearm, undermines the requirements imposed
on legitimate dealers to conduct background checks on actual purchasers
(18 U.S.C. 922(t)) and maintain transaction records (18 U.S.C.
923(g)(1)-(2)) through which firearms involved in crime can be traced.
---------------------------------------------------------------------------
\75\ See, e.g., United States v. Fields, 608 F. App'x 806, 809
(11th Cir. 2015); United States v. Calcagni, 441 F. App'x 916, 917
(3d Cir. 2011); United States v. Simmons, 485 F.3d 951, 953 (7th
Cir. 2007); United States v. Webber, 255 F.3d 523, 524-25 (8th Cir.
2001); Carter, 801 F.2d at 83-84; United States v. Perkins, 633 F.2d
856, 857-58 (8th Cir. 1981); United States v. Kelley, No. 22C2780,
2023 WL 2525366, at *1 (N.D. Ill. 2023); United States v. Logan, 532
F. Supp. 3d 725, 726 (D. Minn. 2021); United States v. Southern, 32
F. Supp. 2d 933, 937 (E.D. Mich. 1998).
\76\ See, e.g., United States v. Ilarraza, 963 F.3d 1, 6 (1st
Cir. 2020); Fields, 608 F. App'x at 809; United States v. Barrero,
578 F. App'x 884, 886 (11th Cir. 2014); Brenner, 481 F. App'x at
126; United States v. Teleguz, 492 F.3d 80, 82 (1st Cir. 2007);
United States v. Bostic, 371 F.3d 865, 869 (6th Cir. 2004); United
States v. Kitchen, 87 F. App'x 244, 245 (3d Cir. 2004); United
States v. Ortiz, 318 F.3d 1030, 1035 (11th Cir. 2003); United States
v. Rosa, 123 F.3d 94, 96 (2d Cir. 1997); United States v. Twitty, 72
F.3d 228, 234 n.2 (1st Cir. 1995); United States v. Collins, 957
F.2d 72, 73 (2d Cir. 1992); United States v. Hannah, No. CRIM.A.05-
86, 2005 WL 1532534, at *3 (E.D. Pa. 2005).
\77\ See Twitty, 72 F.3d at 234 n.2 (defendant resold firearms
with obliterated serial numbers, which were ``probably designed in
part to increase the selling price of the weapons''); Brenner, 481
Fed. App'x at 126 (firearm traded to defendant was stolen); Hannah,
2005 WL 1532534, at *3 (holding that the defendant engaged in the
business of dealing in firearms without a license in part because,
on two occasions, ``the defendant informed the buyers to obliterate
the serial numbers so he would not `get in trouble' '').
\78\ The National Firearms Act of 1934, 26 U.S.C. 5801 et seq.,
regulates certain firearms, including short-barreled rifles and
shotguns, machineguns, silencers, and destructive devices. NFA
provisions still refer to the ``Secretary of the Treasury.'' See
generally 26 U.S.C. ch. 53. However, the Homeland Security Act of
2002, Public Law 107-296, 116 Stat. 2135, transferred the functions
of ATF from the Department of the Treasury to the Department of
Justice, under the general authority of the Attorney General. 26
U.S.C. 7801(a)(2); 28 U.S.C. 599A(c)(1). Thus, this final rule
refers to the Attorney General throughout.
\79\ See, e.g., United States v. Fridley, 43 F. App'x 830, 831-
32 (6th Cir. 2002) (defendant purchased and resold unregistered
machineguns); United States v. Idarecis, 164 F.3d 620, 1998 WL
716568, at *1 (2d Cir. 1998) (unpublished table decision) (defendant
converted rifles to machineguns and obliterated the serial numbers
on the firearms he sold).
---------------------------------------------------------------------------
The first presumption proposed under the fourth category listed
above--repetitive sales or offers for sale of firearms within 30 days
from purchase--reflects that firearms for a personal collection are not
likely to be repetitively sold within such a short period of time from
purchase.\80\ That
[[Page 28979]]
conduct is more consistent with treatment as business inventory.\81\
Likewise, under the second and third presumptions proposed under this
category, the Department has observed through its investigative and
regulatory experience that persons who repetitively sell firearms in
new condition or in like-new condition in their original packaging,\82\
or firearms of the same or similar kind and type,\83\ are not as likely
to be repetitively selling such firearms from a personal collection. In
contrast with sales from a personal collection, persons engaged in the
business who are selling from a business inventory can earn the
greatest profit by selling firearms in the best (i.e., in a new)
condition, or by selling the particular makes and models of firearms
that their customers most want.
---------------------------------------------------------------------------
\80\ See, e.g., Press Release, DOJ, Minnesota Man Indicted for
Dealing Firearms Without a License (Feb. 18, 2016), <a href="https://www.justice.gov/opa/pr/minnesota-man-indicted-dealing-firearms-without-license">https://www.justice.gov/opa/pr/minnesota-man-indicted-dealing-firearms-without-license</a> (defendant sold firearms he purchased through online
websites, and the average time he actually possessed a gun before
offering it for sale was only nine days); Press Release, DOJ, Ex-
Pasadena Police Lieutenant Sentenced to One Year in Federal Prison
for Unlicensed Selling of Firearms and Lying on ATF Form (Feb. 25,
2019), <a href="https://www.justice.gov/usao-cdca/pr/ex-pasadena-police-lieutenant-sentenced-one-year-federal-prison-unlicensed-selling">https://www.justice.gov/usao-cdca/pr/ex-pasadena-police-lieutenant-sentenced-one-year-federal-prison-unlicensed-selling</a>
(defendant resold 79 firearms within six days after he purchased
them); United States v. D'Agostino, No. 10-20449, 2011 WL 219008, at
*3 (E.D. Mich. Jan. 20, 2011) (some of the weapons defendant sold at
gun shows were purchased ``a short time earlier''); United States v.
One Assortment of 89 Firearms, 511 F. Supp. 133, 137 (D.S.C. 1980)
(``That several sales of firearms occur in a reasonably short space
of time is evidence of dealing in firearms.'').
\81\ Further support for this 30-day presumption comes from the
fact that, while many retailers do not allow firearm returns, some
retailers and manufacturers do allow a 30-day period within which a
customer who is dissatisfied with a firearm purchased for a personal
collection or hobby can return or exchange the firearm. Dissatisfied
personal collectors and hobbyists--persons not intending to engage
in the business--are more likely to return new firearms rather than
to incur the time, effort, and expense to resell them within that
period of time. See, e.g., Learn about the 30 Day Money Back
Guarantee: How to Return Your Firearm, Walther Arms, <a href="https://waltherarms.com/connect/guarantee#">https://waltherarms.com/connect/guarantee#</a> (last visited Apr. 4, 2024);
Retail Policies, Center Target Sports, <a href="https://centertargetsports.com/retail-range/">https://centertargetsports.com/retail-range/</a> (last visited Feb. 29, 2024)
(``When you purchase any gun from Center Target Sports, we guarantee
your satisfaction. Use your gun for up to 30 days and if for any
reason you're not happy with your purchase, return it to us within
30 days and receive a store credit for the FULL purchase price.'');
Warranty & Return Policy, Century Arms (Mar. 6, 2019), <a href="https://www.centuryarms.com/media/wysiwyg/Warranty_and_Return_v02162021.pdf">https://www.centuryarms.com/media/wysiwyg/Warranty_and_Return_v02162021.pdf</a>
(``Customer has 30 days to return surplus firearms, ammunition,
parts, and accessories for repair/replacement if the firearm does
not meet the advertised condition.''); I Love You PEW 30 Day Firearm
Guarantee, Alphadog Firearms, <a href="https://alphadogfirearms.com/i-love-you-pew/">https://alphadogfirearms.com/i-love-you-pew/</a> (last visited Feb. 29, 2024) (``Original purchaser has 30
calendar days to return any new firearm purchased for store
credit.''); Return Exceptions Policy, Big 5 Sporting Goods, <a href="https://www.big5sportinggoods.com/static/big5/pdfs/Customer-Service-RETURN-EXCEPTIONS-POLICY-d.pdf">https://www.big5sportinggoods.com/static/big5/pdfs/Customer-Service-RETURN-EXCEPTIONS-POLICY-d.pdf</a> (last visited Feb. 29, 2024) (``Firearm
purchases must be returned to the same store at which they were
purchased. No refunds or exchanges unless returned in the original
condition within thirty (30) days from the date of release.'');
Returns, Transfers & Consignments, DFW Gun Range & Academy, <a href="https://www.dfwgun.com/memberships/store-policies.html">https://www.dfwgun.com/memberships/store-policies.html</a> (last visited Feb.
29, 2024) (30-day return policy); Return Policy, RifleGear, <a href="https://www.riflegear.com/t-returns.aspx">https://www.riflegear.com/t-returns.aspx</a> (last visited Feb. 29, 2024) (30-
day return policy); Gun-Buyer Remorse Is a Thing of the Past,
Stoddard's Range and Guns, <a href="https://stoddardsguns.com/stoddards-commitment/">https://stoddardsguns.com/stoddards-commitment/</a> (last visited Feb. 29, 2024) (30-day return policy);
Palmetto State Armory's Hassle-Free Return Policy, AskHandle,
<a href="https://www.askhandle.com/blog/palmetto-state-armory-return-policy">https://www.askhandle.com/blog/palmetto-state-armory-return-policy</a>
(last visited Feb, 29, 2024) (30-day return policy); Instructions
for Returns/Repairs, Rock River Arms, <a href="https://www.rockriverarms.com/index.cfm?fuseaction=page.display&page_id=34">https://www.rockriverarms.com/index.cfm?fuseaction=page.display&page_id=34</a> (last visited Feb. 29,
2024) (30-day return policy); ``No Regrets'' Policy, Granite State
Indoor Range, <a href="https://www.granitestaterange.com/our-pro-shop/">https://www.granitestaterange.com/our-pro-shop/</a> (last
visited Apr. 4, 2024) (30-day return policy).
\82\ See, e.g., Carter, 203 F.3d at 189 & n.1 (defendant
admitted to willfully shipping and transporting 11 handguns in the
course of engaging in the business of dealing in firearms without a
license that were contained in their original boxes); Brenner, 481
F. App'x at 127 (defendant frequently referred to firearms as
``coming in'' and ``brand new''); United States v. Van Buren, 593
F.2d 125, 126 (9th Cir. 1979) (defendant's ``gun displays were
atypical of those of a collector because he exhibited many new
weapons, some in the manufacturers' boxes''); United States v.
Powell, 513 F.2d 1249, 1250 (8th Cir. 1975) (defendant acquired and
sold six ``new'' or ``like new'' shotguns over several months);
United States v. Posey, 501 F.2d 998, 1002 (6th Cir. 1974)
(defendant offered firearms for sale, some of them in their original
boxes); United States v. Day, 476 F.2d 562, 564, 567 (6th Cir. 1973)
(60 of the 96 guns to be sold by defendant were new handguns still
in the manufacturer's original packages).
\83\ See, e.g., Press Release, DOJ, FFL Sentenced for Selling
Guns to Unlicensed Dealers (May 27, 2022), <a href="https://www.justice.gov/usao-ndtx/pr/ffl-sentenced-selling-guns-unlicensed-dealers">https://www.justice.gov/usao-ndtx/pr/ffl-sentenced-selling-guns-unlicensed-dealers</a>
(defendant regularly sold large quantities of identical firearms to
unlicensed associates who sold them without a license); Shipley, 546
F. App'x at 453 (defendant sold mass-produced firearms of similar
make and model that were ``not likely to be part of a personal
collection'').
---------------------------------------------------------------------------
The presumption proposed under the fifth category listed above--
that a former licensee, or responsible person acting on behalf of such
former licensee, is engaged in the business when they sell or offer for
sale firearms that were in business inventory upon license
termination--recognizes that the licensee likely intended to
predominantly earn a profit from the repetitive purchase and resale of
those firearms, not to acquire the firearms as a ``personal
collection'' or otherwise as a personal firearm. Consistent with the
GCA's plain language under section 921(a)(21)(C), this presumption
recognizes that former licensees who thereafter intend to predominantly
earn a profit from selling firearms that they had previously purchased
for resale can still be ``engaging in the business'' after termination
of their license. The GCA does not authorize former licensees to
continue to be ``engaged in the business'' without a license even if
the firearms were purchased while the person had a license.
The final presumption proposed--that a former licensee (or
responsible person acting on behalf of the former licensee) is engaged
in the business when they sell or offer for sale firearms that were
transferred to the personal inventory of such former licensee or
responsible person prior to the time the license was terminated, unless
the firearms were received and transferred without any intent to
willfully evade the restrictions placed on licensees by chapter 44 of
title 18 and one year has passed since the transfer--is consistent with
18 U.S.C. 923(c) of the GCA, which deems firearms transferred from a
licensee's business inventory to their personal collection or otherwise
as a personal firearm as business inventory until one year after the
transfer.\84\ This provision indicates a congressional determination
that one year is a sufficient period for a former licensee to wait
before a firearm that is purchased for personal use can be considered
part of a personal collection or otherwise as a personal firearm, as
opposed to business inventory being resold for profit.
---------------------------------------------------------------------------
\84\ Even if one year has passed from the date of transfer,
business inventory transferred to a personal collection or otherwise
as a personal firearm of a former licensee (or responsible person
acting on behalf of that licensee) prior to termination of the
license cannot be treated as part of a personal collection or as a
personal firearm if the licensee received or transferred those
firearms with the intent to willfully evade the restrictions placed
upon licensees by the GCA (e.g., willful violations as cited in a
notice of license revocation or denial of renewal). This is because,
under section 923(c), any firearm acquired or disposed of with
intent to willfully evade the restrictions placed upon licensees by
the GCA is automatically business inventory. Therefore, because the
firearms are statutorily deemed to be business inventory under
either of these circumstances, a former licensee (or responsible
person acting on behalf of such licensee) who sells such firearms is
presumed to be engaged in the business, requiring a license.
---------------------------------------------------------------------------
In the NPRM, the Department noted that these presumptions may be
rebutted in an administrative or civil proceeding with reliable
evidence demonstrating that a person is not ``engaged in the business''
of dealing in firearms.\85\ If, for example, there is reliable evidence
that an individual purchased a few collectible firearms from a licensed
dealer where ``all sales are final'' and then resold those firearms
back to the licensee within 30 days because the purchaser was not
satisfied, the presumption that the unlicensed reseller is engaged in
the business (arising from the evidence of repetitive sales or offers
for sale of firearms within 30 days from purchase) may be rebutted.
[[Page 28980]]
Similarly, the presumption that a person who repetitively resells
firearms of the same make and model within one year of their purchase
is ``engaged in the business'' could be rebutted based on evidence that
the person is a collector who occasionally sells one specific kind and
type of curio or relic firearm to buy another one in better condition
to ``trade-up'' or enhance the seller's personal collection.\86\
Another example in which evidence may rebut the presumption would be
the occasional sale, loan, or trade of an almost-new firearm in its
original packaging to a family member for lawful purposes, such as for
their use in hunting, without the intent to earn a profit or to
circumvent the requirements placed on licensees.\87\
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\85\ An example of an administrative proceeding where rebuttable
evidence might be introduced would be where ATF denied a firearms
license application, pursuant to 18 U.S.C. 923(d)(1)(C) and (f)(2),
on the basis that the applicant was presumed under this rule to have
willfully engaged in the business of dealing in firearms without a
license. An example of a civil case would be an asset forfeiture
proceeding, brought in a district court pursuant to 18 U.S.C.
924(d)(1), on the basis that the seized firearms were intended to be
involved in willful conduct presumed to be engaging in the business
without a license under this rule.
\86\ See Palmieri, 21 F.3d at 1269 (``The fact finder must
determine whether the transactions constitute hobby-related sales or
engagement in the business of dealing from the nature of the sales
and in light of their circumstances.'').
\87\ See, e.g., Clark v. Scouffas, No. 99-C-4863, 2000 WL 91411,
at *3 (N.D. Ill. Jan. 19, 2000) (license applicant was not a
``dealer'' who was ``engaged in the business'' as defined under
section 921(a)(21)(C) where he only sold a total of three .38
Special pistols--two to himself, and one to his wife--without any
intent to profit).
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E. Definition of ``Personal Collection,'' ``Personal Collection of
Firearms,'' and ``Personal Firearms Collection''
The NPRM explained that the statutory definition of ``engaged in
the business'' excludes ``a person who makes occasional sales,
exchanges, or purchases of firearms for the enhancement of a personal
collection or for a hobby, or who sells all or part of his personal
collection of firearms.'' 18 U.S.C. 921(a)(21)(C). To clarify this
definitional exclusion, the proposed rule would: (1) add a single
definition for the terms ``personal collection,'' ``personal collection
of firearms,'' and ``personal firearms collection''; (2) explain how
those terms apply to licensees; and (3) make clear that licensees must
follow the verification and recordkeeping procedures in 27 CFR 478.94
and subpart H, rather than using ATF Form 4473, when they acquire
firearms from other licensees, including a sole proprietor who
transfers a firearm to their personal collection or otherwise as a
personal firearm in accordance with 27 CFR 478.125a.
Specifically, the NPRM proposed to define ``personal collection,''
``personal collection of firearms,'' and ``personal firearms
collection'' as ``personal firearms that a person accumulates for
study, comparison, exhibition, or for a hobby (e.g., noncommercial,
recreational activities for personal enjoyment such as hunting, or
skeet, target, or competition shooting).'' This reflects a common
definition of the terms ``collection'' and ``hobby.'' \88\ The phrase
``or for a hobby'' was adopted from 18 U.S.C. 921(a)(21)(C), which
excludes from the definition of ``engaged in the business'' firearms
acquired ``for'' a hobby. The NPRM also expressly excluded from the
definition of ``personal collection'' ``any firearm purchased for
resale or made with the predominant intent to earn a profit.'' 18
U.S.C. 921(a)(21)(C).
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\88\ See Webster's Third at 444, 1075, 1686 (defining the term
``personal'' to include ``of or relating to a particular person,''
``collection'' to include ``an assembly of objects or specimens for
the purposes of education, research, or interest'', and ``hobby'' as
``a specialized pursuit . . . that is outside one's regular
occupation and that one finds particularly interesting and enjoys
doing''); Personal, Merriam-Webster, <a href="https://www.merriam-webster.com/dictionary/personal">https://www.merriam-webster.com/dictionary/personal</a> (last visited Mar. 1, 2024)
(defining the term ``personal'' to include ``of, relating to, or
affecting a particular person''); Collection, Merriam-Webster,
<a href="https://www.merriam-webster.com/dictionary/collection">https://www.merriam-webster.com/dictionary/collection</a> (last visited
Mar. 1, 2024) (defining ``collection'' to include ``an accumulation
of objects gathered for study, comparison, or exhibition or as a
hobby''); Hobby, Merriam-Webster, <a href="https://www.merriam-webster.com/dictionary/hobby">https://www.merriam-webster.com/dictionary/hobby</a> (last visited Mar. 1, 2024) (defining ``hobby'' as
a ``pursuit outside one's regular occupation engaged in especially
for relaxation''); see also Idarecis, 164 F.3d 620, 1998 WL 716568,
at *4 (``There is no case authority to suggest that there is a
distinction between the definition of a collector and of a
[personal] collection in the statute.'').
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The NPRM further explained that, under the GCA, 18 U.S.C. 923(c),
and its implementing regulations, 27 CFR 478.125(e) and 478.125a, a
licensee who acquires firearms for a personal collection is subject to
certain additional requirements before the firearms can become part of
a ``personal collection.'' \89\ Accordingly, the proposed rule further
explained how that term would apply to firearms acquired by a licensee
(i.e., a person engaged in the business as a licensed manufacturer,
licensed importer, or licensed dealer under the GCA), by defining
``personal collection,'' ``personal collection of firearms,'' or
``personal firearms collection,'' when applied to licensees, to include
only firearms that were: (1) acquired or transferred without the intent
to willfully evade the restrictions placed upon licensees by chapter
44, title 18, United States Code; \90\ (2) recorded by the licensee as
an acquisition in the licensee's acquisition and disposition record in
accordance with 27 CFR 478.122(a), 478.123(a), or 478.125(e) (unless
acquired prior to licensure and not intended for sale); \91\ (3)
recorded as a disposition from the licensee's business inventory to
their personal collection in accordance with 27 CFR 478.122(a),
478.123(a), or 478.125(e); (4) stored separately from, and not
commingled with the business inventory, and appropriately identified as
``not for sale'' (e.g., by attaching a tag), if on the business
premises; \92\ and (5) maintained in such personal collection (whether
on or off the business premises) for at least one year from the date
the firearm was so transferred, in accordance with 18 U.S.C. 923(c) and
27 CFR 478.125a.\93\ These proposed parameters to define the term
``personal collection'' as applied to licensees reflect the statutory
and regulatory requirements for personal collections in 18 U.S.C.
923(c) and 27
[[Page 28981]]
CFR 478.122(a), 478.123(a), 478.125(e), and 478.125a.\94\ To implement
these changes, the rule also proposed to make conforming changes by
adding references in 27 CFR 478.125a to the provisions that relate to
the acquisition and disposition recordkeeping requirements for
importers and manufacturers.
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\89\ The GCA, 18 U.S.C. 923(c), and its implementing
regulations, also require that all firearms ``disposed of'' from a
licensee's personal collection, including firearms acquired before
the licensee became licensed, that are held for at least one year
and that are sold or otherwise disposed of, must be recorded as a
disposition in a personal bound book. See 18 U.S.C. 923(c); 27 CFR
478.125a(a)(4).
\90\ See ATF, May a Licensee Create a Personal Collection to
Avoid the Recordkeeping and NICS Background Check Requirements of
the GCA?, <a href="https://www.atf.gov/firearms/qa/may-licensee-create-personal-collection-avoid-recordkeeping-and-nics-background-check">https://www.atf.gov/firearms/qa/may-licensee-create-personal-collection-avoid-recordkeeping-and-nics-background-check</a>
(last reviewed July 15, 2020).
\91\ See ATF, Does a Licensee Have to Record Firearms Acquired
Prior to Obtaining the License in Their Acquisition and Disposition
Record?, <a href="https://www.atf.gov/firearms/qa/does-licensee-have-record-firearms-acquired-prior-obtaining-license-their-acquisition">https://www.atf.gov/firearms/qa/does-licensee-have-record-firearms-acquired-prior-obtaining-license-their-acquisition</a> (last
reviewed July 15, 2020); ATF, ATF Federal Firearms Regulations
Reference Guide, ATF P 5300.4, Q&A (F2) at 201 (2014) (``All
firearms acquired after obtaining a firearms license must be
recorded as an acquisition in the acquisition and disposition record
as business inventory.''); ATF, FFL Newsletter: Federal Firearms
Licensee Information Service 7 (Feb. 2011), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-february-2011/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-february-2011/download</a> (``There may be occasions where a firearms
dealer utilizes his license to acquire firearms for his personal
collection. Such firearms must be entered in his permanent
acquisition records and subsequently be recorded as a disposition to
himself in his private capacity.''); ATF, FFL Newsletter: Federal
Firearms Licensee Information Service 7 (Mar. 2006), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-march-2006/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-march-2006/download</a> (``[E]ven if a dealer acquires a
firearm from a licensee by completing an ATF Form 4473, the firearm
must be entered in the transferee dealer's records as an
acquisition.'').
\92\ See ATF, May a Licensee Store Personal Firearms at the
Business Premises?, <a href="https://www.atf.gov/firearms/qa/may-licensee-store-personal-firearms-business-premises">https://www.atf.gov/firearms/qa/may-licensee-store-personal-firearms-business-premises</a> (last reviewed July 15,
2020); ATF, FFL Newsletter: Federal Firearms Licensee Information
Service 7 (Feb. 2011), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-february-2011/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-february-2011/download</a>; ATF
Industry Circular 72-30, Identification of Personal Firearms on
Licensed Premises Not Offered for Sale (Oct. 10, 1972).
\93\ See ATF, May a Licensee Maintain a Personal Collection of
Firearms? How Can They Do So?, <a href="https://www.atf.gov/firearms/qa/may-licensee-maintain-personal-collection-firearms-how-can-they-do-so">https://www.atf.gov/firearms/qa/may-licensee-maintain-personal-collection-firearms-how-can-they-do-so</a>
(last reviewed July 15, 2020).
\94\ The existing regulations, 27 CFR 478.125(e) and 478.125a--
which require licensees to record the purchase of all firearms in
their business bound books, record the transfer of firearms to their
personal collection, and demonstrate that personal firearms obtained
before licensing have been held at least one year prior to their
disposition as personal firearms--were upheld by the Fourth Circuit
in National Rifle Ass'n, 914 F.2d at 482-83.
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F. Definition of ``Responsible Person''
The NPRM also proposed to add a regulatory definition of the term
``responsible person'' in 27 CFR 478.11, to mean ``[a]ny individual
possessing, directly or indirectly, the power to direct or cause the
direction of the management and policies of a sole proprietorship,
corporation, company, partnership, or association, insofar as they
pertain to firearms.'' This definition comes from 18 U.S.C.
923(d)(1)(B) and has long been reflected on the application for license
(Form 7) and other ATF publications since enactment of a similar
definition in the Safe Explosives Act in 2002.\95\ This definition
would exclude, for example, store clerks or cashiers who cannot make
management or policy decisions with respect to firearms (e.g., what
company or store-wide policies and controls to adopt, which firearms
are bought and sold by the business, and who is hired to buy and sell
the firearms), even if their duties include buying or selling firearms
for the business.
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\95\ See 18 U.S.C. 841(s); Application for Federal Firearms
License, ATF Form 7, Definition 3 (5300.12) (Oct. 2020); Gilbert v.
ATF, 306 F. Supp. 3d 776, 781 (D. Md. 2018); Gossard v. Fronczak,
206 F. Supp. 3d 1053, 1064-65 (D. Md. 2016), aff'd, 701 F. App'x 266
(4th Cir. 2017); ATF, FFL Newsletter: Federal Firearms Licensee
Information Service 6 (Sept. 2011), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-september-2011/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-september-2011/download</a>.
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G. Definition of ``Predominantly Earn a Profit''
The NPRM also explained that the BSCA broadened the definition of
``engaged in the business'' as a dealer by substituting ``to
predominantly earn a profit'' for ``with the principal objective of
livelihood or profit.'' 18 U.S.C. 921(a)(21)(C). It also defined the
term ``to predominantly earn a profit.'' 18 U.S.C. 921(a)(22). The NPRM
proposed to incorporate those statutory changes, as discussed above.
The NPRM proposed to further implement the BSCA's amendments by:
(1) clarifying that the ``proof of profit'' proviso--i.e., the BSCA's
provision that ``proof of profit shall not be required as to a person
who engages in the regular and repetitive purchase and disposition of
firearms for criminal purposes or terrorism''--also excludes intent to
profit, thus making clear that it is not necessary for the Federal
Government to prove that a person intended to make a profit if the
person was dealing in firearms for criminal purposes or terrorism; (2)
clarifying that a person may have the predominant intent to profit even
if the person does not actually obtain pecuniary gain from selling or
disposing of firearms; and (3) establishing a presumption in civil and
administrative proceedings that certain conduct demonstrates the
requisite intent to ``predominantly earn a profit,'' absent reliable
evidence to the contrary.
These proposed regulatory amendments are consistent with the plain
language of the GCA. Neither the pre-BSCA definition of ``with the
principal objective of livelihood and profit'' nor the post-BSCA
definition of ``to predominantly earn a profit'' requires the
Government to prove that the defendant actually profited from firearms
transactions. See 18 U.S.C. 921(a)(22), (a)(23) (referring to ``the
intent underlying the sale or disposition of firearms''); Focia, 869
F.3d at 1282 (``The exact percentage of income obtained through the
sales is not the test; rather, . . . the statute focuses on the
defendant's motivation in engaging in the sales.'').\96\
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\96\ See also Valdes, 681 F. App'x at 877 (the government does
not need to show that the defendant ``necessarily made a profit from
dealing'' (quoting Wilmoth, 636 F.2d at 125)); United States v.
Mastro, 570 F. Supp. 1388, 1391 (E.D. Pa. 1983) (``[T]he government
need not show that defendant made or expected to make a profit.''
(citing cases)); United States v. Shirling, 572 F.2d 532, 534 (5th
Cir. 1978) (``The statute is not aimed narrowly at those who profit
from the sale of firearms, but rather broadly at those who hold
themselves out as a source of firearms.''); cf. King, 735 F.3d at
1107 n.8 (section 922(a)(1)(A) does not require an actual sale of
firearms).
---------------------------------------------------------------------------
ATF's experience also establishes that certain conduct related to
the sale or disposition of firearms presumptively demonstrates a
primary motivation to earn a profit. In addition to conducting criminal
investigations of unlicensed firearms businesses under 18 U.S.C.
922(a)(1)(A), ATF has for many decades observed through qualification
and compliance inspections how dealers who sell or dispose of firearms
demonstrate a predominant intent to obtain pecuniary gain, as opposed
to other intents, such as improving or liquidating a personal
collection.
Based on this decades-long body of experience, the proposed rule
provided that, absent reliable evidence to the contrary, a person would
be presumed to have the intent to ``predominantly earn a profit'' when
the person: (1) advertises, markets, or otherwise promotes a firearms
business (e.g., advertises or posts firearms for sale, including on any
website; establishes a website for selling or offering for sale their
firearms; makes available business cards; or tags firearms with sales
prices), regardless of whether the person incurs expenses or only
promotes the business informally; \97\ (2) purchases, rents, or
otherwise secures or sets aside permanent or temporary physical space
to display or store firearms they offer for sale, including part or all
of a business premises, table or space at a gun show, or display case;
\98\ (3) makes or maintains records, in any form, to document, track,
or calculate profits and losses from firearms purchases and sales; \99\
(4) purchases or otherwise secures merchant services as a business
(e.g., credit card transaction services, digital wallet for business)
through
[[Page 28982]]
which the person makes or offers to make payments for firearms
transactions; \100\ (5) formally or informally purchases, hires, or
otherwise secures business security services (e.g., a central station-
monitored security system registered to a business \101\ or guards for
security \102\) to protect business assets or transactions that include
firearms; (6) formally or informally establishes a business entity,
trade name, or online business account, including an account using a
business name on a social media or other website, through which the
person makes or offers to make firearms transactions; \103\ (7) secures
or applies for a State or local business license to purchase for resale
or to sell merchandise that includes firearms; or (8) purchases a
business insurance policy, including any riders that cover firearms
inventory.\104\ Any of these firearms-business-related activities
justifies a rebuttable presumption that the person has the requisite
intent to predominantly earn a profit from reselling or disposing of
firearms.
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\97\ See, e.g., United States v. Caldwell, 790 F. App'x 797, 799
(7th Cir. 2019) (defendant placed 192 advertisements on a website
devoted to gun sales); Valdes, 681 F. App'x at 878 (defendant handed
out business card); United States v. Pegg, 542 F. App'x 328 (5th
Cir. 2013) (defendant sometimes advertised firearms for sale in the
local newspaper); United States v. Crudgington, 469 F. App'x 823,
824 (11th Cir. 2012) (defendant advertised firearms for sale in
local papers, and tagged them with prices); United States v. Dettra,
No. 99-3667, 2000 WL 1872046, at *2 (6th Cir. Dec. 15, 2000)
(``Dettra's use of printed business cards and his acceptance of
credit payment provide further reason to infer that he was
conducting his firearms activity as a profitable trade or business,
and not merely as a hobby.''); United States v. Norman, No. 4-
10CR00059-JLH, 2011 WL 2678821, at *3 (E.D. Ark. 2011) (defendant
placed advertisements in local newspaper and on a website).
\98\ See, e.g., United States v. Wilkening, 485 F.2d 234, 235
(8th Cir. 1973) (defendant set up a glass display case and displayed
for sale numerous ordinary long guns and handguns that were not
curios or relics); United States v. Jackson, 352 F. Supp. 672, 676
(S.D. Ohio 1972), aff'd, 480 F.2d 927 (6th Cir. 1973) (defendant set
up glass display case, displaying numerous long guns and handguns
for sale that were not curios or relics); Press Release, DOJ,
Asheville Man Sentenced for Dealing Firearms Without a License (Jan.
20, 2017), <a href="https://www.justice.gov/usao-wdnc/pr/asheville-man-sentenced-dealing-firearms-without-license-0">https://www.justice.gov/usao-wdnc/pr/asheville-man-sentenced-dealing-firearms-without-license-0</a> (defendant sold
firearms without a license from his military surplus store).
\99\ See, e.g., United States v. White, 175 F. App'x 941, 942
(9th Cir. 2006) (``Appellant also created a list of all the firearms
he remembers selling and the person to whom he sold the firearm.'');
Dettra, 2000 WL 1872046, at *2 (``Dettra carefully recorded the cost
of each firearm he acquired, enabling him to later determine the
amount needed to sell the item in a profitable manner.''); United
States v. Angelini, 607 F.2d 1305, 1307 (9th Cir. 1979) (defendant
kept sales slips or invoices).
\100\ See, e.g., King, 735 F.3d at 1106-07 (defendant
``incorporated and funded a firearms business `on behalf' of a
friend whose American citizenship enabled business to obtain Federal
firearms license'' and then ``misappropriated company's business
account, using falsified documentation to set up credit accounts and
order firearms from manufacturers and wholesalers''); Dettra, 2000
WL 1872046, at *2 (``Dettra's . . . acceptance of credit payment
provide[s] further reason to infer that he was conducting his
firearms activity as a profitable trade or business, and not merely
as a hobby.'').
\101\ Numerous jurisdictions require all persons with alarms or
security systems designed to seek a police response to be registered
with or obtain a permit from local police and pay the requisite fee.
See, e.g., Albemarle County (Virginia) Code sec. 12-102(A);
Arlington County (Virginia) Code sec. 33-10(A); Cincinnati (Ohio)
City Ord. Ch. 807-1-A4 (2); City of Coronado (California) Code sec.
40.42.050; Irvine (California) Code sec. 4-19-105; Kansas City
(Missouri) Code sec. 50-333(a); Larimer County (Colorado) Security
Alarm Ord. 09142010O001 sec. 3(A); Lincoln (Nebraska) Mun. Code sec.
5.56.030(a); Los Angeles (California) Mun. Code sec. 103.206(b);
Loudoun County (Virginia) Code sec. 655.03(a); Mobile (Alabama) Code
sec. 39-62(g)(1); Montgomery County (Maryland) Code sec. 3A-3;
Prince William County (Virginia) Code sec. 2.5.25(a); Rio Rancho
(New Mexico) Mun. Code sec. 97.04(A); Scottsdale (Arizona) Code sec.
3-10(a); Tempe (Arizona) Code sec. 22-76(a); Washington County
(Oregon) Code sec. 8.12.040; West Palm Beach (Florida) Code sec. 46-
32(a); Wilmington (Delaware) Code sec. 10-38(c); Woburn
(Massachusetts) Code sec. 8-31. Due to the value of the inventory
and assets they protect, for-profit businesses are more likely to
maintain, register, and pay for these types of alarms rather than
individuals seeking to protect personal property.
\102\ See, e.g., United States v. De La Paz-Rentas, 613 F.3d 18,
22-23 (1st Cir. 2010) (defendant was hired as bodyguard for
protection in an unlawful firearms transaction).
\103\ See, e.g., United States v. Gray, 470 F. App'x at 469
(defendant sold firearms through his sporting goods store,
advertised his business using signs and flyers, and displayed guns
for sale, some with tags).
\104\ See, e.g., United States v. Kish, 424 F. App'x 398, 404
(6th Cir. 2011) (defendant could only have 200 firearms on display
because of insurance policy limitations).
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The NPRM noted that these rebuttable presumptions concerning an
intent ``to predominantly earn a profit'' are independent of the set of
presumptions described above regarding conduct that presumptively shows
a person is ``engaged in the business.'' This second set of
presumptions that addresses only intent ``to predominantly earn a
profit'' would be used to independently establish the requisite intent
to profit in a particular proceeding. As with the ``engaged in the
business'' presumptions, the activities set forth in these intent
presumptions would not be exhaustive of the conduct that may show that,
or be considered in determining whether, a person actually has the
requisite intent ``to predominantly earn a profit.'' There are many
other fact patterns that would not fall within the specific conduct
that presumptively requires a license under this rule but that reveal
one or more preparatory steps that presumptively demonstrate an intent
to predominantly earn a profit from firearms transactions. Again, none
of these presumptions would apply to criminal prosecutions, but could
be useful to courts in criminal cases, for example, to inform
appropriate jury instructions regarding permissible inferences. These
presumptions would be supported by the Department's investigative and
regulatory efforts and experience as well as conduct that the courts
have relied upon in determining whether a person was required to be
licensed as a dealer in firearms even before the BSCA expanded the
definition.
H. Disposition of Business Inventory After Termination of License
The NPRM next explained that one public safety issue that ATF has
encountered over the years relates to former licensees who have
liquidated their business inventory of firearms without performing
background checks or maintaining required records after their license
was revoked, denied renewal, or otherwise terminated (e.g., license
expiration or surrender of license). Some former licensees have
transferred their business inventory of firearms to a ``personal
collection'' and then sold them without performing background checks or
recordkeeping.\105\ Sometimes former licensees even continue to acquire
more firearms for resale (``restocking'') after license termination.
These activities have resulted in numerous firearms being sold without
background checks by former licensees (including those whose licenses
have been revoked or denied due to willful violations of the GCA) to
potentially prohibited persons without any ability to trace those
firearms if later used in crime.\106\
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\105\ See, e.g., Annie Linskey, Closed Store Is a Source of
Guns, Baltimore Sun (Apr. 15, 2008), <a href="https://www.baltimoresun.com/news/bs-xpm-2008-04-15-0804150118-story.html">https://www.baltimoresun.com/news/bs-xpm-2008-04-15-0804150118-story.html</a> (after revocation of
license, a dealer transferred around 700 guns to his ``personal
collection'' and continued to sell them without recordkeeping). The
problem of licensees liquidating their business inventory of
firearms as firearms from their ``personal collections'' without
background checks or recordkeeping has been referred to by some
advocacy groups and Members of Congress as the ``fire-sale
loophole.'' See Dan McCue, Booker Bill Takes Aim at Gun Fire Sale
Loophole, The Well News (Sept. 9, 2022), <a href="https://www.thewellnews.com/guns/booker-bill-takes-aim-at-gun-fire-sale-loophole/">https://www.thewellnews.com/guns/booker-bill-takes-aim-at-gun-fire-sale-loophole/</a>; Shira Toeplitz, Ackerman Proposes Gun-Control Bill to
Close `Firesale Loophole', Politico: On Congress Blog (Jan. 12,
2011), <a href="https://www.politico.com/blogs/on-congress/2011/01/ackerman-proposes-gun-control-bill-to-close-firesale-loophole-032289">https://www.politico.com/blogs/on-congress/2011/01/ackerman-proposes-gun-control-bill-to-close-firesale-loophole-032289</a>.
\106\ See, e.g., Dettra, 2000 WL 1872046, at *2 (defendant
continued to deal in firearms after license revocation); Press
Release, DOJ, Gunsmoke Gun Shop Owner and Former Discovery Channel
Star Indicted and Arrested for Conspiracy, Dealing in Firearms
without a License and Tax Related Charges (Feb. 11, 2016), <a href="https://www.justice.gov/opa/pr/gunsmoke-gun-shop-owner-and-former-discovery-channel-star-indicted-and-arrested-conspiracy">https://www.justice.gov/opa/pr/gunsmoke-gun-shop-owner-and-former-discovery-channel-star-indicted-and-arrested-conspiracy</a> (defendant continued
to deal in firearms at a different address after he surrendered his
FFL due to his violations of the Federal firearms laws and
regulations); Kish, 424 F. App'x at 405 (defendant continued to sell
firearms after revocation of license); Gilbert v. Bangs, 813 F.
Supp. 2d 669, 672 (D. Md. 2011), aff'd 481 F. App'x 52 (4th Cir.
2012) (license denied to applicant who willfully engaged in the
business after license revocation); ATF Letter to AUSA (Mar. 13,
1998) (advising that seized firearms offered for sale were not
deemed to be part of a ``personal collection'' after surrender of
license).
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The NPRM proposed to revise the regulation's sections on
discontinuing business, 27 CFR 478.57 and 478.78, to clarify how the
prohibitions on engaging in the business of dealing in firearms without
a license in 18 U.S.C 922(a)(1)(A) and 923(a) apply with respect to the
sale of firearms that remain in the possession of a former licensee (or
a responsible person of the former licensee) as business inventory at
the time the license is terminated. Firearms that were in the business
inventory of a former licensee at the time the license was terminated
(i.e., license revocation, denial of license renewal, license
expiration, or surrender of license) and that remain in the possession
of the licensee (or a responsible person acting on behalf of the former
licensee) are not part of a ``personal collection.'' While 18 U.S.C.
921(a)(21)(C) allows an unlicensed person to ``sell all or part of his
personal collection'' without being considered ``engaged in the
business,'' in this context, these firearms were purchased
[[Page 28983]]
by the former licensee as business inventory and were not accumulated
by that person for study, comparison, exhibition, or for a hobby.
Accordingly, a former licensee who sells business inventory after their
license is terminated could be unlawfully engaging in the business of
dealing in firearms without a license.
Under the proposals to revise 27 CFR 478.57 (discontinuance of
business) and 478.78 (operations by licensee after notice), once a
license has been terminated (i.e., license revocation, denial of
license renewal, license expiration, or surrender of license), the
former licensee would have 30 days, or such additional period
designated by the Director for good cause, to either: (1) liquidate any
remaining business inventory by selling or otherwise disposing of the
firearms to a licensed importer, licensed manufacturer, or licensed
dealer for sale, auction, or pawn redemption in accordance with part
478 of the regulations; \107\ or (2) transfer the remaining business
inventory to the ``personal inventory of the former licensee'' (or a
responsible person of the former licensee) provided the recipient is
not prohibited by law from receiving or possessing firearms. The term
``personal inventory of the former licensee'' was proposed to clarify
that such firearms are not part of a ``personal collection'' within the
meaning of 18 U.S.C. 921(a)(21)(C). Except for the sale of remaining
inventory to a licensee within the 30-day period (or designated
additional period), a former licensee (or responsible person of such
licensee) who resells any such inventory, including business inventory
transferred to ``personal inventory,'' would be subject to the same
presumptions in 27 CFR 478.11 (definition of ``engaged in the
business'' as a dealer other than a gunsmith or pawnbroker) that apply
to a person who repetitively purchased those firearms for the purpose
of resale.
---------------------------------------------------------------------------
\107\ Consistent with its dictionary definition, the term
``liquidate'' in this context means to sell or otherwise dispose of
a firearms inventory without acquiring additional firearms for the
inventory (i.e., ``restocking''). See Liquidate, Merriam-Webster,
<a href="https://www.merriam-webster.com/dictionary/liquidate">https://www.merriam-webster.com/dictionary/liquidate</a> (last visited
Mar. 4, 2024) (defining ``liquidate'' as ``to convert (assets) into
cash''); see also, e.g., Brenner, 481 F. App'x at 127 (defendant
former licensee was not liquidating a personal collection where all
of the indictment-charged firearms were acquired after his license
had not been renewed).
---------------------------------------------------------------------------
The 30-day period from license termination for a former licensee to
transfer the firearms either to another licensee or to a personal
collection parallels the period of time for record disposition after
license termination in the GCA, 18 U.S.C. 923(g)(4), and is a
reasonable period for that person to wind down operations after
discontinuance of business without acquiring new firearms.\108\ That
period of liquidation was proposed to be extendable by the Director for
good cause, such as to allow pawn redemptions if required by State,
local, or Tribal law.
---------------------------------------------------------------------------
\108\ See also 27 CFR 478.57 (requiring the owner of a
discontinued or succeeded business to notify ATF of such
discontinuance or succession within 30 days); 27 CFR 478.127
(requiring discontinued businesses to turn in records within 30
days).
---------------------------------------------------------------------------
Also, the NPRM proposed to make clear in the definition of
``personal collection'' in 27 CFR 478.11 that firearms transferred by a
former licensee to a personal collection prior to the license
termination would not be considered part of a personal collection
unless one year had passed from the date the firearm was transferred
into the personal collection before the license was terminated. This
proposal would give effect to 18 U.S.C. 923(c), which requires that all
firearms acquired by a licensee be maintained as part of a personal
collection for a period of at least one year before they lose their
status as business inventory. Former licensees (or responsible persons)
who sell business inventory within one year after transfer to a
personal collection would be presumed to be engaging in the business of
dealing in those firearms because the firearms are not yet considered
part of a ``personal collection.'' See Sec. 478.13(b)(5).
Moreover, under the proposed rule, a former licensee would not be
permitted to continue to engage in the business of importing,
manufacturing, or dealing in firearms by importing or manufacturing
additional firearms for purposes of sale or distribution, or purchasing
additional firearms for resale (i.e., ``restocking'') without a
license. Therefore, a former licensee (or responsible person) would be
subject to the same presumptions in 27 CFR 478.11 (definition of
``engaged in the business'' as a dealer other than a gunsmith or
pawnbroker) that apply to persons who sell firearms that were
repetitively purchased with the predominant intent to earn a profit and
any sales by such a person will be closely scrutinized by the
Department on a case-by-case basis.
I. Transfer of Firearms Between FFLs and Form 4473
Finally, to ensure the traceability of all firearms acquired by
licensees from other licensees, the NPRM proposed to make clear that
licensees cannot satisfy their obligations under 18 U.S.C. 923(g)(1)(A)
by completing a Form 4473 when selling or otherwise disposing of
firearms to another licensed importer, licensed manufacturer, or
licensed dealer, or disposing of a curio or relic to a licensed
collector, including a sole proprietor licensee who transfers the
firearm to their personal collection or otherwise as a personal firearm
in accordance with 27 CFR 478.125a.\109\ Form 4473 was not intended for
use by licensees when transferring firearms to other licensees or by a
sole proprietor transferring to their personal collection or otherwise
as a personal firearm.
---------------------------------------------------------------------------
\109\ See ATF, FFL Newsletter: Federal Firearms Licensee
Information Service 7 (Mar. 2006), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-march-2006/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-march-2006/download</a> (``A dealer who purchases a firearm from another licensee
should advise the transferor licensee of his or her licensed status
so the transferor licensee's records may accurately reflect that
this is a transaction between licensees. An ATF Form 4473 should not
be completed for such a transaction, because this form is used only
for a disposition to a nonlicensee.'').
---------------------------------------------------------------------------
Pursuant to 18 U.S.C. 926(a)(1) and 27 CFR 478.94, 478.122(b),
478.123(b), and 478.125(e), when a licensee transfers a firearm to
another licensee, the transferor must first verify the recipient's
identity and license status by examining a certified copy of the
recipient's license and recording the transfer as a disposition to that
licensee in the bound book record. In turn, the recipient licensee
would record the receipt as an acquisition in their bound book record.
See 27 CFR part 478, subpart H. The NPRM explained that if a recipient
licensee were to complete a Form 4473 for the purchase of a firearm,
but not record that receipt in their bound book record, asserting it is
a ``personal firearm,'' then tracing efforts pursuant to the GCA could
be hampered if the firearm was later used in a crime.
However, this clarification that FFLs may not satisfy their
obligations by completing a Form 4473 to transfer firearms between
themselves would not include dispositions by a licensed legal entity
such as a corporation, company (to include a limited liability
company), or partnership, to the personal collection of a responsible
person of such an entity. This is because, when a responsible person
acquires a firearm for their personal collection from the business
entity holding the license, they are not acting on behalf of the
licensee, even if the entity in which they are employed holds a Federal
firearms license.\110\ Such an entity, including a
[[Page 28984]]
corporation, company, or partnership, would therefore have to use a
Form 4473, NICS check, and disposition record entry when transferring a
firearm to one of its individual officers (or partners, in the case of
a partnership, or members, in the case of a limited liability company)
for their personal use.\111\
---------------------------------------------------------------------------
\110\ See ATF Ruling 2010-1, Temporary Assignment of a Firearm
by an FFL to an Unlicensed Employee (May 20, 2010), <a href="https://www.atf.gov/firearms/docs/ruling/2010-1-temporary-assignment-firearm-ffl-unlicensed-employee/download">https://www.atf.gov/firearms/docs/ruling/2010-1-temporary-assignment-firearm-ffl-unlicensed-employee/download</a> (permanently assigning a
firearm to a specific employee for personal use is considered a
``transfer'' that would trigger the recordkeeping and NICS
background check requirements).
\111\ See ATF, Does an Officer or Employee of an Entity That
Holds a Federal Firearms License, Such as a Corporation, Have to
Undergo a NICS Check When Acquiring a Firearm for Their Own Personal
Collection?, <a href="https://www.atf.gov/firearms/qa/does-officer-or-employee-entity-holds-federal-firearms-license-such-corporation-have">https://www.atf.gov/firearms/qa/does-officer-or-employee-entity-holds-federal-firearms-license-such-corporation-have</a>
(last reviewed May 22, 2020); ATF, 2 FFL Newsletter: Federal
Firearms Licensee Information Service 4 (Sept. 2013), <a href="https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-september-2013-volume-2/download">https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-september-2013-volume-2/download</a>.
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IV. Analysis of Comments and Department Responses
Subsections in Section IV
A. Issues Raised in Support of the Rule
B. Issues Raised in Opposition to the Rule
C. Concerns With Specific Proposed Provisions
D. Concerns With the Economic Analysis
In response to the NPRM, ATF received nearly 388,000 comments. Of
these, there were nearly 258,000 comments that expressed support for
the proposed rule, or approximately two thirds of the total number of
comments. Of these, over 252,000 (or approximately 98 percent) were
submitted by individuals as form letters, i.e., identical text that is
often supplied by organizations or found online and recommended to be
submitted to the agency as a comment.\112\ There were nearly 99,000
comments opposed to the rule, or approximately 26 percent of the total
number of comments, of which over 80,000 (or approximately 81 percent)
were submitted as form letters.\113\ The commenters' grounds for
support and opposition, along with specific concerns and suggestions,
are discussed below.
---------------------------------------------------------------------------
\112\ There were four form letter campaigns in support of the
rule and five form letter campaigns in opposition to the rule.
Altogether, form letters totaled 332,000 comments, or about 86
percent. The vast majority of these form letter submissions included
the name and city/state of the commenter. However, thousands also
included personal stories, information, and concerns in addition to
the form letter text. For example, at least one of these form
letters had more than 1,000 variations (identified by a text
analytics program and subsequent manual review) due to commenter
additions and changes.
\113\ In addition to the number of comments in support or in
opposition to the rule, for about 1,000 comments, the commenters'
positions could not be determined. Another nearly 30,000 comments
were identified by a text analytics program as duplicate
submissions, some in support and some in opposition to the
rulemaking.
---------------------------------------------------------------------------
ATF also received some comments and recommendations on issues that
are outside the scope of this rulemaking, such as comments asking ATF
to implement provisions of the BSCA other than the definition of
``engaged in the business,'' \114\ and comments not addressing issues
presented in the proposed rule. Comments and recommendations that were
outside the scope of this rulemaking, or received after the comment
period deadline, are not addressed in this final rule.\115\
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\114\ The Department is incorporating other firearm provisions
of the BSCA into ATF regulations through a separate rulemaking, a
direct final rule entitled ``Bipartisan Safer Communities Act
Conforming Regulations.''
\115\ See Thompson v. Clark, 741 F.2d 401, 408 (D.C. Cir. 1984)
(``[The Administrative Procedure Act] has never been interpreted to
require the agency to respond to every comment, or to analyze every
issue or alternative raised by the comments, no matter how
insubstantial.''); cf. Home Box Off., Inc. v. FCC, 567 F.2d 9, 35
n.58 (D.C. Cir. 1977) (``[O]nly comments which, if true, raise
points relevant to the agency's decision and which, if adopted,
would require a change in an agency's proposed rule cast doubt on
the reasonableness of a position taken by the agency.'').
---------------------------------------------------------------------------
A. Issues Raised in Support of the Rule
As noted, nearly 258,000 commenters expressed support for the NPRM,
including through form letters submitted as part of mass mail
campaigns. The majority provided specific reasons why they supported
the proposed rule. ATF received supporting comments from a wide variety
of individuals and organizations, such as multiple city and State
officials, including almost half of the States' attorneys general;
Members of Congress; \116\ teachers and teacher organizations; doctors,
national medical organizations, and hospitals; victim advocate
organizations; clergy and religious organizations; firearm owners;
student and parent organizations; military veterans and active duty
members; persons with law enforcement backgrounds; and various firearm
control advocacy organizations, among many others. As discussed below,
numerous commenters raised particular reasons they consider the rule
necessary, as well as suggestions regarding the Department's proposed
amendments to ATF regulations.
---------------------------------------------------------------------------
\116\ ATF received two letters from Members of the United States
House of Representatives in support of the rule, one dated December
1, 2023, with 149 signatories, and another dated December 7, 2023,
with seven signatories. ATF received one letter in support from
Members of the United States Senate, dated November 30, 2023, with
17 signatories.
---------------------------------------------------------------------------
1. General Support for the Rule
Comments Received
Commenters supported the rule for a wide variety of reasons. The
vast majority of supportive commenters expressed overall relief that
this rule was forthcoming, were in support of the provisions as at
least a beginning toward needed increases in public safety, and
indicated that the rule was well designed. For example, one commenter
stated, ``I wholeheartedly support the proposed amendments,'' while
another added, ``I am thrilled that the ATF is taking action to tighten
background checks.'' Another commenter said, ``[w]ow. What a well
thought out and thorough set of rules . . . . I support the rules set
out as written.'' A fourth commenter, an organization, said, ``[i]t is
important to note that the various parts of the Proposed Rule are
carefully integrated and work together to bring clarity, balance, and
enforceability to the GCA's implementing regulations after BSCA amended
the GCA--and we urge ATF to preserve each and every provision through
to final publication.''
Those who commented about their public safety concerns added that
this rule would help reduce gun violence, prevent prohibited persons
from obtaining firearms, make communities safer, and save lives of both
private citizens and police personnel, all of which they considered
essential. The overall sentiment, as succinctly summed up in one of the
form letters submitted by many thousands in support of the regulation,
was, ``we must do what we can to stop gun violence.'' One commenter
stated that moving beyond guidance to rulemaking is ``absolutely
essential'' to ensure those selling firearms for profit are conducting
background checks that are essential for public safety. One veteran and
gun owner stated, ``I have great respect for the challenging but
important role the [ATF] plays to ensure firearms are properly sold to
and remain in the hands of owners who can both legally and safely own a
firearm. Public Safety is paramount for me and will always supersede
any perceived infringement on my Second Amendment Rights.'' Another
commenter stated that numerous avenues must be taken to help protect
Americans and emphasized that the number of mass shootings, suicides by
gun, domestic violence deaths by firearms, and all the other shooting
deaths ``are out of control, and appalling.'' Many other commenters
also expressed their concern for public safety, for keeping prohibited
persons from having firearms, and the resulting need for this rule,
stating for example,
[[Page 28985]]
``[a]lthough no single action will eliminate gun violence, this rule,
which will have an especial impact on reducing gun access to those who
are most interested in using it for ill, is essential to saving lives
in our country.''
Many of the commenters believed that the proposed rule would
increase public safety. One commenter stated, for example, that
``broadening the language [as Congress did in the statute] and
strengthening this particular regulation will help to serve as a strong
foundation for potential reforms in the future.'' Numerous other
commenters stated that they considered the rule's provisions to be
necessary, but only modest or starting steps toward much-needed public
safety measures. For example, one commenter stated, ``[t]he standards
in the proposed [rule] are such a modest beginning to the action needed
to eliminate gun violence in our society.'' A further commenter added,
``if [the rule] could save even one life, wouldn't that be worth it?
Please do not let another opportunity pass to do something to make our
country safer!''
Military veteran groups in support of gun safety stressed that
veterans' unique and valuable understanding of guns comes from the
three basic pillars of military gun culture: (1) training, (2) safety,
and (3) accountability--concepts they said are often lacking in
civilian gun culture and laws. They added that this rule will keep guns
out of the hands of dangerous individuals by ensuring that those
prohibited by Federal law from purchasing firearms cannot use gun shows
or internet sites to avoid our nation's background check laws--people
who could be a danger not just to others, but to themselves.
Additionally, these veteran groups pointed out that veterans are 2.3
times more likely to die by suicide, and 71 percent of veteran suicides
are by gun (compared to about half of nonveteran suicides).
Furthermore, they said, guns are 90 percent effective in causing a
death by suicide, while all other lethal means combined are less than 5
percent effective. They concluded, ``[t]his rule will save veterans
lives; but it must be done now.''
Healthcare and physicians' organizations called gun violence a
public health epidemic and urged that ATF issue the rule because it
would reduce or prevent firearm-related injuries and death. Several
teacher organizations and religious organizations of different
denominations expressed similar views, as did multiple parent and
student-led organizations. One commenter stated, ``Gun violence is
among our nation's most significant public health problems. Indeed, gun
violence is the leading cause of death of children and teens. The
impact of gun violence is not only death and injury, but also the long-
term psychological toll that gun-related incidents inflict on those who
survive shootings, as well as on the friends and family members of the
injured, killed or impacted.'' They added that the proposed rule is
vital and must be finalized. One commenter summarized, ``[t]his ruling
can help to address the horrific epidemic of gun violence in this
country.'' Another commenter agreed, observing that ``[g]un violence
needs to be treated as the public health issue that it is. We owe our
children a safe environment in schools as well as places of worship,
stores and other public spaces.''
Department Response
The Department acknowledges the commenters' support and agrees that
the final rule will increase public safety, as further explained below.
See Section IV.A.6 and Department Response in Section IV.B.2 of this
preamble.
2. Changes Are Consistent With Law
Comments Received
A number of commenters believed the proposed rule's approach was
fair and consistent with current law. For example, one commenter stated
that the ``proposed rule balances regulatory oversight and individual
rights'' and ``ensures that responsible gun enthusiasts can engage in
legal sales without unnecessary burdens while addressing concerns
related to unlicensed firearms dealing.'' Several other commenters
stated that promulgating this rule would not be forcing new law onto
people and that the rule falls in line with the new gun laws that have
already been established. As another commenter added, under the
proposed rule, gun sellers will be no more exposed to criminal
liability than they are currently for engaging in unlicensed business
dealings; ``they will just have a much clearer sense of what conduct
does and does not fall within that prohibition.''
Some commenters said the current process for acquiring firearms
from licensed dealers is working, is not burdensome, and should be
applied more broadly. For example, one gun owner commented that she
could ``attest to how fast a background check can take after completing
an online sale and then going to pick up the gun through a local
dealer'' and that ``[n]o one is being inconvenienced by doing a
[background] check.'' A sport trap shooter agreed, commenting that, ``I
don't understand why there is something wrong with [this] process in
the eyes of the [National Rifle Association] and others.'' Another
commenter added that this rule still easily allows law-abiding people
to obtain a gun if they go through the appropriate process. Some State
attorneys general agreed, specifically mentioning that ATF's
``predominantly earn a profit'' presumptions are consistent with
commercial, for-profit enterprises and are inconsistent with ``other
intents, such as improving or liquidating a personal firearms
collection,'' that Congress intended to exempt.
Department Response
The Department acknowledges commenters' support for the proposed
rule and agrees that the rule is fully consistent with the GCA. The
presumptions in the rule are based on the text and structure of the GCA
as well as decades of post-FOPA case law interpreting the GCA.
Additionally, the presumptions in the rule are consistent with the
purpose of the GCA, as amended by the BSCA.
3. Changes Are Consistent With Statutory Authority
Comments Received
Other comments in support of the proposed rule emphasized that the
proposed rule, which clarifies who must be licensed as a dealer and
perform background checks, is fully within the Department's and ATF's
statutory authority. Two sets of congressional commenters from both the
House and Senate explained that ATF has interpreted the BSCA amendments
to the GCA ``pursuant to the authority that Congress has long and
consistently delegated to the Department of Justice and ATF to enforce
our federal firearms laws--including the Gun Control Act of 1968 and
now BSCA.'' The commenters added, ``[t]he proposed rule is
appropriately based on investigative efforts and regulatory action that
ATF has undertaken for decades and Congress' recognition that ATF can,
and must, address the modern firearms marketplace, including the
conditions under which guns are bought and sold. Claims that ATF has
overstepped or even usurped Congress' legislative powers are
inapposite. ATF has, time and again, implemented the laws that Congress
has passed, including those related to licensing requirements and
procedures, as well as background checks. ATF's proposed rule is no
different.''
[[Page 28986]]
Another set of commenters (some State attorneys general) added,
``[t]he proposed rule is an exercise of ATF's inherent authority to
amend its own regulations to implement the broadened definition of
`engaged in the business' promulgated by Congress in the BSCA. It is a
function explicitly authorized by 18 U.S.C. 926(a), as clarifying a
definition within the rule is a `rule[ ] [or] regulation necessary to
carry out the provisions' of the [GCA]. ATF's regulatory authority
under the GCA plays a critical role in protecting the public from gun
violence and has been repeatedly reaffirmed by federal courts in the
decades since the GCA's passage.'' In support, the commenters cited
cases in which courts have recognized ATF's expertise and authority to
promulgate regulations.
Additional commenters noted that the proposed regulatory changes
are fully within ATF's lawful authority and that the proposed rule is,
as stated by one commenter, ``in fact necessary for ATF to be able to
implement and enforce the new law that Congress has put on the books.''
Citing multiple ATF firearms regulations, this commenter also pointed
out that ATF has for decades exercised its authority to promulgate and
revise regulations implementing and enforcing the GCA, including by
issuing and updating detailed regulatory definitions.
Department Response
The Department acknowledges commenters' support for the proposed
rule and agrees that the rule is fully consistent with the Department's
and ATF's statutory authority.
4. Enhances Public Safety by Expanding Background Checks
Comments Received
Many commenters opined that the proposed rule would improve public
safety by expanding background checks for firearms purchasers. One
commenter declared that, ``[a]s a US citizen, I would like to feel
safer knowing at least the steps of background checks through the FBI
database were done before a person could obtain a weapon.'' Another
commented that the danger from unlicensed dealers is great because,
according to several recent studies cited by the commenter: (1) over
one million ads for firearms are posted each year that would not
legally require the seller to conduct a background check for the
purchase to be completed; (2) 80 percent of firearms purchased for
criminal purposes come from sellers without a license; (3) firearms
sold at gun shows are used disproportionately to commit crimes; and (4)
96 percent of inmates convicted of gun offenses were prohibited from
having a firearm when they acquired one from an unlicensed seller.
Another commenter summed up the current societal situation in their
comment using information from a Centers for Disease Control and
Prevention (``CDC'') database: ``[e]very day, an average of around 120
people in the United States are killed by gunfire and more than 200 are
shot and wounded. Firearms are now the leading cause of death for
American children and teens.''
Most supporters thought that the rule provided a fair approach that
would increase safety. One commenter declared that the proposal ``is
the very minimum our federal government can do to not only protect
innocent victims from gun violence but also to protect law abiding gun
owners from being tarred with the same brush as irresponsible gun
owners.'' A self-described firearm owner commented, ``I whole heartedly
support the rule to expand background checks'' because ``this will make
our communities that much safer.''
Other commenters believed that the proposed rule was a step in the
right direction. One commenter stated, ``[m]others everywhere are
begging you to support background checks.'' They added that background
checks certainly will not be the only solution to the multifaceted
problem of gun violence, but said they are a step in ensuring people
have the right accountability to keep guns away from those who mean to
do harm. Another commenter said there is no downside to background
checks that help prevent troubled and misguided persons from acquiring
over-powered guns.
Many commenters expressed frustration with the current state of
affairs and expressed support for expanding background checks and
compliance with the law. One commenter stated that it should not be
easier to buy a high-speed rifle than get a driver's license. Another
commenter explained, ``I manage volunteer programs and people have to
complete a background check before they can help a child learn to read
or assist an older adult. We should require this same level of scrutiny
for anyone looking to purchase a weapon.'' Another commenter stated,
``[g]uns are too serious to be privy to simple loopholes . . . . we
can't just turn a blind eye to gaps in our legal system.'' Several
other commenters expressed that there was never a valid policy reason
for what the commenters called ``the gun-show loopholes.'' The
commenters used this term to refer to a pre-BSCA interpretation of the
definition of ``engaged in the business'' that many unlicensed dealers
believe allows them to make unlicensed sales online and at gun shows.
(See the Department Response at Section IV.C.16 of this preamble for
explanation of the GCA provisions on this subject). The commenters
stated that these ``loopholes'' are shameful, there is no downside to
strict background checks, and people should do the right thing by
requiring more background checks. Another commenter emphasized, ``[i]t
really is beyond time that we consider the rights of non gun-toting
citizens, too.''
Another commenter said that the regulation goes directly to the
``loopholes'' people have been trying to close for years, referring to
guns offered for sale online or at gun shows. Similarly, a commenter
said that, while background checks might be imperfect, they are
certainly safer than not performing them. One commenter simply stated
that background checks are excellent and that, ``[a]nyone who doesn't
want one, should likely not be car[ry]ing a gun.'' Another commenter
highlighted the public's opinion on the issue and referred to a recent
Fox News poll showing that 87 percent of Americans support requiring
criminal background checks on all gun buyers. A health research
organization commented on the danger from not doing background checks,
saying that experts estimate that nearly one in nine people who seek
out firearms online would not pass a background check.
Most commenters cited safety concerns as a basis for their support
of the BSCA's changes narrowing the background check gap, as
implemented through the rule. One professional physicians' organization
commented that private firearm sales conducted at gun shows or over the
internet should be subject to the same background check requirements as
firearm sales by federally licensed firearms dealers. They added that
this would make children, their families, and their communities safer.
Another commenter stated that reducing impulsive purchases and
requiring time necessary to conduct background checks can save lives
and spare family members grief.
One commenter provided a real-world example of what is currently
happening without background checks for sales at gun shows, describing
an experience they had at a recent gun show: ``[a]s he was filling out
the paperwork someone approached him and told him [they] had the same
gun [for sale] and a background check would not be
[[Page 28987]]
required [to buy it]--he could walk out with it that day.'' Another
commenter stated, ``[h]onest, law abiding, gun owners are NOT afraid of
accountability and pro-active requirements.''
Department Response
The Department acknowledges the commenters' support for the
proposed rule. The GCA and these implementing regulations are designed
to improve public safety by helping to prevent persons who are
prohibited from possessing firearms under Federal law from acquiring
firearms and allowing law enforcement officers to trace firearms
involved in crime. By clarifying the circumstances in which persons are
engaged in the business of dealing in firearms under the GCA and
required to become a Federal firearms licensee, this regulation will
result in more NICS background checks being run on prospective firearms
purchasers. Not only will fewer prohibited persons obtain firearms from
FFLs, but notifications that NICS denied a firearm transfer will be
made by NICS to State, local, and Tribal law enforcement agencies
within 24 hours to help them prevent gun crime.\117\ In sum, the rule
will help implement the provisions and goals of the GCA, as amended by
the BSCA. At the same time, as explained more below, the rule does not
require or implement universal background checks for private firearm
sales between individuals. The rule affects only persons engaged in the
business of dealing in firearms, including manufacturers and importers
who deal in the firearms they manufacture or import.
---------------------------------------------------------------------------
\117\ 18 U.S.C. 925B.
---------------------------------------------------------------------------
5. Creates Universal Background Checks
Comments Received
Many commenters indicated a belief that the proposed rule created a
universal background check requirement or expressed support for such a
development. For example, one commenter stated, ``[b]ackground checks
have been shown to stop some who should not have firearms from
acquiring them,'' adding that, in ``order to make [background checks]
more effective, they must be systematically and carefully applied
nationwide.'' Likewise, another commenter said that instituting
universal background checks ``is a no-brainer'' and should have been
done long ago. Similarly, commenters said the current situation ``is
madness'' and ``[u]niversal backgrounds checks are the very least and
most obvious of interventions.'' Several other commenters stated that
they fully support making background checks mandatory for gun buyers,
that they support not just expanded background firearms checks, but
indeed universal background checks, and that background checks should
be required for all gun purchasers, every time, and similar variations.
Many commenters expressed support for requiring background checks for
all sales/transfers of firearms, including sales between private
citizens.
Some commenters wanted to see a stronger, quicker approach to
resolving the issue. One commenter said, ``[g]un laws as they stand are
incredibly too relaxed and need to be amended,'' and ``I strongly feel
that universal background checks are critical and need to be done
now.'' Other commenters agreed that it is long overdue to pass
universal background checks for gun ownership and they should be
instituted now as the least that we should be doing. Likewise, a
commenter requested that, hopefully, Congress would eventually move to
a universal background check on all gun sales in the near future.
Another commenter added that, since gun sales by legal dealers have
required background checks for decades, these same requirements should
apply to all gun sales.
A few commenters thought that implementing universal background
checks was a minimally intrusive method of implementing change. For
example, one commenter stated, ``[u]niversal background checks make
sense. It doesn't take away a responsible gun owner's right but it
provides a means to track those that should not own guns.''
A few commenters suggested additional actions that could be
implemented. For example, one suggested regular checks at multi-year
intervals in addition to universal background checks for all
purchasers. Another commenter suggested adding mandatory waiting
periods for every gun sale. And another suggested universal background
checks for ammunition sales, as well.
Department Response
The Department acknowledges the commenters' support for the
proposed rule and agrees that the BSCA expands the definition of
``engaged in the business.'' As a result, the rule's implementation of
that expansion will increase the number of background checks to prevent
prohibited persons from obtaining firearms under the provisions of the
GCA, as amended by the BSCA. However, the Department disagrees with
commenters who believe this rule will result in ``universal background
checks.'' The concept of ``universal background checks'' is not defined
in Federal law, but is commonly understood to require persons to run
background checks whenever a private, unlicensed person transfers a
firearm to another, and some States have imposed this requirement.\118\
Congress has not passed a law to require universal background checks,
and this rule does not require unlicensed individuals who are not
engaged in the business of manufacturing, importing, or dealing in
firearms to run background checks for private firearm sales between
individuals. Congress decided that only persons engaged in the business
of manufacturing, importing, or dealing in firearms must obtain a
license and run NICS background checks on firearm transferees.
Nonetheless, by clarifying the meaning of ``engaged in the business,''
the rule will make clear that licensees must run NICS background checks
when they transfer firearms at gun shows, over the internet, and by
other means.
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\118\ Michael Martinez, `Universal Background Check:' What Does
It Mean?, CNN (Jan. 28, 2013), <a href="https://www.cnn.com/2013/01/14/us/universal-background-checks/index.html">https://www.cnn.com/2013/01/14/us/universal-background-checks/index.html</a>.
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6. Enhances Public Safety by Allowing More Crime Guns To Be Traced
Comments Received
Several commenters believed that the current state of affairs, in
which unlicensed dealers are selling firearms without making records,
has a negative impact on crime gun tracing. One commenter opined that
the rule can provide law enforcement with better tools to track and
trace firearms used in crimes, aiding in their efforts to protect our
communities. A law enforcement organization commented that the proposed
rule would ``enable law enforcement to investigate guns recovered at
crime scenes. With more gun sellers required to become licensed
dealers, more information will be available to law enforcement aiding
in completing the investigations. Law enforcement will be better
equipped to identify and follow leads in criminal investigations and
solve more crimes.'' Another commenter said, ``the absence of
background checks means no sales records, hampering crime gun
tracing.'' Finally, one group commented that aggregate firearm trace
data can help identify patterns and trends that are valuable for
understanding and combatting the trafficking of firearms into criminal
hands, and more comprehensive transaction recordkeeping, like the rule
will require,
[[Page 28988]]
would help increase the aggregate amount of information available for
tracing.
Department Response
The Department acknowledges commenters' support for the proposed
rule and agrees that the rule will help Federal, State, local, and
Tribal law enforcement solve crimes involving firearms through crime
gun tracing. Under the GCA, ``dealers must store, and law enforcement
officers may obtain, information about a gun buyer's identity. That
information helps to fight serious crime. When police officers retrieve
a gun at a crime scene, they can trace it to the buyer and consider him
as a suspect.'' Abramski, 573 U.S. at 182 (internal citations omitted).
As more persons become licensed, the transaction records maintained by
those dealers will allow law enforcement to trace more firearms
involved in crime \119\ and to apprehend more violent offenders who
misuse firearms.
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\119\ See Definition of ``Frame or Receiver'' and Identification
of Firearms, 87 FR 24652, 24659 (Apr. 26, 2022).
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7. Prevents Unlicensed Dealers From Exploiting Loopholes
Comments Received
Thousands of commenters in support of the rule expressed their
desire to close gaps in the clarity of ``engaged in the business''
that, in their view, had been enabling people to deal in firearms
without a license or prohibited persons to acquire firearms from
unlicensed dealers. One set of commenters said that the rule ``will
help close loopholes in our background check system that have, for
decades, been exploited by bad actors like gun traffickers, straw
purchasers, and other prohibited persons, including domestic abusers
and convicted felons.'' Another commenter said, ``I can't think of any
reasonable argument for continuing to allow loopholes that allow
individuals to acquire guns outside the well-established, affordable,
and reasonable process that applies to all other purchases.'' One of
the form letters submitted by many commenters stated that, ``[a]nyone
offering guns for sale online or at a gun show is presumed to be trying
to make a profit and should therefore be licensed and run a background
check on their customers.'' Other commenters simply stated that we need
to be closing the loopholes in the system and do so once and for all.
Another commenter shared this example: ``[i]t was as easy as going
to a flea market or pawn shop. Fifteen minutes or less and he had
another gun for his collection.'' A third commenter observed that
``[g]uns sold without background checks in all cases are like the old
days of the Wild West'' and that gun shows ``are a huge source for gun
traffickers and people looking to avoid scrutiny.''
Some commenters were concerned that the current state of affairs is
unjust. One commenter stated that they believe the proposed rule is
necessary in fairness to the brick-and-mortar businesses and the up-
front online retailers. Similarly, another commenter said that
``[c]losing loopholes so that commercial transactions that have
previously evaded background checks [can no longer do so] is simply
consistency; this is a very good idea, and I wholeheartedly support
it.'' Additionally, a commenter thought that ``[t]here shouldn't be
venues where background checks can be skirted. If a firearm changes
hands, it benefits society to ensure that the hands accepting that
firearm are going to handle it safely.''
Several commenters highlighted the fact that dealing as a licensee
had integral advantages. For example, one commenter said the proposed
rule expands the range of people required to have a license to sell a
firearm, which makes neighborhoods safer because citizens know the
firearms are being sold by a trusted merchant. Another commenter
expressed that people should be happier to see firearms coming from a
reputable source, rather than some ``flipper'' who might not have
safety-checked the item. A dealer will stand behind an item and can be
held accountable if there is an issue, they added.
Some commenters appreciated the Department's balanced approach. One
commenter stated, ``[o]f course anyone selling firearms should be
licensed & appropriately conducting background checks! Most responsible
gun-owners agree on this point. Thank you for seeking to make our
communities safer!'' One group commented that, by clarifying who is not
considered to be ``engaged in the business,'' ATF has protected the
ability of genuine hobbyists and collectors to transact firearms
without fear of breaking the law. Another commenter added, ``I support
this idea because this does not infringe on any rights, in my opinion,
but rather stops back yard or home-based individuals from buying
firearms then selling these items for a profit within a quick time
frame.''
Department Response
The Department acknowledges the commenters' support for the
proposed rule and agrees that the rule will result in more persons who
are engaged in the business of dealing in firearms, regardless of
location, becoming licensed as required under the GCA, as amended by
the BSCA. Once licensed, those persons will be required to abide by the
recordkeeping and background check requirements of the GCA. The
Department also agrees that promoting compliance with the licensing
requirements of the GCA, as passed by Congress, is another benefit of
the rule. As more persons dealing in firearms become licensed under
this rule, there will be more fairness in the firearms marketplace.
Licensed dealers are at a competitive disadvantage when, for example,
similar firearms are being sold at a nearby table at a gun show by a
seller who is engaged in the business of dealing in firearms but is not
following the requirements that licensed dealers must follow. However,
the Department disagrees with the comment that offering guns for sale
online or at a gun show necessarily means the person must be licensed.
This rule also recognizes that persons may, for example, occasionally
offer firearms for sale to enhance or liquidate their personal
collections even if a profit is sought from those sales.
8. Closes the Gun Show/Online Loophole
Comments Received
Several commenters voiced support for closing what they referred to
as the ``gun show loophole,'' by which commenters meant a situation in
which many sellers dealing in firearms offer them for sale at gun shows
without becoming licensed or subjecting purchasers to background
checks. For example, one commenter simply requested that the government
please stop criminals from easily buying guns at gun shows without a
background check. Another commenter expressed that Americans cannot
allow individuals with violent histories to purchase a gun at a gun
show or online without their background being investigated. A mother
and gun owner added that she is relieved to hear that ATF is moving
forward on closing the gun show loopholes. As a final example, one
commenter stated that the ``only reason this loophole exists is to
create a method for criminals & people with histories of violence to
procure guns, there are no other reasons.''
Many supporters of the rule believed that it would resolve a long-
standing inequity. As one commenter stated, ``[f]or decades, gun
sellers have exploited loopholes in federal law that
[[Page 28989]]
let them sell guns online and at gun shows without conducting
background checks. It's a recipe for disaster that worsens our
country's gun violence crisis.'' Another commenter made the following
comparison: ``[a]llowing unlicensed sellers to operate alongside
licensed dealers at gun shows is akin to allowing some airline
passengers to board without going through security--it's inconsistent
and unsafe.'' Another commenter said that it shouldn't be as easy to
purchase a gun online or at a gun show as it is to purchase a pair of
shoes. Other commenters stated that our current reality is one in which
firearms can be too easily acquired without background checks, notably
through online platforms and at gun shows, and that the loophole that
allows legal purchase of firearms at gun shows is a tragedy. A licensee
commented with the following example from his 20 years of selling
firearms: ``[t]here are 100s of guns sold at every gun show with no
background check whatsoever. I see the same dealers at every show with
tables full of guns selling to anyone with cash. I have had people who
were denied in the NICS background check [I had conducted,] only to see
them walk out with a gun. I beg of you to change the law to where
EVERYONE at gun shows has to do background checks.''
Some commenters believed the rule presented a balanced approach.
One commenter stated that closing the gun show loophole is a ``common-
sense measure'' and doesn't infringe on the rights of responsible gun
owners; rather, it ensures that background checks are conducted for all
firearm purchases, regardless of where they take place. Additionally, a
commenter said that t
[…truncated; see source link]Indexed from Federal Register on April 19, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.