Definition of “Engaged in the Business” as a Dealer in Firearms, 28968-29093 [2024-07838]
Download as PDF
<![CDATA[
28968
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
DEPARTMENT OF JUSTICE
Bureau of Alcohol, Tobacco, Firearms,
and Explosives
FOR FURTHER INFORMATION CONTACT:
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
Bureau of Alcohol, Tobacco,
Firearms, and Explosives, Department of
Justice.
ACTION: Final rule.
AGENCY:
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
khammond on DSKJM1Z7X2PROD with RULES3
SUMMARY:
VerDate Sep<11>2014
02:22 Apr 19, 2024
than by using a Firearms Transaction
Record, ATF Form 4473.
DATES: This rule is effective May 20,
2024.
Jkt 262001
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
PO 00000
Frm 00002
Fmt 4701
Sfmt 4700
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’’
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
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 selfprotection 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.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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
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).
PO 00000
Frm 00003
Fmt 4701
Sfmt 4700
28969
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.
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
2 See generally Public Law 90–618, 82 Stat. 1213
(1968).
3 33 FR 18555 (Dec. 14, 1968).
E:\FR\FM\19APR3.SGM
19APR3
28970
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
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.
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.
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
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
khammond on DSKJM1Z7X2PROD with RULES3
8 Public
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.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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).
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
PO 00000
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
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 § 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 parttime basis.’’ 16
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).
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
Frm 00004
Fmt 4701
Sfmt 4700
the taking of any firearm as security for the
repayment of money would automatically be a
‘dealer.’ ’’ Id. at 9.
14 Id. at 8.
15 27 CFR 178.11 (1988).
16 Id.
17 27 CFR 478.125a(a); see also S. Rep. No. 98–
583, at 13.
18 S. Rep. No. 98–583, at 13.
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
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
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
19 See
18 U.S.C. 923(c).
53 FR 10480 (Mar. 31, 1988); 27 CFR
178.125a (1988) (now § 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).
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
khammond on DSKJM1Z7X2PROD with RULES3
20 See
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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
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.
D. Bipartisan Safer Communities Act
(2022)
Over 35 years after FOPA’s
enactment, and 29 years after passage of
the Brady Handgun Violence Protection
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))).
22 See Press Release, The White House FACT
SHEET: New Executive Actions to Reduce Gun
Violence and Make Our Communities Safer (Jan. 4,
2016), https://obamawhitehouse.archives.gov/thepress-office/2016/01/04/fact-sheet-new-executiveactions-reduce-gun-violence-and-make-our.
23 See generally ATF, Do I Need a License to Buy
and Sell Firearms? (Jan. 2016), https://
www.govinfo.gov/content/pkg/GOVPUB-J38-PURLgpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf;
ATF, Do I Need a License to Buy and Sell Firearms?
(Aug. 2023), https://www.atf.gov/file/100871/
download.
24 ATF, Do I Need a License to Buy and Sell
Firearms? 5 (Jan. 2016), https://www.govinfo.gov/
content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/
GOVPUB-J38-PURL-gpo125446.pdf.
PO 00000
Frm 00005
Fmt 4701
Sfmt 4700
28971
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).
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
25 Public Law 103–159, 107 Stat. 1536 (1993). The
Brady Act created NICS, which became operational
on November 30, 1998.
26 Buffalo Supermarket Shooting Gunman Kills 10
at Buffalo Supermarket in Racist Attack, N.Y.
Times (May 14, 2022), https://www.nytimes.com/
live/2022/05/14/nyregion/buffalo-shooting; Mark
Osborne et al., At Least 19 Children, 2 Teachers
Dead After Shooting at Texas Elementary School,
ABC News (May 25, 2022), https://abcnews.go.com/
US/texas-elementary-school-reports-active-shootercampus/story?id=84940951; Acacia Coronado &
Alex Samuels, Death Toll in Midland-Odessa Mass
Shooting Climbs to Eight, Including the Shooter,
Texas Tribune (Aug. 31, 2019), https://
www.texastribune.org/2019/08/31/odessa-andmidland-shooting-30-victims-reports-say/.
27 Press Release, DOJ, Man Who Sold Midland/
Odessa Shooter AR–15 Used in Massacre Sentenced
for Unlicensed Firearms Dealing (Jan. 7, 2021),
https://www.justice.gov/usao-ndtx/pr/man-whosold-midlandodessa-shooter-ar-15-used-massacresentenced-unlicensed-firearms; Prison for Man Who
Sold Texas Shooter Seth Ator AR–15 Used in
Midland-Odessa Massacre, CBS News (Jan. 7, 2021),
https://www.cbsnews.com/texas/news/prison-forman-sold-texas-shooter-seth-ator-ar-15-midlandodessa-massacre/.
E:\FR\FM\19APR3.SGM
19APR3
28972
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
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
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
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
28 Press Release, DOJ, Man Who Sold Midland/
Odessa Shooter AR–15 Used in Massacre Sentenced
for Unlicensed Firearms Dealing (Jan. 7, 2021),
https://www.justice.gov/usao-ndtx/pr/man-whosold-midlandodessa-shooter-ar-15-used-massacresentenced-unlicensed-firearms.
29 Id.
30 William J. Krouse, Cong. Rsch. Serv., IF12197,
Firearms Dealers ‘‘Engaged in the Business’’ 2
(2022), https://crsreports.congress.gov/product/pdf/
IF/IF12197.
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 bricksand-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).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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
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
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
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.
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).
PO 00000
Frm 00006
Fmt 4701
Sfmt 4700
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 § 478.11 and crossreferenced definition in § 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 § 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
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
‘‘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.
khammond on DSKJM1Z7X2PROD with RULES3
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 parttime basis. 27 CFR 478.11 (definition of
‘‘dealer’’). The NPRM explained that,
due to the BSCA amendments, as well
as continual confusion and noncompliance 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 ecommerce 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.
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.’’).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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.
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
35 See ATF, FFL Newsletter: Federal Firearms
Licensee Information Service 9 (July 2017), https://
www.atf.gov/firearms/docs/newsletter/federalfirearms-newsletter-july-2017/download (gun show
guidelines); ATF, Important Notice to Dealers and
Other Participants at This Gun Show, ATF
Information 5300.23A 1 (Sept. 2021) https://
www.atf.gov/firearms/docs/guide/important-noticedealers-and-other-participants-gun-shows-atf-i530023a/download (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?, https://www.atf.gov/firearms/qa/
how-may-licensee-participate-raffling-firearmsunlicensed-organization (last reviewed May 22,
2020); ATF, FFL Newsletter: Federal Firearms
Licensee Information Service 8–9 (June 2021),
https://www.atf.gov/firearms/docs/newsletter/
federal-firearms-licensee-ffl-newsletter-june-2021/
download (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),
https://www.atf.gov/firearms/docs/newsletter/
federal-firearms-licensees-newsletter-february-1999/
download (addressing dinner banquets).
37 See ATF, FFL Newsletter: Federal Firearms
Licensee Information Service 5–6 (June 2010),
https://www.atf.gov/firearms/docs/newsletter/
federal-firearms-licensees-newsletter-june-2010 (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.
PO 00000
Frm 00007
Fmt 4701
Sfmt 4700
28973
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
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), https://
www.atf.gov/firearms/docs/newsletter/federalfirearms-licensee-ffl-newsletter-june-2021/
download (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),
https://www.nyc.gov/html/om/pdf/2013/felon_
seeks_firearm.pdf; 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), https://www.atf.gov/firearms/docs/
newsletter/ffl-newsletter-september-2016/download;
ATF, 2 FFL Newsletter: Federal Firearms Licensee
Information Service 6–7 (Mar. 2013), https://
www.atf.gov/firearms/docs/newsletter/federalfirearms-licensees-newsletter-march-2013-volume2/download; 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), https://www.justice.gov/opa/pr/
minnesota-man-indicted-dealing-firearms-withoutlicense (defendant dealt in firearms through
websites such as GunBroker.com, 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),
https://www.justice.gov/usao-md/pr/odentonmaryland-man-exiled-8-years-prison-firearmstrafficking-conspiracy (defendant texted photos of
firearms for sale to his customer and discussed
prices).
E:\FR\FM\19APR3.SGM
19APR3
28974
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
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).
44 See ATF, FFL Newsletter: Federal Firearms
Licensee Information Service 9 (June 2021), https://
www.atf.gov/firearms/docs/newsletter/federalfirearms-licensee-ffl-newsletter-june-2021/
download (‘‘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), https://
www.justice.gov/usao-edca/pr/snapchat-gundealer-convicted-unlawfully-manufacturing-andselling-firearms; Press Release, DOJ, Sebring
Resident Sentenced to Prison for Unlawfully
Dealing Firearms on Facebook (Nov. 7, 2016),
https://www.justice.gov/usao-sdfl/pr/sebringresident-sentenced-prison-unlawfully-dealingfirearms-facebook.
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
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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).
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
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)).
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).
PO 00000
Frm 00008
Fmt 4701
Sfmt 4700
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
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
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
medium of exchange 55 or valuable
consideration.56
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.
khammond on DSKJM1Z7X2PROD with RULES3
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
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).
57 See ATF, Does an Auctioneer Who Is Involved
in Firearms Sales Need a Dealer’s License?, https://
www.atf.gov/firearms/qa/does-auctioneer-whoinvolved-firearms-sales-need-dealer-license (last
reviewed July 10, 2020); ATF, ATF Federal
Firearms Regulations Reference Guide, ATF
Publication 5300.4, Q&A L1, at 207–08 (2014),
https://www.atf.gov/firearms/docs/guide/federalfirearms-regulations-reference-guide-2014-editionatf-p-53004/download; ATF, FFL Newsletter 3 (May
2001), https://www.atf.gov/firearms/docs/
newsletter/federal-firearms-licensees-newslettermay-2001/download; ATF Ruling 96–2, Engaging in
the Business of Dealing in Firearms (Auctioneers)
(Sept. 1996), https://www.atf.gov/file/55456/
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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.’’
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.
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,
download; ATF, FFL Newsletter 7 (1990), https://
www.atf.gov/firearms/docs/newsletter/federalfirearms-licensees-newsletter-1990-volume-1/
download; Letter for Editor, CarPac Publishing
Company, from Acting Assistant Director
(Regulatory Enforcement), ATF, at 1–2 (July 26,
1979).
58 ATF Rul. 96–2 at 1.
PO 00000
Frm 00009
Fmt 4701
Sfmt 4700
28975
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
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), https://www.atf.gov/resource-center/factsheet/fact-sheet-facts-and-figures-fiscal-year-2022.
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.
E:\FR\FM\19APR3.SGM
19APR3
28976
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
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
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
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’’).
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
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
text made clear that the presumptions
do not apply to criminal proceedings.
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
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).
67 See also ATF Publication 5310.2, Do I Need a
License to Buy and Sell Firearms?, https://
www.govinfo.gov/content/pkg/GOVPUB-J38-PURLgpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf
(Jan. 2016), https://www.govinfo.gov/content/pkg/
GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38PURL-gpo125446.pdf; 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 codefendant ‘‘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.’’).
PO 00000
Frm 00010
Fmt 4701
Sfmt 4700
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.’’
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
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)).
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
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
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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.
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.
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
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), https://www.atf.gov/firearms/
docs/newsletter/federal-firearms-licensee-fflnewsletter-june-2021/download (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, https://www.collinsdictionary.com/us/
dictionary/english/occasional (last visited Apr. 4,
2024) (defining ‘‘occasional’’ in ‘‘American
English’’).
71 See the discussion at the beginning of Section
III.D, ‘‘Presumptions that a Person is ‘Engaged in
the Business.’ ’’
PO 00000
Frm 00011
Fmt 4701
Sfmt 4700
28977
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
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
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)).
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), https://
www.justice.gov/usao-ndtx/pr/man-who-soldmidlandodessa-shooter-ar-15-used-massacresentenced-unlicensed-firearms (defendant
convicted of filing a false tax return that concealed
his income from firearms sales).
E:\FR\FM\19APR3.SGM
19APR3
28978
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
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.
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
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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
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), https://www.justice.gov/opa/pr/
utah-business-owner-convicted-dealing-firearmswithout-license-and-filing-false-tax-returns
(defendant illegally sold firearms under the
auspices of a company owned by another Utah
resident).
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.
PO 00000
Frm 00012
Fmt 4701
Sfmt 4700
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.
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
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).
80 See, e.g., Press Release, DOJ, Minnesota Man
Indicted for Dealing Firearms Without a License
(Feb. 18, 2016), https://www.justice.gov/opa/pr/
minnesota-man-indicted-dealing-firearms-withoutlicense (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, ExPasadena Police Lieutenant Sentenced to One Year
in Federal Prison for Unlicensed Selling of Firearms
and Lying on ATF Form (Feb. 25, 2019), https://
www.justice.gov/usao-cdca/pr/ex-pasadena-policelieutenant-sentenced-one-year-federal-prisonunlicensed-selling (defendant resold 79 firearms
within six days after he purchased them); United
States v. D’Agostino, No. 10–20449, 2011 WL
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
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
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, https://waltherarms.com/
connect/guarantee# (last visited Apr. 4, 2024);
Retail Policies, Center Target Sports, https://center
targetsports.com/retail-range/ (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), https://
www.centuryarms.com/media/wysiwyg/Warranty_
and_Return_v02162021.pdf (‘‘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, https://alphadogfirearms.com/i-love-youpew/ (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, https://
www.big5sportinggoods.com/static/big5/pdfs/
Customer-Service-RETURN-EXCEPTIONS-POLICYd.pdf (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, https://www.dfwgun.com/
memberships/store-policies.html (last visited Feb.
29, 2024) (30-day return policy); Return Policy,
RifleGear, https://www.riflegear.com/t-returns.aspx
(last visited Feb. 29, 2024) (30-day return policy);
Gun-Buyer Remorse Is a Thing of the Past,
Stoddard’s Range and Guns, https://
stoddardsguns.com/stoddards-commitment/ (last
visited Feb. 29, 2024) (30-day return policy);
Palmetto State Armory’s Hassle-Free Return Policy,
AskHandle, https://www.askhandle.com/blog/
palmetto-state-armory-return-policy (last visited
Feb, 29, 2024) (30-day return policy); Instructions
for Returns/Repairs, Rock River Arms, https://
www.rockriverarms.com/index.cfm?
fuseaction=page.display&page_id=34 (last visited
Feb. 29, 2024) (30-day return policy); ‘‘No Regrets’’
Policy, Granite State Indoor Range, https://
www.granitestaterange.com/our-pro-shop/ (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
VerDate Sep<11>2014
03:08 Apr 19, 2024
Jkt 262001
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.
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
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),
https://www.justice.gov/usao-ndtx/pr/ffl-sentencedselling-guns-unlicensed-dealers (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’’).
PO 00000
Frm 00013
Fmt 4701
Sfmt 4700
28979
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.
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.
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.
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.
E:\FR\FM\19APR3.SGM
19APR3
28980
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
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
khammond on DSKJM1Z7X2PROD with RULES3
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
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).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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).
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
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, https://www.merriamwebster.com/dictionary/personal (last visited Mar.
1, 2024) (defining the term ‘‘personal’’ to include
‘‘of, relating to, or affecting a particular person’’);
Collection, Merriam-Webster, https://www.merriamwebster.com/dictionary/collection (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, https://www.merriamwebster.com/dictionary/hobby (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.’’).
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
PO 00000
Frm 00014
Fmt 4701
Sfmt 4700
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
Background Check Requirements of the GCA?,
https://www.atf.gov/firearms/qa/may-licenseecreate-personal-collection-avoid-recordkeepingand-nics-background-check (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?, https://
www.atf.gov/firearms/qa/does-licensee-have-recordfirearms-acquired-prior-obtaining-license-theiracquisition (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), https://
www.atf.gov/firearms/docs/newsletter/federalfirearms-licensees-newsletter-february-2011/
download (‘‘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), https://
www.atf.gov/firearms/docs/newsletter/federalfirearms-licensees-newsletter-march-2006/
download (‘‘[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?, https://
www.atf.gov/firearms/qa/may-licensee-storepersonal-firearms-business-premises (last reviewed
July 15, 2020); ATF, FFL Newsletter: Federal
Firearms Licensee Information Service 7 (Feb.
2011), https://www.atf.gov/firearms/docs/
newsletter/federal-firearms-licensees-newsletterfebruary-2011/download; 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?,
https://www.atf.gov/firearms/qa/may-licenseemaintain-personal-collection-firearms-how-canthey-do-so (last reviewed July 15, 2020).
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
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.
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.
G. Definition of ‘‘Predominantly Earn a
Profit’’
khammond on DSKJM1Z7X2PROD with RULES3
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.
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.
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), https://www.atf.gov/firearms/docs/
newsletter/federal-firearms-licensees-newsletterseptember-2011/download.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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
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
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).
PO 00000
Frm 00015
Fmt 4701
Sfmt 4700
28981
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
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), https://
www.justice.gov/usao-wdnc/pr/asheville-mansentenced-dealing-firearms-without-license-0
(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).
E:\FR\FM\19APR3.SGM
19APR3
28982
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
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 stationmonitored 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
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).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
predominantly earn a profit from
reselling or disposing of firearms.
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
105 See, e.g., Annie Linskey, Closed Store Is a
Source of Guns, Baltimore Sun (Apr. 15, 2008),
https://www.baltimoresun.com/news/bs-xpm-200804-15-0804150118-story.html (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
PO 00000
Frm 00016
Fmt 4701
Sfmt 4700
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
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
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), https://
www.thewellnews.com/guns/booker-bill-takes-aimat-gun-fire-sale-loophole/; Shira Toeplitz,
Ackerman Proposes Gun-Control Bill to Close
‘Firesale Loophole’, Politico: On Congress Blog (Jan.
12, 2011), https://www.politico.com/blogs/oncongress/2011/01/ackerman-proposes-gun-controlbill-to-close-firesale-loophole-032289.
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), https://www.justice.gov/
opa/pr/gunsmoke-gun-shop-owner-and-formerdiscovery-channel-star-indicted-and-arrestedconspiracy (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).
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
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 30day 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.
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
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,
https://www.merriam-webster.com/dictionary/
liquidate (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).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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.
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 § 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
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).
PO 00000
Frm 00017
Fmt 4701
Sfmt 4700
28983
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.
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
109 See ATF, FFL Newsletter: Federal Firearms
Licensee Information Service 7 (Mar. 2006), https://
www.atf.gov/firearms/docs/newsletter/federalfirearms-licensees-newsletter-march-2006/
download (‘‘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.’’).
110 See ATF Ruling 2010–1, Temporary
Assignment of a Firearm by an FFL to an
Unlicensed Employee (May 20, 2010), https://
www.atf.gov/firearms/docs/ruling/2010-1temporary-assignment-firearm-ffl-unlicensedemployee/download (permanently assigning a
E:\FR\FM\19APR3.SGM
Continued
19APR3
28984
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
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
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
A. Issues Raised in Support of the Rule
khammond on DSKJM1Z7X2PROD with RULES3
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
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?, https://www.atf.gov/firearms/qa/doesofficer-or-employee-entity-holds-federal-firearmslicense-such-corporation-have (last reviewed May
22, 2020); ATF, 2 FFL Newsletter: Federal Firearms
Licensee Information Service 4 (Sept. 2013), https://
www.atf.gov/firearms/docs/newsletter/federalfirearms-licensees-newsletter-september-2013volume-2/download.
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.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
specific concerns and suggestions, are
discussed below.
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
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.
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.’’).
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.
PO 00000
Frm 00018
Fmt 4701
Sfmt 4700
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,
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
‘‘[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.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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
PO 00000
Frm 00019
Fmt 4701
Sfmt 4700
28985
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.’’
E:\FR\FM\19APR3.SGM
19APR3
28986
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
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
khammond on DSKJM1Z7X2PROD with RULES3
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
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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 selfdescribed 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 overpowered 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
PO 00000
Frm 00020
Fmt 4701
Sfmt 4700
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
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
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.
5. Creates Universal Background Checks
khammond on DSKJM1Z7X2PROD with RULES3
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
117 18
U.S.C. 925B.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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
PO 00000
Frm 00021
Fmt 4701
Sfmt 4700
28987
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.
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,
118 Michael Martinez, ‘Universal Background
Check:’ What Does It Mean?, CNN (Jan. 28, 2013),
https://www.cnn.com/2013/01/14/us/universalbackground-checks/.
E:\FR\FM\19APR3.SGM
19APR3
28988
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
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.
khammond on DSKJM1Z7X2PROD with RULES3
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 wellestablished, 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
119 See
Definition of ‘‘Frame or Receiver’’ and
Identification of Firearms, 87 FR 24652, 24659 (Apr.
26, 2022).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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 homebased 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
PO 00000
Frm 00022
Fmt 4701
Sfmt 4700
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
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
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 the
‘‘proposal laid out does not appear
overly cumbersome for currently
licensed dealers or citizens looking to
liquidate guns from their personal
collection’’ and that ‘‘[c]losing the ‘gun
show loophole’ and requiring a record
of firearms sold limits the possibility of
nefarious characters obtaining weapons
while increasing and promoting
responsible gun ownership.’’ Another
commenter agreed, describing the rule
as a modest, common-sense measure to
close some of the huge loopholes that
buyers and sellers use to get around our
necessary and otherwise effective
system of background checks.
Another commenter, while supporting
this aspect of the rule, also
recommended that ATF provide popular
online marketplaces, such as Armslist
and GunBroker, with materials and
guidance once the rule is finalized to
ensure their users understand their
obligations to obtain Federal firearms
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
licenses and conduct background
checks before dealing in firearms.
Department Response
The Department acknowledges the
commenters’ support for the proposed
rule and agrees that, as a result of this
rule, there will be greater compliance
with the law and more individuals who
engage in the business of dealing in
firearms at gun shows and online will
become licensed under the GCA and
therefore run background checks. ATF
has updated its guidance in light of the
BSCA and intends to further update the
guidance to ensure that persons who
operate at gun shows and online
understand the relevant licensing
obligations. See Section II.C of this
preamble. The Department also notes
that the term ‘‘gun show loophole’’ is a
misnomer in that there is no statutory
exemption under the GCA for
unlicensed persons to engage in the
business of dealing in firearms at a gun
show, or at any other venue. As this rule
clarifies, all persons who engage in the
business of dealing in firearms must be
licensed (and, once licensed, conduct
background checks), regardless of
location.
9. Reduces Firearms Trafficking
Comments Received
Some commenters thought the
proposed rule could have a positive
impact on reducing illegal firearms
trafficking. One commenter said that
firearm transfers must be regulated to
prevent criminals from obtaining
weapons and unscrupulous arms
dealers from trafficking weapons that
fuel violence here and in Mexico.
Another commenter thought the rule
would cause a reduction in trafficking
because gun traffickers are
‘‘masquerading as hobbyists or
collectors.’’ Other commenters stated
that firearm rules or legislation may be
very different between neighboring
States, thus enabling trafficking. For
example, one commenter, relying on a
news story, stated that, ‘‘[b]ecause
Massachusetts has universal background
checks and Maine does not, Maine is a
top ‘source state’ for crime guns in
Massachusetts’’ and that ‘‘[c]riminals
come to Maine to get the guns in private
sales that they cannot get in
Massachusetts or in other states with
universal background checks.’’ Another
commenter stated that creating
additional regulations on how firearms
are sold will reduce the number of
firearms that are trafficked and that the
rule will decrease the number of guns
trafficked between State lines.
Commenters who participated in one of
PO 00000
Frm 00023
Fmt 4701
Sfmt 4700
28989
the form letter campaigns stated that
guns purchased in unlicensed sales
often end up trafficked across State
lines, recovered at crime scenes in major
cities, and used against police officers,
which contributes to the gun violence
epidemic plaguing our country. Such
commenters also added that guns sold
without background checks—both
online and at gun shows—are a huge
source for gun traffickers and people
trying to avoid such checks.
Department Response
The Department acknowledges the
commenters’ support for the proposed
rule and agrees that the rule will help
reduce firearms trafficking. Many ATF
criminal gun trafficking investigations
reveal that guns used in crimes involve
close-to-retail diversions of guns from
legal firearms commerce into the hands
of criminals, including straw purchases
from FFLs, trafficking by FFLs, and
illegal transfers by unlicensed sellers.120
As more persons become licensed as a
result of the BSCA’s amendments to the
meaning of ‘‘engaged in the business,’’
the multiple sales forms, out-of-business
records, demand letter records, theft and
loss reports, and trace responses
provided to ATF by those dealers during
criminal investigations will provide law
enforcement with additional crucial
crime gun intelligence. Law
enforcement can use this information to
better target limited resources to pursue
illicit firearms traffickers nationally and
internationally.121
10. Closes Liquidation Loophole for
Former Licensees
Comments Received
Some commenters supported the
proposed rule’s clarification as to how
the GCA applies to firearm sales and
former dealers. For example, one
commenter stated that dealers who have
lost their licenses should never be
allowed to sell guns again. Similarly,
another commenter said that they
support the rule because it ‘‘goes a step
beyond [previous liquidation
provisions] and does not allow any
dealers who had their licenses revoked
to sell, trade, or distribute firearms to
the public.’’
120 ATF, National Firearms Commerce and
Trafficking Assessment (NFCTA): Crime Gun
Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the
United States and Its Territories 41 (Mar. 27, 2024),
https://www.atf.gov/firearms/docs/report/nfctavolume-ii-part-iii-crime-guns-recovered-and-tracedus/download.
121 See 18 U.S.C. 923(g)(3)–(7); ATF Form 3310.4
(Dec. 2021) (multiple handgun sales); ATF Form
3310.11 (Oct. 2020) (theft-loss report); ATF Form
3310.12 (Feb. 2024) (multiple sales of certain rifles).
E:\FR\FM\19APR3.SGM
19APR3
28990
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
Department Response
The Department acknowledges the
commenters’ support for the proposed
rule and agrees that the rule will reduce
the number of firearms in the business
inventory of a former licensee that are
sold improperly, i.e., without
background checks and associated
recordkeeping. However, the
Department is not adopting the
suggestion to bar former dealers from
ever selling guns again. Rather, former
dealers are prohibited from engaging in
the business of dealing in firearms,
unless they once again become licensed.
11. Establishes Better Standards for Who
Should Become Licensed
khammond on DSKJM1Z7X2PROD with RULES3
Comments Received
Several commenters appreciated the
transparency established by the
proposed rule. For example, one
commenter stated, ‘‘I strongly support
this proposed regulation because it sets
a clear, common-sense standard for
when gun sellers must become licensed
dealers and run background checks’’
and builds on the BSCA passed by
Congress. Multiple commenters and
those associated with certain form
letters said that they believe that anyone
offering guns for sale online or at a gun
show is trying to make a profit and
should therefore be licensed, adding
that they supported the rule’s clarifying
provisions. One group of parents whose
children were victims of a mass
shooting stated that they recognized that
‘‘the intent of the proposed rule is not
to be punitive.’’ They added, ‘‘[w]e
support ATF maintaining an evaluation
of the totality of the circumstances
when determining if one is ‘engaged in
the business’ rather than establishing a
minimum standard of how many
firearms bought or sold constitutes a
licensure.’’ Other commenters
supported the clarifying provisions
because they do more to ensure that
sellers engaged in the business are
treated alike. For example, one
commenter stated that it ‘‘simply makes
no sense for some gun dealers/sellers to
be exempt from the same standards that
apply to licensed dealers.’’
Department Response
The Department acknowledges
commenters’ support for the proposed
rule and agrees that the rule will
provide needed clarity to persons who
are unsure whether they must become
licensed under the GCA based on their
firearms purchase and resale activities.
Although this rule does not set forth a
presumption that any person offering
guns for sale online or at a gun show is
engaged in the business, it does set forth
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
several actions that give rise to a
presumption that persons engaging in
those activities, including online or at
gun shows, are engaged in the business.
12. Consistent With Second
Amendment Rights
Comments Received
Many supporters recognized that the
proposal did not conflict with an
individual’s Second Amendment rights.
One commenter stated that the rule is an
important clarification in how gun laws
are enforced in the United States, and it
does not infringe upon the rights of
citizens to ‘‘keep and bear arms’’
because ‘‘[a]nyone wanting to transfer a
firearm can still do so under this rule by
using an existing federally-licensed
firearms dealer.’’ In another
commenter’s opinion, the ‘‘right to bear
arms is still alive and well even with
reasonable rules set in place.’’ Another
commenter stated that gun advocates
will argue that taking away these
loopholes endangers their Second
Amendment rights and that this is a
false argument. This commenter added
that, ‘‘[a]ny American citizen who wants
to purchase a firearm online for selfprotection or hunting and who has a
clean mental health and criminal record
has nothing to fear from common sense
restrictions to online gun sales.’’ Other
commenters stated that this rule will
make all citizens of the United States
safer without disrupting or infringing
upon Second Amendment rights.
Many commenters thought that
firearm ownership comes with certain
responsibilities and that this rule helps
ensure that those who are not able to be
responsible are less able to get firearms.
Several commenters stated that the rule
would not limit Second Amendment
rights but would increase safety. For
example, one commenter stated that the
proposed rule ‘‘in no way infringes on
our rights for gun ownership but instead
makes it safer for all of us to own and
purchase guns responsibly.’’ Another
commenter stated, ‘‘[g]un ownership is
a protected right but it is also a privilege
reserved for those who can handle the
responsibility.’’ Other firearm owners
commented that they are firm believers
in their Second Amendment rights and
feel strongly that those rights were
conferred on individuals with
responsible gun ownership in mind, and
that they grew up being taught respect
for guns.
Department Response
The Department agrees that this rule
is fully consistent with the Second
Amendment. This rule implements the
provisions of the GCA, as amended by
PO 00000
Frm 00024
Fmt 4701
Sfmt 4700
the BSCA, that require persons who are
engaged in the business of dealing in
firearms to be licensed. The Supreme
Court has emphasized that its recent
Second Amendment opinions ‘‘should
not be taken to cast doubt on laws
imposing conditions and qualifications
on the commercial sale of arms.’’
District of Columbia v. Heller, 554 U.S.
570, 626–27 & n.26 (2008); see also
Bruen v. N.Y. State Rifle & Pistol Ass’n,
597 U.S. 1, 80–81 (2022) (Kavanaugh, J.,
concurring, joined by Roberts, C.J.)
(same). See Section IV.B.8.c of this
preamble for more discussion on this
topic.
B. Issues Raised in Opposition to the
Rule
As noted, nearly 99,000 commenters
expressed opposition to the NPRM,
including through form letters
submitted as part of mass mail
campaigns. ATF received comments
from a variety of interested parties,
including FFL retailers and
manufacturers; legal organizations that
represent licensees; firearm sporting
organizations; gun owner and gun
collector organizations; more than half
of States’ attorneys general; Members of
Congress; 122 firearm owners; activeduty military members and veterans;
various firearm advocacy organizations;
gun enthusiasts; and people with law
enforcement backgrounds. As discussed
below, numerous commenters raised
various concerns about the
Department’s proposed amendments to
ATF regulations. The topics included
constitutional and statutory authority
concerns, issues with the clarity and
effect of the proposed definitions,
presumptions, changes to procedures
upon discontinuation of business, and
concerns about the public safety goals of
the Department in promulgating this
rule.
1. Lack of Clarity
Comments Received
Many commenters opposed the rule
on the grounds that it was vague or
lacked clarity. Most of these
commenters made statements to that
effect without providing an explanation
or examples. Some explained that they
found the entire rule to be confusing,
stating, ‘‘[t]he language and grammar of
122 ATF received two letters from Members of the
United States House of Representatives in
opposition to the rule, one dated October 12, 2023,
with four signatories, and another received on
December 7, 2023, with nine signatories. ATF
received three letters in opposition from Members
of the United States Senate, one dated September
21, 2023, with seven signatories, and two received
December 7, 2023, one with two signatories and one
with one signatory.
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
the entire preamble is intentionally
misleading and confusing unless the
reader is an attorney,’’ ‘‘the regulations
are exceedingly confusing to me, and I
consider myself to be a learned man,’’
and ‘‘this rule is so vague that people
trying to be right will never know
exactly what would make them need to
be a dealer.’’
Some commenters, however, were
more specific. Some of these
commenters gave examples of particular
parts of the rule they found vague, for
example: ‘‘the proposed definitions are
replete with the use of the term ‘may’
with respect to being engaged in the
business as a dealer in firearms’’; the
rule ‘‘leaves the interpretation of
‘occasional’ subjective in nature’’; the
word ‘‘repetitively’’ used in the fourth
EIB presumption is ambiguous and
could be interpreted as ‘‘selling any
number of firearms that is more than
one’’; ‘‘it states ‘even a single firearm
transaction, or offer to engage in a
transaction, when combined with other
evidence, may be sufficient to require a
license.’ No examples are provided’’; the
rule ‘‘creates confusion by attempting to
clarify the term ‘dealer’ and how it
applies to auctioneers’’; and the
presumption that a person is a dealer
when that person ‘‘‘sells or offers for
sale firearms, and also represents to
potential buyers or otherwise
demonstrate a willingness and ability to
purchase and sell additional firearms’ is
vague and would likely include even
harmless banter between buyer and
seller of a single firearm regarding
additional purchases these individuals
with to make some time in the future.’’
One commenter argued that, ‘‘[t]he
apparent fines and jail time are
draconian relative to the vagueness of
the application of the proposed rule.’’
At least one commenter asked that the
Department qualify ‘‘repetitively’’ with
a time limit so that a firearms owner
who is likely to sell a firearm more than
once in their lifetime or even over a
five-year period would not be
inadvertently captured under the
presumptions. And, at least one
commenter took the position that ‘‘of
course, repetition means more than
once.’’
Some other commenters focused on
the impacts of the provisions they stated
were vague. One commenter said it
appears that the ‘‘intent of this law is to
force all sales through an FFL as you
otherwise are never sure the sale is
lawful.’’ A couple of commenters
mentioned that ‘‘four times in the
proposed rule the ATF provide[d] a list
of ‘rebuttable presumption[s]’ or other
factors and then conclude[d] by noting
that the list is ‘not exhaustive’ ’’ and that
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
the proposed rule is ‘‘unlikely’’ to cover
selling one’s gun to an immediate family
member—but leaves open the
possibility that ATF could change its
mind. ‘‘This makes compliance both
difficult and inconsistent,’’ one of these
commenters added. ‘‘When definitions
are vague in this manner, it leaves far
too much opportunity for unlawful or
unjust ‘interpretation’ or inconsistent
implementation and enforcement,’’ they
concluded. The commenter further
explained that the proposed rule’s lack
of clarity ‘‘places citizens who wish to
abide by laws . . . in the unreasonable
position of having their lawfulness in a
gray area. In this way, an unelected
official of ATF seems to have discretion
to arrest persons, seize property, or take
other ‘enforcement actions’ somewhat
arbitrarily. Additionally, even if courts
later overturn that ATF officer’s
decision, the hardship faced by the
law[-]abiding citizens due to those
circumstances (lost wages, attorney fees,
reputational damage, emotional stress
and trauma, etc.) are unreasonable.’’
Other commenters were concerned
about what they described as the
ambiguity of the statutory definitions,
which ATF proposed to include
verbatim in the regulation. One
commenter stated, ‘‘[t]he new
definitions, such as ‘predominantly earn
a profit’ and ‘terrorism,’ may lead to
differing interpretations and legal
challenges.’’ Another stated, ‘‘[t]he
proposed rule is riddled with
ambiguous and imprecise terms such as
‘predominantly earn a profit’ and
‘principal objective of livelihood and
profit.’ This lack of clarity is
unacceptable and can lead to arbitrary
enforcement and interpretation,
jeopardizing the rights of law-abiding
citizens.’’
One commenter suggested that
additional education will be necessary
because the rule is hard to understand.
‘‘While I appreciate the intention to
assist individuals in understanding
when they are required to have a license
to deal in firearms, the proposed
changes, as they currently stand, create
more questions than answers. The need
for comprehensive education and
outreach efforts to inform the public
about these changes is evident.’’
Department Response
The Department disagrees that the
rule is vague or lacks clarity. The rule
implements the BSCA by setting forth
specific conduct that is presumed to be
‘‘engag[ing] in the business’’ of dealing
in firearms or acting with a predominant
intent to earn a profit under the GCA.
This rule provides persons who may be
unclear how the statute applies to them
PO 00000
Frm 00025
Fmt 4701
Sfmt 4700
28991
with greater clarity as to what conduct
implicates the statute, even though the
rule does not purport to include every
possible scenario. Many thousands of
commenters stated that they believe this
rulemaking provides much needed
clarity to help ensure that persons who
are prohibited from receiving or
possessing firearms do not receive them.
The Department acknowledges
commenters’ concerns that the
presumptions are not exhaustive of all
of the conduct that may show that, or be
considered in determining whether, a
person is engaged in the business of
dealing in firearms or has a
predominant intent to earn a profit.
However, there are numerous and
various fact patterns that could fall
within the statutory definition of being
‘‘engaged in the business’’ of dealing in
firearms under 18 U.S.C. 921(a)(21)(C).
This rule cannot possibly describe every
potential scenario. It is important to
note the presumptions are designed to
improve clarity and consistency,
though, as presumptions, they are not
conclusive findings and may be
rebutted. The conduct that
presumptively falls within the
definition of ‘‘engaged in the business’’
represents common fact patterns that
the Department has seen during
numerous criminal investigations,
regulatory enforcement actions, and
criminal prosecutions, and which the
Federal courts have recognized as strong
indicators of engaging in the business of
dealing in firearms even prior to the
BSCA’s expanded definition. In other
words, these presumptions represent
situations that have been observed and
tested repeatedly over decades as
conduct that is indicative of whether a
person is engaged in the business or has
a predominant intent to earn pecuniary
gain from the sale or disposition of
firearms. The Department therefore
disagrees that the rule, which provides
additional clarification about what the
statute requires, is vague or will result
in inconsistent or unfair
implementation and enforcement.
The Department also disagrees that
the rule is confusing or overly complex.
The Department acknowledges that the
preamble to the proposed rule was long
and included significant discussions
and legal case citations in support of the
Department’s proposed regulatory
changes. However, the rule changes the
regulatory definition of what it means to
be ‘‘engaged in the business’’ as a dealer
in firearms to match the statutory
definition as amended by the BSCA and
provides additional detail to aid persons
in understanding what conduct is likely
to meet that definition. This includes
addressing particular contexts, such as
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
28992
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
auctioneers, and licensees who cease to
be licensed. The rule does this by
defining certain terms and describing
specific, identifiable conduct in specific
rebuttable presumptions. These
definitions are based on statutory
language, standard dictionary
definitions, and Federal court opinions.
Based on concerns identified in the
public comments, this final rule has
further refined some definitions and
presumptions to help collectors and
hobbyists better understand when they
are enhancing or liquidating a personal
collection without the need for a
license. For example, in response to one
of the specific comments on the first EIB
presumption, the Department has added
a parenthetical after ‘‘represents to
potential buyers or otherwise
demonstrates a willingness and ability
to purchase and resell additional
firearms’’ to explain that it means ‘‘(i.e.,
to be a source of additional firearms for
resale).’’ This presumption, like the
others, is based on ATF’s criminal and
regulatory enforcement experience and
the case law cited in both the proposed
rule and this final rule.
The Department does not agree with
commenters that the rule’s use of the
term ‘‘may’’ in the regulatory definition
of ‘‘engaged in the business’’ does not
provide firearms sellers with sufficient
clarity as to who is required to be
licensed. While the presumptions in the
rule are intended to provide clarity to
persons who resell firearms, the
Department cannot establish bright-line
rules that address every conceivable
scenario. For example, while the
regulatory text states that ‘‘[s]elling large
numbers of firearms . . . may be highly
indicative of business activity,’’ that
will not always be the case, depending
on the circumstances. This is why the
regulatory text uses the word ‘‘may’’ at
times and expressly states that activities
set forth in the rebuttable presumptions
are not exhaustive of the evidence or
conduct that may be considered in
determining whether a person is
engaged in the business of dealing in
firearms or in determining the more
limited question of whether a person
has the intent to predominantly earn a
profit through the repetitive purchase
and resale of firearms.
The Department does not agree with
commenters that the undefined terms in
the rule are vague. In the absence of
specific definitions, readers should use
the ordinary meaning of these statutory
terms and other words in the regulatory
text. This includes the definition of the
term ‘‘occasional,’’ which means
‘‘infrequent,’’ or ‘‘of irregular
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
occurrence,’’ 123 and the term
‘‘repetitively’’ as it applies to a person
engaged in the business as a dealer,
which means that a person intends to or
actually does purchase and resell
firearms again. With regard to the
comment that the term ‘‘repetitive’’
should be limited to a period of time,
again, this term, like the term
‘‘occasional,’’ should be read
consistently with its ordinary
meaning.124 Consistent with that
ordinary meaning, a person is less likely
to be understood as ‘‘repetitively’’
selling firearms if they do so twice over
five years than if they do so several
times over a short period. With regard
to statutory terms, such as ‘‘to
predominantly earn a profit’’ and
‘‘terrorism,’’ those definitions were
added to the GCA by the BSCA. The
Department is now adding them into
ATF regulations so that the regulatory
text conforms to the statute.
The Department disagrees that no
examples were provided in the
proposed rule to explain the statement,
‘‘even a single firearm transaction or
offer to engage in a transaction, when
combined with other evidence, (e.g.,
where a person represents to others a
willingness to acquire more firearms for
resale or offers more firearms for sale)
may require a license.’’ 88 FR 62021.
That regulatory text itself included an
example: ‘‘(e.g., where a person
represents to others a willingness to
acquire more firearms for resale or offers
more firearms for sale).’’ Id. This
distinguishes a person engaged in the
business of dealing in firearms from a
person who makes only a single isolated
firearm transaction without such other
evidence, and who would not ordinarily
require a license, as the case law
demonstrates.125 To further clarify this
example, the Department has added the
following clause to the regulatory text,
‘‘whereas, a single isolated firearm
transaction without such evidence
123 See Occasional, Collins English Dictionary,
https://www.collinsdictionary.com/us/dictionary/
english/occasional (last visited Feb. 29, 2024)
(defining ‘‘occasional’’ in ‘‘American English’’).
124 See, e.g., Repetitive, Merriam-Webster
Dictionary, https://www.merriam-webster.com/
dictionary/repetitive (last visited Apr. 1, 2024)
(‘‘containing repetition’’); Repetition, MerriamWebster Dictionary, https://www.merriamwebster.com/dictionary/repetition (last visited Apr.
1, 2024) (‘‘the act or instance of repeating or being
repeated’’).
125 See footnote 72; cf. S. Rep. No. 98–583, at 8
(1984) (The statute does ‘‘not require that the sale
or disposition of firearms be or be intended as, a
principal source of income or a principal business
activity. Nor does it apply to isolated sales, unless
of course, such sales are part of a regular course of
business with the principal objective of livelihood
and profit.’’).
PO 00000
Frm 00026
Fmt 4701
Sfmt 4700
would not require a license.’’
§ 478.13(b).
The Department disagrees that ATF’s
enforcement of the rule would be
arbitrary. The rule clarifies the meaning
of statutory terms and identifies
common scenarios under which persons
are presumptively engaged in the
business, allowing for uniform
application and understanding.
The Department also disagrees that
the rule creates confusion as to how the
term ‘‘dealer’’ applies to auctioneers. As
described in Section III.C of this
preamble, the proposed and final
regulatory text explains that firearms
dealing may occur anywhere, including
by online auction, and establishes by
regulation ATF’s longstanding
interpretations that distinguish between
estate-type and consignment-type
auctions.
The Department agrees with
commenters that undertaking additional
outreach efforts would be beneficial to
further explain the amendments made
to the GCA by the BSCA and how this
rule implements those changes. The
Department plans to do so. As one
example, in response to the BSCA, ATF
already updated its guidance entitled Do
I Need a License to Buy and Sell
Firearms? 126 and intends to further
update the guidance to include
additional details that conform with this
final rule.
2. Does Not Enhance Public Safety
Comments Received
Other commenters opposed the rule
on the grounds that it will not enhance
public safety. The majority of comments
on this topic argued that criminals are
the people putting public safety at risk,
and that they are not going to abide by
the BSCA and the proposed regulation
or purchase firearms through FFLs. As
a result, they stated, the proposed rule
will do nothing to affect public safety,
while imposing a burden on law-abiding
citizens. One commenter stated,
‘‘[p]rivate firearm sales and transfers
happen among law-abiding people and
are not in any way part of the
unreasonable public safety risk that gun
prohibition advocates claim. Therefore,
this rule does nothing to address the
unlawful acts of the criminals that pose
a true and actual threat to public
safety.’’ Another stated, ‘‘there is very
little public safety i[f] this rule is
enacted. The criminal element in
society simply will ignore it, and the
lawful gun owners will be greatly
affected with the burden of complying
126 ATF Publication 5310.2, Do I Need a License
to Buy and Sell Firearms? (Aug. 2023), https://
www.atf.gov/file/100871/download.
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
with the rule. Time and effort[ ] and
money will have to be expended by gun
owners for no appreciable benefit.’’ A
third commenter stated there is no
evidence to support a correlation with
public safety, asserting, ‘‘[t]he proposed
rule change lacks empirical evidence to
substantiate its assumed benefit of
improved public safety. Numerous
studies, including those published in
peer-reviewed journals [citing a journal
article], have found that the correlation
between gun control measures and
reduction in gun violence is negligible.
This suggests that the rule change is a
reactive measure rather than a wellconsidered evidence-based policy.’’
Another commenter said that, if ATF
wants to do something to promote gun
safety, it should be actively involved
with industry experts to develop
standards in education and safe
ownership instead of issuing the rule.
Other commenters suggested that
issuing the regulation will ‘‘only serve
to create a black market in firearms
sales, while doing nothing to actually
stop crime,’’ asked ‘‘how this helps with
cartels and organized crime, when most
of those people are already under a class
that shouldn’t have guns anyway (i.e.
illegal),’’ and argued that the rule ‘‘will
create criminals out of lawful gun
owners, while dangerous criminals like
drug dealers and gang members could
not care less.’’ They added that the rule
will make the public less safe because
law-abiding gun owners will face more
hurdles while criminals will keep doing
what they are doing. Another
commenter stated that, ‘‘[o]n the
whole[,] gun owners are more law
abiding[,] not less. We purposely avoid
breaking any law that may affect our
ability to own firearms, even laws we
may not agree with. So this affects a
population that is less likely to be a
problem and does nothing to discourage
the criminal population.’’
Several commenters stated that
criminals receive their firearms from
sources other than FFLs. For example,
one commenter said: ‘‘Federal studies
have repeatedly found that persons
imprisoned for firearm crimes get their
firearms mostly through theft, the black
market, or family members or friends.’’
They stated, ‘‘less than one percent get
guns at gun shows [citing a report].’’
Another commenter said that a study
conducted by ATF, which reportedly
concludes that less than 1 percent of
guns used in crimes were acquired by
other means (i.e., through private sales),
indicates that this rule would not be
effective in preventing criminals from
obtaining firearms. And a couple of
commenters stated that the source of
danger comes from outside the country,
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
asserting, for example, ‘‘This rule will
not make anyone safer. America has
enemies across the globe. Who will do
everything they can to attack us. When
[our] border is wide open, America is
significantly less safe because our
border is open. Guns that will come
from across the border will not be
known to the ATF. Close the border to
truly secure our nation.’’ Another
commenter said the rule will only
encourage more back-alley deals and the
proliferation of unsafe, hand-made, and
3D-printed firearms to evade the
regulatory provisions.
Department Response
The Department disagrees that this
rule will not enhance public safety or
lacks empirical evidence to support it.
In enacting the BSCA, Congress
determined that there were persons who
were engaged in the business of dealing
in firearms at wholesale or retail who
should have been licensed under
existing law.127 Congress therefore
amended the GCA to clarify that those
persons must be licensed. This rule
implements that amendment to the
GCA. The result will be that more
persons who are engaged in the business
of dealing in firearms will become
licensed, run NICS background checks,
and maintain transaction records
through which firearms involved in
crime can be traced. See Section VI.A.2
of this preamble. One empirical
indication of support for this
anticipated increase is that after the
original publication of the guidance Do
I Need a License to Buy and Sell
Firearms?, ATF Publication 5310.2, in
January 2016, there was a modest
increase of approximately 567 license
applications (based on Federal Firearms
Licensing Center (‘‘FFLC’’) records). In
addition, around 242,000 commenters
stated that they believe this rulemaking
will increase public safety and provided
data on that point. Additional empirical
evidence that public safety will be
enhanced includes the following:
More Background Checks: As
explained previously, the amended
regulations will increase the number of
background checks performed because
more dealers will become licensed and
run background checks on their
customers. With additional background
checks being run by licensed dealers,
more prohibited persons will be denied
firearms, consistent with the plain
language and intent of the GCA, as
amended by the Brady Act and the
BSCA. Since the inception of NICS in
1998, the FBI has denied at least
2,172,372 transfers due to background
127 See
PO 00000
footnotes 30 and 31, supra.
Frm 00027
Fmt 4701
Sfmt 4700
28993
checks, and in 2022 alone, it denied
131,865.128 From among the transfers
denied in 2022, 60,470 potential
transferees were convicted of a crime
punishable by imprisonment for a term
exceeding one year; 129 12,867 were
under indictment or information for
such a crime; 8,851 were fugitives from
justice; and 10,756 had been convicted
of a misdemeanor crime of domestic
violence.130
These NICS denials prevented the
receipt and possible misuse of a firearm
by a prohibited person. Additionally,
since the passage of the BSCA’s
provision on enhanced background
checks for juveniles, 18 U.S.C.
922(t)(1)(C)(iii), the FBI has conducted
more than 200,000 enhanced checks,
resulting in at least 527 potentially
dangerous juveniles being denied
firearms as of the first week of January
2024.131 And, as a result of the NICS
Denial Notification Act, codified at 18
U.S.C. 925B, these denials will be
reported within 24 hours directly to
State, local, and Tribal law enforcement
authorities, which can then take
appropriate action. Because more
persons will become licensed under the
BSCA and this rule, more enhanced
juvenile checks will be conducted and
more denials will be reported to State,
local, and Tribal law enforcement,
resulting in fewer firearms being
transferred to prohibited persons and
faster investigation of denials and
recovery of transferred firearms as
appropriate.
More Crime Gun Traces: With more
licensed dealers, law enforcement will
have increased ability to trace firearms
involved in crime through required
records, including out-of-business
records. Between 2017 and 2021, law
enforcement agencies nationally and
internationally submitted a total of
1,922,577 crime guns to ATF for tracing,
with 460,024 submitted in 2021. During
that period, the number of traces
increased each year, resulting in a 36
percent rise over the five years from
128 FBI, Crim. Just. Info. Servs. Div., National
Instant Criminal Background Check System 2022
Operational Report 14, https://www.fbi.gov/filerepository/nics-2022-operations-report.pdf/view.
129 See 18 U.S.C. 921(a)(20) (defining ‘‘crime
punishable by imprisonment for a term exceeding
one year’’).
130 FBI, Crim. Just. Info. Servs. Div., National
Instant Criminal Background Check System 2022
Operational Report 32, https://www.fbi.gov/filerepository/nics-2022-operations-report.pdf/view.
131 Press Release, DOJ, Justice Department Marks
More Than 500 Illegal Firearm Purchases Stopped
by New Enhanced Background Checks (Jan. 5,
2024), https://www.justice.gov/opa/pr/justicedepartment-marks-more-500-illegal-firearmpurchases-stopped-new-enhanced-background.
E:\FR\FM\19APR3.SGM
19APR3
28994
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
2017 to 2021.132 ATF was able to
determine the first retail purchaser in 77
percent of those requests, providing law
enforcement with crucial leads and an
increasing capability to solve gun
crimes in their respective jurisdictions
throughout the United States and
abroad.133
In response to the comment alleging
that few criminals (1 percent) acquire
firearms at gun shows, the most recent
ATF report on firearms commerce—the
National Firearms Commerce and
Trafficking Assessment, Volume Two,
Part III—reveals that, between 2017 and
2021, 41,810 crime guns were traced to
licensees at gun shows, reflecting a 19
percent increase during that time.134
While the figure from 2021 represents
only 3 percent of the total number of
crime guns traced, ‘‘this figure does not
represent the total percentage of
recovered crime guns that were sold at
a gun show during the study period as
private citizens and unlicensed dealers
sell firearms at gun show venues.’’ ATF
has no ability to trace crime guns to the
numerous unlicensed dealers at gun
shows, and therefore, ‘‘[n]ational data
. . . [is] not available on unregulated
firearms transfers at gun shows.’’ 135 The
low figure, therefore, does not suggest
that few crime guns are sold at gun
shows—to the contrary, it demonstrates
law enforcement agencies’ limited
ability to trace crime guns that are
purchased at those venues. As more
unlicensed gun show dealers become
licensed, law enforcement will be able
to trace more firearms subsequently
involved in crime that were sold at gun
shows to help solve those crimes.
Better Crime Gun Intelligence: All
licensed dealers are required to report
multiple sales of handguns occurring
within five consecutive business days,
report thefts or losses of firearms from
their inventory or collection, and
respond to trace requests.136 Certain
dealers are required to report multiple
sales of certain rifles to ATF occurring
within five consecutive business days,
and respond to demand letters with
records that report transactions where
there is a short ‘‘time-to-crime.’’ 137
132 ATF, National Firearms Commerce and
Trafficking Assessment (NFCTA): Crime Gun
Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the
United States and Its Territories 1 (Mar. 27, 2024),
https://www.atf.gov/firearms/docs/report/nfctavolume-ii-part-iii-crime-guns-recovered-and-tracedus/download.
133 Id. at 2.
134 Id. at 14.
135 Id.
136 18 U.S.C. 923(g)(3), (6), (7).
137 18 U.S.C. 923(g)(3)(a); ATF, National Tracing
Center: Demand Letter Program, https://
www.atf.gov/firearms/national-tracing-center (last
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
From this information, ATF is able to
provide law enforcement agencies
throughout the United States with key
crime gun intelligence showing firearm
trafficking patterns.138 In addition to
crucial intelligence provided directly to
law enforcement in their respective
jurisdictions, comprehensive data
gathered from licensee sources was used
to compile the National Firearms
Commerce and Trafficking Assessment,
Volume II, regarding the criminal use of
firearms that have been diverted from
lawful commerce. This assessment
allows law enforcement to better focus
their limited resources on dangerous
criminals and enhances policymakers’
ability to create strategies to better stem
the flow of crime guns to their
jurisdictions.139 For example, stolen
firearms play an indirect role in
trafficking and diversion to the
underground firearm markets used by
prohibited persons, juveniles, and other
individuals seeking to buy firearms
without going through a background
check. From 2017 to 2021, licensees
reported being the victims of 3,103
larcenies, 2,154 burglaries, and 138
robberies.140 This data was further
broken down over time by license type,
business premises type, State, quantity
of firearms stolen, weapon type, caliber,
time-to-crime, time-to-recovery,
recovery location, and age and gender of
ultimate possessor.141 This information
will help reduce thefts from licensees
reviewed Feb. 26, 2024) (‘‘Demand Letter 2 is issued
to FFLs who had 25 or more firearms traced to them
the previous calendar year with a ‘time-to-crime’ of
three years or less.’’); Report of Multiple Sale or
Other Disposition of Certain Rifles, ATF Form
3310.12 (Feb. 2024), https://www.atf.gov/firearms/
docs/form/report-multiple-sale-or-other-dispositioncertain-rifles-atf-form-331012/download; Demand
Letter 2 Program: Report of Firearms Transactions,
ATF Form 5300.5 (Dec. 2021), https://www.atf.gov/
firearms/docs/form/report-firearms-transactionsatf-form-53005/download.
138 ATF, National Firearms Commerce and
Trafficking Assessment (NFCTA): Crime Gun
Intelligence and Analysis, Volume Two, Part II:
National Tracing Center Overview 8–10 (Jan. 11,
2023), https://www.atf.gov/firearms/docs/report/
nfcta-volume-ii-part-ii-ntc-overview/download.
139 Press Release, DOJ, Justice Department
Announces Publication of Second Volume of
National Firearms Commerce and Trafficking
Assessment: Report Presents Unprecedented Data
on Crime Gun Intelligence and Analysis (Feb. 1,
2023), https://www.atf.gov/news/pr/justicedepartment-announces-publication-second-volumenational-firearms-commerce-and (‘‘The
comprehensive—and unprecedented—compilation
of data in this report is intended to provide strategic
insight to law enforcement, policymakers, and
researchers as they work to reduce and prevent gun
violence.’’).
140 ATF, National Firearms Commerce and
Trafficking Assessment (NFCTA): Crime Gun
Intelligence and Analysis, Volume Two, Part V:
Firearm Thefts 2 (Jan. 11, 2023), https://
www.atf.gov/firearms/docs/report/nfcta-volume-iipart-v-firearm-thefts/download.
141 Id. at 5–12.
PO 00000
Frm 00028
Fmt 4701
Sfmt 4700
and, therefore, reduce firearms
trafficking.142 ATF does not receive the
same detailed information about thefts
from non-licensee dealers who do not
submit FFL Theft/Loss Reports (ATF
Form 3310.11) to ATF, but ATF is aware
that thefts from non-licensees constitute
a significantly higher number of thefts
and thus are a larger contributor to
firearms trafficking.143 Increasing the
number of dealers who are licensed will
help reduce firearms trafficking by
providing more of this kind of detailed
information as well.
The Department acknowledges that
there are criminals who are currently
engaged in the business of trafficking in
firearms for profit who will not become
licensed, notwithstanding the
requirements in the GCA (as amended
by the BSCA) and this rule. But the fact
that some persons purposely violate
Federal law is appropriately addressed
through enforcement, and it is not a
reason to refrain from providing further
clarity to increase compliance among
those dealing in firearms. The penalties
for engaging in the business of dealing
in firearms without a license have long
been set forth in the GCA, and this
rulemaking does not purport to change
them. The illicit market in firearms
already exists, and nothing in this rule
furthers that market. By providing
further clarity about who is required to
become licensed, this rule will help
law-abiding persons comply with the
law and will also help ATF in its ability
to enforce the law. It will reduce the
number of persons who are currently
engaged in certain purchases and sales
of firearms without a license so that
their activities do not perpetuate
firearms trafficking.
142 Press Release, DOJ, Justice Department
Announces Publication of Second Volume of
National Firearms Commerce and Trafficking
Assessment: Report Presents Unprecedented Data
on Crime Gun Intelligence and Analysis (Feb. 1,
2023), https://www.atf.gov/news/pr/justicedepartment-announces-publication-second-volumenational-firearms-commerce-and (‘‘The Department
of Justice is committed to using cutting-edge crime
gun intelligence to reduce violent crime, and this
first of its kind data set on emerging threats,
specifically the epidemic of stolen firearms and the
proliferation of machinegun conversion devices,
will have real-world impact in safeguarding our
communities.’’).
143 ATF, National Firearms Commerce and
Trafficking Assessment (NFCTA): Crime Gun
Intelligence and Analysis, Volume Two, Part V:
Firearm Thefts 2 (Jan. 11, 2023), https://
www.atf.gov/firearms/docs/report/nfcta-volume-iipart-v-firearm-thefts/download (‘‘[F]irearm thefts
from private citizens greatly outnumber firearms
stolen from FFLs. As reflected in Figure BRL–01,
firearms stolen from private citizens accounted for
most stolen crime guns known to LEAs. From 2017
to 2021, there were 1,074,022 firearms reported
stolen. About 3% (34,339) were stolen in FFL thefts,
1% (13,145) were stolen in interstate shipments,
and almost 96% (1,026,538) were stolen in thefts
from private citizens.’’).
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
Moreover, as noted previously,
prohibited persons continue to seek to
purchase firearms through licensed
dealers—there were over 130,000
attempts in 2022 alone. By helping
sellers better understand when they
must be licensed pursuant to the BSCA,
and thus increasing the number of
licensees, this rule will result in more
prohibited persons being denied
firearms at the point of sale before they
can be used in a violent crime. And, to
the extent criminals purchase firearms
through licensed dealers, the firearms
they use will be able to be traced
through the dealers’ transaction records
when they are later found at a crime
scene or otherwise linked to a violent
crime. Unlicensed sellers are not
required to run background checks or
maintain transaction records through
which crime guns can be traced. As to
the proliferation of more hand-made
and 3D-printed firearms, other rules
address the licensing requirements for
persons engaged in the business of
manufacturing firearms.144 Nonetheless,
when dealers who become licensed
under this rule accept hand-made, 3Dprinted, and privately made firearms
into inventory, they are already required
to serialize and record such firearms for
crime gun tracing purposes and run
background checks on subsequent
purchasers.145
khammond on DSKJM1Z7X2PROD with RULES3
3. Punishes Law-Abiding Citizens
Comments Received
Thousands of commenters stated that
the proposed rule is an attack on the
entire population of law-abiding firearm
owners through unlawful infringement
of their rights. To that end, many
commenters claimed they will lose the
ability to protect themselves and their
families because they believe the
proposed rule was designed to make it
difficult for law-abiding Americans to
acquire firearms.
Many commenters opined that they
would be prevented—potentially
criminally—from passing firearms to
family, friends, or others when trading
up, retiring from their gun collecting
hobby, or otherwise wishing to purge
firearms from their collections. Many
commenters believed that a certain
number of firearms sold, such as more
than three per year, would make them
a felon. One commenter was concerned
with how the rule affects him as a WWII
re-enactor when members seek to sell
firearms to new members and stated that
144 For more information on who must be
licensed as a manufacturer, see Definition of
‘‘Frame or Receiver’’ and Identification of Firearms,
87 FR 24652 (Apr. 26, 2022).
145 See 27 CFR 478.92(a)(2); 478.125(i).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
it would be difficult for this group to
continue their hobby under the
proposed rule without going through an
FFL.
In that vein, many commenters stated
that the proposed rule is threatening,
puts law-abiding citizens in a
burdensome defensive position of
proving to an ‘‘over-zealous’’
Government that they are not required
to be licensed as a firearms dealer, and
could entrap them. Some opined that
the goal of the proposed rule is to use
complex and confusing language to
criminalize the activities of countless
average individuals who wish to sell or
otherwise liquidate their firearms as
they naturally gain in value over time,
especially during periods of inflation.
One commenter stated that ‘‘[t]his
proposal is a transparent attempt to
strong-arm internet service providers,
gun shows, technology platforms, and
other facilitators to abandon any
involvement in private gun sales with
vague threats of ‘administrative action’
for non-compliance.’’ Another
commenter suggested that the proposed
rule was intended to ‘‘make every
American gun owner live in fear of
buying or selling a gun at any point in
their lives.’’
A few commenters raised concerns
that, if they inadvertently deal in
firearms without a license, and are
therefore determined to be in violation
of the rule by ATF, they would not be
able to then become a legal dealer. ‘‘One
footnote in this proposed rule suggests
the ATF might prevent a person from
obtaining a license to even engage in
future firearm transactions because they
were presumed to have ‘willfully
engaged in the business of dealing in
firearms without a license,’ ’’ a
commenter said. ‘‘Therefore, the agency
might warn that individual of their
purportedly unlawful behavior,’’ the
commenter continued, and ‘‘[s]uch an
individual, wishing to complete a future
firearm transaction without ATF
harassment, might submit an
application to obtain a license to deal in
firearms. But ATF’s footnote suggests
the law-abiding individual might be
denied the license simply because their
previous conduct was presumptively
unlawful,’’ they concluded.
Department Response
The Department disagrees with the
assertions that this rule is intended to or
will make felons of law-abiding citizens
when they wish to pass firearms to
family or friends, or to sell all or a part
of a personal collection of firearms. This
rule effectuates the BSCA and helps
protect innocent and law-abiding
citizens from violent crime. This rule
PO 00000
Frm 00029
Fmt 4701
Sfmt 4700
28995
does not place additional restrictions on
law-abiding citizens who occasionally
acquire or sell personal firearms to
enhance a personal collection or for a
hobby. Instead, the rule provides clarity
to persons on when they are engaged in
the business as a dealer in firearms with
the predominant intent to profit. It
articulates what it means to be engaged
in the business, as well as other relevant
statutory terms, to identify those
persons whose conduct requires that
they obtain a license—as distinguished
from persons who make occasional
purchases and sales in private
transactions not motivated
predominantly by profit.
This rule does not prevent lawabiding persons from purchasing or
possessing firearms, from selling
inherited firearms, or from using their
personal firearms for lawful purposes
such as self-defense, historical reenactments, or hunting. The rule
includes a non-exhaustive list of
conduct that does not support a
presumption that a person is engaging
in the business and that may also be
used to rebut the presumptions.
Additionally, this rule does not impose
any new restrictions in the application
process to become an FFL. Further,
nothing in this rule imposes licensing
requirements on internet service
providers, gun show promotors, or
technology platforms that are operating
in conformity with applicable legal
requirements. And finally, this rule does
not inhibit law-abiding citizens from
acquiring firearms. In fact, this rule will
likely increase the number of licensed
dealers available to sell firearms to
consumers. Nonetheless, a small
percentage of unlicensed persons who
are engaged in the business under the
BSCA amendments, and therefore must
become licensed to continue dealing in
firearms, might choose to leave the
firearm sales market rather than become
licensed, for a variety of reasons. See
Sections IV.D.5 and VI.A of this
preamble for further discussion of this
potential outcome.
In this rule, despite several
commenters advocating for a strict
numerical threshold, the Department
did not establish a numerical threshold
for what would constitute being
‘‘engaged in the business.’’ Any number
would be both overinclusive and
underinclusive. It would be
overinclusive in that a collector who
does not sell firearms to predominantly
earn a profit might sell a significant
number of firearms to liquidate a
personal collection (and thus cross the
numerical threshold), even though the
GCA provides that sales to liquidate a
personal collection are not made to
E:\FR\FM\19APR3.SGM
19APR3
28996
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
predominantly earn a profit. See 18
U.S.C. 921(a)(22). And it would be
underinclusive in that someone might
devote time, attention, and labor to
dealing in firearms with the intent to
profit (and would thus qualify as being
engaged in the business under the
statute), but might not meet some
hypothetical number of sales and thus
elect not to get, or purposefully evade
getting, a license. As stated above, the
courts have indicated that a license may
be required even when there is a single
firearms transaction or offer to engage in
a transaction where persons also hold
themselves out as sources of additional
weapons. See Section III.D of this
preamble. At the same time, however,
Congress specifically exempted from the
definition of ‘‘engaged in the business’’
as a dealer in firearms ‘‘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), so a person who
makes multiple sales will not always be
engaged in the business.
The Department disagrees with the
commenters who said that persons who
inadvertently deal without a license in
violation of the rule would be ‘‘caught
in a trap’’ of not being able to become
a licensed dealer. Even if a person is
presumed to be engaged in the business
of dealing in firearms under one of the
EIB presumptions in the rule, ATF
would need to have evidence that the
person ‘‘willfully’’ engaged in that
business without a license to deny the
application for license. See 18 U.S.C.
923(d)(1)(C). Consistent with the way
the courts have long interpreted this
term in this administrative firearms
licensing context, the term ‘‘willfully’’
means that the license applicant ‘‘knew
of his legal obligation [to become
licensed] and purposefully disregarded
or was plainly indifferent to’’ that
requirement. Article II Gun Shop, Inc. v.
Gonzales, 441 F.3d 492, 497 (7th Cir.
2006) (quoting Stein’s, Inc. v.
Blumenthal, 649 F.2d 463, 467 (7th Cir.
1980)).146 So, only an applicant who
purposefully disregarded or was plainly
indifferent to the licensing requirement
146 See also CEW Properties, Inc. v. ATF, 979 F.3d
1271, 1273 (10th Cir. 2020); Shawano Gun & Loan,
LLC v. Hughes, 650 F.3d 1070, 1077–78 (7th Cir.
2011) (quoting Gonzales, 441 F.3d at 497); Armalite,
Inc. v. Lambert, 544 F.3d 644, 647–49 (6th Cir.
2008); On Target Sporting Goods, Inc. v. Attorney
General of U.S., 472 F.3d 572, 575 (8th Cir. 2007);
RSM, Inc. v. Herbert, 466 F.3d 316, 321–22 (4th Cir.
2006); Willingham Sports, Inc. v. ATF, 415 F.3d
1274, 1277 (11th Cir. 2005); Perri v. ATF, 637 F.2d
1332, 1336 (9th Cir. 1981).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
would be denied a license on those
grounds.
The Department disagrees that WWII
re-enactors will be unable to sell
firearms to fellow hobbyists under this
rule without going through a licensed
dealer. While Federal law already
generally prevents persons from selling
firearms to a person in another State
without going through a licensed
dealer,147 neither existing law nor this
rule prevents persons residing in the
same State from occasionally
purchasing and reselling firearms to
enhance their personal collections or for
a hobby without going through a
licensee. Nonetheless, to further address
these concerns, the Department has
amended the definition of ‘‘personal
collection’’ in this rule to include, as an
example, personal firearms that a person
accumulates for ‘‘historical reenactment.’’
4. Adverse Impact on Underserved and
Minority Communities
Comments Received
Certain commenters opined that the
proposed rule could somehow have an
adverse effect on persons with limited
economic means who would be forced
to ‘‘choose between living expenses and
protecting themselves and love[d]
ones.’’ Comments included scenarios
such as economically disadvantaged
persons being unable to sell a personally
owned firearm to make ends meet
because of, for example, prohibitive
costs and hurdles to becoming licensed;
families needing to liquidate assets,
including personally owned firearms, to
care for loved ones, pay for food, rent,
or other obligations; disadvantaged
persons having to choose between
selling a firearm at a loss or being
prosecuted as an ‘‘illegal gun dealer’’;
and low-income individuals being
financially unable to acquire a firearm
to provide protection for themselves or
families as a result of the rule. One
commenter stated that the requirement
for individuals to rebut presumptions in
administrative or civil proceedings
poses a considerable financial burden,
particularly for those with lower
incomes, and specifically persons of
color.
Several commenters expressed
concern that the proposed rule would
unfairly target minority communities.
Some commenters opined that the
proposed rule is classist and racist:
‘‘only rich [White] people’’ can afford to
legally obtain guns because licensed
firearms dealers are disproportionately
distributed in white neighborhoods;
147 See
PO 00000
18 U.S.C. 922(a)(5).
Frm 00030
Fmt 4701
Sfmt 4700
minority populations experience
disproportionately higher rates of arrest
versus non-minority populations; and
minority communities will have the
greatest struggle to obtain a firearm for
protection where self-defense needs
may be most acute. Another commenter
opined that Black and brown
communities, LGBTQI+ people, and
transgender people will be
disproportionately affected by the final
rule. Others suggested that the FFL
licensing costs should be reduced by
this rule, suggesting a $10 limited FFL
license for a personal collector.
Department Response
The Department disagrees that this
rule will prevent persons with limited
income from lawfully acquiring or
liquidating firearms. Specifically, under
this rule, a person will not be presumed
to be engaged in the business of dealing
in firearms when reliable evidence
shows that the person is only reselling
or otherwise transferring firearms
occasionally as bona fide gifts, to obtain
more valuable, desirable, or useful
firearms for the person’s personal
collection; occasionally to a licensee or
to a family member for lawful purposes;
to liquidate all or part of a personal
collection; to liquidate firearms they
have inherited; or to liquidate firearms
pursuant to a court order. See 27 CFR
478.13(e). With respect to the cost of a
dealer license and the comment
suggesting that ATF reduce the FFL
licensing cost, this rule must effectuate
the laws of Congress and that amount is
set by 18 U.S.C. 923(a)(3)(B) ($200 for
three years, and $90 renewal for three
years). With respect to commenters’
asserted limited access to licensed
dealers in minority communities,
neither the GCA nor this rule
distinguishes between communities. All
persons who engage in the business of
dealing in firearms must be licensed at
fixed business premises within a State,
see 18 U.S.C. 923(d)(1)(E), and this rule
implements the licensing requirements
wherever that dealing may occur.
The Department further disagrees that
this rule will disproportionately affect
lower-income individuals or certain
minority groups. This final rule
implements the GCA, as amended by
the BSCA, which regulates commerce in
firearms. The GCA requires that all
persons who meet the definition of
engaged in the business of dealing in
firearms must become licensed without
regard to their socioeconomic status,
where they live, or to which identity
groups they belong. The GCA does not
distinguish between minority groups
and other groups, and its licensing
provisions are not targeted at reducing
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
the number of locations where lower
income residents can lawfully purchase
firearms. And, according to several
commenters, including a civil rights
organization, minority communities are
disproportionately hurt by gun violence,
including hate crimes (often by
prohibited persons who would not pass
a background check), and this rule will
help minority communities by reducing
gun violence.
Under the GCA and this rule, 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 the person’s personal
collection of firearms’’ is not ‘‘engaged
in the business’’ of dealing firearms.
§ 478.13(a). In addition, nothing in the
GCA or this rule precludes a person
from lawfully purchasing firearms for
self-protection or other lawful personal
use, or making isolated sales of such
firearms without devoting time,
attention, and labor to dealing in
firearms as a regular course of trade or
business. A single or isolated sale of a
firearm that generates pecuniary gain to
help make ends meet, care for loved
ones, or pay for food, rent or other
obligations would not alone be
sufficient to qualify as being engaged in
the business; instead, there would need
to be additional conduct indicative of
firearms dealing within the meaning of
the GCA. Similarly, persons who
liquidate (without restocking) all or part
of their personal collection are not
considered to be engaged in the
business and may use the proceeds for
lawful purposes, including those
mentioned above. However, a person
could still be engaged in the business
even when they are using proceeds to
make ends meet, care for loved ones, or
pay for food, rent, or other obligations
if they were to engage in additional
conduct that is indicative of firearms
dealing within the meaning of the GCA.
khammond on DSKJM1Z7X2PROD with RULES3
5. More Important Priorities and
Efficiencies
Comments Received
Many of the commenters opined that
there are more important ways that ATF
should address firearm violence and
crime instead of promulgating the rule.
Thousands of commenters suggested
considering alternative solutions that
address the root causes of gun violence,
such as community-based violence
prevention programs, mental health
reform, or improved access to mental
health services, including allocating
money for such services. Others
suggested implementing weapon safety
courses in schools. Specifically, a
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
commenter said, ‘‘[a]ccording to the
government’s own statistics [citing to
the CDC website], the majority of gun
deaths are due to suicides. And the next
highest category of deaths by firearms is
inner city peer on peer murders of
young men[.]’’ If the Government wants
to try to fix these sources of firearmrelated deaths, the commenter added, it
should look at the evidence and address
the root causes.
Many commenters suggested
increasing support for law enforcement
agencies, such as funding and
equipment, while many more suggested
enforcing current laws, such as targeting
stolen firearms or felons possessing
firearms, instead of creating new laws
and regulations. Others suggested
targeting straw purchases, criminals
who sell firearms to minors, unlawful
internet sales such as Glock switches,
and individuals who lie on the ATF
Form 4473.
Some suggested focusing enforcement
efforts based on geography, such as
focusing on the southern border to
address firearm, drug, and human
trafficking whereas others suggested
focusing on gangs or criminals known to
operate in certain cities or other areas
and creating gang task forces. Along
those lines, some suggested enforcing
existing Federal law against prohibited
persons possessing firearms in
communities where local officials
downplay Federal prohibitions for
political reasons. In addition to
enforcing current laws, some suggested
other measures, such as harsher prison
sentences for violent criminals,
eliminating ‘‘no bail’’ policies,
constructing more prisons, and ending a
‘‘revolving door’’ justice system that
they said fails to hold violent felons
accountable.
Other commenters expressed concern
about the firearm background check
system. Some commenters suggested
improving firearm background check
response times for currently licensed
FFLs before implementing a rule that
would increase the number of licensees.
Some suggested focusing on
comprehensive background checks and
closing legal loopholes that allow
firearms to fall into the wrong hands.
Department Response
The Department acknowledges
comments about treating mental health
and drug addiction, securing schools
and workplaces, improving records
available to the NICS, properly funding
law enforcement, and various other
national policy issues, such as the root
causes of gun violence, border control,
gangs, drug and human trafficking,
penal facilities and laws, and how State
PO 00000
Frm 00031
Fmt 4701
Sfmt 4700
28997
and local officials implement laws. The
Department agrees that these are
important issues; however, they are not
addressed in the GCA or the BSCA’s
provisions relating to persons engaged
in the business of dealing in firearms,
and therefore are outside the scope of
this rule.
To the extent that commenters raised
issues within ATF’s jurisdiction—such
as by suggesting that ATF focus on
firearms trafficking, felons possessing
firearms, stolen firearms, targeting straw
purchases, criminals who sell firearms
to minors, unlawful internet sales of
weapons such as Glock switches, and
individuals who lie on ATF Form
4473—the Department agrees that these
are, and should be, among the
Department’s most important concerns.
At their core, they are all related to
keeping firearms out of the hands of
prohibited persons and others who may
commit crimes with firearms. In
addition to ATF’s other enforcement
efforts, the Department considers this
rulemaking necessary to implement the
GCA and address those concerns.148
Clarifying who qualifies as a dealer in
firearms and must be licensed will not
only increase the number of FFLs, but
also provide ATF with a better ability
to: (1) curb prohibited sales to minors,
felons, and others; (2) better identify
and target those engaging in straw
purchases and firearms trafficking
(which can indirectly aid in capturing
people who engage in drug and human
trafficking); and (3) identify unlawful
internet sales and false statements on
ATF Forms 4473, among other benefits.
These issues are precisely what this rule
targets.
6. Concerns With Effect on ATF
Comments Received
A number of commenters expressed
views that the proposed rule would
cause such an increase in the number of
dealer applicants and licensees that
ATF would not have the resources to
handle the corresponding increased
workload. One commenter stated,
‘‘Legal sales of firearms by individuals
take place every day over trading
websites and gun shows, creating
thousands of transactions; estimates in
the proposed rule indicate as many as
300,000 individuals would need to
obtain an FFL which would overburden
the ATF and result in long delays and
high expense for the government, likely
148 Although these other matters may fall within
the scope of ATF’s authority, ‘‘an agency has broad
discretion to choose how best to marshal its limited
resources and personnel to carry out its delegated
responsibilities.’’ Massachusetts v. E.P.A., 549 U.S.
497, 527 (2007).
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
28998
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
much greater than the estimates.’’
Another stated, ‘‘[t]he true cost is likely
to be far greater when factoring in the
ATF’s expanded responsibilities,
increased workload, and the potential
need for additional personnel and
resources to manage the influx of
license applications and compliance
checks. This could result in unforeseen
financial and logistical challenges for
both the ATF and the individuals
seeking licenses.’’ Another commenter
stated that the NPRM would increase
the number of inspections ATF would
have to conduct, including just for one
or two firearms sold.
In addition to costs to ATF and
potential licensees, another commenter
suggested that the proposed rule raises
concerns relating to the NICS. By
exponentially increasing the number of
transactions requiring background
checks, the proposal risks
overburdening the NICS, leading to
delays or even erroneous outcomes, they
said, adding, ‘‘This rule would
exacerbate existing problems, thereby
undermining its effectiveness as a tool
for ensuring public safety.’’
Other commenters suggested that all
this extra cost and work would provide
little benefit because nearly all of these
current exchange activities are innocent
and legal, having no criminal intent, the
‘‘mountains of applications [would be]
for what will be temporary FFL
licenses,’’ and the increase would,
ironically, ‘‘hinder’’ ATF’s ability to
solve crime. As one commenter stated,
‘‘After all, licensed dealers can directly
order firearms from distributors or
manufacturers, and the more licensed
dealers, the harder it is to ensure all
those dealers are complying with all
applicable laws and regulations (fixed
number of agents available for
compliance inspections, more license
holders, lower rate of inspections per
license holder).’’ Although
acknowledging that the licensing fee is
set by statute, several of these
commenters nonetheless suggested an
increase in the fees to help ATF. The
application fee for dealers in firearms is
currently set by the GCA at $200 for the
first three-year period, stated one of
these commenters. They continued by
comparing this to the amount people
spend in State fees for hunting licenses,
as well as the scope of ATF’s work: ‘‘In
the area of firearms alone ATF not only
assists thousands of law enforcement
agencies nationally and internationally
in firearm tracing but also further
contributes to public safety through
permitting and monitoring with follow
up compliance checks of 11 different
types of [FFLs]. Your agency needs
additional staff and funding support. I
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
recommend increasing the FFL
application fee to $600 to help facilitate
carrying out your public safety mission.
If an out of state person went on an elk
hunting trip to Oregon, Wyoming,
Montana, or Colorado they would be
paying over $700 just for the license/
tags!’’ (emphasis removed)
Department Response
In response to comments saying that
ATF does not have resources necessary
to process additional licenses and
increasing workload, the Department
acknowledges that the BSCA amended
the GCA to broaden the scope of persons
who are required to be licensed as
dealers under the GCA. The Department
anticipates that, soon after this final rule
is published, there will be an initial
influx of applicants, which will then
level off as licenses are processed and
issued. The Department will reallocate
resources as necessary to handle the
estimated initial increase in the number
of license applicants and anticipates
being able to do so without taking away
from other enforcement priorities.
The Department acknowledges
commenters’ desire to increase dealer
license fees; however, those fees are set
by statute, not by regulation. See 18
U.S.C. 923(a)(3). As such, those
comments are beyond the scope of this
rule.
7. Concerns With the Comment Process
Comments Received
One commenter stated that ATF
required all commenters to include their
name and address to comment and
added that this requirement violates the
First Amendment, adding that courts
have consistently held that restrictions
on anonymous speech are subject to
‘‘exacting scrutiny.’’ They also stated
that asking for commenter identity
‘‘severely limit[s] both the degree and
amount of public participation.’’ The
commenter further stated that this ‘‘is
predictably likely to chill the gun
owning public from weighing in and
exercising their right to participate.’’
Finally, the commenter pointed out that
many government agencies accept
anonymous comments in identical
circumstances and that the
Administrative Procedure Act (‘‘APA’’)
does not require agencies to
authenticate comments. As a result, the
commenter requested that ATF re-open
the comment period. At least one
commenter who submitted a comment
later in the comment period expressed
skepticism about the large number of
comments already posted in favor of the
rule and thought they could have been
produced by automated bots. Further, at
PO 00000
Frm 00032
Fmt 4701
Sfmt 4700
least two commenters were under the
impression that ATF refused to accept
boxes of petitions submitted by a
firearms advocacy organization.
Department Response
The Department disagrees that ATF’s
request for self-identification in its
instructions ‘‘severely limit[ed] the
degree and amount of public
participation,’’ or discouraged the
public from commenting, as evidenced
by the thousands of electronic
comments that ATF received that were
either submitted anonymously or under
an obvious pseudonym. Moreover,
among the tens of thousands of
submitted comments opposing the rule
were many comments in which
commenters expressly declared that
they would not comply with any
regulation or simply made disparaging
or profane statements about the
proposed rule, DOJ, or ATF, which
undermines the comment’s suggestion
that commenters who have a negative
view of ATF were deterred from
submitting comments. ATF accepted,
posted, and considered the anonymous
and pseudonymous comments and
those with negative views.
The commenter’s statement that
restrictions on anonymous speech are
subject to ‘‘exacting scrutiny’’ under the
First Amendment is irrelevant here
because ATF did not restrict anonymous
speech. Rather, ATF required
commenters to include their first and
last name and contact information when
submitting comments, and noted that
‘‘ATF may not consider, or respond to,
comments that do not meet these
requirements.’’ 88 FR 62019. Thus,
individuals could submit anonymous
comments at will, but ATF indicated
that it might not respond. ATF is not
constitutionally required to respond to
all comments, as ‘‘[n]othing in the First
Amendment or in [the Supreme Court’s]
case law interpreting it suggests that the
rights to speak, associate, and petition
require government policymakers to
listen or respond to individuals’
communications on public issues.’’
Minn. State Bd. for Cmty. Colleges v.
Knight, 465 U.S. 271, 285 (1984).
Nonetheless, ATF did consider the
submitted comments, anonymous or
not, and is responding in this preamble
to the issues raised, even though not to
every individual comment.
The NPRM instructions under ‘‘Public
Participation,’’ requiring that
commenters include their first and last
name and contact information (88 FR
62019), were for mail-in comments. ATF
generally requires that persons provide
such information on mailed comments
in case of illegible handwriting in the
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
comment or in case the agency would
like to follow up on a comment to gain
further information or perspective from
the commenter. In addition, ATF also
generally requests such information on
any comment submitted by electronic
means or mail for the latter reason.
Commenters are encouraged to include
such information when submitting an
electronic comment; however, the
NPRM made clear that if commenters
were submitting via the Federal
eRulemaking portal, they should follow
instructions on the portal. 88 FR 61993,
62019. On the Federal eRulemaking
portal, the Department permits
individuals to submit comments
anonymously or even use aliases to
mask their identity.
The significant majority of comments
were submitted through the
eRulemaking portal and were not
required to include identifying
information. As discussed above,
thousands of commenters submitted
electronic form letters opposing the
rule, and those commenters, though
they could have submitted
anonymously, typically provided a
name as part of those mass-mail
campaigns. Accordingly, the
Department disagrees that commenters
opposing the rule were discouraged
from participating and also disagrees
with the suggestion that ATF should reopen the comment period.
Additionally, the developers of the
Federal eRulemaking portal have in
place measures to prevent comments
from automated bots 149 and did not
inform ATF that there were any system
irregularities during the comment
period.
And finally, the commenters who
believed that ATF denied acceptance of
boxes of petitions were mistaken. ATF
received, accepted, scanned, posted,
and considered the petitions from the
firearms advocacy organization on
behalf of their constituency, which were
timely mailed before the close of the
comment period in accordance with the
NPRM instructions. Those petitions,
which expressed objections to the
proposed rule, totaled over 17,000
comments and were processed and
considered.
149 According to regulations.gov, the system
employs reCAPTCHA ‘‘to support the integrity of
the rulemaking process and manage the role of
software-generated comments.’’ See Frequently
Asked Questions, Regulations.gov, https://
www.regulations.gov/faq (last visited Mar. 7, 2024).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
8. Constitutional Concerns
a. Violates the Ex Post Facto Clause
Comments Received
A few commenters stated that the
NPRM directly violates clause 3 of
Article I, Section 9, of the United States
Constitution, which prohibits ex post
facto laws. These commenters’
opposition comes from their belief that,
once the final rule goes into effect, sales
of firearms that are currently lawful will
no longer be legal, and that the new
prohibition would constitute an ex post
facto law. The commenters who
provided reasons for their assertion that
this rule constitutes an ex post facto law
primarily focused on their belief that the
rule would be an ‘‘infringement on
firearms ownership and property rights’’
and would create a backdoor firearms
registry, that the rule is ‘‘criminalizing
and restricting transactions and
expanding the scope of scrutiny’’ of the
‘‘engaged in the business’’ as a dealer
definition to ‘‘those who the original
law had not intended,’’ and that the rule
is an attempt to tax and punish
Americans that have not committed a
crime. One commenter stated that the
EIB presumption that applies when a
person repetitively sells firearms of the
same or similar kind or type ‘‘reads like
a trap ready to spring on an
unsuspecting collector who[se conduct]
would previously be perfectly legal’’ if,
for example, they had exchanged a boltaction Mosin-Nagant rifle in 7.62x54r
for a Star Model B pistol in 0x18.
According to the commenter, ‘‘the
concern here is taking an activity which
was entirely acceptable prior to this
rule, then moving the goalposts to make
it illegal. It is concerning that this
would appear to be an ex-post facto
change.’’ Another commenter asked
whether it was legal ‘‘to pass a law in
2022, then redefine what that law says?’’
Department Response
The Department disagrees that the
proposed rule violates the Ex Post Facto
Clause. As an initial matter, the rule
does not itself impose any new liability.
Rather, the rule implements the BSCA,
which amended the GCA, a statute
passed by Congress. A law ‘‘violates the
Ex Post Facto Clause if it applies to
events occurring before its enactment
and alters the definition of criminal
conduct or increases the punishment for
a crime.’’ United States v. Pfeifer, 371
F.3d 430, 436 (8th Cir. 2004) (citing
Lynce v. Mathis, 519 U.S. 433, 441
(1997)). But a law does not violate the
Ex Post Facto Clause just because it
applies to conduct that ‘‘began prior to,
but continued after’’ its effective date.
PO 00000
Frm 00033
Fmt 4701
Sfmt 4700
28999
United States v. Brady, 26 F.3d 282, 291
(2d Cir. 1994) (internal quotation marks
omitted). For example, in the context of
firearm possession, courts have
consistently recognized that regulating
the continued or future possession of a
firearm that was acquired before the
regulation took effect does not implicate
the Ex Post Facto Clause because such
a regulation does not criminalize past
conduct. See, e.g., United States v.
Pfeifer, 371 F.3d 430, 436–37 (8th Cir.
2004); United States v. Mitchell, 209
F.3d 319, 322–23 (4th Cir. 2000); United
States v. Brady, 26 F.3d 282, 290–91 (2d
Cir. 1994); United States v. Gillies, 851
F.2d 492, 495–96 (1st Cir. 1988); United
States v. D’Angelo, 819 F.2d 1062,
1065–66 (11th Cir. 1987); cf. Samuels v.
McCurdy, 267 U.S. 188, 193 (1925)
(rejecting Ex Post Facto Clause
challenge to statute that prohibited the
post-enactment possession of
intoxicating liquor, even when the
liquor was lawfully acquired before the
statute’s enactment).
Here, the rule does not impose any
civil or criminal penalties and nothing
in this rule requires that the statute be
applied in a manner that violates the Ex
Post Facto Clause. Nor does this rule
regulate ‘‘firearm ownership’’ in a
vacuum—it addresses dealing in
firearms. This rule describes the proper
application of the terms Congress used
in various provisions of the GCA, as
modified by the BSCA, to define what
constitutes being engaged in the
business as a dealer—and, thus, when
persons must obtain a dealer’s license
before selling firearms. As stated above,
this rule does not impose liability
independent of the pre-existing
requirements of those statutes.
The Department disagrees that this
rule ‘‘redefine[s] what that law says.’’ It
simply explains and further clarifies the
terms of the BSCA. The Department
further disagrees that substantive rules
that interpret an earlier statute—such as
the 2022 changes the BSCA made to the
GCA—through a congressional grant of
legislative rulemaking authority are ex
post facto laws merely because they
interpret or clarify those laws. The
proposed rule is exclusively prospective
and does not penalize prior conduct; it
is not an ex post facto law. See Lynce,
519 U.S. at 441. For these reasons, the
Department disagrees with commenters’
assertions that the rule violates the Ex
Post Facto Clause.
b. Violates the First Amendment
Comments Received
A few commenters raised concerns
that the proposed definitions violate the
First Amendment. These commenters
E:\FR\FM\19APR3.SGM
19APR3
29000
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
stated that, ‘‘One is not required by the
Constitution to be vetted and permitted
in order to claim protection under the
First Amendment Right to Free
Speech,’’ which the commenters stated
includes the right to ‘‘procure and sell
firearms as a citizen.’’ In addition, at
least one commenter stated that the
‘‘promotion’’ presumption under the
definition of ‘‘predominantly earn a
profit’’ violates the First Amendment by
infringing on a private citizen’s ability
to promote their brand by conflating
intent to sell with promotion of a brand.
Another commenter stated that, when
an agency can charge a crime against a
person solely because they utter an offer
to sell a firearm, ATF is enforcing
thought crimes. The commenter added
that this goes beyond existing law
structures and does not meet the
standard of calling ‘‘Fire!’’ in a theater.
Some commenters expressed First
Amendment concerns specifically
regarding the definition of terrorism
included in the regulation. While some
commenters voiced approval of
including the definition of terrorism
because they believe it allows the
Government address potential threats
effectively, other commenters objected,
with some stating it is unnecessary and
possibly infringes on freedom of speech
and expression because the Government
might inadvertently stifle protected
political activism or dissent. They urged
that the definition needs to be more
precise to avoid unintended
consequences and to ensure that
legitimate firearms activities are not
penalized.
Department Response
The Department disagrees with the
commenters’ First Amendment
objections. As an initial matter, this rule
does not regulate speech at all, nor is
the right to ‘‘procure and sell firearms
as a citizen’’ protected speech under the
First Amendment. Although the
Supreme Court has held that the First
Amendment protects ‘‘expressive
conduct,’’ it is not implicated by the
enforcement of a regulation of general
application not targeted at expressive
activity. Arcara v. Cloud Books, Inc.,
478 U.S. 697, 702, 706–07 (1986). (First
Amendment scrutiny ‘‘has no relevance
to a statute directed at . . . nonexpressive activity,’’ but applies ‘‘where
it was conduct with a significant
expressive element that drew the legal
remedy in the first place.’’); see also
Wright v. City of St. Petersburg, 833 F.3d
1291, 1298 (11th Cir. 2016) (‘‘First
Amendment scrutiny ‘ha[d] no
relevance to [a trespass ordinance]
directed at imposing sanctions on
nonexpressive activity’ ’’); cf. Talk of the
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
Town v. Dep’t of Fin. & Bus. Servs. ex
rel. Las Vegas, 343 F.3d 1063, 1069 (9th
Cir. 2003) (section of Las Vegas Code
barring consumption of alcohol in
places that lack valid liquor licenses ‘‘in
no way can be said to regulate conduct
containing an element of protected
expression’’). Conduct may be
expressive where ‘‘[a]n intent to convey
a particularized message [is] present,
and . . . the likelihood [is] great that the
message would be understood by those
who viewed it.’’ Texas v. Johnson, 491
U.S. 397, 404 (1989) (quoting Spence v.
Washington, 418 U.S. 405, 410–11
(1974)). This final rule does not regulate
expressive conduct of any kind, and the
commenters have not offered any valid
reason to believe that selling firearms
constitutes expressive conduct. As such,
the First Amendment is not implicated
by this rule.
Even if certain aspects of procuring
and selling a firearm could be
considered expressive conduct, ‘‘a
sufficiently important governmental
interest in regulating the nonspeech
element’’ of conduct that also includes
an expressive element ‘‘can justify
incidental limitations on First
Amendment freedoms.’’ United States v.
O’Brien, 391 U.S. 367, 376 (1968).
Under an O’Brien analysis—
a government regulation is sufficiently
justified [1] if it is within the constitutional
power of the Government; [2] if it furthers an
important or substantial governmental
interest; [3] if the governmental interest is
unrelated to the suppression of free
expression; and [4] if the incidental
restriction on alleged First Amendment
freedoms is no greater than is essential to the
furtherance of that interest.
Id. at 377.
Addressing these elements, first, ‘‘the
Government may constitutionally
regulate the sale and possession of
firearms.’’ Wilson v. Lynch, 835 F.3d
1083, 1096 (9th Cir. 2016). Second,
courts have repeatedly held that public
safety and preventing crime are not only
substantial, but compelling,
governmental interests. See, e.g., United
States v. Salerno, 481 U.S. 739, 750
(1987); Mai v. United States, 952 F.3d
1106, 1116 (9th Cir. 2020); Worman v.
Healey, 922 F.3d 26, 39 (1st Cir. 2019);
Kolbe v. Hogan, 849 F.3d 114, 139 (4th
Cir. 2017); N.Y. State Rifle & Pistol
Ass’n v. Cuomo, 804 F.3d 242, 261 (2d
Cir. 2015); Horsley v. Trame, 808 F.3d
1126, 1132 (7th Cir. 2015). Third, ‘‘the
Government’s efforts to reduce gun
violence’’ are not directed at any
hypothetical expressive conduct and
cannot be construed to be related to the
suppression of free expression in any
way. Wilson, 835 F.3d at 1096–97.
Fourth, the regulation’s definitions and
PO 00000
Frm 00034
Fmt 4701
Sfmt 4700
rebuttable presumptions do not ban
ownership, purchase, or sale of firearms,
nor do they restrict purchases and sales
for enhancement of personal firearms
collections. The regulation merely
clarifies that recurring sales or
purchases for resale, with the
predominant intent to earn a profit,
constitute being engaged in the business
as a dealer. It does not ban these sales;
it just requires that dealers comply with
existing statutory licensing
requirements. Therefore, any burden is
‘‘incidental’’ and ‘‘minimal.’’ Id.
Because the regulation ‘‘satisfies each of
the O’Brien conditions,’’ it would
‘‘survive[ ] intermediate scrutiny.’’ Id. at
1097 (finding ATF’s Open Letter to
Federal Firearms Licensees, informing
them that they would have cause to
deny a firearm sale as violating 18
U.S.C. 922(d)(3) if a purported
purchaser presented their medical
marijuana registry card, did not violate
the First Amendment even if having the
card was considered expression). Thus,
even if the O’Brien standard applies, the
regulation does not violate the First
Amendment.
Moreover, this rule does not establish
that an individual will be charged with
a crime ‘‘solely’’ because they ‘‘utter’’ an
offer to sell a firearm. As noted above,
the presumptions set forth in this rule
do not apply to criminal proceedings.
Further, the application of a rebuttable
presumption based on a seller’s speech
does not restrict speech in any way—it
means only that, in a proceeding to
determine whether a seller of firearms is
‘‘engaged in the business’’ of dealing in
firearms, the Department may be able to
make an initial evidentiary showing
based on the seller’s speech, and the
evidentiary burden then shifts to the
seller. The Supreme Court has held that
the First Amendment ‘‘does not prohibit
the evidentiary use of speech to
establish’’ a claim ‘‘or to prove motive
or intent.’’ Wisconsin v. Mitchell, 508
U.S. 476, 489 (1993). Consistent with
this principle, courts have rejected First
Amendment challenges to rebuttable
presumptions that are triggered by
speech evidence. See Cook v. Gates, 528
F.3d 42, 63–64 (1st Cir. 2008); cf. Village
of Hoffman Estates v. Flipside, Hoffman
Estates, Inc., 455 U.S. 489, 495–96
(1982) (rejecting claim that a village had
unlawfully restricted speech through a
drug paraphernalia licensing ordinance
just because guidelines for enforcing the
ordinance ‘‘treat[ed] the proximity of
drug-related literature as indicium that
paraphernalia are ‘marketed for use with
illegal cannabis or drugs’’’). Ultimately,
the subject of this final rule is a seller’s
conduct and not his speech, and the
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
rule does not impose any burdens on
speech.
To the extent commenters are alleging
this rule impermissibly inhibits
commercial speech, it does no such
thing. Repetitively or continuously
advertising the sale of firearms can
result in a person being presumed to be
engaging in the business, but a
presumption may be rebutted. At any
rate, even if unrebutted, the implication
of the presumption is simply that the
person must have a license to deal in
firearms—that person is not precluded
from advertising the sale of firearms.
Assuming the presumption does burden
commercial speech, courts have
routinely recognized that ‘‘[t]he
Constitution accords a lesser protection
to commercial speech than to other
constitutionally guaranteed expression.’’
Cent. Hudson Gas & Elec. Corp. v. Pub.
Serv. Comm’n of New York, 447 U.S.
557, 562–63 (1980) (internal quotation
marks omitted). If the content of the
commercial speech is not illegal or
misleading, the Government must first
‘‘assert a substantial interest in support
of its regulation; second, the
government must demonstrate that the
restriction on commercial speech
directly and materially advances that
interest; and third, the regulation must
be ‘narrowly drawn.’’’ Fla. Bar v. Went
For It, Inc., 515 U.S. 618, 624 (1995). As
stated above, ‘‘the Government may
constitutionally regulate the sale and
possession of firearms,’’ Wilson, 835
F.3d at 1096, and public safety is a
compelling governmental interest.
Requiring those who are engaged in the
business of dealing in firearms to be
licensed—and thus to keep records and
conduct background checks on potential
purchasers to deny transfers to those
who are prohibited from possessing
firearms—materially advances public
safety. Moreover, this requirement is
narrowly drawn because it pertains to
only those ‘‘who devote[ ] 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.’’ It does not apply to
every sale.
The Department also disagrees that
the rule’s definition of ‘‘terrorism’’ is
unnecessary or infringes upon protected
speech. The definition mirrors the
statutory definition of ‘‘terrorism’’ that
Congress enacted and codified in 18
U.S.C. 921(a)(22) and (a)(23), with only
a minor addition at the beginning to
state the definitions to which it applies.
It is also necessary to explain the
congressionally enacted proviso that
proof of profit shall not be required
when a person engages in the regular
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
and repetitive purchase and disposition
of firearms in support of terrorism. The
definition does not constitute a
governmental restriction on speech or
expressive conduct, and so it does not
violate the First Amendment.
Again, it bears emphasizing that this
statutory definition of ‘‘terrorism’’
existed in the definition of ‘‘principal
objective of livelihood and profit’’
before the BSCA was passed, and still
remains there verbatim. The BSCA
added that same definition to the new
‘‘predominantly earn a profit’’
definition. This rule merely moves that
definition within the regulations to be a
standalone definition so that it applies
to both the term ‘‘predominantly earn a
profit’’ and ‘‘principal objective of
livelihood and profit’’ (in the sections
governing importers, manufacturers,
and gunsmiths)—consistent with the
statute—without repeating it in two
places, and makes a slight edit at the
beginning to state that it applies to both
definitions. This rule does not further
interpret or define that term, and
comments in that regard are beyond the
scope of the rule.
c. Violates the Second Amendment
Comments Received
Of those who objected to the NPRM,
a majority argued that any changes to
the definitions, or creating new
requirements and rebuttable
presumptions, are inconsistent with the
Second Amendment and are therefore
unconstitutional. Commenters stated
that the right to have—and thus
purchase and sell—firearms dates back
to the Founding and that requiring
licenses for any aspect of firearm sales
is an unconstitutional infringement of
Second Amendment rights. Many
commenters stated that the rule is
‘‘reclassifying all sales (even private) to
require a ‘licensed dealer’ (FFL) . . .
thusly preventing law abiding United
States citizens from obtaining firearms.
If a citizen cannot obtain a firearm, a
citizen cannot keep or bear a firearm
violating the Second Amendment,’’ and
similar statements. Some of these
commenters stated that the rule violates
the Second Amendment by creating
universal background checks, making it
difficult and costly for citizens to sell
personal firearms, and that it deprives
people of the inherent right to dispose
of, trade, or do what they wish with
their own property.
Some stated they understand the
importance of balancing public safety
and regulation of illegal firearms
activity with firearm ownership, but
expressed concerns that the correct
balance point has not been determined
PO 00000
Frm 00035
Fmt 4701
Sfmt 4700
29001
yet or that the proposed regulation
might ‘‘inadvertently classify
individuals who engage in the lawful
and occasional transfer of personal
firearms to friends or family members as
arms dealers,’’ raising concerns about
overreach and undue burden.
Several commenters tied these
concerns to District of Columbia v.
Heller, 554 U.S. 570 (2008), stating that
expanding the definition of who is
engaged in the business of dealing in
firearms may criminalize law-abiding
citizens engaging in their Second
Amendment rights, which the
commenters stated were ‘‘unequivocally
affirm[ed]’’ by Heller. One commenter
stated that the Heller decision
‘‘emphasized that any restrictions
placed on the Second Amendment must
be closely tailored to avoid unnecessary
infringement on individual rights. The
proposed rule, by including casual
sellers under the umbrella of those
‘engaged in the business,’ stretches this
definition beyond its historical and legal
boundaries. This is not a close tailoring
of restrictions but an undue burden on
average citizens who may occasionally
sell firearms without falling under any
standard commercial definition of a
firearms dealer.’’
Many other commenters stated that
the regulation violates New York State
Rifle & Pistol Ass’n, v. Bruen, 597 U.S.
1 (2022), because, the commenters
argued, there is no analogous historical
law from either the Founding era—
when the Second Amendment was
ratified—or the Reconstruction period—
when the Fourteenth Amendment’s Due
Process Clause incorporated the Second
Amendment’s protections and rendered
them applicable to the States—that
defined a ‘‘dealer’’ in firearms or
required background checks, dealer
licensing, recordkeeping, or gun
registration. Others stated that the
regulation violates Bruen because, they
stated, Bruen precludes the Government
from using means-end scrutiny to justify
its firearms laws. Accordingly, the
commenters argued, the proposed rule’s
use of public safety as a basis for
purportedly banning firearms from
average citizens renders it
unconstitutional under Bruen. These
commenters further argued the
proposed rule is unconstitutional under
Bruen because it serves no public
interest.
A few other commenters directly
stated that the BSCA, GCA, and NFA all
violate the Second Amendment. Some
added that the ATF regulation is
misinterpreting the BSCA, which did
not intend to change the definition of
‘‘engaged in the business’’ or any other
definition, and the proposed rule is thus
E:\FR\FM\19APR3.SGM
19APR3
29002
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
an effort to work around the Second
Amendment.
Department Response
The Department disagrees with
commenters that the GCA, the BSCA
amendments, or this rule implementing
these statutes violate the Second
Amendment. Those statutes and this
final rule are consistent with the
Supreme Court’s Second Amendment
decisions. In Heller, the Court
emphasized that ‘‘the right secured by
the Second Amendment is not
unlimited’’ and ‘‘nothing in our opinion
should be taken to cast doubt’’ on
certain laws, including those ‘‘imposing
conditions and qualifications on the
commercial sale of arms.’’ 554 U.S. at
626–27. The Court repeated the same
statement in McDonald v. City of
Chicago, 561 U.S. 742, 786 (2010), and
Justice Kavanaugh, joined by the Chief
Justice, reiterated the point in his
concurring opinion in Bruen, 597 U.S.
at 81 (Kavanaugh, J.).
Those precedents confirm that this
rule raises no constitutional concern
under the Second Amendment. The rule
addresses the commercial sale of
firearms. This rule does not prevent
individuals who are permitted to
possess firearms under Federal law from
possessing or acquiring firearms;
individuals remain free to purchase
firearms from an FFL or in a private sale
from a non-licensee who is not engaged
in the business of dealing in firearms.
Nor does this rule require a dealer’s
license for all sales. By its terms, this
rule applies only to those who ‘‘devote[ ]
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.’’ 18 U.S.C.
921(a)(21)(C). And because this rule
does not mandate a license for all sales,
it does not mandate a background check
for all sales. Likewise, this rule does not
prevent those who own firearms from
lawfully selling, acquiring, or keeping
this property. This rule does not prevent
law-abiding citizens from making
occasional sales or purchases of firearms
for the enhancement of a personal
collection or for a hobby—it concerns
only those ‘‘engaged in the business’’ of
firearms dealing. Firearm owners would
only need a license in the event that
they are devoting 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.
At least one circuit court has rejected
a facial Second Amendment challenge
to the licensing requirement in 18
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
U.S.C. 923(a) on the ground that it
‘‘imposes a mere condition or
qualification. Though framed as a
prohibition against unlicensed firearm
dealing, the law is in fact a requirement
that those who engage in the [business
of selling] firearms obtain a license.’’
United States v. Hosford, 843 F.3d 161,
166 (4th Cir. 2016). The licensing
requirement, which is implemented by
this rule, is ‘‘a crucial part of the federal
firearm regulatory scheme.’’ Id. at 168;
see also Focia, 869 F.3d at 1286
(prohibiting transfers between
unlicensed individuals in different
states ‘‘does not operate to completely
prohibit [the defendant] or anyone else,
for that matter, from selling or buying
firearms’’; instead, it ‘‘merely’’ imposes
‘‘conditions and qualifications on the
commercial sale of arms’’ (internal
quotation marks omitted)); United
States v. Nowka, No. 11–CR–00474,
2012 WL 2862061, at *6 (N.D. Ala. May
10, 2012) (‘‘[Plaintiff’s] right to buy or
sell a firearm is not abridged. It is
regulated.’’). This rule implements a
definitional change that Congress made
in the BSCA, which will expand the
number of firearms sellers affected by
the licensing requirement in 18 U.S.C.
923(a).
Additionally, the final rule is
consistent with the Supreme Court’s
more recent decision in Bruen. That
case clarified the standard for resolving
Second Amendment claims ‘‘[i]n
keeping with Heller,’’ 597 U.S. at 17,
and the Court did not draw into
question Heller’s explanation that
regulations of commercial sales of
firearms are presumptively lawful. See
id. at 81 (Kavanaugh, J., concurring); see
also id. at 79 (noting that the Second
Amendment does not prohibit the
imposition of objective ‘‘licensing
requirements’’ commonly associated
with firearms ownership); id. at 72
(Alito, J., concurring) (noting that
nothing in that opinion decided
anything about ‘‘the requirements that
must be met to buy a gun’’). Under
Bruen, to establish a Second
Amendment violation, a challenger
must first show that the final rule
implicates ‘‘the Second Amendment’s
plain text.’’ Id. at 17 (majority opinion).
Only if that threshold requirement is
met is the Government then required to
‘‘demonstrate that the [final rule] is
consistent with this Nation’s historical
tradition of firearm regulation.’’ Id.
Here, the final rule does not implicate
the Second Amendment’s ‘‘plain text,’’
which addresses the right to ‘‘keep and
bear Arms’’ and is silent as to the
commercial sale of firearms. U.S. Const.
amend. II. Both before and after Bruen,
PO 00000
Frm 00036
Fmt 4701
Sfmt 4700
courts have agreed that the Second
Amendment does not ‘‘protect a
proprietor’s right to sell firearms.’’
Teixeira v. County of Alameda, 873 F.3d
670, 690 (9th Cir. 2017); see also United
States v. Kazmende, No. 22–CR–236,
2023 WL 3872209, at *5 (N.D. Ga. May
17, 2023) (rejecting a Second
Amendment challenge to 18 U.S.C.
922(a)(1)’s prohibition on willfully
engaging in the business of dealing in
firearms without a license on the ground
that the ‘‘Second Amendment . . .
simply does not cover the commercial
dealing in firearms.’’), report and
recommendation adopted, 2023 WL
3867792 (N.D. Ga. June 7, 2023); United
States v. Flores, 652 F. Supp. 3d. 796,
799–802 (S.D. Tex. 2023) (holding that
‘‘commercial firearm dealing is not
covered by the Second Amendment’s
plain text’’); United States v. King, 646
F. Supp. 3d. 603, 607 (E.D. Pa. 2022)
(holding that ‘‘the Second Amendment
does not protect the commercial dealing
of firearms’’); United States v. Tilotta,
2022 WL 3924282, at *5 (S.D. Cal. Aug.
30, 2022) (concluding that the plain text
of the Second Amendment does not
cover the commercial sale and transfer
of firearms).
Even if, contrary to law, the scope of
the Second Amendment’s protection
extended to commercial dealing in
firearms, there is a robust historical
tradition supporting the Government’s
authority to require licenses and
inspection of firearms sellers. Where a
regulation implicates the Second
Amendment, the Government may
justify it ‘‘by demonstrating that it is
consistent with the Nation’s historical
tradition of firearm regulation,’’
including, for example, by pointing to
‘‘a well-established and representative
historical analogue.’’ Id. at 24, 30. To be
analogous, historical and modern
firearms regulations need only be
‘‘relevantly similar’’; a ‘‘historical twin’’
is not required. Id. at 29–30. In fact,
from colonial times, State and local
governments have routinely exercised
their authority to regulate the sale of
firearms, through licensing, inspection,
and similar requirements.
For instance, the third U.S. Congress
made it unlawful for a limited period
‘‘to export from the United States any
cannon, muskets, pistols, bayonets,
swords, cutlasses, musket balls, lead,
bombs, grenades, gunpowder, sulpher,
or saltpetre,’’ Act of May 22, 1794, 1
Stat. 369, ch. 33, sec. 1 (‘‘An Act
prohibiting for a limited time the
Exportation of Arms and Ammunition,
and encouraging the Importation of the
same’’), demonstrating a clear
understanding that the Constitution
permitted regulation of firearms sellers.
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
Further, as the en banc Ninth Circuit
recounted in detail, as early as the
1600s, ‘‘colonial governments
substantially controlled the firearms
trade,’’ including through ‘‘restrictions
on the commercial sale of firearms.’’
Teixeira, 873 F.3d at 685 (further
explaining, as examples, that
‘‘Connecticut banned the sale of
firearms by its residents outside the
colony,’’ and Virginia law made it
unlawful for any individual to travel
more than three miles from a plantation
with ‘‘arms or ammunition above and
beyond what he would need for
personal use’’).
Measures regulating firearms sellers,
similar to the inspection and licensing
regime of today, have been
commonplace throughout history. To
take one example, in 1805,
Massachusetts required that all musket
and pistol barrels manufactured in the
State and offered for sale be ‘‘proved’’
(inspected and marked by designated
individuals) upon payment of a fee, to
ensure their safe condition, and Maine
enacted similar requirements in 1821.150
Further, multiple States, such as
Massachusetts (1651, 1809), Connecticut
(1775), New Jersey (1776), and New
Hampshire (1820), required licenses or
inspection to export or sell gunpowder
(akin to modern ammunition).151 See
150 See 3 Laws of the Commonwealth of
Massachusetts, from November 28, 1780, to
February 28, 1807, at 259–61 (1807); 1 Laws of the
State of Maine 546 (1830).
151 See Colonial Laws of Massachusetts Reprinted
from the Edition of 1672, at 126, Powder (1890)
(1651 statute requiring license to export
gunpowder); 2 General Laws of Massachusetts from
the Adoption of the Constitution to February, 1822,
at 198–200, ch. 52, An Act Providing for the
Appointment of Inspectors, and Regulating the
Manufactory of Gun-Powder, secs. 1, 8 (1823) (1809
statute providing for the appointment of an
‘‘inspector of gunpowder for every public powder
magazine, and at every manufactory of
gunpowder,’’ and imposing penalties for any sale or
export of gunpowder ‘‘before the same has been
inspected and marked’’); 15 The Public Records of
the Colony of Connecticut, from May, 1775, to June,
1776, Inclusive 191, An Act for Encouraging the
Manufactures of Salt Petre and Gun Powder (1890)
(1775 Connecticut law establishing, among other
things, that no gunpowder manufactured in the
colony ‘‘shall be exported out’’ of the colony
‘‘without [an applicable] licence’’); Acts of the
General Assembly of the State of New-Jersey, at a
Session Begun at Princeton on the 27th Day of
August 1776, and Continued by Adjournments 6,
ch. 6, An Act for the Inspection of Gun-Powder, sec.
1 (1877) (No person shall offer any gunpowder for
sale ‘‘without being previously inspected and
marked as is herein after directed.’’); Laws of the
State of New Hampshire; With the Constitutions of
the United States and of the State Prefixed 276–78,
An Act to Provide for the Appointment of
Inspectors and Regulating the Manufactory of
Gunpowder, secs. 1, 8 (1830) (authorizing
‘‘inspector of gunpowder for every public powder
magazine, and at every manufactory of gunpowder
in this state’’ and imposing penalties for any sale
or disposition of gunpowder ‘‘before the same has
been inspected and marked’’).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
also United States v. El Libertad,—F.
Supp. 3d—,No. 22–CR–644, 2023 WL
4378863, at *7 (S.D.N.Y. July 7, 2023)
(finding that historical laws showed
‘‘expansive authority exercised by
colonial and early state legislatures as
well as early congresses over the
transfer of firearms between individuals
and across borders,’’ including through
‘‘licensing requirements [and]
registration requirements’’). Similar
licensing and taxation requirements for
the sale of gunpowder and certain arms
were enacted through the antebellum
and Reconstruction eras.152
That modern laws regarding the
commercial sale of firearms may not be
identical to laws from the Founding era
is not dispositive. There are many
reasons other than constitutional
limitations that historical regulations
are not a ‘‘dead ringer’’ for modern
regulations. Bruen, 597 U.S. at 30. For
example, during the Founding era, guns
in America were ‘‘produced laboriously,
one at a time,’’ Pamela Haag, The
Gunning of America 9 (2016), and
communities were ‘‘close-knit,’’ where
‘‘[e]veryone knew everyone else,’’ Range
v. Att’y Gen., 69 F.4th 96, 117 (3d Cir.
2023) (en banc) (Krause, J., dissenting)
(quoting Stephanos Bibas, The
Machinery of Criminal Justice 2 (2012)).
That is substantially different from
today, where guns may be massproduced quickly and are widely
available for purchase at ubiquitous
retailers through modern technology
and more plentiful and far-reaching
channels of national and international
commerce, where sellers are unlikely to
know their customers. But from the
Founding and before, the principle
remains the same. The Government has
been allowed to—and has enacted
measures to—regulate the commercial
sale of firearms to prevent their sale to
persons the Government deemed
dangerous. Thus, assuming for the sake
of argument that the regulation
152 The Revised Charter and Ordinances of the
City of Chicago: To Which are Added the
Constitutions of the United States and State of
Illinois 123–24, ch. 16, Regulating the Keeping and
Conveying Gun Powder and Gun Cotton, secs. 1, 6
(1851) (1851 city law barring the sale of gunpowder
‘‘in any quantity’’ without government permission,
and barring ‘‘retailer[s] of intoxicating liquors’’ and
‘‘intemperate person[s]’’ from such permits); The
Charter and Ordinances of the City of Saint Paul,
to August 1st, 1863, Inclusive 166, Gunpowder, ch.
21, sec. 1 (1863) (similar 1858 city law requiring
permission to sell gunpowder,); Acts of the General
Assembly of Alabama: Passed at the Session of
1874–75, at 41, An Act to Establish Revenue Laws
for the State of Alabama, Act No. 1, sec. 102(27)
(1875) (imposed $25 license fee on dealers of pistols
and certain knives); Acts of the General Assembly
of Alabama, Passed at the Session of 1878–9, at
436–37, Act of Feb. 13, 1879, Act No. 314, sec. 14
(authorized town to ‘‘license dealers in pistols,
bowie-knives and dirk-knives’’).
PO 00000
Frm 00037
Fmt 4701
Sfmt 4700
29003
implicates Second Amendment rights, it
would pass muster under Bruen.
In response to commenters stating
that the Department should not use the
Heller two-step process, the Department
acknowledges that Bruen abrogated the
‘‘two-step’’ framework of Heller, as ‘‘one
step too many,’’ and rejected the
application of means-end scrutiny at the
second step. Bruen, 597 U.S. at 19.
Although the Department believes this
rule does promote public safety, the
Department is not relying on this benefit
in conducting the historical analysis
required by Bruen (assuming again for
the sake of argument that it applies).
Therefore, to the extent that
commenters argued the rule or the
underlying statute violates the Second
Amendment, the Department disagrees
for all of the reasons stated above.
d. Violates the Fourth or Fifth
Amendment Right to Privacy
Comments Received
Several commenters claimed the
proposed rule violates their right to
privacy under the Fourth Amendment
and the Fifth Amendment’s Due Process
Clause. These commenters believe that
the proposed rule creates a de facto
firearms registry by requiring that
people who engage in recurring
purchases and sales with the
predominant intent to earn a profit must
obtain a dealer’s license. Other
commenters stated that enforcement of
the proposed rule would lead to a
violation of their constitutional right to
privacy by requiring them to be
registered dealers subject to privacyinvading and warrantless inspections
without breaking a law—even for a
single firearms transaction. They raised
particular concerns in this regard for
those who operate from home. And
other commenters asserted a Fourth
Amendment violation in regard to their
property if the Government knows what
firearms or how many weapons each
individual owns. One commenter
focused on the rule’s inclusion of
electronic marketplaces as a violation of
privacy, stating that including online
brokers, auctions, text messaging
services, and similar electronic means of
transacting purchases and sales would
cause people to ‘‘forfeit their privacy to
the ATF in these matters.’’
Department Response
The Department disagrees that the
rule violates the Fourth Amendment or
any constitutional right to privacy.
Under both the statute and the proposed
and final rules, there are no
recordkeeping or background check
requirements for personal firearms that
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
29004
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
are occasionally bought and sold as part
of enhancing a personal collection, such
as for sporting purposes. As to the
recordkeeping and background check
requirements for the licensees engaged
in the business of dealing in firearms,
those records are not maintained in the
custody of the government but are
retained by the licensee until they
discontinue their business. See 18
U.S.C. 923(g)(4); 27 CFR 478.129.
Moreover, even when these records are
in ATF’s possession after the licensee
discontinues their business, due to
statutory and permanent appropriations
restrictions, they are not searchable by
a transferee’s name or any personal
identification code. See 18 U.S.C.
926(a); 153 Consolidated and Further
Continuing Appropriations Act, 2012,
Public Law 112–55, 125 Stat. 552, 609–
10 (2011) (‘‘That, hereafter, no funds
made available by this or any other Act
may be used to electronically retrieve
information gathered pursuant to 18
U.S.C. 923(g)(4) by name or any
personal identification code . . .’’). This
rule does not create or modify
requirements with respect to retaining
and searching records.
The Department also does not agree
that this rule will violate a
constitutional right to privacy with
regard to commenters’ property. This
rule does not require individuals to
provide any information with regard to
their possession of firearms. It applies
only to those engaged in the business of
dealing in firearms. ‘‘Property used for
commercial purposes is treated
differently for Fourth Amendment
purposes from residential property. ‘An
expectation of privacy in commercial
premises . . . is different from, and
indeed less than, a similar expectation
in an individual’s home.’’’ Minnesota v.
Carter, 525 U.S. 83, 90 (1998) (quoting
New York v. Burger, 482 U.S. 691, 700
(1987)). Moreover, every applicant for a
license is made aware of ATF’s right of
entry into their premises and
examination of their records, see 27 CFR
478.23; thus there can be no reasonable
expectation of privacy in the
information contained in those records.
Cf. United States v. Marchant, 55 F.3d
509, 516 (10th Cir. 1995) (finding no
reasonable expectation of privacy in the
information contained in ATF Form
4473 and further noting that ‘‘Form
4473 did not advise Defendant that the
information elicited was private, or that
it would remain confidential’’).
Additionally, while the proposed rule in
no way establishes a registry of firearms,
and Congress has specifically prohibited
such a registry, it is worth noting that
the nearly century-old requirement for
the actual registration of privately held
firearms has never once been found to
violate a Fourth Amendment right to
privacy.
Some courts have recognized a
privacy interest in avoiding disclosure
of certain personal matters under the
Due Process Clauses of the Fifth and
Fourteenth Amendments. See Doe No. 1
v. Putnam County, 344 F. Supp. 3d 518,
540 (S.D.N.Y. 2018). Even under these
court decisions, however, ‘‘not all
disclosures of private information will
trigger constitutional protection.’’ Id.
(internal quotation marks omitted). In at
least one circuit, the right to privacy in
one’s personal information under the
Due Process Clauses is ‘‘limited [to a]
set of factual circumstances involving
one’s personal financial or medical
information.’’ Id. ‘‘[T]he question is not
whether individuals regard [particular]
information about themselves as private,
for they surely do, but whether the
Constitution protects such information.’’
DM v. Louisa County Dep’t of Human
Services, 194 F. Supp. 3d 504, 508–09
(W.D. Va. 2016) (internal quotation
marks omitted) (finding no right to
privacy with respect to the nature and
location of an individual’s counseling
sessions). Basic information regarding
firearms ownership or possession is of
neither the medical nor financial
variety, and no court has found this
information to be constitutionally
protected. See Doe 1, 344 F. Supp. 3d
at 541 (‘‘Disclosure of one’s name,
address, and status as a firearms license
[holder] is not one of the ‘very limited
circumstances’ in which’’ a right to
privacy exists).
153 ‘‘No such rule or regulation prescribed after
the date of the enactment of the Firearm Owners’
Protection Act may require that records required to
be maintained under this chapter or any portion of
the contents of such records, be recorded at or
transferred to a facility owned, managed, or
controlled by the United States or any State or any
political subdivision thereof, nor that any system of
registration of firearms, firearms owners, or firearms
transactions or dispositions be established. Nothing
in this section expands or restricts the [Attorney
General’s] authority to inquire into the disposition
of any firearm in the course of a criminal
investigation.’’
Comments Received
Some commenters objected to the rule
on the ground that it is so vague that it
violates the Due Process Clause of the
Fifth Amendment. Most commenters
merely stated that the rule violates the
Fifth Amendment because it is
unconstitutionally vague, without
providing further details. Of those few
commenters that elaborated their
vagueness concern, the primary concern
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
e. Violates the Fifth Amendment—
Unconstitutionally Vague
PO 00000
Frm 00038
Fmt 4701
Sfmt 4700
was that the rule does not define a
threshold number of firearms that must
be sold to qualify a person as a dealer
in firearms, and that they felt this is
unconstitutionally vague. A couple of
other commenters stated that the rule
was unconstitutionally vague and
arbitrary in setting some of the
rebuttable presumptions, and focused
particularly on the presumption that a
resale within 30 days after purchase
could qualify a person as a dealer in
firearms. These commenters believed
that the time period included in this
provision was arbitrary and so vague
that routine actions that commonly arise
in personal firearms contexts could
trigger the presumption without people
realizing it, thus entrapping people or
exposing law-abiding citizens to a
criminal prosecution. One commenter
stated that ‘‘[p]hrases like ‘time,
attention, and labor’ or ‘predominantly
earn a profit’ are nebulous and subject
to interpretation,’’ and stated that this
vagueness conflicts with the principles
established in Grayned v. City of
Rockford, 408 U.S. 104 (1972).
One commenter argued that the
proposed rule is unconstitutional,
relying on Johnson v. United States, 576
U.S. 591 (2015), for the proposition that
a criminal statute is unconstitutionally
vague in violation of due process for
either of two reasons: first, if ‘‘it fails to
give ordinary people fair notice’’ of
what is proscribed; and, second, if it is
‘‘so standardless that it invites arbitrary
enforcement.’’ Johnson, 576 U.S. at 595.
The commenter added that ‘‘[o]ther case
law expounding the ‘void for vagueness’
doctrine’’ includes Grayned. According
to the commenter, ‘‘[u]nder Grayned,
due process required that a law provide
fair warning and provide ‘persons of
reasonable intelligence a reasonable
opportunity to know what is prohibited
so he may act accordingly.’’’ Another
commenter cited to Cargill v. Garland,
57 F.4th 447, 469 (5th Cir.) (en banc),
cert. granted 144 S. Ct. 374 (2023)
(mem.), and stated, ‘‘‘ambiguity
concerning the ambit of criminal
statutes should be resolved in favor of
lenity.’’’ Relying on Cargill, the
commenter said, ‘‘[a] statute is
ambiguous if, after a court has ‘availed
[itself] of all traditional tools of statutory
construction,’ the court is left to ‘guess
at its definitive meaning’ among several
options. Id. (cleaned up).’’ This
commenter continued, ‘‘In those
circumstances involving ambiguous
criminal statutes, the court is ‘bound to
apply the rule of lenity.’ Id. at 471. So
even if a court were to find that the
statutory definition of ‘engaged in the
business’ is ambiguous enough to allow
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
for presumptions of guilt based on a
single transaction, that is far from the
most obvious reading of the statute,
which interpretation would thus be
resolved in favor of lenity.’’ Some
congressional commenters stated, ‘‘The
proposed rule raises serious vagueness
concerns in light of the severe penalties.
Will someone face a civil investigation
for handing out business cards to sell
his personal collection? What about if
someone decides to sell a firearm in its
original packaging?’’
Department Response
The Department disagrees with
commenters that this regulation, terms
within it, or the rebuttable
presumptions established by it are
unconstitutionally vague. To begin,
many of the comments are critical of the
specific language Congress included in
the statute (which is being added to the
regulation). The Department cannot
change the terms in the statute or their
effect on sellers’ legal rights and
obligations. However, these comments
illustrate the benefits of a rule that
provides additional clarification to the
public. The rule explains the
Department’s understanding of the
statutory terms at issue and describes
how those terms apply to particular
circumstances, thus providing greater
clarity to the public.
In any event, however, the terms
employed in the statute and rule are not
unconstitutionally vague. ‘‘It is a basic
principle of due process that an
enactment is void for vagueness if its
prohibitions are not clearly defined.’’
Grayned, 408 U.S. at 108. A law is
impermissibly vague if it ‘‘fails to
provide a person of ordinary
intelligence fair notice of what is
prohibited, or is so standardless that it
authorizes or encourages discriminatory
enforcement.’’ FCC v. Fox Television
Stations, Inc., 567 U.S. 239, 253 (2012)
(internal quotation marks omitted).
However, ‘‘[c]ondemned to the use of
words, we can never expect
mathematical certainty from our
language.’’ Grayned, 408 U.S. at 110.
The definitions in this rule use the
terms with their ordinary meanings and
in context, see United States v. TRW
Rifle, 447 F.3d 686, 689, 690 (9th Cir.
2006), and are sufficiently clear to ‘‘‘give
the person of ordinary intelligence a
reasonable opportunity to know what is
prohibited,’’’ Village of Hoffman
Estates, 455 U.S. at 498 (quoting
Grayned, 408 U.S. at 108). Absolute
certainty is not required. See Hosford,
843 F.3d at 171 (explaining that laws
‘‘necessarily have some ambiguity, as no
standard can be distilled to a purely
objective, completely predictable
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
standard’’); Draper v. Healey, 827 F.3d
1, 4 (1st Cir. 2016) ([I]f due process
demanded [a] how-to guide, swaths of
the United States Code, to say nothing
of state statute books, would be
vulnerable.’’); United States v.
Lachman, 387 F.3d 42, 56 (1st Cir. 2004)
(‘‘The mere fact that a statute or
regulation requires interpretation does
not render it unconstitutionally
vague.’’); Kolbe v. O’Malley, 42 F. Supp.
3d 768, 800 (D. Md. 2014) (A ‘‘statute
is not impermissibly vague simply
because it does not spell out every
possible factual scenario with celestial
precision.’’ (internal quotation marks
omitted)). The many objective examples
and detailed explanations in the rule, all
supported by a thorough administrative
record, provide clarification and assist
people in complying with the statute.
This rule is therefore not
unconstitutionally vague.
The Department further disagrees that
this rule violates the rule of lenity. The
rule of lenity does not apply whenever
a law or rule may contain some
ambiguity. ‘‘The simple existence of
some statutory ambiguity . . . is not
sufficient to warrant application of that
rule, for most statutes are ambiguous to
some degree.’’ Muscarello v. United
States, 524 U.S. 125, 138 (1998). To
invoke the rule of lenity, a court ‘‘must
conclude that there is a ‘grievous
ambiguity or uncertainty’ in the
statute.’’ Id. at 138–39 (quoting Staples
v. United States, 511 U.S. 600, 619 n.17
(1994)). A grievous ambiguity or
uncertainty is present ‘‘‘only if, after
seizing everything from which aid can
be derived, [a] [c]ourt ‘can make no
more than a guess as to what Congress
intended.’’’ Ocasio v. United States, 578
U.S. 282, 297 n.8 (2016) (quoting
Muscarello, 524 U.S. at 138–39). This
rule does not require ‘‘a guess’’ as to
what conduct satisfies being ‘‘engaged
in the business’’; it adopts the plain,
statutory or dictionary meaning of terms
and provides rebuttable presumptions
and examples for additional clarity.
The rule’s rebuttable presumptions
are also not unconstitutionally vague;
indeed, such presumptions are common
in the law. Courts frequently rely on
them because they provide an approach
that is particularized to certain
circumstances. The presumptions in
this rule are specific and tailored to
particular situations. The fact that they
may be overcome by rebuttal evidence
does not render them vague. Although
the presumptions do not address all
circumstances in which a person might
be engaged in the business, they do take
into account common fact patterns that
have been found to be appropriate
indicators.
PO 00000
Frm 00039
Fmt 4701
Sfmt 4700
29005
While a bright line numerical
approach might provide greater clarity,
the Department has rejected such an
approach for the reasons identified in
Section IV.B.3 of this preamble, as well
as in the NPRM. The Department has
also chosen to use presumptions in this
rule rather than another approach,154
because these presumptions are
consistent with the 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
even under the pre-BSCA definition.
f. Violates the Fifth Amendment—
Unconstitutional Taking
Comments Received
A few commenters opposed the rule
as an unconstitutional taking under the
Fifth Amendment. The primary
concerns raised by these commenters
were that, by requiring people who
currently sell firearms without a license
to acquire a license, the rule creates a
backdoor registry, enabling the
Government to identify what weapons,
and how many, each person has, so that
the Government can then enter private
property without a warrant and seize
them. One commenter spelled out the
concern more fully, stating, ‘‘Moreover,
the rights to self-defense and to keep
and bear arms are, in no small measure,
property rights. The Fifth Amendment’s
Takings Clause provides additional
protection to these rights. This clause
ensures that private property cannot be
taken for public use without just
compensation. Arms, as personal
property acquired lawfully, fall under
this protection. Therefore, any
regulation that effectively deprives an
individual of their arms, or the utility
thereof, intersects with property rights
and demands rigorous scrutiny under
the Takings Clause.’’
Department Response
The Department disagrees that the
proposed regulation constitutes a taking,
and further disagrees that it results in a
compensable taking. As an initial
matter, no property is being taken. This
rule does not require individuals who
currently own firearms that they might
sell or who might buy firearms in the
future to surrender or destroy any
personal property in order to engage in
those activities. Further, even if they
predominantly intend to earn a profit
through repetitive purchases or resales,
and thus must obtain a dealer license,
they still do not have to surrender or
154 For the reasons why the Department did not
adopt a factor-based approach, see Section IV.C.3.
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
29006
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
destroy any personal property to comply
with this rule.
Furthermore, even where the
application of Federal firearms laws
results in the forfeiture of firearms, that
is not a compensable taking. The
Federal Circuit has recognized that,
under Supreme Court precedent, there
are certain exercises ‘‘of the police
power that ha[ve] repeatedly been
treated as legitimate even in the absence
of compensation to the owners of the
. . . property.’’ Acadia Tech. Inc. v.
United States, 458 F.3d 1327, 1332–33
(Fed. Cir. 2006). As the Supreme Court
articulated the doctrine, ‘‘[a] prohibition
simply upon the use of property for
purposes that are declared, by valid
legislation, to be injurious to the health,
morals, or safety of the community,
cannot, in any just sense, be deemed a
taking or an appropriation of property
for the public benefit.’’ Mugler v.
Kansas, 123 U.S. 623, 668–69 (1887);
see Acadia Tech., Inc., 458 F.3d at 1333.
The Federal Circuit and the Court of
Federal Claims have also made clear
that these principles apply with full
force in analyzing the impact of firearms
regulations. See Mitchell Arms, Inc. v.
United States, 7 F.3d 212 (Fed. Cir.
1993); Akins v. United States, 82 Fed.
Cl. 619 (2008).
Even if a takings analysis would be
appropriate, a takings claim would
likely be analyzed under Penn Central
Transportation Co. v. City of New York,
438 U.S. 104, 124 (1978), and the result
would be the same. Under Penn Central,
a court considers: (1) the character of
the Government’s actions, (2) the
property holder’s investment-backed
expectations, and (3) the economic
impact on the property holder. Id.
No taking exists under the Penn
Central test. A restriction ‘‘directed at
the protection of public health and
safety . . . is the type of regulation in
which the private interest has
traditionally been most confined and
governments are given the greatest
leeway to act without the need to
compensate those affected by their
actions.’’ Rose Acre Farms, Inc. v.
United States, 559 F.3d 1260, 1281 (Fed.
Cir. 2009). A plaintiff’s ‘‘reasonable
investment-backed expectations are
greatly reduced in a highly regulated
field,’’ Branch v. United States, 69 F.3d
1571, 1581 (Fed. Cir. 1995), such as the
firearms industry. And as the Supreme
Court has made clear, an owner of
personal property ‘‘ought to be aware of
the possibility that new regulation
might even render his property
economically worthless.’’ See Lucas v.
South Carolina Coastal Council, 505
U.S. 1003, 1027–28 (1992). At the same
time, with respect to economic impact,
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
the Court has observed that even when
a regulation ‘‘prevent[s] the most
profitable use of [a person’s] property,’’
a ‘‘reduction in the value of property is
not necessarily equated with a taking.’’
Andrus v. Allard, 444 U.S. 51, 67
(1979); see also Jacob Ruppert, Inc. v.
Caffey, 251 U.S. 264, 303 (1920)
(upholding a Federal law banning
nonintoxicating alcoholic beverages on
the ground that ‘‘there was no
appropriation of private property, but
merely a lessening of value due to a
permissible restriction imposed upon its
use’’). Therefore, even under a takings
analysis, this rule does not constitute a
taking under the Fifth Amendment.
The Department disagrees that the
proposed rule will enable ATF to create
a national firearms registry that can be
used to seize firearms. Since Fiscal Year
1979, Congress has prohibited ATF from
using any Federal funds to create a
national gun registry. Treasury, Postal
Service, and General Government
Appropriations Act, 1979, Public Law
95–429, 92 Stat. 1001, 1002 (1978). ATF
complies with that statutory
prohibition, and this proposed rule does
not change either the prohibition or
ATF’s compliance. Nor does the rule
permit ATF to create a backdoor
national firearms registry, and it is not
doing so. Any records that licensed
dealers are legally required to keep
remain with the dealer as long as the
business continues, and information
from those records is requested only if
a particular firearm becomes part of a
criminal investigation by a law
enforcement entity. See 18 U.S.C.
923(g). ATF does not keep or receive
records until the licensee ceases
operations. And, although ATF may
receive some records from discontinued
businesses, they are not searchable by
name or other personally identifiable
information. This rule does not change
that.
g. Violates the Fifth Amendment—Equal
Protection Clause
Comments Received
A few commenters claimed that the
proposed rule violates what they
characterize as the Fifth Amendment’s
Equal Protection Clause by enabling
uneven application of the law; uneven
enforcement; seizing personal property;
and creating a chilling effect on owners,
buyers, and sellers of firearms.
Department Response
The Department disagrees that the
proposed rule violates the equal
protection component of the Fifth
Amendment’s Due Process Clause.
Under certain circumstances, the equal
PO 00000
Frm 00040
Fmt 4701
Sfmt 4700
protection component prohibits the
Federal Government from treating
similarly situated persons differently.
See Bolling v. Sharpe, 347 U.S. 497, 498
(1954). However, like the Fourteenth
Amendment Equal Protection Clause,
the equal protection component of the
Fifth Amendment ‘‘must coexist with
the practical necessity that most
legislation classifies for one purpose or
another, with resulting disadvantage to
various groups or persons.’’ Romer v.
Evans, 517 U.S. 620, 631 (1996). If a
‘‘classification ‘impermissibly interferes
with the exercise of a fundamental right
or operates to the peculiar advantage of
a suspect class,’ [a court will] subject
the classification to strict scrutiny.
Otherwise, [courts] will uphold the
classification if it is ‘rationally related to
a legitimate state interest.’’’ Mance v.
Sessions, 896 F.3d 699, 711 (5th Cir.
2018) (footnote omitted) (quoting Nat’l
Rifle Ass’n v. ATF, 700 F.3d 185, 211–
12 (5th Cir. 2012)). There is no
fundamental right to be engaged in the
business of dealing in firearms or in
selling firearms without a license. See
Kazmende, 2023 WL 3872209, at *5.
Nor are firearms dealers a ‘‘suspect
class,’’ meaning a class that is ‘‘saddled
with such disabilities, or subjected to
such a history of purposeful unequal
treatment, or relegated to such a
position of political powerlessness as to
command extraordinary protection from
the majoritarian political process.’’
Massachusetts Bd. of Retirement v.
Murgia, 427 U.S. 307, 313 (1976)
(internal quotation marks omitted).
Rational basis review thus applies
here. Rational basis review requires a
‘‘rational relationship’’ between the
classification and ‘‘some legitimate
governmental purpose.’’ See Heller v.
Doe, 509 U.S. 312, 320 (1993). Under
rational basis review, a classification ‘‘is
accorded a strong presumption of
validity,’’ id. at 319, and will be upheld
if ‘‘there is some rational basis for the
statutory distinctions made . . . or
[those distinctions] have some relevance
to the purpose for which the
classification is made.’’ Lewis v. United
States, 445 U.S. 55, 65 (1980) (internal
quotation marks omitted) (rejecting an
equal protection challenge to a ‘‘firearm
regulatory scheme’’ that prohibits a
felon from possessing a firearm).
There is clearly a rational basis for
requiring those engaged in the business
of dealing in firearms to be licensed
according to the classifications and
other requirements set forth in this rule.
The ‘‘principal purpose’’ of the GCA is
‘‘to curb crime by keeping firearms out
of the hands of those not legally entitled
to possess them.’’ Huddleston v. United
States, 415 U.S. 814, 824 (1974)
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
(internal quotation marks omitted). As a
result, ‘‘[c]ommerce in firearms is
channeled through federally licensed
importers, manufacturers, and dealers in
an attempt to halt mail-order and
interstate consumer traffic in these
weapons.’’ Id.; see also United States v.
Biswell, 406 U.S. 311, 315 (1972)
(‘‘[C]lose scrutiny’’ of ‘‘interstate traffic
in firearms’’ is ‘‘undeniably of central
importance to federal efforts to prevent
violent crime and to assist the States in
regulating the firearms traffic within
their borders’’); id. at 315–16 (‘‘Federal
regulation’’ of the traffic in firearms
‘‘assures that weapons are distributed
through regular channels and in a
traceable manner’’); United States v.
Hosford, 82 F. Supp. 3d 660, 667 (D.
Md. 2015) (prohibiting engaging in the
business of firearms without a license
‘‘ensures that significant commercial
traffic in firearms will be conducted
only by parties licensed by the federal
government’’ (internal quotation marks
omitted)); id. (‘‘Nor is the licensing
requirement onerous.’’). As discussed
throughout this preamble, the regulatory
changes in this final rule are essential to
implementing Congress’s changes to the
GCA and furthering the Government’s
interest in having people who are
engaged in the business of selling
firearms be licensed as FFLs.
khammond on DSKJM1Z7X2PROD with RULES3
h. Violates the Fifth Amendment—Due
Process Clause
Comments Received
A few commenters claimed that the
proposed rule violates the Fifth
Amendment’s Due Process Clause and
the concept of ‘‘innocent until proven
guilty’’ by creating rebuttable
presumptions. The Due Process Clause
states, ‘‘No person shall be . . .
deprived of life, liberty, or property,
without due process of law . . . .’’ U.S.
Const. amend. V. Some of these
commenters asserted that the
presumptions reduce the scrutiny that
would be required under the Due
Process Clause before charging a person
with a crime or removing their property,
or cause a person to inadvertently
commit a crime without knowing it
would be seen that way under a
presumption.
Others interpreted the presumptions
as causing people to be presumed guilty,
and then having to prove their
innocence, thereby undermining the
concept of ‘‘innocent until proven
guilty.’’ Two U.S. senators stated, ‘‘If the
proposed rule goes into effect, innocent
people will have to prove to the ATF
that they are not firearms dealers when
they, for example, try to resell firearms
that are in the original packaging or
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
represent that they can sell additional
firearms to their friends. These types of
activities do not make someone a
licensed firearms dealer. Nothing in
current law, including as amended by
the BSCA, empowers the ATF to shift
the burden to an innocent person to
prove that keeping a firearm in its
original packaging or discussing the sale
of firearms to friends or family makes
him a licensed firearms dealer.’’
Other commenters asserted that the
statutory provision saying that it is not
necessary for the Government to prove
intent to profit if the person was dealing
in firearms for criminal purposes or
terrorism runs contrary to the axiom
that one is innocent until proven guilty
and raises due process concerns under
the Fifth Amendment. Others were
concerned that the process of defending
oneself during administrative processes
to rebut a presumption would require
people to set themselves up for selfincrimination during a subsequent
criminal process. One commenter
explained that using rebuttable
presumptions shifts the burden of proof
from the Government to the subject of
the investigation, and runs counter to
the Fifth Amendment, which they
explained precludes using ‘‘forced
testimony’’ against a person in a
criminal trial unless waived. The
commenter argued that if an accusation
that a person is engaged in the business
of dealing in firearms without a license
is based upon a rebuttable presumption,
then the person is unfairly and
unconstitutionally placed in legal
jeopardy. The person will lose the civil
or administrative action against them,
the commenter said, if they do not
present facts to rebut the presumption,
but then the information shared with
the Government will be available for use
against them in a criminal case. (The
commenter cited Allen v. Illinois, 478
U.S. 364 (1986), Minnesota v. Murphy,
465 U.S. 420, 435 & n.7 (1984), and
other cases.) In other words, the
commenter added, the person is
penalized for not responding to the
inquiry or allegation based upon a
presumption. (The commenter cited
Marchetti v. United States, 390 U.S. 39
(1968).)
Department Response
The Department disagrees that the
rebuttable presumptions in this rule
violate the Due Process Clause of the
Fifth Amendment. First, the rebuttable
presumptions apply only to shift the
burden of production, not the burden of
persuasion. Although the presumptions
expressly do not apply in criminal
proceedings, even in that context,
presumptions that shift only the burden
PO 00000
Frm 00041
Fmt 4701
Sfmt 4700
29007
of production do not violate due
process. See Ruan v. United States, 597
U.S. 450, 463–64 (2022). Second, ‘‘[t]he
law is well established’’ that
presumptions shifting the burden of
production ‘‘may be established by
administrative agencies, as long as there
is a rational nexus between the proven
facts and the presumed facts.’’
Cablevision Sys. Corp. v. F.C.C., 649
F.3d 695, 716 (D.C. Cir. 2011); see also
Cole v. U.S. Dep’t of Agric., 33 F.3d
1263, 1267 (11th Cir. 1994); Atchison,
Topeka & Santa Fe R.R. v. Interstate
Com. Comm’n, 580 F.2d 623, 629 (D.C.
Cir. 1978). The BSCA broadened the
scope of persons who are required to be
licensed under the GCA, and the
implementing presumptions in this rule
are necessary to provide persons with a
greater understanding as to who is likely
to be ‘‘engaged in the business’’ as a
‘‘dealer’’ under that new standard. The
presumptions are narrowly tailored and
based on specific firearms purchase and
sale activities to effectuate that purpose.
As a result, there is a rational
connection between the facts to be
proven—for example, frequent and
multiple purchases and resales,
accepting credit cards as a method of
payment, advertising, etc.—and the
presumed facts—being engaged in the
business or having the requisite intent
to profit. See USX Corp. v. Barnhart,
395 F.3d 161, 172 (3d Cir. 2004) (finding
agency’s ‘‘rebuttable presumption [was]
entirely reasonable’’ and noting that the
‘‘presumption is rebuttable and
therefore avoids problematic
mechanical operation’’).
Contrary to commenters’ assertions,
the rebuttable presumptions in this rule,
even when applied in a civil or
administrative proceeding, do not
alleviate the burden of persuasion on
the Government to prove that a person
is willfully engaged in the business
without a license under the applicable
evidentiary standard. They neither limit
nor prescribe the manner in which a
party can rebut such a presumption.
Agencies may adopt evidentiary
presumptions provided that the
presumptions shift the burden of
production, not the burden of
persuasion (also sometimes referred to
as the burden of proof). Cablevision, 649
F.3d at 716.155 That is the case here.
Because the rebuttable presumptions are
merely evidentiary tools to assist the
trier of fact in determining whether the
Government has met its burden of
production in a given proceeding and
155 See also Chem. Mfrs. Ass’n. v. Dep’t of
Transp., 105 F.3d 702, 706 (D.C. Cir. 2007); U.S.
Steel Corp. v. Astrue, 495 F.3d 1272, 1284 (11th Cir.
2007) (internal quotation marks omitted)).
E:\FR\FM\19APR3.SGM
19APR3
29008
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
do not shift the burden of persuasion,
this rule does not violate due process.156
In the NPRM, the Department stated that
a person ‘‘shall not be presumed to be
engaged in the business of dealing in
firearms’’ when the person engaged in
certain types of conduct (e.g., clearly a
person is not presumed to be engaged in
the business when that person’s conduct
is limited to activity the statute
specifically excludes). However, to
alleviate commenter concerns, the
regulatory text of this final rule now
makes clear that evidence of such
conduct may also be presented as
rebuttal evidence (e.g., gifts, certain
occasional sales, etc.), and further
makes clear that additional types of
reliable rebuttal evidence could be
offered beyond those examples.
The Department acknowledges the
commenters’ concerns about the
possibility of self-incrimination if they
provide rebuttal evidence in an
administrative or civil proceeding that
could be used against them in a criminal
proceeding. The Fifth Amendment
privilege against compulsory selfincrimination, however, can be asserted
‘‘in any proceeding, civil or criminal,
administrative or judicial, investigatory
or adjudicatory,’’ and it ‘‘protects
against disclosures which the witness
reasonably believes could be used in a
criminal prosecution or could lead to
other evidence that might be so used.’’
Kastigar v. United States, 406 U.S. 441,
444–45 (1972). The Fifth Amendment’s
protection against self-incrimination not
only protects the individual against
being involuntarily called as a witness
against himself in a criminal
prosecution, but it also affords
protection against having compelled
responses provided in civil or
administrative proceedings used against
him in a later criminal prosecution.
Lefkowitz v. Turley, 414 U.S. 70, 77
(1973). Moreover, it is not uncommon
for individuals to have to balance the
implications of providing testimony in a
civil or administrative case against the
potential that such testimony may be
used in a future criminal proceeding.
For instance, this circumstance can
occur whenever a statute has criminal,
civil, and administrative implications.
156 See Ruan v. United States, 597 U.S. 450, 463–
64 (2022) (Statute providing ‘‘a presumptive device,
akin to others we have recognized in a criminal
context, which merely shift[s] the burden of
production to the defendant, following the
satisfaction of which the ultimate burden of
persuasion returns to the prosecution’’ did not
violate due process); Alabama By-Products Corp. v.
Killingsworth, 733 F.2d 1511, 1517 (11th Cir. 1984)
(regulatory presumption under 20 CFR
727.203(a)(1) that miner is presumed to be disabled
with an X-ray showing of pneumoconiosis did not
violate due process).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
See, e.g., 15 U.S.C. 1825(a), (b) (civil and
criminal penalties for violations relating
to sales or exhibitions of horses that are
sore); 18 U.S.C. 670(c), (d) (civil and
criminal penalties for theft of medical
products); 22 U.S.C. 2778(c), (e) (civil
and criminal penalties for unlawful
exportation of defense articles); 30
U.S.C. 820(a), (b), (d) (civil and criminal
penalties for violations of mine health
and safety standards); and 33 U.S.C.
533(a), (b) (civil and criminal penalties
for failing to comply with lawful orders
of the Coast Guard).
The statutory definition of
‘‘terrorism’’ existed in the GCA’s
definition of ‘‘principal objective of
livelihood and profit’’ before the BSCA
was passed, see 18 U.S.C. 921(a)(22)
(2020), and remains there verbatim. The
BSCA added that same definition to the
new definition of ‘‘to predominantly
earn a profit’’ in the GCA, as well. This
rule merely: (1) moves that definition
within the regulations to be a
standalone definition so that it applies
to both the term ‘‘predominantly earn a
profit’’ and ‘‘principal objective of
livelihood and profit’’ without repeating
it in two places; and (2) makes a minor
revision to identify the provisions to
which the definition applies. This rule
does not further interpret or define that
term, and comments in that regard are
beyond the scope of the rule.
i. Violates the Tenth Amendment
Comments Received
Some commenters opposed the
proposed rule on the grounds that it
violates the Tenth Amendment, which
provides: ‘‘The powers not delegated to
the United States by the Constitution,
nor prohibited by it to the States, are
reserved to the States respectively, or to
the people.’’ U.S. Const. amend. X.
Some of these commenters referred to
the rule as a violation of the separation
of powers or federalism. The majority of
these commenters stated that the rule
‘‘will override the authority of the states
with overburdensome federal
regulations and strip state’s rights.’’ One
commenter suggested that this rule will
‘‘intrud[e] [upon] states’
responsibilities.’’ Several commenters
stated that the power to regulate
commerce in firearms is not a power
delegated to the Federal Government.
Others stated that, although the Federal
Government has the power to regulate
interstate commerce in firearms, it has
not been delegated authority to regulate
commerce between people within a
given state, or in intrastate commerce.
One commenter stated that, ‘‘as long as
the transaction doesn’t cross state lines,
it cannot be regulated by the Federal
PO 00000
Frm 00042
Fmt 4701
Sfmt 4700
government.’’ A couple of commenters
cited McDonald v. City of Chicago, 561
U.S. 742 (2010), for the proposition that
each state has its own body of laws that
reflect its unique needs, culture, and
opinions of its residents, and has the
autonomy to tailor public safety
measures to these unique situations.
These commenters stated that the
proposed rule disregards this principle.
Department Response
The Department disagrees that the
rule violates the Tenth Amendment.
Commenters seemingly argued that the
powers exercised by the Department in
issuing the rule were ‘‘powers not
delegated to the United States by the
Constitution, nor prohibited by it to the
States.’’ U.S. Const. amend. X. However,
if Congress has acted within its power
under the Commerce Clause, ‘‘the Tenth
Amendment expressly disclaims any
reservation of that power to the States.’’
See New York v. United States, 505 U.S.
144, 156 (1992). Simply put, a valid
exercise of Congress’ power is not a
violation of the Tenth Amendment.
Multiple courts have repeatedly and
consistently upheld the GCA as a valid
exercise of Congress’ Commerce Clause
power, see, e.g., United States v.
Hosford, 843 F.3d 161, 163 (4th Cir.
2016); United States v. Rose, 522 F.3d
710, 716–19 (6th Cir. 2008); Navegar,
Inc. v. United States, 192 F.3d 1050,
1054–1065 (D.C. Cir. 1999), and rejected
challenges to the statute on Tenth
Amendment grounds, see, e.g., Bezet v.
United States, 714 F. App’x 336, 342–
43 (5th Cir. 2017) (‘‘[E]ach provision [of
the GCA] that Bezet has standing to
challenge was validly enacted under the
commerce power or the taxing power.
Therefore, the district court was correct
to reject Bezet’s claims under the Tenth
Amendment.’’).
As for commenters who argued
Congress does not have authority to
regulate any intrastate firearms
transactions, regardless of its connection
to interstate commerce, Congress may
‘‘regulate purely local activities that are
part of an economic ‘class of activities’
that have a substantial effect on
interstate commerce.’’ Gonzales v.
Raich, 545 U.S. 1, 17 (2005). Raich held
that one situation in which ‘‘Congress
can regulate purely intrastate activity’’
even if that activity is not itself
commercial, is ‘‘if it concludes that
failure to regulate that class of activity
would undercut the regulation of the
interstate market in that commodity.’’
Id. at 18. When there is a
‘‘comprehensive framework for
regulating the production, distribution,
and possession’’ of a commodity, the
fact that the regulatory scheme
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
‘‘ensnares some purely intrastate
activity is of no moment.’’ Id. at 22, 24.
This analysis has been specifically
applied to firearms. See Montana
Shooting Sports Ass’n v. Holder, No.
CV–09–147, 2010 WL 3926029, at *17
(D. Mont. Aug. 31, 2010) (‘‘As Raich
instructs, the fact that Federal firearms
laws ‘ensnare some purely intrastate
activity,’ such as . . . manufacturing
and sales activity . . . , ‘is of no
moment.’ Under Raich, the National
Firearms Act and Gun Control Act
constitute a valid exercise of federal
commerce power, even as applied to the
purely intrastate manufacture and sale
of firearms . . . .’’) (quoting Raich, 545
U.S. at 22), aff’d, 727 F.3d 975 (9th Cir.
2013); see also United States v. Stewart,
451 F.3d 1071, 1078 (9th Cir. 2006);
Hollis v. Lynch, 121 F. Supp. 3d 617,
640 (N.D. Tex. 2015) (citing Raich, 545
U.S. at 22), aff’d, 827 F.3d 436 (5th Cir.
2016); Rose, 522 F.3d at 717–18.
j. Violates Other Constitutional
Provisions
khammond on DSKJM1Z7X2PROD with RULES3
Comments Received
A small number of commenters stated
that the NPRM violates the Eighth
Amendment’s prohibition against
excessive fines and cruel and unusual
punishments; the Ninth Amendment
(which states, ‘‘[t]he enumeration in the
Constitution, of certain rights, shall not
be construed to deny or disparage others
retained by the people,’’ U.S. Const.
amend. IX); and the Equal Protection
and Due Process Clauses of the
Fourteenth Amendment. These
commenters did not explain how they
thought the proposed rule violated these
constitutional provisions. One
commenter stated that the proposed rule
constitutes restricted zoning that will
deprive people of their rights and is
therefore unconstitutional. Numerous
other commenters stated that the NPRM
is unconstitutional and deprives people
of their rights, but did not provide
detailed arguments, although some of
these commenters based their statement
on a belief that the rule requires anyone
who sells a firearm to be licensed as a
dealer or that it creates a universal
background check. Several commenters
stated that the Constitution does not
grant the Federal Government,
including Congress, the authority to
regulate firearms or the trade in
firearms, and any law or regulation that
does so is unconstitutional. Some of
these commenters specifically stated
that the BSCA, and even the NFA and
GCA, are unconstitutional laws.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
Department Response
The Department disagrees that the
proposed rule violates the Eighth
Amendment’s protection against
excessive fines and cruel and unusual
punishments. Criminal and civil
penalties, including forfeiture, can be
considered fines under the Eighth
Amendment if they are punishments for
an offense and, thus, must not be
excessive. Austin v. United States, 509
U.S. 602, 619 (1993); Disc. Inn, Inc. v.
City of Chicago, 72 F. Supp. 3d 930, 934
(N.D. Ill. 2014), aff’d, 803 F.3d 317 (7th
Cir. 2015). Under the Eighth
Amendment, a ‘‘fine’’ is ‘‘excessive’’ if
it is ‘‘grossly disproportional to the
gravity of [the] offense.’’ United States
v. Bajakajian, 524 U.S. 321, 334 (1998).
Here, the penalties for dealing firearms
without a license are up to five years’
imprisonment, a $250,000 fine, or both.
See 18 U.S.C. 922(a)(1)(A), 923(a),
924(a)(1)(D), 3571(b)(3). The GCA does
not require a minimum penalty, and the
penalty in any particular case will vary
according to circumstances, so the
Department disagrees that the penalties
associated with unlawfully dealing in
firearms (which could be very low or
none) are facially ‘‘excessive.’’ The
Department may also seek forfeiture of
the property involved in criminal
activity. Courts have repeatedly found
on a case-by-case basis that these are not
excessive penalties, see, e.g., United
States v. Approximately 627 Firearms,
More or Less, 589 F. Supp. 2d 1129,
1135–37 (S.D. Iowa 2008), and the
proposed rule does not increase the
penalties for noncompliance with the
GCA, which are set by statute.157
The Department also disagrees that
the rule violates the commenters’ rights
under the Ninth Amendment. The
BSCA amendments to the statutory
definition of ‘‘engaged in the business’’
and this rule implementing those
amendments constitute only a modest
congressional expansion of the previous
FFL licensing requirements, and do not
infringe upon any constitutional rights.
The commenters discussed an implied
right to self-defense and a right to
‘‘transfer nonliving personal property
without government hindrance or
supervision.’’ This rule does not prevent
any individuals from exercising selfdefense, and no court has ever
recognized a categorical right to transfer
personal property free of government
regulation. The Ninth Amendment
‘‘does not confer substantive rights in
addition to those conferred by other
157 To the extent commenters argue that the fees
required to be a Federal firearms licensee violate
the Eighth Amendment, they are (1) not a fine, and
(2) not excessive.
PO 00000
Frm 00043
Fmt 4701
Sfmt 4700
29009
portions of our governing law.’’ Gibson
v. Matthews, 926 F.2d 532, 537 (6th Cir.
1991).
It is unclear how the commenters
believe that the rule would violate the
Equal Protection or Due Process Clauses
of the Fourteenth Amendment. First, the
Fourteenth Amendment applies to the
States and State actors, not Federal
agencies. See Shell v. United States
Dep’t of Housing & Urban Dev., 355 Fed.
App’x 300, 307 (11th Cir. 2009). Second,
the rule, like the statute, applies to all
persons and does not burden one
suspect class or group of people more
than others. Instead, the rule helps to
identify persons who are engaged in the
business of dealing in firearms or have
the predominant intent to earn a profit
through certain firearms purchase and
resale activities. Nor is the Government
engaging in intentional disparate
treatment of a suspect class or group of
people regarding a fundamental right.
This final rule has also complied with
the requirements of the APA, including
public notice and comment, of which
the commenters availed themselves
during the proposed rule stage. See 5
U.S.C. 553. With respect to a rulemaking
of general and prospective applicability,
the Due Process Clause does not require
additional procedural safeguards. See
Bi-Metallic Inv. Co. v. State Bd. of
Equalization, 239 U.S. 441, 445 (1915);
see also General Category Scallop
Fishermen v. Sec’y of U.S. Dept. of
Commerce, 720 F. Supp. 2d 564, 576
(D.N.J. 2010) (explaining that
publication in the Federal Register
satisfies notice requirements under the
Due Process Clause).
The Department disagrees that this
rule amounts to restricted zoning and is
therefore unconstitutional. The
commenter seems to suggest that
because the BSCA and this rule will
result in more firearms sellers being
deemed to be ‘‘engaged in the business’’
within the meaning of 18 U.S.C. 921,
those sellers will no longer be permitted
to make firearms sales from their homes
and will instead have to comply with
State and local commercial zoning laws.
However, State and local governments
determine zoning classes and
requirements pursuant to their police
powers. Carter v. City of Salina, 773
F.2d 251, 254 (10th Cir. 1985) (‘‘It is the
general rule that zoning ordinances are
in derogation of common-law property
rights and find their authority through
the state police power.’’). Nothing in
this rule purports to alter State and local
zoning laws or dictate how those laws
should treat firearms sellers who are
‘‘engaged in the business’’ of dealing in
firearms under Federal law. Nor does
the commenter point to any particular
E:\FR\FM\19APR3.SGM
19APR3
29010
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
zoning restrictions that might apply to
an individual firearms seller who would
be ‘‘engaged in the business’’ of dealing
in firearms under this rule. At bottom,
this rule does not create additional
zoning restrictions. Such restrictions, if
they exist at all, are created and
managed on the State, local, and Tribal
levels.
9. Statutory Authority Concerns
a. Lack of Delegated Authority To
Promulgate the Rule
khammond on DSKJM1Z7X2PROD with RULES3
Comments Received
A majority of the commenters
opposed to the rule argued that ATF is
exceeding its authority by promulgating
the rule, and that it is the job of
Congress to change the laws and the job
of Federal agencies to enforce them. A
majority of these commenters stated that
they considered the proposed regulation
to be a method of changing the law
without passing new legislation and
stated that Congress has given ATF no
additional authority to ‘‘re-define’’
‘‘details’’ in the law. One commenter
stated that ‘‘No federal agency has the
right to interpret laws, amendments, or
constitutions. That’s what [C]ongress is
for.’’ A few others made similar
statements. Other commenters stated
that the NPRM is an executive order or
a law itself, and ATF has no authority
to change law via an executive order or
by issuing new laws.
One commenter, instead of saying that
ATF has no authority to promulgate
regulations, stated that ATF has no
authority to ‘‘devise its own
definitions.’’ They further argued that
the only exception to this is the term
‘‘collector,’’ because the statute
specifically delegates authority to the
Attorney General to further define that
term. The commenter concluded that
when Congress includes explicit
authorization to define one term, it
negates any implied regulatory power to
expand definitions for other terms,
quoting the expressio unius est exclusio
alterius principle described in Bittmer
v. United States, 598 U.S. 85, 94 (2023).
A second commenter, in a similar but
narrower vein, pointed to the ‘‘specific
definitions provided by Congress for
both ‘engaged in the business’ and
‘predominantly earn a profit.’ ’’ These
definitions, the commenter argued,
‘‘should entirely foreclose any attempt
by ATF to redefine those terms.’’ The
commenter quoted Royce v. Hahn, 151
F.3d 116, 123 (3d Cir. 1998), for the
proposition that ‘‘[s]uch an explicit
reference to a statutory definition
demonstrates a Congressional intent to
forestall interpretation of the term by an
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
administrative agency and acts as a
limitation on the agency’s authority.’’
Some commenters stated that the
proposed definition of ‘‘engaged in the
business’’ is contrary to or an overreach
of the BSCA or the FOPA. One
commenter asked ‘‘[w]here in the text of
the FOPA does the ATF believe
Congress expressly grants it the
authority to redefine ‘engaged in the
business’ as Congress has clearly
defined it through several amendments
made to the FOPA by Congressional
legislative action?’’ Another commenter,
citing 18 U.S.C. 926(a) and section 106
of FOPA, 100 Stat. at 459, stated that the
FOPA reduced ATF’s regulatory
authority under the GCA by changing
the original phrase ‘‘ ‘such rules and
regulations as he deems reasonably
necessary’ ’’ to ‘‘ ‘only such rules and
regulations as are necessary.’ ’’ The
commenter asserted that this change
means that ATF has the authority to
enact only regulations that are
‘‘necessary [for enforcement of the Act]
as a matter of fact, not merely
reasonably necessary as a matter of
judgment.’’ Another commenter,
characterizing the BSCA, stated that
‘‘[t]he essence of the change was simply
that illegal firearm sales need not
amount to a person’s ‘livelihood’ for
that activity to be criminally actionable.
It was never intended to give the
administration a blank check to
comprehensively rewrite settled law or
understandings about private firearms
sales for lawful purposes or for the
enhancement or liquidation of personal
firearm collections.’’ One commenter
cited the legislative record for the GCA,
contending that Congress declined to
adopt a provision that would have made
it a crime to violate any regulation
promulgated pursuant to the GCA due
to asserted concerns that the provision
would delegate to ATF the authority to
determine what constitutes a crime. The
commenter concluded that the proposed
rule ‘‘would do exactly what Congress
rejected when it enacted the GCA in
1968. It would redefine and expand
GCA definitions, with the consequence
that unlawful acts would be expanded
by regulation. ATF has no such
authority.’’
A few commenters argued that the
regulation exceeds ATF’s authority
because it criminalizes behavior or
deprives people of something. As a
result, these commenters assert that the
alleged penal provisions must be clearly
stated in the statute itself. One
commenter stated that the regulation,
‘‘with a stroke of a pen creates
violations that may lead to fines,
confiscation of assets and possibly jail
time.’’ Another added that, because the
PO 00000
Frm 00044
Fmt 4701
Sfmt 4700
proposed rule involves criminal
penalties, it must ‘‘not criminalize any
action that is either not clearly
prohibited by the law or that is
specifically prohibited by the law.’’
‘‘Removing rights,’’ added another
commenter, ‘‘should be a matter take[n]
up before the full body of Congress and
U.S. Citizens, not an un-elected group of
individuals.’’ An additional commenter
couched the issue in terms of deference,
citing cases like United States v. Apel,
571 U.S. 359, 369 (2014), for the
proposition that because the GCA is a
criminal statute, ATF’s reading is not
entitled to any deference.
Department Response
As an initial matter, the Department
disagrees that this rule
‘‘comprehensively rewrite[s]’’ or
otherwise alters ‘‘settled law’’ in a
manner inconsistent with Congress’s
enactments. Most recently, Congress
passed the BSCA in 2022, and this rule
implements the GCA, as amended by
the BSCA. The Department and ATF
have the legal authority to promulgate
regulations and rules that are necessary
to implement, administer, and enforce
the GCA, as amended by the FOPA and
the BSCA, including its definition of
‘‘engaged in the business’’ as a dealer.
See 18 U.S.C. 926(a); 28 U.S.C.
599A(b)(1), (c)(1); 28 CFR 0.130(a)(1)–
(2); Treas. Order No. 221(1), (2)(d), 37
FR 11696–97 (June 10, 1972). This
rule—which updates ATF’s regulations
in accordance with the BSCA’s new
statutory definition of when a person is
considered to be ‘‘engaged in the
business’’ and makes other related
changes—is a valid exercise of that
statutory authority. See Nat’l Rifle Ass’n
v. Brady, 914 F.2d 475, 479 (4th Cir.
1990) (‘‘Because § 926 authorizes the
[Attorney General] to promulgate those
regulations which are ‘necessary,’ it
almost inevitably confers some measure
of discretion to determine what
regulations are in fact ‘necessary.’ ’’)
The rule is also consistent with ATF’s
historical experience implementing the
GCA. In the original GCA implementing
regulations in 1968, ATF’s predecessor
agency provided regulatory definitions
of terms that Congress did not define in
the statute. 33 FR 18555 (Dec. 14, 1968).
Since that time, ATF has promulgated
additional regulatory definitions to
implement amendments to the GCA,
including FOPA and the Brady Act. See,
e.g., Commerce in Firearms and
Ammunition, 53 FR 10480 (Mar. 31,
1988) (providing definitions for, among
other terms, ‘‘dealer’’ and ‘‘engaged in
the business’’); Definitions for the
Categories of Persons Prohibited from
Receiving Firearms, 62 FR 34634 (June
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
27, 1997). Now that Congress has passed
further legislation to amend the
statutory definition of certain terms, it is
logical and appropriate for ATF—
consistent with its statutory authority
and experience in administering the
relevant statutory provisions—to review
existing rules and promulgate new ones
if necessary to properly implement that
statutory change.
This rule is necessary to assist people,
such as unlicensed persons seeking to
comply with the law and fact finders in
certain proceedings, to determine when
firearms sellers are required to be
licensed as wholesale or retail dealers
under the expanded statutory definition
of ‘‘engaged in the business,’’ and for
ATF to effectively regulate the firearms
industry. Indeed, numerous commenters
stated that because the BSCA redefined
‘‘engaged in the business’’ to focus on a
person’s intent ‘‘to predominantly earn
a profit,’’ regulatory updates were
necessary to clarify when a license was
needed and how ATF would consider
and enforce certain aspects of firearms
and sales that are relevant to the intentto-profit analysis in the current
marketplace.158
The Department also disagrees with
commenters that the rule or its
presumptions are inconsistent with the
text or legislative history of FOPA,159 or
with the structure of the GCA. The GCA
includes delegations of rulemaking
authority that are both general and
specific,160 and its express grants of
158 See, e.g., ATF–2023–0002–319816 (Dec. 7,
2023); ATF–2023–0002–362368 (Dec. 6, 2023);
ATF–2023–0002–317174 (Dec. 5, 2023); ATF–2023–
0002–281792 (Nov. 29, 2023); ATF–2023–0002–
333284 (Nov. 26, 2023); ATF–2023–0002–262638
(Nov. 2, 2023); ATF–2023–0002–246750 (Oct. 25,
2023); ATF–2023–0002–171793 (Oct. 18, 2023);
ATF–2023–0002–218598 (Oct. 17, 2023); ATF–
2023–0002–84981 (Oct. 5, 2023); ATF–2023–0002–
65889 (Sep. 19, 2023); ATF–2023–0002–43184 (Sep.
14, 2023); ATF–2023–0002–0538 (Sep. 10, 2023).
159 The Fourth Circuit has explained that the
FOPA amendments did not change ATF’s authority
to promulgate regulations necessary to implement
the GCA. See Nat’l Rifle Ass’n, 914 F.2d at 478–79
(rejecting argument that FOPA requires courts to
‘‘strike down [ATF] regulations if we do not find
them strictly necessary and the least restrictive
means of accomplishing the purposes of the
[GCA]’’).
160 Compare, e.g., 18 U.S.C. 926(a) (‘‘The Attorney
General may prescribe only such rules and
regulations as are necessary to carry out the
provisions of this chapter . . . .’’); H.R. Rep. No.
90–1577, at 18 (1968) (‘‘Section 926. Rules and
regulations. This section grants rulemaking
authority to the Secretary . . . .’’); S. Rep. No. 90–
1501, at 39 (1968) (similar), with, e.g., 18 U.S.C.
921(a)(13) (‘‘The term ‘collector’ means any person
who acquires, holds, or disposes of firearms as
curios or relics, as the Attorney General shall by
regulation define . . . .’’); id. 923(g)(1)(A) (‘‘Each
licensed importer, licensed manufacturer, and
licensed dealer shall maintain such records of
importation, production, shipment, receipt, sale, or
other disposition of firearms at his place of business
for such period, and in such form, as the Attorney
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
statutory authority to define particular
terms do not negate the broader
authority that Congress has granted to
the Department to issue regulations that
define additional statutory terms as
necessary to carry out the GCA. Indeed,
as congressional commenters have
noted, the GCA as amended by FOPA
and the BSCA authorizes the
Department to utilize its expertise
gained from decades of enforcement
experience to further define terms or to
issue other rules that are necessary to
implement the GCA. In light of that
delegation, the fact that Congress
generally defined the term ‘‘engaged in
the business’’ does not mean that the
Department lacks the authority to
further define that term.161 In enacting
the BSCA, Congress found it necessary
to broaden the term ‘‘engaged in the
business,’’ but did not provide guidance
on how to apply that new definition to
specific firearms transaction activities.
This rule provides that necessary
clarification in accordance with the
Department’s delegated authority.
The Department disagrees that the
rule criminalizes behavior or imposes
criminal penalties. Congress long ago
both enacted the statutory requirement
that persons who engage in the business
of dealing in firearms must obtain a
license and imposed criminal penalties
for noncompliance with that statutory
requirement. This rule, on the other
hand, merely implements Congress’s
latest amendment to the definition of
‘‘engaged in the business.’’ Nothing in
the rule criminalizes behavior or
prohibits persons from engaging in the
business of dealing in firearms; it
merely implements the statutory
requirement, as amended by the BSCA,
that requires persons to become licensed
if they wish to engage in that business.
b. Lack of Authority To Promulgate
Presumptions
Comments Received
In addition to the concerns raised
under Section IV.B.8.g of this preamble
about the efficacy of the rule given that
General may by regulations prescribe.’’); id.
923(g)(2) (‘‘Each licensed collector shall maintain in
a bound volume the nature of which the Attorney
General may by regulations prescribe, records of the
receipt, sale, or other disposition of firearms.’’); id.
923(i) (‘‘Licensed importers and licensed
manufacturers shall identify by means of a serial
number engraved or cast on the receiver or frame
of the weapon, in such manner as the Attorney
General shall by regulations prescribe, each firearm
imported or manufactured by such importer or
manufacturer.’’).
161 See, e.g., Guedes v. ATF, 45 F.4th 306, 314–
19 (D.C. Cir. 2022) (upholding ATF regulation
interpreting the statutory term ‘‘machine gun’’); cf.
Nat’l Rifle Ass’n, 914 F.2d at 480–81 (ATF had the
legal authority to define the statutory terms
‘‘business premises’’ and ‘‘gun show or event’’).
PO 00000
Frm 00045
Fmt 4701
Sfmt 4700
29011
the presumptions will not be required in
any criminal proceeding, several
commenters argued that creating such
presumptions is unlawful and
problematic. Some commenters argued
that nowhere in the rule did the
Department cite any authority
authorizing it to adopt or create
presumptions applicable to statutory
terms. Another commenter stated that
‘‘ATF’s recently proposed rule now
aims to create several presumptions
when a person is ‘engaged in the
business,’ despite the [BSCA] definition
that contains no such presumptions. It
is clearly not the intent of Congress to
include those presumptions in this
proposed rule.’’ A third commenter
objected on the grounds that ‘‘many of
[the presumptions] concern common
and entirely innocent conduct related to
firearms transactions.’’
Additionally, at least one commenter
stated that the legislative history of the
GCA clearly demonstrates that ATF
cannot make the violation of a
regulation a crime. As originally
proposed, the commenter stated, the bill
that became the GCA provided,
‘‘[w]hoever violates any provision of
this chapter or any rule or regulation
promulgated thereunder . . . shall be
fined not more than $5,000 or
imprisoned not more than five years, or
both.’’ Prior to passage, however,
Congress deleted the provision making
it an offense to violate ‘‘any rule or
regulation promulgated thereunder.’’
114 Cong. Rec. 14,792, 14,793 (1968).
The commenter concluded that, with
the redefined and expanded GCA
definitions in the proposed rule,
unlawful acts would be expanded by
regulation, which is contrary to the fact
that all GCA offenses are defined in
terms of violations of ‘‘this chapter’’ of
the statute.
Moreover, commenters asserted, as a
practical matter, that even with the
disclaimer that the presumptions are
only required in administrative and
civil proceedings, it does not change the
fact that 18 U.S.C. 924(a)(1)(D), which
makes it a criminal act to engage in the
business of dealing in firearms without
a license, exists and carries prison time
and high fines. One commenter
questioned how ATF could say it would
not use the presumptions in a criminal
case if the agency intends for courts to
be in a position to rely on the
presumptions to create permissive
inferences in jury instructions. Another
commenter stated that the Department
did not adequately explain how any
presumption would be ‘‘useful’’ or in
any way appropriate to a criminal
proceeding, whether considered by the
judge or jury, and that there is no
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
29012
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
explanation as to how these
presumptions become permissive
inferences.
At least one commenter pointed out
that jury instructions are written based
on statutory language and applicable
judicial decisions that interpret the law.
As the GCA is a criminal statute, the
commenter stated, ATF cannot expand
it, and because the GCA definitions are
the same in criminal and civil contexts,
ATF cannot have rebuttable
presumptions regarding the definitions
that are different in a civil or
administrative context. According to
another commenter, this would violate
the ‘‘chameleon cannon’’ in which
courts have said statutory terms ‘‘are not
chameleons, acquiring different
meanings when presented in different
contexts.’’ Maryland v. EPA, 958 F.3d
1185, 1202 (D.C. Cir. 2020); see also
Clark v. Martinez, 543 U.S. 371, 382
(2005) (similar). Other commenters
similarly cited Leocal v. Ashcroft, 543
U.S. 1 (2004), for the proposition that
ATF is legally prohibited from
employing a rebuttable presumption of
liability in noncriminal proceedings that
does not apply in the criminal context.
Commenters pointed out that in Leocal,
the Supreme Court stated that a statute
with ‘‘both criminal and noncriminal
applications’’ must be interpreted
‘‘consistently, whether [courts]
encounter its application in a criminal
or noncriminal context.’’ Id. at 11–12
n.8. Commenters also argued that an
agency involved in the prosecution of a
case does not get to tell the judge how
to draft the jury instructions.
Additionally, commenters argued that
the Department’s use of presumptions in
the civil and administrative context, but
not the criminal context, runs afoul of
the rule of lenity and is contrary to
existing case law, specifically the
Supreme Court’s holding in United
States v. Thompson/Center Arms Co.,
504 U.S. 505 (1992). In Thompson/
Center Arms, commenters stated that
the Court rejected ATF’s interpretation
of the application of a certain definition
in the NFA. The Court concluded that
‘‘although it is a tax statute that we
construe now in a civil setting, the NFA
has criminal applications that carry no
additional requirement of willfulness
. . . . It is proper, therefore, to apply
the rule of lenity and resolve the
ambiguity in Thompson/Center’s favor.’’
Id. at 517–18. Commenters therefore
argued that the Department’s claim that
the rebuttable presumptions are
applicable to civil and administrative
proceedings, but not criminal ones, is
also impermissible.
Commenters also disagreed with the
Department’s characterization of case
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
law in which the Department described
that courts have relied on ATF’s
regulatory definition to decide whether
the defendant was an ‘‘unlawful user of
or addicted to any controlled substance’’
under the GCA. Specifically,
commenters stated that in the cases
cited in footnote 60 of the NPRM, 88 FR
62000, the courts relied on ATF’s
regulation because there was no
applicable statutory definition, unlike
the terms that are the subject of this
rulemaking. Another commenter argued
that none of the cases cited by the
Department support the use of
presumptions in an ‘‘engaged in the
business’’ analysis in which a single
data point would suffice to satisfy what
is inherently a multifactor test. The
commenter argued that an appropriate
and relevant jury instruction would be
for the jury to consider all the facts. In
this sense, the commenter added, at
most the NPRM could have: ‘‘(i)
provided a list (as numerous courts have
provided in their opinions) of various
types of factors that can legitimately
play into an ‘engaged in the business’
determination; (ii) noted that such
conduct involves a tremendous amount
of gray area that cannot be resolved by
unyielding regulation; and (iii)
concluded that each case is to be
decided on its own unique facts and
circumstances.’’ Lastly, at least one
opposing commenter noted that the
Department was also incorrect in
referring to forfeitures as a civil or
administrative proceeding for which the
presumptions could be used because,
the commenter said, forfeitures require
a showing of intent by ‘‘clear and
convincing evidence’’ under 18 U.S.C.
924(d)(1), not a presumed violation.
Focusing on forfeiture, another
commenter stated that ‘‘[f]orfeitures may
occur in civil, administrative, or
criminal proceedings. ATF’s proposed
‘rebuttable presumptions,’ in addition to
being unauthorized by law, are
particularly negated by the . . .
requirement of clear and convincing
evidence in § 922(a)(1) cases involving
forfeiture.’’
In contrast to the commenters
opposed to the presumptions as a matter
of law, one commenter in support of the
rule suggested including the
‘‘predominantly earn a profit’’
presumptions under the EIB
presumptions, rather than having them
as separate sets of presumptions. The
reason for this suggestion is that each of
the proposed presumptions under
‘‘predominantly earn a profit’’ also
demonstrates other elements of the
statutory definition. For example, a
person who purchases or secures
PO 00000
Frm 00046
Fmt 4701
Sfmt 4700
physical space to display firearms not
only demonstrates profit motive but also
establishes that the seller ‘‘devotes time,
attention, and labor to dealing with
firearms,’’ therefore satisfying all
elements of BSCA’s revised statutory
definition of ‘‘engaged in the business’’
as a dealer in firearms. Another
commenter in support stated that in the
final rule, ‘‘ATF should consider
clarifying that the conduct described in
the list of rebuttable presumptions,
while not creating presumptions in
criminal prosecutions, may nonetheless
be relevant and important when ATF
prioritizes what conduct it focuses on
when conducting criminal
investigations.’’
Department Response
The Department disagrees that it lacks
the legal authority to promulgate
rebuttable presumptions in ATF
regulations. As discussed above, the
Attorney General and ATF have the
authority and responsibility to
promulgate regulations necessary to
enforce the provisions of the GCA, and
a regulation that clarifies when a license
is required is such a regulation. See 18
U.S.C. 926(a); see also H.R. Rep. No. 90–
1577, at 18 (1968); S. Rep. No. 90–1501,
at 39 (1968). Because the BSCA
broadened the scope of persons who are
required to be licensed under the GCA,
this rule, including its presumptions,
are necessary to implement the BSCA
and provide persons with a greater
understanding of who is likely to be
‘‘engaged in the business’’ as a ‘‘dealer’’
under that new standard. See Nat’l Rifle
Ass’n, 914 F.2d at 479 (‘‘Because § 926
authorizes the [Attorney General] to
promulgate those regulations which are
‘necessary,’ it almost inevitably confers
some measure of discretion to determine
what regulations are in fact
‘necessary.’ ’’).
Further, ‘‘[t]he law is well established
that presumptions may be established
by administrative agencies, as long as
there is a rational nexus between the
proven facts and the presumed facts.’’
Cole, 33 F.3d at 1267.162 The
162 See, e.g., 88 FR 31314, 31450 (May 16, 2023)
(Department of Homeland Security (‘‘DHS’’) rule
establishing rebuttable presumption that certain
noncitizens are ineligible for asylum); 87 FR 65904,
66069 (Nov. 1, 2022) (Department of Education rule
establishing rebuttable presumption that when a
higher education institution closes and causes
detriment to student loan borrowers, student loan
borrowers who suffered that detriment are entitled
to relief from loan repayment); 81 FR 34243, 34258
(May 31, 2016) (Small Business Administration
(‘‘SBA’’) rule establishing rebuttable presumption of
affiliation based on an identity of interest); 8 CFR
208.13(b) (DHS regulations creating rebuttable
presumption that past persecution of refugee
establishes well-founded fear of future persecution);
12 CFR 225.32 (Federal Reserve Board regulations
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
presumptions that the Department has
chosen to promulgate are derived from
ATF’s extensive regulatory,
enforcement, and investigative
experience, and they are based on
common firearms purchase and sales
activities by dealers engaged in the
business. As the Department has
explained, each of the presumptions
describes conduct that, in its
experience, indicates that an individual
is likely to be engaged in the business
of firearms dealing (or, as applicable,
acting with a predominant intent to
profit). For example, persons who
engage in frequent and multiple
purchases and resales, accept credit
cards as a method of payment, advertise,
etc. are likely to be engaged in the
business or have the requisite intent to
profit. See also, e.g., 88 FR 61999–62003
(NPRM setting forth the rationale
underlying each presumption).
Accordingly, there is a rational
connection between the facts to be
proven and the presumed facts. See
Cablevision Systems Corp. v. FCC, 649
F.3d 695, 716 (D.C. Cir. 2011) (noting
that a court must ‘‘defer to the agency’s
judgment’’ and uphold an evidentiary
presumption so long as ‘‘there is a
sound and rational connection between
the proved and inferred facts, and when
proof of one fact renders the existence
of another fact so probable that it is
sensible and timesaving to assume the
truth of [the inferred] fact . . . until the
adversary disproves it’’ (citation
omitted)). The Department’s
determination that presumptions are
necessary to carry out the GCA here is
also informed by its experience in other
regulatory contexts where the agency
has incorporated presumptions and
found them to promote a common
understanding of, and consistent
compliance with, the laws it
implements.163
creating rebuttable presumptions that determine
when a company controls another company); 13
CFR 124.103(b) (SBA regulations creating rebuttable
presumption that individuals who are members of
certain groups are socially disadvantaged); 38 CFR
3.307 (Department of Veterans Affairs regulations
creating rebuttable presumptions relating to
exposure by veterans to certain chemicals or
diseases).
163 See, e.g., 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.’’); id. § 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.’’); id. § 478.92(a)(1)(vi) (‘‘[F]irearms
awaiting materials, parts, or equipment repair to be
completed are presumed, absent reliable evidence
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
The Department acknowledges, as
commenters noted, that failure to
comply with the licensing requirement
can have criminal implications. It is
unlawful under 18 U.S.C. 922(a)(1)(A),
923(a), and 924(a)(1)(D) for any person
to willfully engage in the business of
dealing in firearms without a license.
However, the Department disagrees with
commenters’ assertions about how the
rule would apply in a criminal context.
First, the presumptions in the regulatory
text do not apply to criminal
proceedings. Instead, persons seeking to
comply with the licensing requirement
should take them into account in
determining whether they must obtain a
license, and they apply in civil and
administrative proceedings. This
includes license denial or revocation
proceedings for willful violations ‘‘of
this chapter or regulations issued
thereunder,’’ see 18 U.S.C. 923(d)(1)(C),
923(e), and civil/administrative asset
forfeiture proceedings based on ‘‘willful
violation of any other provision of this
chapter or any rule or regulation
promulgated thereunder,’’ see id.
924(d)(1).
The Department also disagrees with
the commenters’ assertion that the
rebuttable presumptions are contrary to
the clear and convincing evidence
standard for forfeiture in ‘‘intended to
be used’’ violations of 18 U.S.C.
922(a)(1). Section 924(d)(1) provides for
seizure and forfeiture of firearms and
ammunition involved in the
commission of several specified crimes.
The statute also authorizes the forfeiture
of any firearm and ammunition
intended to be used in the commission
of offenses set forth in 18 U.S.C.
924(d)(3)—which includes the
prohibition against unlicensed dealing
in 18 U.S.C. 922(a)(1). When a civil
forfeiture action is based on the offenses
in 18 U.S.C. 924(d)(3)(C), the
Government is required to establish by
a preponderance of the evidence (as
required by 18 U.S.C. 983(c)(1)) the
underlying violation that supports
forfeiture (including inchoate offenses)
and also, by clear and convincing
evidence (as required by 18 U.S.C.
924(d)(1) and (d)(3)(C)) that the firearms
and ammunition for which forfeiture is
sought were intended to be used in that
crime. When a criminal forfeiture action
is based on the offenses in 18 U.S.C.
924(d)(3)(C), the Government, having
already proven the underlying violation
beyond a reasonable doubt, is required
to establish by clear and convincing
evidence (as required by 18 U.S.C.
924(d)(1) and (d)(3)(C)) that the firearms
to the contrary, to be in the manufacturing
process’’).
PO 00000
Frm 00047
Fmt 4701
Sfmt 4700
29013
for which forfeiture is sought were
intended to be used in that crime. Thus,
the presumptions (or permissive
inferences) would apply only to the
Government’s evidence to prove an
individual is ‘‘engaged in the business’’
for purposes of the underlying section
922(a)(1) violation, not to the
Government’s burden of proving that a
particular firearm was intended to be
used in the section 922(a)(1) violation.
Moreover, the presumptions do not
change the burden of proof applicable to
forfeitures; they simply shift the burden
of producing evidence in the underlying
determination of whether a section
922(a)(1) violation occurred. If the
Government seeks to seize a firearm on
the basis that it was intended to be used
in an unlicensed dealing offense by a
person presumed to be ‘‘engaged in the
business’’ under this rule, the
Government would still have the burden
of proving that intent by clear and
convincing evidence (and the
underlying offense by a preponderance
of the evidence). And in civil forfeiture
cases where the firearms to be forfeited
were actually offered for sale by a
person presumed to be engaged in the
business under this rule, rather than
simply intended to be used in such
violation, the ‘‘preponderance of the
evidence’’ burden of proof applicable to
all civil forfeitures under 18 U.S.C.
983(c)(1) would apply to that forfeiture
proceeding. See 18 U.S.C. 924(d)(1)
(providing for the forfeiture of ‘‘[a]ny
firearm or ammunition involved in or
used in any . . . willful violation of any
other provision of this chapter
[including section 922(a)(1)(A)]’’).164
The rule recognizes the unique
constitutional context in which criminal
proceedings take place, where
defendants are entitled to heightened
procedural protections and the
Government bears the burden of
persuasion beyond a reasonable doubt,
and makes clear that its presumptions
do not apply in criminal cases. But that
does not mean, as some commenters
have suggested, that the Department has
given the statute a different meaning in
the civil and criminal contexts. In any
proceeding that requires proof that an
164 See, e.g., United States v. 133 Firearms With
36 Rounds of Ammunition, No. 08–cv–1084, 2012
WL 511287, at *3 (S.D. Ohio 2012) (‘‘Where it is
alleged that the firearm was ‘involved or used in’
any of the offenses listed in 18 U.S.C. 924(d)(3), the
government’s burden of proof is by a preponderance
of the evidence.’’); United States v. Four Hundred
Seventy Seven Firearms, 698 F. Supp. 2d 890, 893
(E.D. Mich. 2010) (‘‘[T]he statute’s requirement of
a heightened burden of clear and convincing
evidence to prove intent does not apply to a
forfeiture action premised on a firearm being
actually involved in or used in a willful violation
of 922(a)(1)(A).’’).
E:\FR\FM\19APR3.SGM
19APR3
29014
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
individual was ‘‘engaged in the
business’’—whether criminal, civil, or
administrative—the Government has the
burden to prove conduct that meets the
definition in 18 U.S.C. 921(a)(21)(C),
i.e., that the person devoted 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. This rule further
defines that term and sets forth certain
activities that are indicative of being
engaged in the business to provide
clarification and guidance to persons
who are potentially subject to the
licensing requirement. These activities
are indicative of being engaged in the
business regardless of the type of
proceeding in which the activities may
ultimately be offered as proof. But the
rule’s delineation of evidentiary
presumptions for use only in civil and
administrative proceedings does not
require courts to ‘‘giv[e] the same
[statutory] provision a different
meaning.’’ Clark v. Martinez, 543 U.S.
371, 380 (2005). As the proposed rule
explained, in criminal cases, courts may
decide to use the presumptions as
permissive inferences, such as when
drafting jury instructions, and nothing
prevents the Department from
requesting that criminal courts consider,
or prevents such courts on their own
from considering, the conduct
underlying the rule’s presumptions to
determine whether an individual was
‘‘engaged in the business’’ (such as
when instructing juries regarding
permissive inferences).165
For example, the Department has
concluded that a person who
repetitively resells firearms within 30
days from purchase is likely to be
‘‘engaged in the business’’ requiring a
license. A person potentially subject to
the licensing requirement should take
165 See, e.g., United States v. Zareck, Criminal No.
09–168, 2021 WL 4391393, at *68–69 (W.D. Pa.
Sept. 24, 2021) (rejecting challenge to jury
instructions that included an inference of current
drug use based on the regulatory definition of
‘‘unlawful user of a controlled substance’’ in 27
CFR 478.11); United States v. South, No. 19cr43,
2020 WL 3489341 (N.D.W.V. June 26, 2020)
(similar); Eighth Circuit Committee on Model Jury
Instructions, Manual of Model Criminal Jury
Instructions for the District Courts of the Eighth
Circuit, 266–68 (incorporating inference of current
drug use in 27 CFR 478.11); United States v. Perez,
5 F.4th 390, 400 (3d Cir. 2021) (finding that
application note to Federal sentencing guidelines
allowed courts to draw a rebuttable presumption
that a firearm is used in connection with a drugtrafficking offense where it is found in close
proximity to drugs or drug paraphernalia); United
States v. Freeman, 402 F. Supp. 1080, 1082 (E.D.
Wis. 1975) (interpreting Selective Service
regulations to create a rebuttable presumption that
shifted to the defendant the burden of putting
forward evidence showing he did not receive the
order requiring him to report for service).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
that interpretation into account in
assessing their need for a license and, in
a civil or administrative proceeding, the
Government and court will apply that
interpretation through rebuttable
presumptions. Those presumptions do
not apply in criminal proceedings, but
that does not change the Department’s
interpretation that a person who
repetitively resells firearms within 30
days from purchase is likely to be
‘‘engaged in the business’’ requiring a
license, nor does it prevent a court
presiding over a criminal proceeding
from adopting the Department’s
interpretation and applying it in a
manner consistent with the Constitution
and criminal law. In a criminal
proceeding, a court may, at its
discretion, elect to instruct the jury that
it may draw an inference that a person
is ‘‘engaged in the business,’’ or has the
‘‘predominant intent to earn a profit,’’
based on evidence that the person
repetitively resold firearms within 30
days from purchase, or engaged in any
of the other activities set forth in the
rule’s presumptions. If the court
decided to instruct the jury regarding
such a permissive inference, that
instruction would be consistent with the
Department’s interpretation of the
statute contained in this rule.
The Department disagrees with
commenters who imply that it is
improper or unusual for a party,
including the Government, to submit or
advocate for proposed jury instructions
in a case. Under the Federal Rules of
Criminal Procedure, any party may
request in writing that the court instruct
the jury on the law as specified in the
request, and any party may object to any
portion of the instructions. See Fed. R.
Crim. P. 30(a), (d). Independent bodies,
including those that are private, quasijudicial, and academic, also prepare
form or pattern instructions. While
criminal courts are under no obligation
to adopt the Department’s interpretation
of ‘‘engaged in the business,’’ and a
court’s ultimate treatment of the
Department’s evidence might differ
across criminal and civil proceedings,
the Department’s interpretation of the
statutory term is the same across ‘‘both
criminal and noncriminal applications.’’
Leocal, 543 U.S. at 11 n.8.
For similar reasons, the commenters’
reference to the Supreme Court’s
decision in Thompson/Center Arms is
inapposite. There, the Supreme Court
applied the rule of lenity to resolve an
ambiguous statutory term, even though
it was construing that term in a ‘‘civil
setting,’’ due to the statute’s potential
criminal applications. See Thompson/
Center Arms Co., 504 U.S. at 517–18. As
discussed above, the Department’s rule
PO 00000
Frm 00048
Fmt 4701
Sfmt 4700
offers one definition of the statutory
term ‘‘engaged in the business,’’ and its
use of presumptions does not require
that courts apply the term differently in
criminal and noncriminal settings.
Further, Thompson/Center Arms does
not speak to the burden of proof or
attendant evidentiary presumptions,
and its invocation of the rule of lenity
to resolve an ambiguous statutory term
imposes no barrier to the Department
establishing prospectively by regulation
presumptions for persons potentially
subject to the licensing requirement to
consider and for use in civil and
administrative proceedings.
As noted above, it is well established
that administrative agencies can create
rebuttable presumptions. This is the
case even when the statute at issue has
both civil and criminal components.166
In Chemical Manufacturers Association
v. Department of Transportation, for
example, the D.C. Circuit did not invoke
the rule of lenity or suggest that the
Department of Transportation’s
presumptions would result in
inconsistent interpretations, but rather
upheld the presumption at issue
because the agency ‘‘adequately
articulated a reasonable evidentiary
basis for [it].’’ 105 F.3d 702, 707 (D.C.
Cir. 1997). As addressed in Section
IV.B.8.g of this preamble, the
presumptions in this rule are rationally
based on ATF’s regulatory,
investigative, and law enforcement
experience, supported by subject matter
expertise and decades of applicable case
law applying various presumptions in
civil and administrative proceedings.167
166 See footnotes 162 and 163, supra; see also,
e.g., 17 CFR 255.1, 255.3(b)(4) (Securities and
Exchange Commission (‘‘SEC’’) regulations
implementing the Bank Holding Company Act of
1956, which provides for both criminal and civil
penalties, see 12 U.S.C. 1847, and creating a
presumption that the purchase or sale of a financial
instrument by a banking entity is not for the trading
account of the entity if it is held for 60 days or
longer); id. § 255.20(g) (SEC regulation from same
part establishing rebuttable presumption that a
banking entity with limited assets and liabilities is
in compliance with regulatory obligations).
167 See, e.g., Big Branch Res. v. Ogle, 737 F.3d
1063, 1069 (6th Cir. 2013) (in disability benefits
proceeding, claimant’s proof of disability shifted
the burden to employer’s insurer to demonstrate
otherwise); Medina v. Cram, 252 F.3d 1124, 1129
(10th Cir. 2001) (rebuttable presumption of
qualified immunity in civil proceeding ‘‘necessarily
shifts the burden from the party favored by the
presumption to the party rebutting it.’’); Scales v.
I.N.S., 232 F.3d 1159, 1163 (9th Cir. 2000) (in
deportation proceedings, evidence of foreign birth
shifts burden to the petitioner to prove citizenship);
Garvey v. National Transp. Safety Bd., 190 F.3d
571, 580 (D.C. Cir. 1999) (‘‘[O]nce the FAA shows
that a pilot failed to follow a clear ATC instruction,
the burden of production shifts to the pilot to offer
an exculpatory explanation.); Spilman v. MosbyYearbook, Inc., 115 F. Supp. 2d 148, 154 (D. Mass.
2000) (in copyright dispute proceeding, registration
of the copyright created a rebuttable presumption
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
The Department disagrees with the
commenters’ recommendation to
include the set of PEP presumptions
under the EIB presumptions. While the
Department agrees that the conduct
underlying the PEP presumptions may
often be found and proven in cases that
depend on establishing that an
individual ‘‘engaged in the business,’’
the EIB presumptions stand on their
own because, once proven, they
demonstrate a likelihood of devoting
time, attention, and labor to dealing in
firearms as a regular course of business
in addition to the person’s intent to
predominantly earn a profit through the
repetitive purchase and resale of
firearms. In contrast, the PEP
presumptions, once proven,
demonstrate only a likelihood of a
predominant intent to earn a profit
through the repetitive purchase and
resale of firearms, not that the person is
presumed to be engaged in the business
as a result of their actual repetitive
purchasing or reselling of firearms. That
the Government is able to produce
evidence of intent sufficient to satisfy a
PEP presumption does not necessarily
mean that the evidence put forward is
always sufficient to prove the other EIB
statutory elements in a civil or
administrative proceeding.
For example, if a person repetitively
rents tables at gun shows over the
course of several months to display
firearms for resale, that conduct would
demonstrate a predominant intent to
profit from repetitive resales and,
therefore, the second PEP presumption
(repetitively renting physical space to
display firearms for resale). Indeed, a
person would not likely continue to rent
or continuously purchase space at a cost
if the person did not intend to profit
from selling at gun shows, even if no
firearms were actually sold. The seller is
presumed to have a predominant intent
to earn a profit through repetitive
firearms purchases and resales even
though there may not have been any
actual purchases or resales that would
rise to an EIB presumption. Repetitively
renting tables at gun shows over the
course of several months is certainly
of validity and shifted the burden to the respondent
to prove invalidity of the copyright); Idaho Mining
Ass’n v. Browner, 90 F. Supp. 2d 1078, 1087–98 (D.
Idaho 2000) (upholding environmental regulations
adopting a rebuttable presumption in favor of
fishable/swimmable use designations); In re The
Medicine Shoppe, 210 B.R. 310, 312 (N.D. Ill. 1997)
(in bankruptcy proceeding, a properly filed claim
creates a rebuttable presumption of validity and
shifts the burden to the objector to produce
evidence to overcome the presumption); Sinatra v.
Heckler, 566 F. Supp. 1354, 1358–59 (E.D.N.Y.
1983) (in Social Security benefits proceeding,
regulatory presumption served to shift the burden
of going forward with evidence of receipt of notice
of adverse determination).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
indicative of being engaged in the
business; however, by itself, it does not
yet demonstrate the other elements of
being engaged in the business—devoting
time, attention, and labor to dealing in
firearms as a regular course of trade or
business. Those elements would still
have to be proven even if there was
evidence sufficient to demonstrate the
seller’s predominant intent to support a
PEP presumption. In contrast, if the
seller repetitively rents tables at gun
shows over the course of several months
to display firearms for sale, and
repetitively resells firearms within 30
days after purchasing them, the person’s
conduct meets both the PEP and EIB
presumptions. In addition to the second
PEP presumption, the first EIB
presumption (offering to sell firearms
and demonstrating a willingness and
ability to purchase and resell additional
firearms) would be met because this
conduct demonstrates not only a
predominant intent to profit, but also
the devotion of time, attention, and
labor to dealing in firearms as a regular
course of trade or business by actually
transacting firearms.
c. Arbitrary or Capricious
Comments Received
Some commenters objected to the
NPRM on grounds that it is arbitrary
and capricious because, they said, it is
nothing more than a politically
motivated rulemaking designed to stop
all private sales, create universal
background checks, or establish a
national firearms registry in furtherance
of political agendas, rather than
developing clear standards that apply
over time. Others more specifically
argued that the entire rule is arbitrary
and capricious under 5 U.S.C. 706(2)(A)
of the APA. Some of these commenters
argued that the agency relied on factors
that Congress did not intend for it to
consider when enacting the BSCA. A
few contended that the changes being
made to the definition of ‘‘engaged in
the business’’ were unnecessary because
the definition as it was pre-BSCA has
been in effect and working fine for a
long time. Others said that changing the
definition oversteps the authority
allowed by the BSCA, which did not
grant ‘‘additional authority’’ to ‘‘redefine’’ dealer, or asserted that the
Department’s definition does not simply
clarify the law, which cannot be
expanded without a solid basis.
Other commenters stated that the rule
is arbitrary because it causes the
proposed definition of a dealer
‘‘engaged in the business’’ to be less
clear and makes it almost impossible to
determine when one is in compliance.
PO 00000
Frm 00049
Fmt 4701
Sfmt 4700
29015
One of these commenters elaborated
that ‘‘[t]he proposed rule outlines a set
of extremely complex, subjective, and
arbitrary guidelines on how [ATF] will
determine if an individual is engaged in
the business of 2nd Amendment
protected sales.’’ Another commenter
asserted that the rule was unfair because
it changed the definition overnight
without notice that most people would
be aware of. A third stated the rule
‘‘fails to provide any bright-line rules for
individuals to ascertain whether they
are actually ‘engaged in the business’
and instead claims that ATF will
conduct a ‘fact-specific inquiry’ under
which ‘even a single firearm transaction’
may suffice. . . . This is not a rule, nor
is it knowable to the average, reasonable
person. And yet, this Proposed Rule
suggests alterations to Federal
regulation that will bear the full force of
criminal law. More, the Proposed Rule
leaves complete and total discretion in
the hands of ATF.’’
Several commenters focused on the
lack of a threshold number of firearms
as an indicator of the arbitrary nature of
the rule. One of these commenters
explained that ‘‘[t]he rule does not
provide any rationale for why selling
more than one firearm per calendar year
should be considered engaging in the
business of dealing in firearms. There is
no evidence that this is a meaningful
threshold, and there is no reason to
believe that it will be effective in
preventing straw purchases.’’ Related to
frequency, another commenter stated
that ‘‘the proposed rule negatively
affects the public by providing the ATF
exceptionally capricious leeway in its
definition of ‘repetitive’; since no clear
definition is given, it is reasonable to
assume that the ATF considers offering
any of the listed firearms for sale more
than once in the citizen’s lifetime as
repetitive.’’
Other commenters stated that the
rebuttable presumptions as a whole are
‘‘a compilation of totally arbitrary
criteria that just makes it hard for
normal citizens to sell weapons to each
other under non-business transactions.’’
Others focused on specific
presumptions as arbitrary or capricious.
For example, a couple of commenters
asserted that the firearm’s condition is
an unsupported and arbitrary basis for
a rebuttable presumption that one is
engaged in the business. One of these
commenters elaborated that new buyers
may need the manufacturer instructions
on care and handling of the firearms,
among other information contained on
original packaging, as well as special
tools, locks, and cases that come with
the original packaging. As a result,
selling a firearm with original packaging
E:\FR\FM\19APR3.SGM
19APR3
29016
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
may indicate nothing more than passing
it on to a new owner. As another
example, a commenter raised concerns
about the resale of a firearm within 30
days after purchase, stating that ‘‘an
arbitrary 30 day rule to define those
individuals engaged in firearms sales
cannot possibly be based on any data
and facts . . . . If it were based on
actual data, the days would be 28, or 34,
or 67, for example. My point is that 30
days is an arbitrary amount based on
nothing other than making it an easy
number to remember for policy and
enforcement purposes.’’
Some other commenters found the
concept of ‘‘profit’’ to be arbitrary. One
commenter stated that ‘‘[s]elling at a
profit does not equate to engaging in the
business. That is totally absurd. Prices
of firearms appreciate, as do any other
valuable object.’’ Another stated that
‘‘‘the statutory definition further
provides that proof of profit is not
required . . .’, which in other words
means ‘here at the ATF will charge you
whether or not we have evidence of
wrongdoing.’ ’’ Another commenter, an
organization that runs gun shows, stated
that the application of the concept of
profit in the rule not only exceeds the
statutory scope, but also does not
appropriately account for what
constitutes a profit.
And finally, some commenters stated
that the rule lends itself to arbitrary and
capricious interpretation and
enforcement, placing citizens at risk.
For example, one commenter stated that
‘‘[u]ltimately, this rule will only impair
the rights of the law[-]abiding citizens
and potentially create additional felons
through what is merely an arbitrary and
capricious rule.’’ Another stated that
‘‘[t]he rule would give the Attorney
General broad discretion to determine
who is a gun dealer and who is not, and
it would subject gun owners to arbitrary
and capricious enforcement actions.’’
Department Response
The Department disagrees that the
rule is arbitrary or capricious, or
otherwise violates the APA. The BSCA
amended the GCA, and the Department
has invoked its rulemaking authority,
see 18 U.S.C. 926(a), to promulgate
regulations necessary to implement the
GCA, as amended. As stated previously,
ATF has been delegated the authority to
further define statutory terms, such as
‘‘engaged in the business,’’ when
necessary to administer and enforce the
GCA.
While the BSCA broadened the
definition of ‘‘engaged in the business’’
as it applies to dealers, it did not set
forth or explain what specific firearms
purchase and sale activities are
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
sufficient for a person to be ‘‘engaged in
the business’’ of dealing in firearms
under the GCA. Many commenters
stated that they believe this rulemaking
provides much needed clarity about the
persons who must obtain a license,
thereby increasing the firearms
transactions conducted through licensed
dealers, helping to ensure that persons
who are prohibited from receiving or
possessing firearms do not receive them,
and creating more licensed dealers who
maintain records through which crime
guns can be traced.
The Department disagrees that the
rule is unclear or overly complex. The
rule sets forth definitions of terms that
are based on standard dictionary
definitions and decades of case law
interpreting ‘‘engaged in the business.’’
The rebuttable presumptions are based
on specific, identifiable conduct and
clearly defined in the regulatory text.
The Department explained its
reasoning, both in the proposed rule and
elsewhere in this final rule, for not
adopting a specific numerical threshold
of firearms that an individual must sell
to be considered ‘‘engaged in the
business.’’ See Department Response in
Section IV.B.3 of this preamble. The
Department disagrees with commenters
who argued that a single sale, standing
alone, would presumptively classify the
seller as ‘‘engaged in the business’’
under this rule. The regulatory text
explains that a single sale must be
coupled with additional evidence to
support a determination that the seller
required a license. It is important to
note that, in any event, all presumptions
in this rule are rebuttable.
The Department disagrees with the
comments that the presumptions are
arbitrary. As explained previously, and
in response to particular comments
about specific presumptions, the
presumptions are all based on the
Department’s investigative and
regulatory enforcement experience,168
as well as numerous post-FOPA court
and administrative decisions cited in
this rule.169 Indeed, some of the
regulatory text that commenters asserted
is new or represents a significant change
was adopted from ATF’s published
guidance issued almost eight years ago
in 2016.170 That guidance explained
168 See Nat’l Mining Ass’n v. United Steel
Workers, 985 F.3d 1309, 1322 (11th Cir. 2021)
(‘‘Agencies are permitted to rely on their experience
in the regulated field, so long as they explain what
their experience is and how that experience informs
the agency’s conclusion.’’).
169 See footnotes 71–83, supra.
170 See ATF Publication 5310.2, Do I Need a
License to Buy and Sell Firearms? 5 (Jan. 2016),
https://www.govinfo.gov/content/pkg/GOVPUB-J38PURL-gpo125446/pdf/GOVPUB-J38-PURLgpo125446.pdf.
PO 00000
Frm 00050
Fmt 4701
Sfmt 4700
that ‘‘there is no ‘magic number’ related
to the frequency of transactions that
indicates whether a person is ‘engaged
in the business’ of dealing in
firearms.’’ 171
The Department disagrees with the
comments arguing that a firearm’s
condition—or the fact that a firearm is
in, or sold with, original packaging that
contains manufacturer instructions and
other useful items—is an arbitrary basis
for a rebuttable presumption. Persons
who are engaged in the business of
dealing in firearms often desire firearms
that are in either a new condition, or a
nearly new condition, accompanied by
original packaging so they can
command the highest price while
quickly attracting buyers in the shortest
amount of time. Moreover, purchasers of
deadly, explosive-based weapons are
more likely to trust the safety and
reliability of new, factory-tested
firearms, rather than used firearms in a
lesser condition. Nonetheless, in
response to comments regarding the
presumptions that a person is engaged
in the business if they repetitively resell
or offer for resale new or like-new
firearms, or firearms that are of the same
or similar kind and type, the
Department has revised those
presumptions to apply only where the
resales or offers for resale occurs within
one year from the date of purchase (also
referred to in this rule as a ‘‘turnover’’
limitation) to reduce the chance that
personal collection firearms might fall
within either of these presumptions. See
27 CFR 478.13(c)(3)(ii). In this regard,
the Department agrees with some
commenters that collectible firearms
could be maintained in a like-new
condition months or years after they
were originally sold. However, based on
the Department’s extensive experience
investigating and enforcing civil,
administrative, and criminal cases
against persons who were willfully
engaged in the business without a
license, it is unlikely that a collector or
hobbyist would repetitively resell such
firearms within one year after purchase
if not to engage in the business of
dealing in firearms. Of course, as the
rule text states, the determination of
whether a person is engaged in the
business is a fact-specific inquiry. Thus,
a person who intentionally stockpiles
and sells new or like-new firearms, or
the same make and model or variants
thereof, with an intent to evade the oneyear turnover limitation may still be
considered to be engaged in the
business if circumstances warrant that
determination.
171 Id.
E:\FR\FM\19APR3.SGM
at 5.
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
The Department’s views have been
further confirmed and supported by a
survey ATF conducted of special agents
who work on ‘‘engaged-in-the-business’’
criminal cases. The survey was
conducted to better understand the
appropriate turnover limitation, as these
special agents have encountered bona
fide collectors during the course of their
work. In that survey, ATF asked how
soon after purchase bona fide collectors
typically resell a firearm in new or likenew condition with original packaging
or firearms of the same make and model.
Of the 116 agents who responded, 65
percent reported that, based on their
observations, bona fide collectors
typically resell a firearm that they
purchased for their collection sometime
after one year. Of that 65 percent, 13
percent added that many bona fide
collectors do not resell for as long as
five years after purchase, if ever.
Another 15 percent of agents responded
that they had observed some collectors
resell a firearm sometime after six
months. Only 6 percent of agents
reported seeing a collector resell a
firearm after 90 days, and only 1 percent
of agents reported observing a resale
within 60 days. The remaining 15
percent of agents did not provide a
response because they had not closely
observed the behavior of collectors.
None of the agents reported collectors
reselling firearms within 30 days after
purchase. In addition, these results were
about single sales of firearms; they did
not report on frequency of repetitive
sales, or sales involving multiple
firearms. Given that 65 percent of agents
reported that collectors do not typically
resell even one firearm in new or likenew condition with original packaging
or firearms of the same make and model
within a year after purchase, the
likelihood that collectors or hobbyists
would engage in repetitive resales of
such firearms within one year is low.
It is Congress, not the Department,
that identified the predominant intent to
profit as a key element of being engaged
in the business of dealing in firearms, so
commenters’ concerns with the concept
of profit’s role in making EIB
determinations are not addressed in this
rulemaking. However, the Department
agrees with the commenter who stated
that actually ‘‘[s]elling at a profit does
not equate to engaging in [the] business’’
because a showing of actual profit,
whether or not expenses or inflation are
considered, is not required to be
engaged in the business. Rather, it is the
predominant intent of obtaining
pecuniary gain from sale or disposition
of firearms that matters. See 18 U.S.C.
921(a)(22). Moreover, because the
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
person’s predominant intent to profit is
the relevant fact, it does not matter how
actual profit is calculated.
Finally, the Department disagrees that
the rule lends itself to arbitrary or
capricious enforcement of the dealer
licensing requirement because the rule
sets forth specific, identifiable evidence
that is presumed to demonstrate that a
person is engaging in the business, or
predominantly intends to earn a profit.
In any proceedings where such evidence
is presented, it may be rebutted by the
party alleged to be engaged in the
business of firearms dealing to the
extent such rebuttal evidence is
available. The presumptions are based
on purchase and resale activities that, in
ATF’s experience, are indicators of
dealing in firearms, as well as court
cases, which greatly reduces the
possibility of inconsistent interpretation
and enforcement.
d. Violates the Prohibitions Against
Creating a Gun Registry
Comments Received
Numerous commenters objected to the
regulation as a ploy by the Government
to subject law-abiding gun owners who
have the right to buy and sell firearms
to a rigorous registration requirement.
They claimed that the new definition of
‘‘dealer’’ would require any person who
sells a firearm to obtain a license, and
that being licensed requires a person to
register all of their firearms, thereby
creating a universal backdoor gun
registry. A few commenters also stated
that ATF already has and maintains
‘‘nearly a billion entries of gun owner’s
information in a searchable database.’’
Department Response
The Department disagrees that this
rule creates a registry of firearms. First,
the definition of ‘‘engaged in the
business’’ as a dealer in firearms as
implemented in this rule does not result
in a requirement, directly or indirectly,
that all persons who sell a firearm must
be licensed. Under this rule, persons
who sell firearms but who are not
engaged in the business of dealing in
firearms do not need to become
licensed. This includes persons who
make occasional sales to family
members or FFLs, to enhance their
personal collection, and to liquidate
inherited firearms, among others.
Section 478.13(e) of the regulatory text
in this rule provides more information
on conduct that does not support a
presumption of being engaged in the
business as a dealer in firearms.
Second, and more fundamentally, the
rule does not create a firearms registry.
Licensees are required by the GCA, see
PO 00000
Frm 00051
Fmt 4701
Sfmt 4700
29017
18 U.S.C. 923(g)(1)(A), (g)(2), to
complete and maintain records of
production, acquisition, and disposition
of all firearms at their licensed business
premises for such period, and in such
form, as the Attorney General may
prescribe by regulations. But licensees
are not required to register their firearms
with ATF or to otherwise submit a
listing of the firearms they own or sell.
Although ATF has the authority to
inspect a licensee’s records under
certain conditions, see 18 U.S.C.
923(g)(1)(B)–(C), the records belong to
and are maintained by the licensees, not
the government. Only after a licensee
discontinues business do the GCA and
implementing regulations require
licensees to provide their records to
ATF, which allows ATF tracing of crime
guns to continue.172 See 18 U.S.C.
923(g)(4); 27 CFR 478.127. In fact, 18
U.S.C. 926(a)(3) expressly provides that
‘‘[n]othing in this section expands or
restricts the [Attorney General’s]
authority to inquire into the disposition
of any firearm in the course of a
criminal investigation.’’ 173 This rule
does not in any way alter the
longstanding legal requirements
preventing ATF from creating a national
firearms registry.
e. Violates 18 U.S.C. 242
Comments Received
Out of concern regarding their rights
under the Second Amendment to the
Constitution, several commenters
claimed that by working on this rule,
ATF officials are violating 18 U.S.C.
242, which makes it a crime for a person
acting under color of any law to
willfully deprive a person of a right or
privilege protected by the Constitution
or laws of the United States.
Commenters also claimed that ATF
officials and employees are likewise
violating their oath of office to support
172 The out-of-business firearms transaction
records are indexed by abbreviated FFL number so
that they may be accessed when needed to complete
a firearm trace request involving a licensee that is
no longer in business. Out-of-business firearms
transaction records are not searchable by an
individual’s name or other personal identifiers. In
2006, ATF transitioned from using microfilm
images of records to scanning records into a digital
storage system with images that are not searchable
through character recognition, consistent with
ATF’s design and use of its prior Microfilm
Retrieval System.
173 Federal law has long prohibited ATF from
consolidating or centralizing licensee records. Since
1979, congressional appropriations have prohibited
ATF from using any funds or salaries to consolidate
or centralize records of acquisition and disposition
of firearms maintained by FFLs. See Treasury,
Postal Service, and General Government
Appropriations Act, 1980, Public Law 96–74, 93
Stat. 559, 560 (1979). This annual restriction
became permanent in 2011. See Public Law 112–
55, sec. 511, 125 Stat. at 632.
E:\FR\FM\19APR3.SGM
19APR3
29018
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
and defend the Constitution
(particularly the Second Amendment)
under the same provision.
Department Response
The Department disagrees that any
official involved in promulgating or
implementing this rule is violating 18
U.S.C. 242 or any other criminal law.
The regulations proposed and finalized
herein do not raise constitutional
concerns for the reasons given above.
See Section IV.B.8 of this preamble.
C. Concerns With Specific Proposed
Provisions
The Department received thousands
of comments from the public concerned
about specific provisions in the
proposed rule. A majority of those
concerns were in opposition to the rule,
but ATF also received comments from
individuals who generally supported
the proposals. These specific comments
originated from a variety of interested
parties, including advocacy, sporting,
and gun owners’ organizations; gun
safety organizations; lawmakers; gun
enthusiasts; members of the general
public; and persons with legal
backgrounds. The topics included
concerns regarding the proposed
definitions, issues regarding the
presumptions as a general matter,
comments on some of the individual
EIB and PEP presumptions, and
questions about the transfer of firearms
between licensees.
khammond on DSKJM1Z7X2PROD with RULES3
1. Definition of ‘‘Dealer’’
Comments Received
In commenting on whether the rule’s
definition of dealer is clear, a number of
commenters mentioned that the rule
does not include a numerical threshold
of firearms or a specified time frame
establishing when a person’s activities
become engaged in the business. As a
result, for example, one commenter
stated that an average person could not
reasonably be expected to understand
what activities would require them to
get a license, which, the commenter
said, essentially means that a single sale
of a firearm by a private owner would
require a dealer’s license unless the
seller is either selling to improve their
collection or is liquidating their
collection.
Other commenters were concerned
about the places in which the proposed
rule defined firearms purchase and sales
activities as dealing. For example, one
commenter stated that the reference to
an international marketplace in the
definition of ‘‘dealer’’ could be read to
include activities that occur wholly
outside the United States, which goes
against the legal presumption that
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
Congress ordinarily intends its statutes
to have domestic, not extraterritorial,
application. The commenter did not
think the Department intended to
exercise extraterritorial jurisdiction and
suggested the definition of ‘‘dealer’’
should be revised to make this clear. As
another example, one commenter
expressed concerns about the rule’s
clarification that dealing may occur
wherever, or through whatever medium,
qualifying activities may be conducted,
suggesting that instead of clarifying, this
is likely to create more confusion
because having a license would then
prohibit the person from selling in some
locations. The commenter said that 27
CFR 478.100 is clear that a dealer can
transact sales only at its licensed
premises or a ‘‘qualifying’’ gun show or
event. To be a qualifying gun show or
event, the commenter said, it must be
sponsored by an organization devoted to
collecting, competitive use, or other
sporting use of firearms. As an example,
the commenter stated, ‘‘it would be
difficult to imagine a circumstance
where a licensed dealer would be
allowed to sell at a flea market, though
private sales there might be legal.’’
Finally, other commenters expressed
concern about whether the rule would
include certain persons as dealers. For
example, one commenter, a large FFL,
stated that it is unclear whether its
individual employees must be
separately licensed as dealers when
working in the employ of an FFL. They
stated that a plain reading of the
proposed regulatory text suggests its
employees would be required to be
separately licensed. For example, they
noted, an associate working in the
commenter’s customer service
department is responsible for the
physical repair of firearms returned for
service. The associate is a ‘‘person,’’
performs the repair work, and obtains
monetary compensation for the repairs
via paycheck. The commenter asked if,
in this scenario, the associate is a
‘‘dealer’’ requiring license as a
gunsmith, even if the repairs they
perform are made at the direction of the
commenter, who itself is a licensee.
Similarly, another commenter inquired
whether the definition of being engaged
in the business as a dealer now includes
those who sell only component parts of
a weapon, but not the whole weapon
itself. Another commenter was also
concerned about those who fabricate
certain parts, but for a different reason.
The commenter, who supported the
overall definition of ‘‘dealer’’ because
they believe it to be consistent with the
BSCA and to enhance public safety,
said, ‘‘I have concerns about the broad
PO 00000
Frm 00052
Fmt 4701
Sfmt 4700
reach concerning persons engaged in the
fabrication fitment of barrels, stocks,
[and] trigger mechanisms due to these
parts being unregulated and not
considered firearms under the current
frame or receiver rule, as well as the
GCA. See [Docket No.] 2021R–05F, AG
Order No. 5374–2022. Despite this
portion of the definition being in the
previous definition, I . . . would
recommend that this portion be dropped
from the definition.’’
Department Response
The Department disagrees that the
rule does not explain who must be
licensed as a ‘‘dealer.’’ The definition of
‘‘dealer’’ is, in relevant part, ‘‘any
person engaged in the business of
selling firearms at wholesale or retail’’
and was already established in the GCA
and ATF regulations prior to the BSCA
amendments. See 18 U.S.C.
921(a)(11)(A). The rule clarifies within
this definition that a person can be
considered a dealer regardless of the
location or medium through which a
person engages in the business. In the
definition of ‘‘engaged in the business’’
as a wholesale or retail dealer, the rule
then sets forth specific and defined
conduct that will be presumed to be
‘‘engaged in the business’’ requiring a
license as a ‘‘dealer,’’ as well as conduct
that does not support a presumption
and may be used as evidence to rebut
any such presumption. See § 478.13(c),
(e), (f).
The Department disagrees that a
single sale of a firearm by a private
owner, without more, would necessarily
require a dealer’s license under this
rule. To the contrary, a dealer who is
engaged in the business ‘‘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.’’ 18 U.S.C.
921(a)(21)(C). To that end, one
presumption established by this rule
states that a person who sells or offers
firearms for sale (even if a firearm is not
actually sold) and then also represents
to potential buyers or otherwise
demonstrates a willingness and ability
to purchase and resell additional
firearms (i.e., to be a source of
additional firearms for resale) is
presumptively engaged in the business.
Thus, it is clear from the rule’s plain
language that, to trigger this
presumption, additional evidence is
required beyond merely a single sale of
a firearm.
The Department disagrees that the
rule seeks to assert extraterritorial
jurisdiction in excess of statutory
authority by referencing ‘‘international
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
marketplaces’’ in the definition of
‘‘dealer.’’ The statutory prohibition at 18
U.S.C. 922(a)(1)(A) makes it unlawful
for unlicensed persons ‘‘to ship,
transport, or receive any firearm in
interstate or foreign commerce.’’
Including ‘‘international’’ marketplaces
in the definition of ‘‘dealer’’ is
consistent with Congress’s intent to
regulate unlicensed sales in ‘‘foreign’’
commerce.174 Additionally, the GCA, as
recently amended by the BSCA, 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. See 18 U.S.C.
924(k)(2)(B). Willfully engaging in the
business of dealing in firearms without
a license is an offense punishable by
more than one year in prison, see id.
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 sale in another country would
be violating 18 U.S.C. 924(k)(2)(B),
among other provisions of U.S. law.
This is not conduct ‘‘wholly outside the
United States,’’ as the commenter
suggests. Accordingly, this rule now
clarifies in the definition of ‘‘dealer’’
that purchases or sales of firearms as a
wholesale or retail dealer may occur ‘‘at
any other domestic or international
public or private marketplace or
premises.’’
The Department disagrees with the
commenter who said that the definition
of ‘‘dealer’’ will cause more confusion
because it includes dealing that ‘‘may be
conducted’’ at a gun show or event, due
to, as the commenter stated, some gun
shows or events not being qualified
under 27 CFR 478.100. Persons who
want to engage in the business of
dealing in firearms at a gun show or
event must first apply for and receive a
license at a business premises in the
same State as the gun show or event,
regardless of whether the gun show or
event is qualified. During the
application process, ATF advises the
applicant during an application
inspection concerning their
responsibilities as a dealer, to include
dealing only at qualified gun shows or
events within the same State as their
licensed business premises. To the
extent that the definition’s use of the
phrase ‘‘may be conducted’’ causes
some persons to incorrectly believe they
may lawfully deal in firearms at gun
174 See
footnote 48, supra.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
shows or events that are not qualified,
the phrase ‘‘may be conducted’’ has
been replaced with ‘‘are conducted’’ in
the final definition of ‘‘dealer.’’
With regard to the commenter’s
question whether an employee of a
gunsmith who performs repair work, or
fitment of barrels, stocks, and trigger
mechanisms to firearms, is a ‘‘dealer’’
who must be licensed, the rule does not
address who is ‘‘engaged in the
business’’ as a dealer-gunsmith under 18
U.S.C. 921(a)(21)(D), and therefore must
be licensed under 18 U.S.C.
921(a)(11)(B).175 This rule addresses
only who is engaged in the business as
a dealer under 18 U.S.C. 921(a)(11)(A).
Also, this rule does not require
employees of dealers to be licensed
separately. Firearms businesses carry
out their operations through their
employees.176 Employees of dealers
therefore do not require a separate
license, provided the employees are
acting within the scope of their duties
on behalf of the licensee.177
Lastly, in response to the question
whether the rule applies to persons who
deal in component parts of a complete
weapon, this rule applies to persons
who engage in the business of dealing
in ‘‘firearms,’’ as that term is defined by
18 U.S.C. 921(a)(3). This includes
weapons that will, are designed to, or
may readily be converted to expel a
projectile under 18 U.S.C. 921(a)(3)(A),
and the frames or receivers of any such
weapons under 18 U.S.C. 921(a)(3)(B).
Persons who engage in the business of
dealing in any such firearms under the
GCA must be licensed.
2. Definitions of ‘‘Purchase’’ and ‘‘Sale’’
Comments Received
In the NPRM, the Department
proposed to define the terms
175 For more information on who must be
licensed as a gunsmith, see Definition of ‘‘Frame or
Receiver’’ and Identification of Firearms, 87 FR
24652 (Apr. 26, 2022).
176 See ATF Ruling 2010–1, Temporary
Assignment of a Firearm by an FFL to an
Unlicensed Employee, at 2–3 (May 20, 2010),
https://www.atf.gov/firearms/docs/ruling/2010-1temporary-assignment-firearm-ffl-unlicensedemployee/download.
177 See United States v. Webber, No. 2:14–cr–
00443, 2017 WL 149963, at *8 (D. Utah Jan. 13,
2017) (‘‘[A]n employee of Cabela’s is not engaged
in the business of dealing in firearms because
Cabela’s has the profit motive and Cabela’s is the
party engaged in the repetitive purchase and resale
of firearms. However, let us assume that the
employee, who did not have his own FFL, began
buying hundreds of guns from Cabela’s and
reselling them out of his home for personal profit.
Cabela’s maintains the A&D book, but the employee
is not paid for his extracurricular activities. Under
those facts, the Gun Control Act would prohibit the
employee’s conduct. The employee would not be
permitted to circumvent the Gun Control Act’s
licensing requirement by engaging in the business
of dealing in firearms with Cabela’s FFL.’’).
PO 00000
Frm 00053
Fmt 4701
Sfmt 4700
29019
‘‘purchase’’ and ‘‘sale’’ as they pertain to
the term ‘‘engaged in the business’’ of
dealing in firearms. While some
commenters agreed with including
definitions for ‘‘purchase’’ and ‘‘sale’’ so
persons cannot evade licensing through
the barter or exchange of non-monetary
items, other commenters believed the
proposed definitions went too far. One
commenter opined that the definition is
so focused on barter, profit, and trade
that it will allow ATF to find any nexus
such that the agency would be able to
detain, investigate, and refer for
prosecution an honest series of sales,
trades, or bartering that are not in any
way executed as part of a business
scheme. Other commenters opined that
the definitions offered for these terms
‘‘deviate from historical practices that
allowed for the transfer and trade of
firearms among private citizens with
minimal government interference.’’
Another considered the definitions to be
generally consistent with the plain
meaning of those terms.
Several commenters also offered
suggestions to the regulatory text. One
commenter stated that the definition of
‘‘sale’’ is too broad and includes
‘‘Christmas gifts, because [the proposed
definition does] not require[ ] for the
firearm’s delivery to be ‘bargained-for in
exchange,’ [which is] the core of
contract that distinguishes contract from
gift.’’ The commenter stated that ATF’s
definition of ‘‘sale’’ runs counter to the
dictionary definition that is quoted in
footnote 45 of the NPRM, 88 FR 61999.
The commenter quoted this definition of
‘‘sale,’’ emphasizing that it references ‘‘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).’’ (Emphasis added by
commenter) The commenter noted that
ATF’s regulatory definition does not
include the term ‘‘contract’’ and
therefore ignores that there must be
consideration for a sale to have
occurred. In a similar vein, a couple of
other commenters emphasized that
sales, trades, or exchanges of firearms
occur on the basis of agreements or
agreed exchanges between the parties
and should therefore be permitted.
Another commenter raised a concern
that ‘‘the [proposed] definition of ‘sale’
could potentially include nondispositional transfers. . . . Rather than
use the term ‘providing,’ which could
include many temporary transfers, the
more statutorily consistent term would
be ‘disposing of.’ The GCA uses the
terms ‘disposition’ or ‘dispose’ in
connection with the words ‘sale’ or ‘sell’
seven times in section 922. 18 U.S.C.
922(a)(6), 922(b)(2), 922(d), 922(d)(10),
E:\FR\FM\19APR3.SGM
19APR3
29020
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
922(d)(11), 922(j).’’ Therefore, the
commenter suggested it would be more
statutorily consistent to define the term
as ‘‘disposing of a firearm in exchange
for something of value’’ instead of
‘‘providing a firearm in exchange for
something of value.’’
khammond on DSKJM1Z7X2PROD with RULES3
Department Response
The Department disagrees that the
definitions of ‘‘purchase’’ and ‘‘sale’’ are
overbroad and should not include
bartering or trading firearms. As the rule
points out, even before the BSCA, courts
upheld criminal convictions where
payment was made in exchange for
firearms in the form of goods or
services, rather than cash. Non-cash
methods of payment may include
contraband, such as drugs. A non-cash
method of payment may also be used to
conceal illicit firearms dealing, to
include avoiding reporting requirements
associated with transfers of cash.178
Moreover, while the Department agrees
with the commenters that one definition
of ‘‘purchase’’ can include acquiring
something of value by contract (i.e., a
‘‘bargained for’’ exchange), the common
definition of ‘‘purchase’’ is more
generally defined to mean ‘‘to obtain by
paying money or its equivalent.’’ 179
Nonetheless, to ensure that acquiring
the firearm is understood to be
intentional, the Department has added
the words ‘‘an agreed’’ before
‘‘exchange,’’ as used in other comments
that view an exchange more broadly
than by contract. This includes an
agreement to exchange something of
value indirectly, such as payment of the
seller’s debt owed to a third party in
exchange for a firearm.
Regarding the definition of ‘‘sale,’’ the
Department disagrees that the proposed
definition of that term is inconsistent
with common dictionary definitions.180
Moreover, giving bona fide gifts 181
continues to be excluded from conduct
178 See 31 U.S.C. 5313(a); 31 CFR 1010.330
(reports relating to currency in excess of $10,000
received by a trade or business).
179 Purchase, Webster’s Online Dictionary,
https://www.merriam-webster.com/dictionary/
purchase (last visited Mar. 4, 2024); Purchase,
Collins English Dictionary, https://
www.collinsdictionary.com/us/dictionary/english/
purchase (last visited Mar. 4, 2024) (‘‘to obtain for
money or by paying a price’’).
180 See Sale, Collins English Dictionary, https://
www.collinsdictionary.com/us/dictionary/english/
sale (last visited Mar. 4, 2024) (‘‘exchange of
property of any kind, or of services, for an agreed
sum of money or other valuable consideration’’);
Sale, Oxford English Dictionary, https://
www.oed.com/search/dictionary/?scope=Entries&
q=sale (last visited Mar. 4, 2024) (‘‘The action or an
act of selling or making over to another for a price;
the exchange of a commodity for money or other
valuable consideration.’’).
181 For the definition of ‘‘bona fide gift,’’ see
footnote 69, supra.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
presumed to be engaged in the business,
and evidence of such gifts can be used
to rebut the presumptions that a person
is engaged in the business. See
§ 478.13(e)(1), (f). Furthermore, the
Department agrees that it is more
consistent with the GCA to use the
phrase ‘‘disposing of a firearm’’ rather
than ‘‘providing a firearm,’’ in the
definition of ‘‘sale,’’ and that change has
accordingly been made.182
3. Definition of Engaged in the Business
Generally
Comments Received
Numerous commenters did not agree
with the Department’s assertion in the
proposed rule that a single firearms
transaction or no sale at all may require
a license. They believed that this runs
counter to statutory language that
emphasizes ‘‘regular’’ and ‘‘repetitive’’
manufacture and sale or purchase and
resale of firearms. Commenters stated
that ‘‘repetitive’’ cannot be proven by ‘‘a
single firearm transaction’’; that the
statute clearly requires a course of
conduct of purchasing and reselling
firearms repetitively. One commenter
stated that the required repetitive
purchase and resale of firearms means
that ‘‘[the] firearms must be purchased
‘and’ resold. If firearms are not
purchased with the intention of resale at
time of purchase, [they] fall[ ] under the
exception.’’ Otherwise, the commenter
argued, simple purchases and sales are
something any gun owner might do; that
is why Congress carefully chose the
word ‘‘resale’’—meaning ‘‘the act of
selling something again.’’ Along this
vein, at least one commenter suggested
that the Department amend all the
presumptions for engaged in the
business to use the word ‘‘resale’’ or
‘‘reselling’’ rather than ‘‘sale’’ or
‘‘selling’’ to be consistent with the
phrase ‘‘repetitive purchase and resale
of firearms’’ in the GCA definition of
dealer.
Another commenter also rejected the
Department’s position that ‘‘there is no
minimum number of transactions that
determines whether a person is ‘engaged
in the business’ of dealing in firearms,’’
and that ‘‘even a single firearm
transaction, or offer to engage in a
182 See 18 U.S.C. 922(a)(6) (prohibiting false
statements in connection with the ‘‘sale or other
disposition’’ of a firearm); id. 922(b)(2) (prohibiting
the sale or delivery of any firearm in violation of
any State law or published ordinance at the place
of ‘‘sale, delivery or other disposition’’); id.
923(g)(1)(A),(g)(2) (requiring licensees to maintain
records of ‘‘sale, or other disposition of firearms’’);
id. 923(g)(3)(A) (requiring licensees to prepare
reports of multiple ‘‘sales or other dispositions’’);
id. 923(j) (requiring that the gun show or event
location of the ‘‘sale or other disposition’’ of
firearms be entered in licensee records).
PO 00000
Frm 00054
Fmt 4701
Sfmt 4700
transaction [without any actual
transaction], when combined with other
evidence, may be sufficient to require a
license.’’ The organization identified six
indicators in the GCA that they argued
demonstrate that more is required,
including: (1) use of ‘‘firearms’’ in the
plural; (2) ‘‘regular course,’’
contemplating a series of events; (3)
‘‘repetitive,’’ meaning more than once;
(4) requiring actual ‘‘purchase and
resale,’’ which (5) provides a
contemporaneous conjunctive
requirement; and (6) exempting ‘‘sales,
exchanges, or purchases,’’ in the plural.
The commenter concluded that these
indicators require ATF to reverse its
position.
Another organization emphasized that
a person who makes occasional sales,
exchanges, or purchases for
enhancement of a personal collection or
for a hobby, or to sell all or part of their
personal firearms collection, is not
engaged in the business as a dealer even
if the person sells the firearms to
‘‘predominantly earn a profit.’’ ‘‘Profit
motive,’’ they stated, ‘‘is not relevant to
activities that fit within the carve-out
because it is an exception to the general
‘engaged in the business’ rule. This
construction of the statute is extremely
important because it covers common
behavior for law-abiding gun owners.’’
Some congressional commenters
focused specifically on the
presumptions in this light and stated
that ‘‘the civil and administrative
presumptions ignore the occasional
seller and hobbyist protections under
the law. . . . Occasional sellers may
keep firearms in their original packaging
or discuss the purchase and resale of
firearms with friends. Occasional
sellers—because they are occasional
sellers—may represent that they are able
to get firearms. And occasional sellers
may collect or even sell firearms of the
same make and model. The proposed
rule paints a broad brush to attempt to
regulate conduct that is protected under
the law for occasional sellers of
firearms.’’ An additional commenter
stated that the statute’s use of the plural
form of ‘‘occasional sales, exchanges, or
purchases’’ clearly indicates that
multiple sales, exchanges, or purchases
can be made by gun owners without
rising to the level of dealing.
Indeed, at least one commenter in
support of the presumptions suggested
that the rule could be clearer about what
constitutes an occasional sale. ‘‘[W]hile
it is not necessary for the final rule to
establish a numerical ceiling for what
constitutes ‘occasional’ sales or
exchanges under 18 U.S.C. 921(a)(21)(C)
(given the NPRM’s general preference
for a fact-specific inquiry),’’ they said, it
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
‘‘should at minimum clarify that
‘occasional’ sales conduct should not be
construed to include sales conduct that
is consistently ongoing or that is
regularly scheduled in a consistent or
periodic fashion.’’
One commenter stated that ATF has
created a nebulous moving target
without including a numerical
threshold to determine when one is a
dealer in firearms. Indeed, two
commenters otherwise in support of the
rule proposed adding a rebuttable
presumption that the sale or transfer of
five or fewer firearms is presumed to be
selling or transferring firearms
occasionally, whereas another
commenter suggested 8–10 firearm sales
as the appropriate number. One of the
commenters cited to similar provisions
in California (which the commenter
stated has five firearms per year as its
threshold) and other States to support
the proposition that it is possible to set
a number, while not necessarily
agreeing that five is the reasonable
threshold. These commenters stated that
by adding this threshold, the public and
law enforcement would have a clearer
idea of when one is subject to, or
exempt from, becoming licensed.
Similarly, another commenter suggested
a threshold number of five firearms per
month would be reasonable because the
vast majority of individual hobbyists
and collectors would not even approach
half of the limit. This commenter
specifically stated, ‘‘[t]his would leave
no room for guessing and would send a
strong message from the ATF that
persons who may touch the limit would
need to go ahead and obtain their FFL.’’
Another commenter suggested that,
rather than trying to define what
‘‘engaged in the business’’ means, it
would be better to explain how a citizen
may sell a firearm so as not to be
considered a firearms dealer needing a
license. Defining it from that direction,
they added, would make any conduct
outside that ‘‘non-dealer’’ definition
presumptively conduct that requires a
license.
An additional commenter suggested
that, to alleviate the ‘‘occasional seller
exemption’’ issue, ATF should treat the
presumptions as permissive inferences
in civil/administrative contexts as well
as in criminal ones. ‘‘This is a much
more lenient standard for those who
have not even repetitively sold or
purchased a firearm,’’ they stated,
because permissive inferences are not
mandatory, do not shift the burden of
proof, and do not require a specific
outcome. Similarly, a final commenter
suggested that the first EIB presumption
should instead be a permissive
inference (dealing in firearms when the
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
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). The commenter
stated that, as a mandatory
presumption, this presumption is too
inflexible to be fairly applied, even on
a case-by-case basis, but also that it does
not allow for the case-by-case analysis
the commenter said ATF purports to
want. There is a tension between the
presumptions that indicate a person is
‘‘engaged in the business,’’ the
commenter added, and the exclusion
from being engaged in the business for
those who make only occasional sales.
By its plain language, the commenter
continued, the presumption includes
anyone who intends to purchase or sell
any number of firearms, regardless of
whether they intend to do so for
pecuniary gain or to enhance or
liquidate a personal collection. ‘‘This
linguistic imprecision undercuts ATF’s
stated exemption of persons who only
make occasional purchases, sales, or
trades for the enhancement or
liquidation of a personal collection,’’
they concluded.
Department Response
The Department agrees with
commenters that the GCA’s definition of
‘‘engaged in the business’’ contemplates
a person’s devotion of time, attention,
and labor to a regular trade or business
of buying and selling more than one
firearm, but disagrees that the statute
requires any minimum number of
firearms to actually be sold to be
‘‘engaged in the business’’ under the
GCA, or that the EIB presumptions are
contrary to the statutory language.
While some commenters reference
particular words or phrases in the
statute, the statutory language must be
considered as a whole. To be ‘‘engaged
in the business’’ as a wholesale or retail
dealer under 18 U.S.C. 921(a)(11)(A), a
person must ‘‘devote[ ] 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.’’ 18 U.S.C. 921(a)(21)(C).
A person may ‘‘devote[ ] time,
attention, and labor to dealing in
firearms as a regular course of trade or
business,’’ for example, by spending
time, effort, and money each day
purchasing, storing, and securing
firearms inventory, and advertising or
displaying those firearms for sale. The
specific resale activities identified in
each presumption reflect this devotion
of time, attention, and labor to dealing
in firearms as well as the element of
intent. But it is only the intent element
PO 00000
Frm 00055
Fmt 4701
Sfmt 4700
29021
of the statute—to predominantly earn a
profit—that mentions ‘‘repetitive
purchase and resale of firearms.’’ There
is no statutory requirement that firearms
actually be sold; indeed, a dealer may
routinely (i.e., ‘‘regularly’’) devote time
and resources working toward that goal
as a course of trade or business, but
never find a buyer or consummate any
sales due to insufficient demand or poor
sales practices. This is because the
phrase ‘‘repetitive purchase and resale
of firearms’’ refers to the method, or
modus operandi, by which a person
intends to engage in the firearms
business.183 Thus, under the statutory
text and judicial interpretations of it, no
actual sales are required if the intent
element is met and the person’s conduct
demonstrates their devotion of time,
attention, and labor to dealing in
firearms as a regular course of trade or
business.184
Intent may be inferred from a person’s
words or conduct.185 Unlike a
183 See Palmieri, 21 F.3d at 1268 (‘‘Although the
definition [of engaged in the business] 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.’’ (footnote omitted)); Focia, 869 F.3d
at 1281–82 (‘‘[N]othing in the [FOPA] amendments
or the rest of the statutory language indicates that
a person violates § 922(a)(1)(A) only by selling
firearms as his primary means of income. And the
word ‘hobby’—which [defendant] suggests includes
the regular sale of guns for profit and financial gain,
so long as it is not the seller’s primary source of
income—simply cannot bear the weight that
[defendant] seeks to put on it. The exact percentage
of income obtained through the sales is not the test;
rather, we have recognized that the statute focuses
on the defendant’s motivation in engaging in the
sales.’’).
184 See, e.g., King, 735 F.3d at 1107 n.8
(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’’); Nadirashvili, 655 F.3d at 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
Carter, 801 F.2d at 81–82)).
185 See Agnew v. United States, 165 U.S. 36, 50
(1897) (referring to a ‘‘presumption that a person
intends the natural and probable consequences of
acts intentionally done, and that an unlawful act
implies an unlawful intent’’); cf. United States v.
Scrivner, 680 F.2d 1099, 1100 (5th Cir. 1982)
(‘‘[I]ntent may be inferred from words, acts, and
other objective facts.’’); United States v. Arnold, 543
F.2d 1224, 1225 (8th Cir. 1976) (‘‘The requisite
intent may be inferred from the acts of the
defendant.’’); United States v. Spinelli, 443 F.2d 2,
3 (9th Cir. 1971) (‘‘It is clear that the Government
need not adduce direct proof of intent. It may be
inferred from the defendant’s acts.’’); United States
v. Ledbetter, 432 F.2d 1223, 1225 (10th Cir. 1970)
(‘‘Intent may be inferred from the conduct of the
E:\FR\FM\19APR3.SGM
Continued
19APR3
29022
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
numerical threshold number of sales,
the rule’s EIB presumptions are all
activities, based on case law and ATF’s
experience, that are indicative of the
intent to earn a profit through the
repetitive purchase and resale of
firearms. With respect to the suggestion
that there should be a five-firearm sale
or transfer threshold for determining
whether a person is engaged in the
business, the Department’s approach
will allow it to more effectively enforce
the licensing requirement for
individuals who are engaged in the
business. For example, even before the
BSCA broadened the engaged in the
business definition, the Department
successfully prosecuted, and courts
routinely upheld, multiple criminal
cases in which the evidence presented
would not have met a five-sale
threshold, but other evidence made
clear the individual was engaged in the
business without a license.186
The terms ‘‘sale’’ and ‘‘resale’’ were
used interchangeably in the NPRM
because any sale after the firearm was
produced and previously sold is a
‘‘resale.’’ When speaking of a firearm
resale in the context of dealing, it is
generally understood that it includes
any sale of a firearm, including a stolen
firearm, any time after any prior sale has
occurred. Nonetheless, the Department
agrees with the commenters that this
was not explicitly stated in the NPRM,
that using the term ‘‘resale’’ more
consistently would be clearer, and that
the intent element of the statute
contemplates potential repetitive
‘‘resales’’ of firearms to be engaged in
the business. For these reasons, the
Department has revised the regulatory
text to change ‘‘sale’’ to ‘‘resale’’ in
various presumptions where that prefix
(‘‘re’’) was not already used, and defined
‘‘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 any wholesale or
retail sale of a firearm any time after it
was previously sold by anyone.
In response to comments, the
Department has also incorporated, as
examples of rebuttal evidence: bona fide
defendant and from circumstantial evidence which
furnishes a basis for a reasonable inference.’’).
186 See, e.g., Orum, 106 F. App’x 972 (sold three
guns on two occasions and testimony that
defendant frequented flea markets and gun shows
where he displayed and sold firearms); United
States v. Shah, 80 F. App’x 31, 32 (9th Cir. 2003)
(evidence of one sale and defendant’s ‘‘disposition
as a person ‘ready and able to procure’ additional
weapons’’); see also Hosford, 82 F. Supp. 3d 660
(five transactions).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
gifts, occasional sales to enhance a
personal collection, occasional sales to
a licensee or to a family member for
lawful purposes, liquidation of all or
part of a personal collection, and
liquidation of firearms that are
inherited, or liquidation conducted
pursuant to a court order. See
§ 478.13(e), (f). The Department has also
added language explicitly stating that,
similar to the way the presumptions
operate, these are not the only types of
evidence that could be presented to
rebut a claim of being engaged in the
business. See § 478.13(g). Additionally,
while the term ‘‘occasional’’ is not
defined in the regulatory text, the
Department agrees that the plain and
ordinary meaning of that term means
‘‘of irregular occurrence; happening
now and then; infrequent.’’ 187 The
Department also agrees that regular or
routine sales, exchanges, or purchases of
firearms (even on a part-time basis) for
the enhancement of a personal
collection or for a hobby would not fall
within the definition of ‘‘occasional.’’
The Department disagrees with the
suggestion to instead define how a
citizen may not be considered to be
engaged in the business. Because of the
myriad circumstances under which a
person may sell a firearm, it would be
difficult, if not impossible, for the
Department to outline all the
circumstances in which firearms might
lawfully be sold without a license.
However, the Department has set forth
in the final rule a non-exhaustive list of
conduct that does not support a
presumption and can be used as
evidence to rebut any of the narrowly
tailored presumptions indicating that a
person is engaged in the business of
dealing in firearms. See § 478.13(e), (f).
Finally, the Department disagrees
with the recommendation to change the
rebuttable presumptions to permissive
inferences in civil and administrative
proceedings to alleviate concerns by
occasional sellers of personal collection
firearms. The Department believes that
the use of rebuttable presumptions in
civil or administrative proceedings will
be much more effective at achieving
compliance with the GCA, as amended
by the BSCA, than voluntary permissive
inferences or the existing factor-based
approach to determining whether a
person is engaged in the business. ATF’s
2016 guidance, for example, outlined
the general factors and some examples
of being engaged in the business, but
compliance with that guidance
document was voluntary and it was not
published in the Federal Register for
broader distribution and attention by
187 See
PO 00000
footnotes 70, 123, supra.
Frm 00056
Fmt 4701
Sfmt 4700
the public.188 As such, it resulted in
only a brief increase in the number of
persons engaged in the business
becoming licensed dealers (around
567).189 The rule’s approach is
consistent with Congress’s purposes in
enacting the BSCA, which included,
among other things, addressing
significant non-compliance in the
firearms market with the engaged in the
business licensing requirements. See
Section II.D of this preamble. Using
rebuttable presumptions in this context
is also consistent with the use of
rebuttable presumptions in the GCA and
other ATF regulations. Indeed, the GCA
and implementing regulations already
incorporate rebuttable presumptions in
various other firearms-related
contexts.190
4. Definition of Engaged in the Business
as Applied to Auctioneers
Comments Received
Some commenters asserted that the
Department should reconsider or make
clearer the definition of ‘‘engaged in the
business’’ as a dealer in firearms as
applied to auctioneers. At least one
commenter disagreed with conditioning
an auctioneer’s need for a license on
whether that auctioneer takes
possession of the firearm prior to the
auction. The commenter stated that an
auctioneer may take a deceased person’s
firearms into possession prior to the
auction for purposes of safety and
security and indicated that this kind of
action does not make one a dealer.
Another commenter stated the
Department’s attempt to distinguish
between estate-type versus
consignment-type auctions generates
confusion because it seems that, under
the rule, whether an auctioneer must be
licensed depends on who owns the
firearm (i.e., an individual other than
the auctioneer, versus an estate). In
particular, the commenter stated that
ATF’s statement that an auctioneer
would not need a license if acting as an
agent of ‘‘the owner or executor of an
estate who is liquidating a personal
collection,’’ is inconsistent with other
statements in the NPRM, which suggest
that the exemption would apply only to
estate sales (e.g., ‘‘[t]he firearms are
within the estate’s control and the sales
made on the estate’s behalf’’). The
commenter stated that it is the method
or sale (consignment versus true
188 See ATF, Do I Need a License to Buy and Sell
Firearms? (Jan. 2016), https://www.govinfo.gov/
content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/
GOVPUB-J38-PURL-gpo125446.pdf.
189 Source: ATF, Federal Firearms Licensing
Center.
190 See footnote 65, supra.
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
auction) that determines if the
auctioneer exemption applies, not the
origin of the firearm (estate versus
personal collection). Separately, at least
one commenter believed that, because
auctioneers are exempt from the
requirement to have a license under the
rule, a family estate, or the heirs, would
have difficulty selling their collection
through an auction house in the future.
One organization, though not in
support of the rule overall, recognized
this portion as the Department’s attempt
to establish by regulation ATF’s
longstanding guidance for auctioneers.
The commenter suggested that the
Department further clarify how
‘‘engaged in the business’’ applies in
various auction contexts. For instance,
the commenter said it is not clear
whether auction companies, which are
commonly engaged by nonprofit
organizations, would need to be
licensed when assisting nonprofit
organizations with their auctions. The
commenter questioned whether an
auction company that does not take
possession of the firearms prior to the
auction, or consign the firearms for sale,
would be exempt from licensing
requirements even though the firearms
are not part of the nonprofit
organization’s ‘‘personal collection’’ as
defined by the proposed rule.
Separately, the same commenter asked
whether nonprofit organizations that
conduct auctions of donated firearms
would need to obtain a license or
whether their use of an FFL to facilitate
the auction is sufficient. If the nonprofit
itself must be an FFL, the commenter
asked if it could coordinate with other
FFLs out of State to facilitate auctions
outside of the State where the nonprofit
organization’s business premises is
located.
At least one commenter that
supported the proposed rule overall
urged the Department to provide further
guidance to auctioneers that, to the
extent an auctioneer operates in States
that require background checks on
private transactions, estate-type
auctioneers risk aiding and abetting
illegal transactions if they knowingly
facilitate sales of guns without
background checks. Further, the
commenter, while recognizing the
Department did not set any numerical
thresholds to determine when a person
is a dealer in firearms, suggested that it
would be appropriate in this context to
provide numerical thresholds because
estate-type auctions represent a source
of guns that can be purchased without
background checks. They recommended
that the Department clarify that if an
estate-type auctioneer facilitates an
individual auction involving more than
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
five guns or facilitates auctions
involving more than 25 guns in a oneyear period, then they must be a
licensed as an FFL or risk aiding and
abetting liability under Federal law.
Department Response
This rule merely establishes by
regulation ATF’s longstanding
understanding of the GCA’s
requirements with respect to
auctioneers and does not affect the
ability of persons to sell firearms
through auction houses. Estate-type
auctioneers are not required to be
licensed because they are not devoting
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. They are instead
providing services as an agent of the
owner on commission. These
auctioneers are not in the business of
dealing in firearms and do not
themselves purchase the firearms. The
auctioned firearms are within the
estate’s control and the sales are made
on the estate’s behalf. The rule uses the
term ‘‘estate-type’’ auction to indicate
that the firearms need not be part of a
decedent’s estate, but may instead have
been acquired through certain other
non-commercial means, such as a nonprofit organization receiving a donation
of firearms that the non-profit then
auctions through an estate-type
auctioneer who does not take ownership
of the firearms or accept the firearms for
resale on consignment. See § 478.13(a).
The Department agrees with the
comment that there may be personal
firearms that may be auctioned at an
estate-type auction that do not fall
within the rule’s definition of ‘‘personal
collection,’’ such as firearms that were
acquired by an individual for selfdefense. For this reason, the regulatory
text in 27 CFR 478.13(a) has been
revised to delete the reference to a
‘‘personal collection’’ when discussing
how the regulation applies to
auctioneers. The Department also agrees
with commenters’ concerns about
limiting the auctioneer exception where
the estate-type auctioneer takes
possession of firearms prior to the
auction for reasons other than
consignment (e.g., temporary safe
storage and return to the estate). The
main reason consignment-type auctions
require a dealer’s license is because the
auctioneer has been paid to take
firearms into a business inventory for
resale at auction in lots, or over a period
of time, i.e., consigned for sale. In a
‘‘consignment-type’’ auction, the
auctioneer generally inventories,
evaluates, and tags the firearms for
PO 00000
Frm 00057
Fmt 4701
Sfmt 4700
29023
identification, and has the legal
authority to determine how and when
they are to be sold. Consequently, the
auctioneer dealer exception has been
revised in § 478.13(a) so that it does not
apply where the firearms for sale have
been taken into possession on
consignment prior to the auction.
The Department agrees that
auctioneers must comply with Federal,
State, and local laws. The Department
therefore agrees with the comment that
estate-type auctioneers must abide by
State and local laws that require
background checks when the auctioneer
is assisting private parties in liquidating
inventories of firearms on their behalf.
However, no changes are being made as
a result of that comment because the
requirements imposed by State and
local jurisdictions to run background
checks do not determine whether a
person is ‘‘engaged in the business’’ as
a dealer under Federal law. Further,
with regard to those auctioneers who
obtain a license, the regulations already
provide that a license ‘‘confers no right
or privilege to conduct business or
activity contrary to State or other law.’’
See 27 CFR 478.58.
Finally, as stated previously, the
Department disagrees that there should
be a minimum threshold number of
firearms to be considered a dealer,
whether through an estate-type auction
or otherwise. Bona fide estate-type
auctioneers are assisting persons in
liquidating firearms inventories, not
firearms that were acquired for the
purpose of resale, and thus would not
incur aiding and abetting liability.
5. General Concerns on Presumptions
That a Person is Engaged in the
Business
a. Overbreadth and Lack of Foundation
Comments Received
A general sentiment from commenters
opposed to the proposed presumptions
is that they are overbroad, would
capture too many permissible sales by
collectors, and are not valid indicators
of unlawful activity or activity showing
the person is an unlicensed gun dealer.
The commenters opined that the
presumptions include common,
innocent behavior with firearms that
firearm owners engage in every day,
including the presumption, for example,
that arises from evidence of selling
firearms within 30 days after a purchase
or selling firearms that are new or likenew, have original packaging, or are of
the same or similar type of firearms. For
example, one commenter stated that the
presumptions would apply in a typical
situation where a person has improved
their financial situation and upgrades
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
29024
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
multiple of their firearms from entrylevel, inexpensive items to more
expensive items that have more features
or better reputation for reliability. This
commenter argued that such a person’s
conduct in upgrading their collection
would likely touch upon every single
presumption. Similarly, another
commenter explained how a person’s
conduct could fall within multiple
presumptions without that person
necessarily being engaged in the
business. For example, the commenter
said, a person purchases a 9mm firearm
to carry concealed, but then does not
like the recoil impulse and subsequently
sells it in like-new condition within 30
days and with the original box.
Subsequently, the commenter
continued, the person purchases a
second firearm and also does not like
how it operates for concealed carry. If
the person sells that second firearm in
like-new condition within 30 days with
the original box and it is a similar kind
to the previously purchased firearm,
then, the commenter concluded, that
person would have multiple criteria
factored against them as engaging in the
business even though the person is not
in fact engaging in the business of
dealing in firearms.
Further, commenters stated the rule
contradicts the scheme established by
Congress and the new presumptions
would apply to collectors in every
instance despite the statutory language
to specifically exempt from the
licensing requirement ‘‘occasional’’ gun
sales and gun sales from a ‘‘personal
collection.’’ The presumptions, they
stated, fail to recognize this exception.
Some congressional commenters
opposed to the rule stated: ‘‘We merely
struck the ‘livelihood’ language from the
statute. This was done to prevent
someone who should register as a
firearms dealer from evading licensing
requirements because he or she had
another job that supported his
livelihood. In other words, we wanted
to clarify that if a person has a job and
also operates a firearms business, he or
she must still register as a firearms
dealer. This was the law in many
different jurisdictions across the country
and consistent with the ATF’s
guidance. . . . In making this
incremental clarification, we left in
place all of the other language in the
statute that needs to be considered by
the ATF before deeming someone a
firearms dealer. . . . Nothing in the
presumptions take into account whether
the individual devotes time, attention,
and labor to dealing firearms. Similarly,
the presumptions do not factor in
whether the person repeatedly buys and
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
sells firearms as a regular course of trade
or business’’ (footnote omitted).
Additionally, some commenters
stated the proposed rule did not provide
sufficient foundation or actual evidence
for how any of the presumptions are
linked to or give rise to criminal
activity. Even though the Department
cited observations and criminal and
civil actions, one commenter stated
these conclusions are ‘‘based on a
censored sample’’ and are unreliable
because the rule overstates the probative
value of the behavior. The commenter
argued that ATF would need to survey
the likelihood that the circumstances
giving rise to the presumption are
present within the full class of persons
who purchase firearms.
Department Response
The Department disagrees that the
presumptions in the rule are overbroad
and would capture innocent persons
who only occasionally sell firearms
from their personal collection without a
license. The rebuttable presumptions
are narrowly tailored to specific conduct
that the Department has found through
its investigative and regulatory
enforcement experience, as well as
numerous post-FOPA court and
administrative decisions, to require a
license. And crucially, the
presumptions are rebuttable, so in the
event a civil or administrative
proceeding is brought, and a
presumption is raised, it can be rebutted
with reliable evidence to the contrary.
Rebuttable presumptions are just that;
they are not established fact, as some of
the commenters suggest. And as stated
previously, the presumptions shift only
the burden of production; they do not
change the burden of persuasion.
Moreover, consistent with the statutory
exclusions, the final rule expressly
provides that a person will not be
presumed to be engaged in the business
of dealing in firearms when reliable
evidence shows that the person is only
reselling or otherwise transferring
firearms: (a) as bona fide gifts; (b)
occasionally to obtain more valuable,
desirable, or useful firearms for the
person’s personal collection; (c)
occasionally to a licensee or to a family
member for lawful purposes; (d) to
liquidate (without restocking) all or part
of the person’s personal collection; or
(e) to liquidate firearms that are
inherited, or pursuant to a court order.
See § 478.13(e). Evidence of these
situations may be used to rebut any
presumption in the rule, and the
Department has clarified that this is not
an exhaustive list. See § 478.13(f), (g).
The Department is therefore providing
objectively reasonable standards for
PO 00000
Frm 00058
Fmt 4701
Sfmt 4700
when a person is presumed to be
‘‘engaged in the business’’ to strike an
appropriate balance that captures
persons who should be licensed because
they are engaged in the business of
dealing in firearms, without limiting or
regulating occasional sales by personal
collectors and hobbyists.
The Department disagrees that the
proposed rule did not provide sufficient
foundation or evidence for how the
presumptions are linked to or give rise
to criminal activity. First, the
presumptions in the rule are based on
decades of pre-BSCA criminal case law
that continues to be applicable, and the
proposed rule cites numerous ATF
criminal cases brought against persons
who engaged in the business without a
license based on evidence cited in each
presumption. The presumptions are also
based on ATF’s significant regulatory
enforcement experience,191 including
tens of thousands of compliance
inspections of licensed FFLs in the last
decade. ATF also reviewed summary
information on criminal cases from
Fiscal Year 2018 to Fiscal Year 2023
that it investigated, or is currently
investigating, involving violations of 18
U.S.C. 922(a)(1)(A) and 923(a), to assess
the extent to which the presumptions
were consistent with conduct engaged
in by persons who are unlawfully
dealing in firearms without a license.
Hundreds of cases described conduct
that would fall under one or more of the
EIB or PEP presumptions. Each of the
presumptions was supported by the
conduct described in these cases, except
one. ATF did not find a case that
included conduct that would fall under
the PEP presumption on business
insurance. The Department has
therefore removed that presumption in
this final rule. See § 478.13(d).
The Department disagrees with some
commenters that the EIB presumptions
do not indicate that a person devotes
time, attention, and labor to dealing
firearms. Each presumption requires
conduct that demonstrates the devotion
191 To further confirm that the proposed PEP
presumptions were grounded in the behaviors of
licensees who are engaged in the business or
applicants seeking to become licensed, ATF
surveyed Industry Operations Investigators (‘‘IOIs’’)
on their observations of active licensees and
applicants during compliance and qualification
inspections, respectively, regarding conduct that is
described under the PEP presumptions. All PEP
conduct had been observed by IOIs based on their
experience inspecting various sizes and types of
firearms businesses or applicants seeking to become
licensed, except for the eighth PEP presumption
(business insurance). For the eighth PEP
presumption, IOIs indicated that, based on their
experience of interacting with existing FFLs and
FFL applicants who operate out of a residence,
these types of businesses did not have or plan to
have a business insurance policy that covered
firearms inventory.
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
of time, attention, and labor to dealing
in firearms through specific purchase
and sale activities. For example, a
person who purchases and resells
firearms, and then offers to purchase
more firearms for resale to the same
person, has devoted time, attention, and
labor to dealing in firearms as a regular
course of business. The seller has
expended time, effort, and money to
locate and purchase firearms and locate
interested customers, then offered to
buy and sell more firearms to customers.
The statutory definition of ‘‘engaged in
the business’’ does not require a seller
to have repeatedly purchased and resold
firearms; rather, it is the person’s intent
to predominantly earn a profit through
repetitive purchases and resales that
must be proven. Each EIB presumption
involves activities that tend to show this
predominant profitmaking intent.
khammond on DSKJM1Z7X2PROD with RULES3
b. Enforcement of Presumptions
Comments Received
Several commenters stated that the
proposed rule did not make clear to
whom it would apply or how ATF or
other law enforcement entities should
consider the presumptions or criteria in
an enforcement context. Commenters
stated the rule needs to make clear what
sales relating to personal collections or
hobby are allowed without a license, so
the public knows ahead of time if what
they are doing requires a license. One
commenter stated that there are no safe
harbors in the rule that could encourage
lawful and responsible behavior. The
commenter suggested that it would be
simpler to include a presumption that
‘‘[a]ny seller of a firearm who first
transfers that firearm to a licensee
should be presumed not to be a dealer
in firearms regardless of all other
indicia.’’ According to the commenter,
transferring a firearm to a licensee first
shows that the seller cares about
creating a record of the sale more than
simply maximizing profit, and so such
sellers should not be considered dealers.
Further, this suggested presumption
would encourage the conduct of private
transactions through FFLs and
accomplish the statutory objectives and
the Department’s and ATF’s policy
goals. However, the commenter added
that this suggested presumption should
not be used to imply that a sale that
does not occur through an FFL is
automatically an unlawful transaction.
Another commenter similarly suggested
that ATF’s chief concern with creating
these presumptions is to keep people
from avoiding background checks. As a
result, they said, ATF should exclude
from the presumptions all sales in
which background checks are
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
conducted, including sales to a current
FFL, private sales facilitated through a
current FFL, and sales of NFA
firearms.192
Another commenter, who supported
the rule, suggested that absent guidance
from the Department about how the
‘‘criteria’’ would be weighted, an
atmosphere of ambiguity and
uncertainty exists for persons who sell
or transfer firearms at gun shows,
online, or through other means without
an FFL, as well as for law enforcement
and regulatory agencies enforcing the
rule. The commenter suggested adding
language to state that while no single
factor is determinative, the Department
will assign different weights to each
factor depending on the context and
circumstances of each case. For
example, the commenter suggested that
if a person rented a table at a gun show,
the Department would consider the
person to be engaged in the business if
the person has displayed signs or
banners with a business name or logo,
offered warranties or guarantees for the
firearms sold, or transferred firearms to
residents of another State. Likewise, if
the transaction occurs online, the
commenter suggested the Department
make clear in the rule that it will
consider if the person created a website
with a domain name that indicates a
business activity, posted advertisements
on online platforms that cater to firearm
buyers and sellers, accepted payments
through online services that charge fees
for transactions, and whether the person
has shipped firearms to persons who are
residents of another State through
online sales or transfers.
Another suggestion was that ‘‘ATF
should consider clarifying that the
initial burden of producing evidence to
establish an ‘engaged in the business’
presumption in a civil or administrative
proceeding falls on the government.’’
They further suggested the rule should
also state that, after a determination that
the initial evidentiary burden for a
presumption has been met, the burden
of producing reliable rebuttal evidence
shifts to the other party, and if the other
party fails to produce sufficient reliable
rebuttal evidence, the presumption will
stand. They also suggested that the final
rule should clarify whether the
examples of conduct in paragraph (c)(4)
(now § 478.13(e) and (f)) of the NPRM’s
definition of ‘‘engaged in the
business’’—that is not presumed to be
‘‘engaged in the business’’—are
intended to serve as rebuttable
presumptions or as rebuttal evidence.
‘‘It appears,’’ the commenter said, ‘‘from
their placement outside of (c)(3) that the
192 See
PO 00000
footnote 78.
Frm 00059
Fmt 4701
Sfmt 4700
29025
(c)(4) examples are not designed to be
rebuttable presumptions, but the final
rule would benefit from clarifying how
those examples are to be raised and
applied in proceedings.’’
Department Response
The Department disagrees that the
rule does not make clear to whom it
would apply. The rule implements the
provisions of the BSCA that amended
the definition of ‘‘engaged in the
business’’ in the GCA as it applies to
wholesale and retail dealers of firearms.
Thus, the rule is applicable to any
person who intends to ‘‘engage in the
business’’ of dealing in firearms at
wholesale or retail, as the rule further
defines that term. Such persons must
become licensed and abide by the
applicable requirements imposed on
licensees under the GCA and 27 CFR
part 478. And the rule further explains
that the rebuttable presumptions are
applicable in civil and administrative
proceedings (e.g., license issuance and
asset forfeiture), not in criminal
proceedings, though courts in criminal
cases may choose to use them as
permissive inferences. See § 478.13(c),
(h). The Department will exercise its
discretion to utilize the presumptions
set forth in the rule in civil and
administrative cases and may
recommend their use as permissive
inferences in criminal proceedings,
when appropriate.
The Department disagrees that the
rule does not make clear what sales
relating to personal collections or
hobbies are allowed without a license.
The proposed rule explicitly recognized
the GCA’s ‘‘safe harbor’’ provision that
a person is not engaged in the business
if the person makes occasional sales,
exchanges, or purchases of firearms for
the enhancement of a personal
collection or for a hobby. 88 FR 61994,
62001–02. It also stated that a person
would not be presumed to be engaged
in the business if the person transfers
firearms only as bona fide gifts. Id.
Transfers of firearms for these reasons
do not support a presumption that a
person is ‘‘engag[ing] in the business,’’
and reliable evidence of these purposes
may also be used to rebut any
presumption and show that a person is
not engaged in the business under the
statute. See § 478.13(e), (f). The final
rule also specifies that a person shall
not be presumed to be engaging in the
business when reliable evidence shows
that the person is transferring firearms
only to liquidate all or part of a personal
collection of firearms. See id. In
addition, the term ‘‘personal collection’’
is defined consistently with dictionary
definitions to include firearms acquired
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
29026
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
‘‘for a hobby,’’ and explains the
circumstances under which firearms
transferred to a personal collection by a
former licensee prior to license
termination may be sold or otherwise
disposed.
Nonetheless, to further allay the
concerns of commenters who sought
further clarification of the ‘‘safe
harbors,’’ the Department is adding to
this rule a list of conduct that does not
support a presumption, as previously
stated. See § 478.13(e). Reliable
evidence of such conduct may also be
used to rebut the presumptions. See
§ 478.13(f). The Department has also
stated in the rule that the list of rebuttal
evidence is not exhaustive. See
§ 478.13(g). Additionally, while the
Department disagrees with the
commenter that the regulatory text in
the final rule needs to explain how the
rebuttable presumptions shift the
burden of production, the Department
agrees with the commenter as to how
they are to be applied. As an initial
matter, a person will not be presumed
to be engaged in the business of dealing
in firearms when reliable evidence
shows that the person only sells or
transfers firearms for one of the reasons
listed in § 478.13(e). Determining
whether a presumption applies is a factspecific assessment, as is determining
whether a person is engaging in conduct
that does not support a presumption,
such as buying or selling firearms to
enhance or liquidate a personal
collection. For example, unlicensed
individuals selling firearms at a gun
show or using an online platform cannot
merely display a sign or assert in their
advertisement that the firearms offered
for sale are from a ‘‘personal collection’’
and preclude application of a
presumption. Instead, whether a
presumption would apply requires an
assessment of the totality of the
circumstances, including an evaluation
of the reliability of any such assertion
regarding a ‘‘personal collection.’’
Once a proceeding is initiated, the
burden of persuasion never shifts from
the Government or plaintiff. If evidence
sufficient to support a presumption is
produced in a civil or administrative
proceeding, the responding person has
the opportunity to produce reliable
rebuttal evidence to refute that
presumption. If the responding person
produces such reliable evidence,
additional evidence may be offered by
the Government or plaintiff to further
establish that the person has engaged in
the business of dealing in firearms, or
had the intent to predominantly earn a
profit through the repetitive purchase
and resale of firearms, depending on
which set of presumptions is applied. If
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
the responding person fails to produce
evidence to rebut a presumption,
however, the finder of fact would
presume that the person was ‘‘engaged
in the business’’ of dealing in firearms,
or had a predominant intent to earn a
profit from the repetitive sale or
disposition of firearms, as the case may
be.
The Department agrees that a person
should be able to rebut a presumption
that they are engaged in the business of
dealing in firearms requiring a license if
the sales are occasionally only to an FFL
or to a family member for lawful
purposes. A person who only
occasionally sells a firearm to a licensee
is not likely to have a predominant
intent to earn a profit because a licensee
typically will offer less than a nonlicensee for the firearm given the
licensee’s intent to earn a profit through
resale.193 The same reasoning applies to
family members because the seller is
less likely to have a predominant intent
to earn a profit due to their pre-existing
close personal relationship (i.e., a less
than arms-length transaction). For this
reason, the occasional sale of firearms to
a licensee or to a family member for
lawful purposes has been added to the
non-exhaustive list of examples of
evidence that may rebut any
presumption. § 478.13(e)(3), (f).
However, the Department is not
excluding from the presumptions a
person who engages in private sales that
are facilitated by a licensee. Even
though such sales are certainly
allowed,194 a private seller likely
193 See Enlisted Auctions, How Do I Sell My
Firearms?, https://www.enlistedauctions.com/
resources/how-do-i-sell-my-firearms (last visited
Mar. 6, 2024) (‘‘You can take your firearm to a local
gun shop. Typically gun shops will buy your
firearm from you at a lower price and then try to
resell the firearm at a profit. Pros to this method are
that you can take the firearm to the store, drop it
off, receive your payment and you are done.
Downside is that you do not typically receive
market value for your firearm. Think of it as trading
in a vehicle. When you trade in your car at a
dealership, the dealer never pays you what the car
is worth on the open market.’’); Dunlap Gun Buyers,
How to Sell a Gun in Maryland: A Comprehensive
Guide (Sept. 8, 2023), https://
www.cashmyguns.com/blog/how-to-sell-a-gun-inmaryland (‘‘Gun owners can sell their firearm to a
local dealer. This is a good way to help ensure gun
owners are complying with gun laws in Maryland
for firearm sales. However, sellers may be leaving
money on the table by selling for much less than
the gun’s actual market value.’’).
194 See ATF, Facilitating Private Sales: A Federal
Firearms Licensee Guide, https://www.atf.gov/
firearms/docs/guide/facilitating-private-salesfederal-firearms-licensee-guide/download (last
visited Mar. 6, 2024); ATF Proc. 2020–2,
Recordkeeping and Background Check Procedure
for Facilitation of Private Party Firearms Transfers
(Sept. 2, 2020), https://www.atf.gov/rules-andregulations/docs/ruling/atf-proc-2020-2%E2%80%93-recordkeeping-and-backgroundcheck-procedure/download.
PO 00000
Frm 00060
Fmt 4701
Sfmt 4700
intends to predominantly earn a profit
from those arms-length sales even if the
licensee requires a fee for the service of
running a background check.
The Department disagrees with the
comment that the rebuttable
presumptions in the rule should be
considered only as criteria that should
be weighted and not as rebuttable
presumptions. Of course, in the final
determination of whether someone is
‘‘engaged in the business,’’ all the
evidence, for and against, will be
weighed by the fact finder. But that does
not preclude the use of reasonable and
supported rebuttable presumptions as
part of that process. In that vein, to best
clarify who is presumptively required to
be licensed as a dealer, the rule
identifies specific conduct that will be
presumed to be ‘‘engaging in the
business’’ with the intent to
‘‘predominantly earn a profit.’’ The
presumptions are not factors; nor are
they weighted according to the various
circumstances described in each
presumption because any one of them is
sufficient to raise the presumption, and
any may be rebutted by reliable
evidence to the contrary.
c. Exemption From Presumptions
Comments Received
At least one commenter in support of
the proposed rule raised concerns about
the exception from the presumptions
where a person ‘‘would not be
presumed to be engaged in the business
requiring a license as a dealer when the
person transfers firearms only as bona
fide gifts or occasionally 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.’’ 195
The commenter stated that, although a
bona fide gift should suffice to rebut a
presumption, the exclusion of these
types of situations ‘‘risks creating a
significant loophole whereby firearms
traffickers could shift the burden of
proof simply by claiming that any
suspicious transaction was a gift.’’ The
commenters cited United States v.
Gearheart, No. 23–cr–00013, 2023 WL
5925541, at *2 n.3 (W.D. Va. Sept. 12,
2023) as an example of when a straw
purchaser initially told investigators
that she bought the gun as a gift.
By contrast, another commenter not in
support of the rule stated that ‘‘Congress
affirmatively exempted from licensure
all sales to expand or liquidate a private
collection and occasional transactions—
even with some profit motive—to
195 88
E:\FR\FM\19APR3.SGM
FR 62001–02.
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
enhance a collection or for a hobby. But
ATF now seeks to presume the opposite
for a wide array of transactions.’’
khammond on DSKJM1Z7X2PROD with RULES3
Department Response
The Department disagrees that the
bona fide gift exception is a ‘‘loophole’’
for multiple reasons. First, transferring a
firearm as a bona fide gift to another
person is not a ‘‘sale’’ because there is
no ‘‘exchange’’ or payment of money,
goods, or services for the firearm.
Second, a person who is not otherwise
engaged in the business as a dealer and
truly intends to give a firearm as a gift
does not ordinarily devote time,
attention, and labor to firearms dealing
as a trade or business or show the
predominant intent to earn a profit
through the repetitive purchase and
resale of firearms. The Gearhart case
cited by one of the commenters is not
a case of dealing in firearms without a
license; rather, it is a case where a
person aided and abetted a straw
purchaser to buy a firearm for himself—
the actual buyer—not for resale to
others. Third, as in all fact-based
proceedings, a party must establish
through evidence that a claim of fact is
reliable in order to use that fact in their
favor. That determination is made by
the finder of fact, not the proponent of
the argument. Fourth, to the extent that
gifts are mutually exchanged between
both parties, as the commenter
recognizes, the transfer of bona fide gifts
is evidence that can be used to rebut any
presumption. Once the Government
proves an exchange, or offer to
exchange, firearms for something of
value, the responding party may submit
evidence to show that the firearms were
transferred only as bona fide gifts.
The Department disagrees with the
commenter that this rule causes all
firearms transactions to be deemed
engaged in the business of dealing in
firearms, but agrees that the rule should
make clear that an occasional sale only
to obtain more valuable, desirable, or
useful firearms for a personal collection
or hobby, or liquidation of all or part of
a personal collection, should not be
presumed to be engaging in the
business. Based on the Department’s
agreement with this comment, the final
rule adds this activity to the list of
conduct that does not support a
presumption and as evidence that can
rebut any presumption should a
proceeding be initiated. See
§ 478.13(e)(2) and (4), (f). However, as
explained previously, the term
‘‘liquidation’’ is inconsistent with a
person acquiring additional firearms for
their inventory (i.e., ‘‘restocking’’), and
that has been made clear in a
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
parenthetical in the regulatory text. See
§ 478.13(e)(4).
d. Use of Presumptions in Particular
Proceedings
Comments Received
Several commenters expressed
concerns about the application of the
presumptions in criminal contexts or in
administrative or civil contexts. More
than one commenter expressed that
there was confusion as to whether ATF
will use the presumptions (either the
engaged in the business presumptions
or the intent to predominantly earn a
profit presumptions) in criminal
proceedings. One of the commenters
raised concerns about when and how
ATF will use the presumptions in
administrative or civil proceedings. The
commenter stated that much of ATF’s
administrative jurisdiction is over
existing FFLs, which are already
engaged in the business and thus not
affected by the rule. The commenter
then asked whether ATF intends to
apply the presumptions to ‘‘FFLs who
transfer firearms for unlicensed
individuals that ATF believes are
‘engaged in the business?’ ’’ They
expressed concerns that this would
mean holding FFLs responsible for
whether their customers are unlawfully
engaging in the business ‘‘under the
nebulous standards of the proposed
rule,’’ which would make it too risky for
any FFL to ever facilitate a third-party
transfer. The commenter suggested that
the only other possibility was to use the
presumptions in forfeiture actions, but
these were substantially restricted as
part of FOPA and were not amended as
part of the BSCA.
Department Response
The Department acknowledges
commenters’ confusion about the
application of the presumptions to
criminal, civil, and administrative
proceedings. This final rule makes clear
that the rebuttable presumptions are to
be used by persons potentially subject to
the licensing requirement to consider
whether they must obtain a license, as
well as in civil and administrative
proceedings, but they do not apply to
criminal proceedings. Civil and
administrative proceedings include, for
example, civil asset forfeiture and
administrative licensing proceedings.196
However, as discussed in Section
IV.B.9.b of this preamble, this final rule
indicates that a court in a criminal case,
in its discretion may, for example, elect
to use the presumptions as permissive
inferences in jury instructions.197
196 See
197 See
PO 00000
footnote 85, supra.
footnote 66, supra.
Frm 00061
Fmt 4701
Sfmt 4700
29027
Criminal investigations, prior to formal
charging, are covered by separate
policies, rules, and legal limitations,
and are not within the scope of this rule.
The final rule does not suggest the
presumptions be used in criminal
proceedings to shift the Government’s
burden of proof to the defendant. In
criminal proceedings, the Due Process
Clause prohibits the prosecution from
using evidentiary presumptions in a
jury charge that have the effect of
relieving the prosecution of its burden
of proving every element of an offense
beyond a reasonable doubt.198 This rule
does no such thing.
Regarding civil or administrative
proceedings involving existing
licensees, the Department disagrees that
the standards in the rule are
‘‘nebulous.’’ The presumptions identify
specific conduct that is presumed to be
engaging in the business, and the
presumptions are to be applied in all
civil and administrative proceedings
where there is evidence of such specific
conduct. Indeed, licensees have long
been prohibited by the GCA from
willfully assisting persons they know
are engaged in the business of dealing
in firearms without a license. See 18
U.S.C. 2; 922(a)(1)(A). Moreover, the
BSCA’s amendment at 18 U.S.C.
922(d)(10) now prohibits licensees or
any other person from selling or
otherwise disposing of a firearm to a
person knowing or having reasonable
cause to believe that such person
intends to sell or otherwise dispose of
the firearm in furtherance of a Federal
or State felony, including 18 U.S.C.
922(a)(1). These violations of the GCA
may be brought against a licensee, or the
licensee’s firearms, in a civil forfeiture
or administrative licensing proceeding.
For example, if a licensed dealer sold
firearms to a known member of a violent
gang who the dealer knew was
repetitively selling the firearms within
30 days from purchase to other gang
members, the dealer’s license could be
revoked under 18 U.S.C. 923(d)(1)(C) for
willfully aiding and abetting a violation
of section 922(a)(1)(A), and potentially
for willfully violating section
922(d)(10). Under these circumstances,
the gang member would be presumed to
be engaged in the business, and
evidence of the gang member’s
repetitive sales could be put forward in
the administrative action to revoke the
dealer’s license.
However, for the Government to take
administrative action on that basis
against an existing licensee, or a license
applicant, it would still need to prove
the person committed the conduct
198 See
E:\FR\FM\19APR3.SGM
Francis, 471 U.S. at 313.
19APR3
29028
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
willfully. See 18 U.S.C. 922(a)(1)(A),
923(d)(1)(C), 923(e). Even if a
presumption applied in a given case
against a licensee, the Government
would still have to prove that a licensee
facilitating a private sale knew of an
unlicensed dealer’s purchase and resale
activities without a license, and either
purposefully disregarded the unlicensed
dealer’s lack of a license or was plainly
indifferent to it. Thus, a licensed dealer
who inadvertently facilitates occasional
private sales for an unlicensed person
whom the licensee does not know is
engaged in the business, and who is not
plainly indifferent to the seller’s need
for a license, would not be liable for the
private seller’s misconduct.
khammond on DSKJM1Z7X2PROD with RULES3
6. EIB Presumption—Willingness and
Ability To Purchase and Sell More
Firearms
Comments Received
Generally, commenters opposing this
EIB presumption stated it was too broad
and provided several examples of
typical conduct that would be captured
under the presumption requiring a
person to obtain an FFL. Gun collectors’
associations stated that most people
who collect firearms or engage in the
sale of firearms for a hobby are willing
to buy or willing to sell. A commenter
provided additional examples in which
the commenter stated that ATF could
presume a person is unlawfully engaged
in the business, such as a person
downsizing a personal collection by a
single firearm while expressing a desire
to continue downsizing, selling one
firearm while offering to buy another, or
trading one firearm for another in
someone else’s collection. Likewise,
some commenters believed that any gun
owner who discusses sales of firearms
with friends or relatives or who makes
repetitive offers to sell a firearm in order
to secure a reasonable price will need to
be licensed because of the first
presumption.
Specifically, some commenters argued
that this presumption would capture
and penalize sellers who make
statements as a part of normal
interactions, such as ‘‘I need money to
settle my divorce. That’s why I’m selling
this Colt 1911. If you like this one, I also
have another with a consecutive serial
number. Yeah, I’m losing money on
them, but I need the cash.’’ This type of
statement or innocuous statements such
as, ‘‘[M]y wife makes me sell a gun to
buy a new one, so I’m always buying
and selling guns’’ are being wrongfully
equated to criminal actors who may say
to an undercover officer, ‘‘I can get you
whatever you want’’ or that he can ‘‘get
plenty more of these guns’’ and ‘‘in a
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
hurry’’ for the right amount of money.
Commenters indicated that a huge
difference between these two scenarios
is the totality of the circumstances. The
rule, they argued, is incorrectly crafted
to avoid the need for any totality of the
circumstances analysis, so that only one
firearm, one presumptive circumstance,
or ‘‘possibly one overriding
circumstance’’ is necessary, coupled
with the subjective assessment of an
agent.
Another commenter suggested that
ATF could amend the presumption to
correct the issue. ‘‘Presently,’’ the
commenter said, ‘‘the language is too
broad to function as a rebuttable
presumption because its plain language
meaning places it in conflict with the
presumption that an occasional seller is
not ‘engaged in the business.’ If ATF
amended this presumption to include a
frequency element, it would rectify this
issue.’’ (emphasis added by commenter).
The commenter suggested one option
could be, ‘‘[a] person will be presumed
to be engaged in the business of dealing
in firearms when the person, on a
recurring basis, sells or offers for sale
firearms, and also represents to
potential buyers a willingness and
ability to purchase and sell additional
firearms, or otherwise demonstrates the
person’s willingness and ability to act as
a dealer in firearms on a recurring
basis,’’ and added that this alternative
would add the necessary frequency
element and also correct a disjunctive
‘‘or’’ included in the original to make
the presumption clearer.
Department Response
The Department disagrees with the
comments that the first EIB presumption
is too broad, or that collectors or
hobbyists will be unable to maintain or
downsize their personal collections
without a license under the first EIB
presumption in the rule. A person who
makes repetitive offers to sell firearms to
downsize or liquidate a personal
collection does not fall within the
presumption, which requires not only
that the person sell or offer for sale
firearms, but also demonstrate a
willingness and ability to purchase and
resell additional firearms that were not
already part of their personal collection.
This conduct is sometimes referred to as
‘‘restocking.’’ 199 Nonetheless, to make
199 See Restock, Cambridge Online Dictionary,
https://dictionary.cambridge.org/us/dictionary/
english/restock (last visited Mar. 7, 2024) (‘‘to
replace goods that have been sold or used with a
new supply of them’’); Restock, The Britannica
Online Dictionary, https://www.britannica.com/
dictionary/restock (last visited Mar. 7, 2024) (‘‘to
provide a new supply of something to replace what
has been used, sold, taken, etc.’’).
PO 00000
Frm 00062
Fmt 4701
Sfmt 4700
this point clear, the following
parenthetical has been added in the first
EIB presumption: ‘‘(i.e., to be a source
of additional firearms for resale).’’
§ 478.13(c)(1). This presumption, like
the others, may be rebutted with reliable
evidence to the contrary in any
proceeding.
The Department disagrees that the
first presumption is too broad to
function as a presumption without a
time limitation because it conflicts with
the statutory exception for occasional
sales to enhance a personal collection.
Persons who resell (or offer for resale)
firearms and hold themselves out to
potential buyers or otherwise
demonstrate a willingness and ability to
purchase and resell additional firearms
for resale are engaged in the business,
according to well-established case law.
For example, in Carter, 801 F.2d at 82,
the Second Circuit found there was
sufficient evidence that the defendant
engaged in the business in violation of
18 U.S.C. 922(a)(1) even though he
made only two sales four months apart.
The Court explained that, ‘‘[a]lthough
the terms ‘engage in the business of’ and
‘dealing in’ imply that ordinarily there
must be proof of more than an isolated
transaction in order to establish a
violation of this section . . . [the]
defendant’s conduct was within the
intended scope of the statute’’ because
‘‘the statute reaches those who hold
themselves out as a source of
firearms.’’ 200 There is no need for a time
limitation because such persons are
holding themselves out as a source of
additional firearms for resale, thereby
demonstrating a present intent to engage
in repetitive purchases and resales for
profit. This presumption merely shifts
the burden of production to the
responding person to show that those
resales occurred only occasionally to
enhance a personal collection, liquidate
inherited firearms, or were otherwise
not sold to engage in the business as a
dealer.
7. EIB Presumption—Spending More
Money on Firearms Than Reported
Income
Comments Received
Numerous commenters stated that
this presumption is broad and unclear.
A couple of commenters questioned the
meaning of ‘‘applicable period of time’’
in this presumption, with one
commenter claiming that the
presumption would ‘‘assume the
majority of purchasers of high end
collectible firearms [are] ‘engaged in the
business’ off of merely the fact [that]
200 801 F.2d at 81, 82 (internal quotation marks
omitted); see also footnote 68, supra.
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
they purchased a gun more expensive
than their income for some period.’’
Other commenters also stated there are
many ways people might not have
reportable gross income. For example,
adult children may not have any gross
taxable income, so buying and selling
even two firearms in a year could trigger
the presumption. Similarly, commenters
noted that retired collectors with little
or no reportable gross income compared
to their assets could be at significant
risk of being considered dealers without
even offering a gun for sale or for
spending as little as $200 to advertise
the sale of a firearm on GunBroker.com
or in a similar publication.
Another commenter provided specific
examples of how law-abiding gun
owners who should not be considered
dealers could easily be dealers under
this presumption. For instance, a
California peace officer, who suffers
career-ending injuries and goes through
the appropriate process, would be
eligible for ongoing disability payments
of 50 percent of base pay, none of which
is taxable. Under this pattern of facts,
the commenter argued, a law-abiding
gun owner with such a disability award
and no other income could be presumed
to be a dealer if they sold only one
firearm of any value. The commenter
asserted that many military members are
in a similar situation where they may
receive disability pay that is not taxable.
In all these cases, these people might
need post-separation income or to buy
and sell firearms without ever desiring
to be dealers or making a profit on the
sales, but they run the risk of being
presumed to be dealers based on this
second presumption. An additional
commenter similarly stated the
‘‘provision that a person who spends
more money than their reported gross
taxable income on purchasing firearms
for resale, has no basis what-so-ever in
‘profit.’ Profit is based on a sum in
excess of all costs. Not gross income.
Further, many retired people have a
small gross taxable income compared to
their assets.’’
One commenter claimed that assorted
welfare benefits are excluded from gross
income and that, to the extent that those
benefits ‘‘benefit disproportionately
persons based on race or other
classification,’’ the second presumption
is constitutionally suspect. The
commenter said that ATF needs to
justify the use of gross income in this
presumption, which could have a
disproportionate impact on persons on
the basis of race. Similarly, at least one
commenter in support of the proposed
rule also suggested that this
presumption could potentially create an
‘‘unreliable’’ standard, whereby high-
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
income dealers could sell large amounts
of firearms without ever being subject to
the presumption, while a single sale
could be enough to subject a person
with low or fixed income to the
presumption of unlawful dealing. The
commenter advised that for this specific
presumption, the Department adopt a
numerical threshold of ten gun sales per
year, which would make applying this
presumption easier for courts and law
enforcement while avoiding the
inequities of ATF’s income-based
approach.
Department Response
In proposing this presumption, the
Department noted that the likely
intention of a person who expends more
funds on the purchase of firearms in an
‘‘applicable period of time’’ than the
total amount of their reported gross
income for that period would be to
resell the firearms for a profit. As noted
by several commenters, however, there
are several situations in which
individuals with income that is not
reportable as gross taxable income—
such as those receiving disability or
welfare benefits, retired firearm
collectors, retirees drawing on Roth
IRAs, and young adult children—could
expend that non-reportable income at
levels in excess of their gross reported
income to purchase firearms, yet not
intend to resell those firearms for a
profit. Application of a gross income
presumption to such individuals,
commentors argued, would unfairly
require them to disprove that they were
engaged in the business when they
purchased a firearm or firearms. While
such circumstances would seem to be
unlikely, the Department acknowledges
they could occur. The Department
similarly acknowledges that
commenters’ observations regarding the
potential disparate effect of a gross
income-based presumption on lowincome individuals, while also unlikely,
may occur. In light of these
considerations, the Department has
decided not to include a gross incomebased presumption in this final rule and
has removed it from the final rule.
Although the Department has
determined not to include a gross
income-based presumption in this final
rule, the Department notes that evidence
of expenditures for the purchase of
firearms in excess of an individual’s
reported gross income may nevertheless
be relevant to the factual assessment as
to whether an individual is engaged in
the business. As amended by BSCA, the
relevant assessment under the GCA is
whether a person’s intent in engaging in
firearms sales is predominantly one of
obtaining pecuniary gain; the financial
PO 00000
Frm 00063
Fmt 4701
Sfmt 4700
29029
circumstances of an individual engaged
in the repetitive acquisition and sale of
firearms is therefore relevant to this
assessment.
8. EIB Presumption—Certain Types of
Repetitive Transactions
a. Repetitively Transacting Firearms
Through Straw Persons/Sham
Businesses
Comments Received
With regard to this presumption, at
least one commenter questioned why it
was needed if straw purchasing is
already a felony, while another
commenter raised no objection to a
presumption that relied on other crimes
to establish the presumption. A couple
of commenters did not agree with the
straw purchaser presumption because it
could unfairly capture unlicensed
persons, as demonstrated in the
following scenarios. For example, they
said, collectors purchase firearms on the
used firearms market, which is the only
place to find vintage firearms, but they
could trigger this presumption without
being aware they had purchased the
firearm through a straw seller. Similarly,
an unlicensed person who innocently
sells two firearms that he no longer
finds suitable for self-defense would be
presumed to be engaged in the business
if the buyers of the firearms turn out to
be straw purchasers.
One commenter suggested that ‘‘[t]he
final rule should clarify that while
firearm sales involving illicit straw
middlemen and contraband firearms are
indicative of the seller’s criminal
purposes, these sales are also indicative
of an individual’s predominant intent to
profit when undertaking the sales. The
conduct can indicate both at the same
time, and, as the NPRM notes, it is the
illicit nature of the middleman activity
and firearm types that increases the
profitability of the sale. While the
criminal purposes involved in such
sales obviate ATF’s need to prove profit
under BSCA’s definition of ‘to
predominantly earn a profit,’ it does not
obviate the fact that such sales are in
fact predominantly motivated by
profit.’’
The same commenter, who generally
supported the rule, had a suggestion for
improving this presumption. They
stated that, ‘‘[w]hile sensible as
currently drafted and deserving of
inclusion in the final rule, this
presumption would benefit by clarifying
whether the word ‘repetitively’ in the
Proposed Rule is intended to apply to
the phrase ‘sells or offers for sale’ in the
same way that it clearly applies to
‘purchases for the purpose of resale.’ ’’
E:\FR\FM\19APR3.SGM
19APR3
29030
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
Department Response
The Department disagrees that the
presumption addressing straw
purchasers is not needed because straw
purchasing is already a felony. While it
is true that straw purchasing is a
felony,201 all persons who engage in the
business of dealing in firearms are
required to be licensed, even if the
means by which those firearms are
purchased and sold is unlawful.
Moreover, the Department agrees with
the comment that firearms purchases
and sales through straw individuals and
sham businesses are indicative of an
individual’s predominant intent to
profit from those repeated illicit sales.
In any event, Federal law provides that
the Government is not required to prove
profit, including an intent to profit,
where a person is engaged in regular
and repetitive sales for criminal
purposes, pursuant to 18 U.S.C.
921(a)(22). Making repetitive resales
through straw individuals or sham
businesses for the purpose of engaging
in the business without a license is a
criminal purpose.202 The statute itself
thereby provides notice to such persons
that they may be unlawfully engaging in
the business of dealing in firearms.
At the same time, collectors who
innocently purchase and sell firearms
from or through a straw purchaser
without knowing the person was acting
for someone else, or purposefully
disregarding or being plainly indifferent
to that fact, would not incur liability for
engaging in the business without a
license. The Government must prove
willful intent in all relevant licensing
and forfeiture proceedings. For example,
if the Government were to deny an
application for a license because of
previous unlawful unlicensed dealing, it
must show that the applicant ‘‘willfully
violated’’ the unlicensed dealing
prohibition at 18 U.S.C. 922(a)(1). See
18 U.S.C. 923(d)(1)(C).
The Department agrees that the term
‘‘repetitively’’ applies to purchases of
firearms in the same way as it applies
to sales of firearms. Consequently, the
Department has added the word
‘‘repetitively’’ before ‘‘resells or offers
for resale’’ with respect to the straw/
sham business and unlawfully
201 See 18 U.S.C. 932 (prohibiting straw
purchasing of firearms); 922(a)(6) (prohibiting false
statements about the identity of the actual
purchaser when acquiring firearms); 924(a)(1)(A)
(prohibiting false statements made in licensee’s
required records).
202 See 18 U.S.C. 922(d)(10) (making it unlawful
for any person to sell or otherwise dispose of a
firearm to any person knowing or having reasonable
cause to believe that such person, including as a
juvenile, intends to sell or otherwise dispose of the
firearm or ammunition in furtherance of a felony,
including sec. 922(a)(1)).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
possessed firearms presumptions. See
§ 478.13(c)(2).
b. Repetitively Purchasing Unlawfully
Possessed Firearms
Comments Received
As with the presumption related to
straw purchasing or sham businesses, at
least one commenter said that the
presumption is unnecessary because
unlawful possession of certain firearms
can already be prosecuted as a standalone felony. The commenter also
questioned the need for this
presumption because no legitimate
business would deal in illegal firearms,
and so buying and selling such firearms
would show that a person is not
engaged in the business. The commenter
further noted that there is no way for a
person to know if the firearm they
acquire is stolen because ‘‘[t]here is no
database where a would-be purchaser,
or seller for that matter, may check if a
gun is stolen.’’ The commenter similarly
questioned how an average person
would know if a particular firearm was
imported illegally, providing the
example of a vintage World War I Luger
that could have been brought to the
United States legally in 1919 as a
souvenir, or smuggled into the country
illegally in 1970. Another commenter
noted that the NPRM did not explain
how possession of certain unlawful
firearms (stolen guns, those with serial
numbers removed, or those imported in
violation of law), in addition to its own
separate crime, also constitutes
unlawful dealing. The commenter
added that the GCA draws no
connection between being engaged in
the business as a dealer in firearms and
the unlawful possession of certain types
of firearms.
By contrast, at least one commenter in
support of the rule suggested that the
Department add ‘‘weapons, the
possession of which is prohibited under
[S]tate or local laws’’ to the list of
examples in the presumption of firearms
that cannot be lawfully purchased or
possessed.
Department Response
The Department disagrees that the
presumption addressing buying and
selling of prohibited firearms is not
needed because possession of such
firearms is already a crime. As with
dealers who transact through straw
individuals, which is also a Federal
crime, all persons who engage in the
business of dealing in firearms are
required to be licensed even if the
firearms purchased and sold by the
business are also unlawful to possess.
Contraband firearms are actively sought
PO 00000
Frm 00064
Fmt 4701
Sfmt 4700
by criminals and earn higher profits for
the illicit dealer because of the
additional labor and risk to acquire
them. Illicit dealers will often buy and
sell stolen firearms and firearms with
obliterated serial numbers because those
firearms are preferred by both sellers
and buyers to avoid background checks
and crime gun tracing. However, bona
fide collectors who occasionally
purchase and resell firearms from their
personal collections without knowing
the characteristics of the firearms that
make them unlawful to possess would
not incur liability for engaging in the
business without a license. There is
always a requirement for the
Government to prove a willful intent to
violate the law in any proceeding
arising under 18 U.S.C. 922(a)(1), 923(a),
923(d)(1)(C), or 923(e). In addition, each
presumption may be refuted with
reliable evidence that shows the person
was not engaging in the business, such
as evidence that they were occasionally
reselling to obtain more valuable
firearms for their personal collection.
See § 478.13(f). Moreover, under the
BSCA, 28 U.S.C. 534(a)(5), once
licensed, dealers who may have
innocently purchased unlawful firearms
will now have access to the FBI’s
National Crime Information Center
database to verify whether firearms
offered for sale have been stolen.
The Department agrees with the
comment that it should revise this
presumption on repetitive purchases
and resales to clarify that it includes
firearms unlawfully possessed under
State and local law. The fact that profit
motive is buttressed by the illicit nature
of the product applies equally to
firearms that are illegal under State law.
One of the primary purposes of the GCA
was to enable the States effectively to
regulate firearms traffic within their
borders. See Omnibus Crime Control
and Safe Streets Act of 1968, Public Law
90–351, sec. 901(a), 82 Stat. 197, 225–
26.203 And, according to the comment
from Attorneys General representing 20
States and the District of Columbia,
‘‘many guns are trafficked across [S]tate
lines, exploiting the differences in
[S]tate regulations.’’ Accordingly, the
Department has revised the
presumption to make it clear that it
includes all firearms that cannot
lawfully be purchased, received, or
possessed ‘‘under Federal, State, local,
or Tribal law,’’ and cites the Federal
prohibitions only as examples.
§ 478.13(c)(2)(ii).
203 See also S. Rep. No. 90–1097, at 28 (1968);
H.R. Rep. No. 90–1577, at 6 (1968); S. Rep. No. 90–
1501, at 1 (1968).
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
9. EIB Presumption—Repetitively
Selling Firearms in a Short Period of
Time
a. Repetitively Selling Firearms Within
30 Days After Purchase
khammond on DSKJM1Z7X2PROD with RULES3
Comments Received
Numerous commenters disagreed
with the presumption that a person is a
dealer if they repetitively sell or offer for
sale a firearm within 30 days after
originally purchasing the firearm.
Commenters noted that this
presumption shows ATF’s lack of
understanding of the firearms
community. Commenters stated it is
common for people, including collectors
and firearm enthusiasts, to find
themselves in a situation where they
buy a firearm and quickly regret the
purchase. They disagreed with the
Department basing the presumption on
the assertion that stores have a 30-day
return period. Some commenters stated
that stores frequently have strict noreturn policies, and other commenters
stated that stores frequently offer a
‘‘non-firing inspection period’’ within
which a customer can return the
firearm. This means that if the customer
fires the gun after purchase and does not
like it, the person has no choice but to
sell the firearm as used. Another
commenter provided common scenarios
where they claimed a person would be
presumed to be a dealer under this
presumption. In one example, a nonlicensee who buys two firearms that do
not work or fulfill their intended role
and subsequently sells them within 30
days would be presumed to be engaged
in the business because of the
‘‘repetitive’’ sales of the firearms within
30 days of purchase. The commenter
also suggested that a person who
inherits a firearm collection from a
parent and chooses to sell those firearms
by auction or by other private sale
within 30 days would be subject to
prosecution under this presumption.
At least one commenter in support of
the rule recommended that the period
for this presumption be extended from
30 days to 90 days to make it more
difficult for people to structure
transactions in a way that would evade
licensing and background check
obligations.
Department Response
The Department disagrees with
commenters that it is common for
persons to repetitively purchase and
resell firearms within 30 days without a
predominant intent to profit, such as by
selling unsuitable or defective firearms.
Common sense and typical business
practices dictate that it is more
consistent with profit-based business
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
activity than collecting to buy and resell
inventory in a short period, and as
stated previously, that is true especially
when the firearm could be returned yet
is resold instead. For one thing,
multiple firearms would have to be
purchased and resold within that 30-day
period of time to trigger the
presumption. Thus, even assuming a
person could not return a firearm,
which is not always the case, it is
unlikely that there would be more than
one unsuitable or defective firearm that
would need to be resold during the 30day period unless the person is engaged
in the business.204 And, as with the
other presumptions, this presumption
may be refuted by reliable evidence to
the contrary to account for less common
circumstances raised by the
commenters.
With regard to the suggestion to
extend the 30-day period to 90 days, the
Department disagrees. The Department
believes that the turnover presumption
for persons actively engaged in the
business of dealing in firearms of
varying conditions, kinds, and types is
more likely to occur within a relatively
short period of time from the date of
purchase. While the Department
understands that some licensees will
not accept returns, 30 days is a
reasonable time frame within which
ATF can distinguish those who are
engaged in the business from those who
are not because many licensees,
including licensed manufacturers, will
accept returns of unsuitable or defective
firearms within that period of time. See
footnote 81, supra.
Finally, the Department disagrees that
a person who inherits a personal
collection and liquidates it within 30
204 Further support for a 30-day resale
presumption comes from ATF’s experience
observing persons who sell firearms at gun shows.
Because of the frequency of gun shows, unlicensed
dealers have a readily available marketplace in
which to buy, display, and sell numerous firearms
for a substantial profit within one month.
According to one study, there were 20,691 guns
shows in the United States that were promoted and
advertised between 2011 and 2019, with 2,299 gun
shows per year. See David Pe´rez Esparza et al.,
Examining a Dataset on Gun Shows in the US,
2011–2019, 4 Journal of Illicit Economies and
Development 86, 87 (2022), https://
storage.googleapis.com/jnl-lse-j-jied-files/journals/
1/articles/146/submission/proof/146-1-1646-1-1020220928.pdf; see also Crossroads of the West, 2024
Gun Show Calendar 1, https://
www.crossroadsgunshows.com/wp-content/
uploads/2024/03/Calendar-2024.pdf (last updated
Mar. 20, 2024) (48 gun shows in Arizona,
California, Nevada, and Utah in 2024); Gun Show
Trader, Missouri Gun Shows, https://
gunshowtrader.com/gunshows/missouri-gun-shows/
(last visited Mar. 26, 2024) (57 gun shows in
Missouri and Arkansas in 2024); Gun Show Trader,
Central Indiana Gun Show Calendar, https://
gunshowtrader.com/gunshows/central-indiana/
(last visited Mar. 8, 2024) (54 gun shows in Indiana
in 2024).
PO 00000
Frm 00065
Fmt 4701
Sfmt 4700
29031
days after inheritance falls within the
30-day turnover presumption. The
presumption applies only to persons
who repetitively resell firearms within
30 days ‘‘after the person purchased the
firearms.’’ § 478.13(c)(3)(i). A person
who inherits a personal collection does
not, in the absence of other factors,
‘‘purchase’’ or exchange something of
value in order to receive the firearms.
To further clarify, the final rule also
lists, as rebuttal evidence, the specific
example of a person who liquidates
inherited firearms. See § 478.13(e)(5)(i),
(f).
b. Repetitively Selling New or Like-New
Firearms
Comments Received
Of the several presumptions, some
commenters believed that this
presumption hurts collectors, who are
not licensees, the most because they
value the original condition of firearms
and, as such, frequently keep firearms in
like-new condition and with their
original packaging. Again, commenters
stated that including this presumption
demonstrates the Department’s and
ATF’s lack of understanding of how the
community values firearms. One
commenter pointed out, as an example,
that ‘‘[t]he National Rifle Association
has three collector grades for new or like
new modern firearms—‘New,’ ‘Perfect,’
and ‘Excellent’—which represent the
three most coveted and sought-after
grades,’’ and included a link to an
article on how to evaluate firearms.
Another commenter noted that it is
fairly standard for a person to buy a
firearm, shoot it a few times, and then
sell it in the original box in a private
sale because selling the firearm in its
original box contributes to the value of
the firearm. This, the commenter noted,
should not be considered to be engaging
in the business. Numerous commenters
noted that owners keep firearms in the
original boxes not out of criminality, but
for collectability. At times, the
packaging may be more valuable than
the firearm. Therefore, a gun might
appear to be ‘‘like new’’ possibly
months or years after a transaction and
one may be presumed to be engaged in
the business under this presumption if
the person later sells their like-new
firearm with the original packaging.
Further, ‘‘like new in original packing
firearms are . . . the most sought after
of collectible firearms,’’ said one
commenter. At least one commenter
stated that this rule will make firearms
less safe if individuals discard the
original packaging, which often
includes warnings and safety
information about the firearm, in order
E:\FR\FM\19APR3.SGM
19APR3
29032
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
to avoid being considered a dealer
under the presumption when they later
want to sell the firearm.
Department Response
The Department does not agree that
most persons who repetitively purchase
and resell firearms that are in a new
condition, or like-new condition in their
original packaging, lack a predominant
intent to earn a profit. That is too broad
an assessment. On the contrary, the
Department has found—based on its
experience as described above—that this
type of behavior is an indicator of being
engaged in the business with a
predominant intent to earn a profit from
dealing in firearms in pristine
condition.205 This is even more likely to
be the case when the new or like-new
firearms are repetitively purchased and
resold within a one-year period of time.
However, the Department acknowledges
commenters’ concerns and agrees that
true collectors may hold collectible
firearms for a long period of time, and
that some collectible firearms may
appear to be like-new months or years
after purchase. Therefore, to reduce the
possibility that these ‘‘new’’ or ‘‘likenew’’ firearms 206 are part of a personal
collection, and to account for the higher
likelihood that repetitive resales of such
firearms in a relatively short time period
are made with an intent predominantly
to earn a profit, the Department has
incorporated a one-year turnover
limitation into the presumption. See
§ 478.13(c)(3)(ii)(A). The Department
believes that persons acting with a
predominant intent to earn a profit are
likely to repetitively turn over firearms
they purchase for resale within this
period. In addition, ATF’s
experience 207 is that collectors and
205 See
footnote 82, supra.
purposes of this rule, the Department
interprets the term ‘‘new’’ in accordance with its
common definition to mean, ‘‘having recently come
into existence,’’ and the term ‘‘like new’’ to mean
‘‘like something that has recently been made.’’ See,
e.g., New, Merriam-Webster Online Dictionary,
https://www.merriam-webster.com/dictionary/new
(last visited Mar. 8, 2024); Like New, MerriamWebster Online Dictionary, https://www.merriamwebster.com/dictionary/like%20new (last visited
Mar. 8, 2024). The Department understands that
collectors commonly grade or rate collectible
firearms as a means of determining their
appreciated value over time, insurance,
collectability, etc. However, this presumption is not
aimed at collectible firearms and is not making a
distinction based on a firearm’s grade or rating in
relation to commonly accepted firearms condition
standards, such as those contained in the NRA
Modern Gun Condition Standards or the Standard
Catalog of Smith & Wesson. See Jim Supica,
Evaluating Firearms Condition, NRA Museums,
https://www.nramuseum.org/gun-info-research/
evaluating-firearms-condition.aspx (last visited
Mar. 26, 2024).
207 See the discussion under the Department’s
response in Section IV.B.9.c of this preamble.
khammond on DSKJM1Z7X2PROD with RULES3
206 For
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
hobbyists routinely retain their personal
collection firearms for at least one year
before resale, so the Department
believes this is also a reasonable period
that would not pose a burden on
collectors and hobbyists.208 As with the
other presumptions, this one may be
refuted with reliable evidence to the
contrary.
c. Repetitively Selling Same or Similar
Kind/Type Firearms
Comments Received
Numerous commenters stated that
this presumption targets collectors who
often focus on collecting a specific type
or kind of firearm (e.g., Colt single
action revolvers, over-under shotguns,
or World War II-era bolt-action rifles)
and would thus be more likely to sell
firearms by the same manufacturer or of
the same type to enhance their
collection. ‘‘Virtually every collector or
hobbyist focuses their efforts on specific
manufactures and types of firearms.
They are for the most part devoted to
something,’’ said one commenter. The
commenters claimed that ‘‘a collector
liquidating his collection will almost
assuredly be presumed to be engaged in
the business, especially if he requires
more than one incident to sell his
collection,’’ but the collector ‘‘is doing
exactly that which is explicitly allowed
by statute.’’
Some commenters strongly disagreed
with ATF’s description that
‘‘[i]ndividuals who are bona fide
collectors are less likely to amass
firearms of the same kind and type than
amass older, unique, or less common
firearms’’ because this disregards not
only the fact that collectors can
purchase and sell common firearms that
do not hold antique value, but also what
is known in the firearms community as
‘‘pattern collecting.’’ According to
commenters, some people purchase the
same type of pistol or rifle over and over
again, in every single iteration
imaginable, which can vary due to
manufacturing date, manufacturing
location, minute changes in the
firearms, or any number of reasons. In
pattern collecting, a person would have
multiple firearms for sale that look
exactly the same to a lay person. For
instance, one commenter asked if a
seller would be subject to this
presumption if they sold a small
collection of highly valuable 19th
century Winchester lever action rifles,
which would be of the same kind and
208 In further support of a one-year time limit, 18
U.S.C. 923(c) provides that after one year, firearms
transferred by a licensee from the licensee’s
business inventory to the licensee’s personal
collection are no longer deemed business inventory.
PO 00000
Frm 00066
Fmt 4701
Sfmt 4700
type. Similarly, another commenter said
that large portions of the modern
firearms market can be considered ‘‘of
similar kind,’’ pointing out that a ‘‘Gen
3 Glock in 9mm Luger is of similar kind
to a polymer Walther in 9mm or a
Palmetto State Armory Dagger in 9mm.
The 9mm polymer pistol market has a
lot of variety, but [those firearms] can all
be considered ‘of similar kind.’ ’’ The
commenter noted further that
individuals might have numerous 9mm
polymer pistols in their personal
collection because it makes it easier to
acquire ammunition, and if magazines
or accessories are interchangeable, it
makes it easier to have a variety of
configurations at hand at a lower cost.
The commenter also noted that many
modern sporting rifles would also be
considered of ‘‘similar kind’’ if they can
all be chambered in the same caliber.
The commenter stated that it is
overbroad for the Department to assume
that someone selling modern firearms of
the same type is more likely to be a
dealer in firearms because collecting is
not limited to curio and relic firearms.
One commenter expressed concerns
about how firearms of the same or
similar kind and type could be
ascertained and quoted an example from
the proposed rule’s discussion about the
‘‘same kind and type’’ presumption. As
quoted by the commenter, the proposed
rule stated that this presumption may be
rebutted based on ‘‘evidence that a
collector occasionally sells one specific
kind and type of curio or relic firearm
to buy another one of the same kind and
type that is in better condition to ‘tradeup’ or enhance the seller’s personal
collection.’’ The commenter added,
‘‘using ‘same kind and type’ is not
correct. For instance, a [Curio and Relic]
(C&R) [license] holder sells a bolt-action
Mosin-Nagant rifle in 7.62x54r, then
uses the funds to purchase a Star Model
B pistol in 9x18. Are these (MosinNagant & Star Model B) the ‘same kind
and type’ or not? Both are clearly
collectable C&R firearms, while one is a
bolt-action rifle and the other a pistol.’’
Department Response
As with the previous EIB
presumption, the Department disagrees
that collectors are likely to repetitively
purchase and resell firearms that are of
the same or similar kind and type
without a predominant intent to earn a
profit, at least not within a relatively
short period of time. If a person is
accumulating and repetitively reselling
the same or similar kinds and types of
firearms as part of a personal collection
as defined in this rule, they can use
evidence that they are doing so to
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
enhance or liquidate their personal
collection to refute the presumption.
Nonetheless, to substantially reduce
the possibility that these ‘‘like-kind’’
firearms are part of a personal
collection, as stated previously, a oneyear turnover limitation has been
incorporated into the presumption and,
as always, any presumption may be
rebutted with reliable evidence to the
contrary.209 See § 478.13(c)(3)(ii)(B). It is
unlikely that persons who collect the
same or similar kinds and types of
firearms for study, comparison,
exhibition, or for a hobby will
repetitively resell them within one year
after they were purchased.
Finally, in response to commenters’
concerns about determining which
firearms would be of the same kind and
type, the Department has made some
changes. First, as to the comment on
whether the Mosin and Star firearms
described would be the same kind and
type, the Department notes that the
Mosin-Nagant rifle in 7.62x54r and the
Star Model B pistol in 9x18 are not the
same or similar kind and type of
firearms. They are of a different
manufacturer (Mosin-Nagant v. Star),
model (M1891 v. BM), type (rifle v.
pistol), caliber (7.62x54R v. 9x18), and
action (bolt action v. semiautomatic).
They share almost no design features
and would thus not be subject to the
‘‘same kind and type’’ presumption.
Nonetheless, to avoid any confusion
about the meaning of ‘‘same kind and
type’’ of firearms, and to allow for
collectors who obtain multiple firearms
of the same type, but from different
makers and of different models, the
Department has substituted the more
precise term ‘‘same make and model’’ in
the final rule. See § 478.13(c)(3)(ii)(B).
Further, to clarify the meaning of
‘‘similar’’ in this context, the final rule
now instead refers to ‘‘variants thereof’’
(i.e., variants of the same make and
model). See id. The term ‘‘variant’’ is
already defined in 27 CFR 478.12(a)(3)
to mean ‘‘a weapon utilizing a similar
frame or receiver design, irrespective of
new or different model designations or
configurations, characteristics, features,
components, accessories, or
attachments.’’ Thus, to identify a
‘‘variant’’ of a particular make and
model, the design of the frame or
receiver of one firearm is compared to
the design of the frame or receiver of the
other firearm, regardless of newer model
designations or configurations other
than the frame or receiver.210 For
209 Per footnote 208, this time period is also
supported by 18 U.S.C. 923(c).
210 In addition to the fact that the term ‘‘variant’’
was incorporated into ATF regulations in 2022, see
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
example, an AK–74M is a rifle variant
of the original AK–47 rifle. ‘‘The notable
changes in the AK–74M include a 90degree gas block, a lightened bolt and
bolt carrier, a folding polymer stock, a
new dust cover designed to resist the
recoil of an attached grenade launcher,
[and] a reinforced pistol grip.’’
Alexander Reville, What are all the AK
Variants?, guns.com (Jan. 5, 2024),
https://www.guns.com/news/what-areak-variants. But none of the changes
found in the AK–74M involve a design
modification to the receiver—the
housing for the bolt—so that firearm is
a rifle variant of the original make and
model (AK–47 rifle). See 27 CFR
478.12(a)(4)(vii). Likewise, an AR-type
firearm with a short stock (i.e., pistol
grip) is a pistol variant of an AR–15 rifle
because they share the same or a similar
receiver design. See 27 CFR
478.12(a)(3), (f)(1)(i). Repetitive resales
of firearms that are the same make and
model, or variants of the same make and
model, within a year of purchase,
demonstrate that the firearms were
likely purchased and resold as
commodities (i.e., business inventory),
as opposed to collectibles. Thus, to
identify a firearm subject to this
presumption, the rule now looks to the
make and model of a firearm and its
‘‘variants’’ (as defined in 27 CFR
478.12(a)(3)) which are generally easy to
determine by comparing the design of
the frame or receiver—the key structural
component of each firearm repetitively
sold. As with the other presumptions,
this one may be rebutted with reliable
evidence to the contrary.
10. EIB Presumption—Selling Business
Inventory After License Termination
Comments Received
Commenters raised concern over the
impact of this presumption on certain
former licensees. Commenters stated
that they believe this EIB presumption
will hurt recently retired FFLs who
might need to sell off firearms due to
financial hardship. Some commenters
stated that the rule would punish former
FFLs, holding them to a different and
more onerous standard than persons
who were never licensed, and disagreed
with ATF’s statement in justification of
the presumption that a ‘‘licensee likely
87 FR 24735, this term is well understood by the
firearms industry and owners. See, e.g., Alexander
Reville, What are all the AK Variants?, guns.com
(Jan. 5, 2024), https://www.guns.com/news/whatare-ak-variants (‘‘[T]he AK has gone through several
revisions over the years, creating more modern
variants. In fact, what you find yourself calling an
AK–47 might just be something different.’’); Aaron
Basiliere, The AR–15 Pistol: The Rise of America’s
Rifle Variant, catoutdoors.com (Apr. 19, 2022),
https://catoutdoors.com/ar-15-pistol/.
PO 00000
Frm 00067
Fmt 4701
Sfmt 4700
29033
intended to predominantly earn a profit
from the repetitive purchase and resale
of those firearms, not to acquire the
firearms as a ‘personal collection.’ ’’ 88
FR 62003. They stated that ATF offered
no citation for this proposition and
ignored that a firearm might be acquired
first for business inventory and later
become a part of a personal collection.
They argued that the former FFL should
be entitled to sell part or all of that
collection under the statute without
becoming a dealer. Further, they argued
that, unlike the other presumptions
affecting former FFLs, there is no time
limitation, which in essence means this
presumption bars a former FFL from
ever selling firearms that were in their
business inventory for any purpose
without triggering the presumption of
again being engaged in the business.
This puts former licensees in an
untenable position never contemplated
by Congress. One commenter suggested
that, at a minimum, the rule should
grandfather in former FFLs who went
out of business prior to this rule
becoming effective and allow them to
treat those former business-inventory
firearms as a personal collection even if
all the proposed criteria of that
presumption (now § 478.13(c)(4)), such
as formal transfer from the A&D book,
were not followed.
An additional commenter suggested
that ATF should consider
supplementing this presumption with
an additional presumption that any
formerly licensed firearms dealer, or
person acting on their behalf, that sells
or offers to sell multiple guns that were
in the former FFL’s business inventory
at the time the license was terminated
will be presumed to be ‘‘engaged in the
business’’ unless the firearms are
disposed of through a sale to another
FFL.
Department Response
The Department disagrees that this
EIB presumption is contrary to the GCA,
or that firearms that were repetitively
purchased for resale by licensees can be
considered part of a ‘‘personal
collection’’ if they were not transferred
to a personal collection prior to license
termination. The GCA at 18 U.S.C.
923(c) clearly contemplates that any
business-inventory firearms transferred
while the person is a licensee must be
held in a personal collection by the
licensee for at least one year before the
firearms lose their status as business
inventory. However, when a licensee
does not transfer business inventory
firearms to a personal collection prior to
license termination, the firearms remain
E:\FR\FM\19APR3.SGM
19APR3
29034
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
business inventory.211 Such firearms
were not acquired for a personal
collection, and were not transferred to
one, and cannot be said to have lost
their status as firearms purchased for
resale with a predominant intent to
profit simply because the licensee is no
longer licensed to sell them. Moreover,
allowing former licensees to continue to
sell business inventory after license
termination without background checks
and records through which crime guns
can be traced clearly undermines the
licensing requirements of the GCA. It
also places such former licensees at an
unfair competitive advantage over
current FFLs, who are continuing to sell
firearms while following the rules and
procedures of the GCA. Indeed, there
would be little point revoking a license
for willful violations of the GCA by a
non-compliant FFL if the former
licensee could simply continue to sell
firearms without abiding by the
requirements under which they
purchased the firearms with the
predominant intent to profit, and by
which the compliant FFLs abide. As to
concerns that a former licensee might
need to quickly sell its inventory to
stave off financial hardship, the former
licensee is still free to sell firearms from
this inventory on occasion to a licensee.
See §§ 478.57(b)(1), (c); 478.78(b)(1), (c).
Under the rule, this presumption
operates in conjunction with the new
liquidation-of-business-inventory
provisions in 27 CFR 478.57
(discontinuance of business) and 478.78
(operations by licensee after notice),
which allow former licensees to either
liquidate remaining business inventory
to a licensee within 30 days after their
license is terminated (or occasionally to
a licensee thereafter), or transfer what is
now defined as ‘‘former licensee
inventory’’ (firearms that were in the
business inventory of a licensee at the
time of license termination, as
distinguished from a ‘‘personal
collection’’ or other personal firearms)
to a responsible person of the former
licensee within that period. Under these
new provisions, when firearms in a
former licensee inventory are
211 See ATF, Important Notice: Selling Firearms
AFTER Revocation, Expiration, or Surrender of an
FFL 1 (June 3, 2021) (‘‘If a former FFL is disposing
of business inventory, the fact that no [firearms]
purchases are made after the date of license
revocation, expiration, or surrender does not
immunize him/her from potential violations of 18
U.S.C. 922(a)(l)(A). Instead, business inventory
acquired through repetitive purchases while
licensed are attributed to the former FFL when
evaluating whether subsequent [firearms] sales
constitute engaging in the business of dealing in
firearms without a license.’’); ATF, Important
Notice: Selling Firearms AFTER Revocation,
Expiration, or Surrender of an FFL 1 (Dec. 1, 2014)
(same).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
transferred to the responsible person,
they remain subject to the presumptions
in this rule. Such firearms were
repetitively purchased for resale and
cannot be considered part of a ‘‘personal
collection’’ as that term is defined in the
rule. Firearms in a former licensee
inventory differ from those in a personal
collection or other personal firearms in
that they were purchased repetitively as
part of a business inventory with the
predominant intent to earn a profit.
Persons who continue to sell those
business inventory firearms, including
those transferred to a responsible person
of the former licensee, other than
occasionally to an FFL, will be
presumed to be engaged in the business
without a license, though the
presumption may be refuted with
reliable evidence to the contrary.
The Department disagrees with a
commenter’s suggestion to grandfather
in former FFLs who went out of
business prior to the effective date of the
rule and allow them to treat former
business inventory as a personal
collection. Prior to the rule, former
licensees and their responsible persons
were not entitled to sell their business
inventories after license termination if
their predominant intent was to obtain
livelihood and pecuniary gain from
those sales. This rule merely establishes
by regulation the guidance ATF has
provided for at least ten years and of
which the FFL community has been
aware; that is, ATF has long advised
former licensees in written notices of
revocation, expiration, and surrender
not to engage in the business after
license termination by selling the
business inventory.212 Continuing to
sell business inventory would
undermine the licensing requirements
of the GCA.
The Department agrees with a
commenter’s suggestion to incorporate a
presumption that a formerly licensed
dealer who sells firearms from the
former business inventory is engaging in
the business unless the firearms are sold
to a licensee. An occasional sale to a
licensee generally does not show a
predominant intent to profit because a
licensed dealer is likely to pay less than
fair market value to buy a firearm for
resale from an unlicensed person given
the licensed dealer’s intent to profit. Nor
does it present the same public safety
concerns associated with unlicensed
dealing because the purchasing dealer
would record the acquisitions and
dispositions and run background checks
when they resell the firearms. For these
reasons, in addition to allowing
liquidation of a business inventory to a
212 See
PO 00000
footnote 211, supra.
Frm 00068
Fmt 4701
Sfmt 4700
licensee within 30 days, this
presumption has been amended by the
final rule to allow former licensees (or
a responsible person acting on their
behalf) to occasionally sell ‘‘former
licensee inventory’’ firearms to an active
licensee after the initial 30-day
liquidation period in accordance with
the discontinuation of business
provisions at §§ 478.57(b)(2) and
478.78(b)(2) without triggering the EIB
presumptions. However, if the former
licensee (or responsible person) sells
former licensee inventory more
frequently than occasionally to a
licensee after the initial 30-day
liquidation period, they are subject to
the presumptions in this rule.
11. EIB Presumption—Selling Business
Inventory Transferred to a Personal
Collection Prior to License Termination
Comments Received
Commenters disagreed with inclusion
of this last presumption in which a
former licensee (or responsible person
acting on behalf of the former licensee)
is presumed to be a dealer if they sell
or offer to sell firearms that were
transferred to their personal collection
prior to license termination, unless
those firearms were transferred to the
former licensee’s personal collection
without intent to willfully evade
firearms laws and one year has passed
from the date of transfer to the personal
collection.
At least one commenter stated that
prior unlawful transfers do not
necessarily taint a future transfer, nor do
they demonstrate that a former FFL
continues to be engaged in the business.
The commenter stated that there would
be no possible way for former FFLs,
whose licenses were revoked and who
may be prohibited or facing practical
circumstances that preclude them from
being re-licensed in the future, to
liquidate their former inventory that
was not transferred to a personal
collection to ATF’s satisfaction. The
commenter also noted that section
923(c) applies only to licensees and that
none of the provisions apply to an
unlicensed person who happened to
formerly have held an FFL. In other
words, the commenter seemed to
question how the Department could
require former FFLs or even responsible
persons, who are non-FFLs, to abide by
certain restrictions upon license
revocation, such as disposing of the
former business inventory in a
particular manner; as former licensees,
the commenter argued, they
automatically do not have ‘‘business
inventory.’’ This is particularly true, the
commenter stated, as a former licensee
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
whose license was revoked—and who,
by law, may never be able to be a
licensee again—may be precluded from
ever transferring their firearms under
any circumstances (other than by giving
them away as free gifts).
Furthermore, a commenter stated,
section 923(c) adds that ‘‘nothing in this
chapter shall be construed to prohibit a
licensed manufacturer, importer, or
dealer from maintaining and disposing
of a personal collection of firearms,
subject only to such restrictions as
apply in this chapter to dispositions by
a person other than a licensed
manufacturer, importer, or dealer.’’ The
commenter concluded that this means,
under the statute, a dealer may acquire
a personal collection while they are a
dealer or while going out of business
and may later dispose of that collection
under the same rules as other nondealers, except as provided in 18 U.S.C.
923(c). The commenter also noted that
nothing in either 18 U.S.C. 921(a)(21)(C)
or 923 discusses a required intent at the
time the firearm is acquired, and ATF
provided no citation to support the
‘‘proposition that firearms acquired by
an FFL are not (or cannot be) for a
‘personal collection.’ ’’ While all can
agree that the predominant purpose of
the FFL is to earn a profit, the
commenter stated the proposed rule
ignores the fact that many FFL holders
are also firearm collectors or
enthusiasts, and that often many of the
firearms that are put into the business
inventory are for the personal collection
of the FFL holder or its responsible
persons.
One of the commenters stated that
this presumption seems to apply to all
firearms transferred to any responsible
person of an FFL, even if those guns
were transferred to that responsible
person via an ATF Form 4473 and a
background check was conducted. They
stated this presumption overlooks the
fact that an FFL may have dozens of
responsible persons who may change
frequently, and that a former
responsible person may have no say in
the business dealings once they are
gone; in fact, the person may not even
know that the business has given up or
lost its license. Yet, they said, ATF’s
presumption now seeks to hold that
former responsible person to a
burdensome presumption based on their
former employer’s decision to cease its
firearms operations.
The commenter stated that this
presumption seems contrary to ATF’s
existing position that a transfer to a
personal collection happens as a matter
of law once the license is given up
because there is no more business
inventory as a result of the firearms
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
business ceasing operations. They cited
ATF’s National Firearms Act Handbook,
ATF E-Publication 5320.8 (Apr. 2009),
https://www.atf.gov/firearms/docs/
guide/atf-national-firearms-acthandbook-atf-p-53208/download (‘‘NFA
Handbook’’), as an example of the
agency’s position; they said that, in
section 14.2.2 of the NFA Handbook,
ATF stated, ‘‘FFLs licensed as
corporations, partnerships, or
associations, who have been qualified to
deal in NFA firearms and who go out of
the NFA business, may lawfully retain
their inventory of these firearms . . . as
long as the entity does not dissolve but
continues to exist under State law.’’
Further, as a practical matter, the
commenter stated that it is not clear
how a company going out of business
would store the firearms ‘‘separately
from, and not commingled with the
business inventory’’ to meet the
definition of ‘‘personal collection’’
when the company no longer has a
business inventory due to its going out
of business. The rule, they argued,
provides no clarity for how former FFLs
are to treat their business inventory if
the former FFL just allowed firearms to
come into their collection after their
business ceased but did not meet all of
the requirements set out by ATF.
Department Response
The Department disagrees that this
EIB presumption is contrary to section
923(c) of the GCA. Contrary to the
implicit views of the commenters, an
FFL that loses or surrenders its license
is not thereby immune from the
provisions of the GCA. As provided by
section 923(c), for licensees to dispose
of firearms from a personal collection,
they must be transferred from the
business inventory to a personal
collection and maintained in that
collection for at least one year before
they lose their status as business
inventory. This rule implements section
923(c) by establishing a presumption
that resales or offers for resale of such
firearms show that the former licensee
is engaging in the business. Thus,
licensees who know they will be going
out of business by reason of license
revocation, denial of renewal, surrender,
or expiration cannot simply transfer
their business inventory to a ‘‘personal
collection’’ the day before license
termination, and two days later, sell off
the entire inventory as liquidation of a
‘‘personal collection’’ without
background checks or transaction
records. Such firearms were not
personal firearms acquired for ‘‘study,
comparison, exhibition . . . or for a
hobby.’’ However, consistent with
section 923(c) and this rule, once the
PO 00000
Frm 00069
Fmt 4701
Sfmt 4700
29035
one-year period has passed, the former
licensee will no longer be presumed to
be engaged in the business without a
new license if they later liquidate all or
part of the personal collection, assuming
the firearms were received and
transferred prior to license termination
without any intent to willfully evade the
restrictions placed on licensees by the
GCA. This includes licensees whose
licenses were revoked or denied
renewal due to willful violations if they
transferred business-inventory firearms
to their personal collection or otherwise
as personal firearms prior to license
termination in accordance with the law.
The Department disagrees with the
comment that, under the law, prior
unlawful transfers do not ‘‘taint a future
transfer.’’ The GCA at 18 U.S.C.
923(d)(1)(C) authorizes approval of an
application for firearms license if the
applicant ‘‘has not willfully violated
any of the provisions of this chapter or
regulations issued thereunder.’’ If ATF
previously revoked or denied license
renewal for willful violations of the
GCA or its implementing regulations,
then under the law, that former licensee
may be denied a firearms license in the
future. See id. This provision shows that
prior unlawful activity is relevant to
future dealing in firearms. Moreover,
section 923(c) deems firearms to be part
of a business inventory if their transfer
to a personal collection ‘‘is made for the
purpose of willfully evading the
restrictions placed upon licensees.’’
This demonstrates that Congress was
specifically concerned with licensees
evading the requirements of the GCA
through improper transfers to a personal
collection. Therefore, as to the comment
that ATF cannot require former
licensees (or a responsible person acting
on their behalf) to abide by regulations
addressing their former business
inventory, the Department believes that
it has the authority under the GCA to
take enforcement action, such as to deny
a license or seize firearms for forfeiture,
when a former licensee (or a responsible
person acting on their behalf) has
willfully violated the rules concerning
winding down licensed business
operations, 27 CFR 478.57 or 478.78 (as
applicable). The former licensee (or a
responsible person acting on their
behalf) is presumed to be engaged in the
business without a license if they
thereafter sell off that business
inventory (unless they transfer it within
30 days after license termination to a
former licensee inventory, and
thereafter only occasionally sell a
firearm from that inventory to a
licensee)—inventory that they did not
transfer to a personal collection or
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
29036
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
otherwise as a personal firearm prior to
license termination and then retain for
a year, as required.
Regarding responsible persons while
they are acting on behalf of such
licensees, the Department does not agree
that such persons will be unaware of the
termination of the license. As set forth
in 18 U.S.C. 923(d)(1)(B) and this rule,
responsible persons are only those
responsible for the management and
policies of the firearms business. They
are not sales associates, logistics
personnel, engineers, or representatives
who might have little control over or
understanding of the firearms business
operations or license status. Responsible
persons acting on behalf of a former
licensee must therefore be careful not to
sell business inventory of the former
licensee without a license. Nonetheless,
the final rule makes clear that
responsible persons of former licensees
who (1) after one year from transfer, sell
firearms from their personal collection
that were transferred from the former
licensee’s business inventory before
license termination, or (2) occasionally
sell firearms to a licensee that were
properly transferred to a former licensee
inventory after license termination, are
not presumed to be engaged in the
business due to those sales (assuming
they did not acquire or dispose of those
firearms to willfully evade the
restrictions placed on licensees).
Regarding the comment that this
presumption applies to all firearms
transferred to any responsible person of
a licensee, even if those firearms were
transferred to that responsible person on
an ATF Form 4473 and a background
check was conducted, the Department
disagrees that the presumption applies.
Responsible persons who properly
received a firearm from the thenlicensee’s business inventory on an ATF
Form 4473 for their own personal use,
in accordance with 27 CFR 478.124, are
not subject to the liquidation
presumption because they now own the
firearm disposed to them by the
business. Subsequent termination of the
license has no bearing on the
responsible person’s prior acquisition of
a personal firearm. The liquidation
presumption does not apply to former
responsible persons who are selling
what are now their own personal
firearms. Any subsequent sale of those
personally owned firearms is evaluated
the same way as any other firearm
transactions by unlicensed persons.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
12. Definition of ‘‘Personal Collection
(or Personal Collection of Firearms, or
Personal Firearms Collection)’’
Comments Received
At least one commenter noted that the
proposed definition of personal
collection, which excludes any firearm
purchased for the purpose of resale with
the predominant intent to earn a profit,
is problematic because collectors buy
guns with the purpose of eventual resale
when they locate and can afford guns of
higher quality and rarity. This sentiment
was echoed by several commenters who
asserted that the proposed rule
negatively affects collectors and
hobbyists by requiring them to become
licensed dealers simply because they
want to sell or trade some firearms from
their personal collection. For instance,
one commenter stated that a hobbyist
may purchase a firearm in degraded
condition, or lacking components. This
commenter indicated that they should
not be considered engaged in the
business of dealing even if they made a
reasonable profit simply because they
refurbished or upgraded the lawfully
acquired firearm and sold it for a
personal reason.
Another commenter stated the
definition of ‘‘personal collection’’ was
too vague, leaving room for
misinterpretation. The commenter
stated that, without more clarity,
licensees will have difficulty
determining whether their occasional
sale for personal collection
enhancement falls within that scope,
and the definition will create further
confusion among licensees and law
enforcement officials.
Some commenters stated that the
definition of ‘‘personal collection,’’ and
also the examples of what constitutes a
hobby, are too narrow. First, they
explained that the hobbies mentioned in
the statute and the regulation as
examples focus heavily on activities that
involve shooting firearms (e.g., hunting,
skeet, or target shooting) but do not
mention non-shooting hobbies, such as
curio collecting. Further, they
questioned why ‘‘personal collection’’ is
limited to non-commercial purposes
and pointed out that commercial
entities that are not engaged in the
business of dealing in firearms
frequently use firearms for commercial
business purposes. They provided
examples, including a hunting outfitter
that might have a collection of firearms
for use in the commercial hunting
enterprise, yet the firearms would still
be considered part of a personal
collection, or an armored car company
having firearms for protection that
would be in the company’s personal
PO 00000
Frm 00070
Fmt 4701
Sfmt 4700
collection and not in a business
inventory. These businesses are engaged
in a business and have firearms, but
they are not engaged in the business of
dealing in firearms even if they, for
example, buy firearms to upgrade ones
used by the truck drivers or replace old
ones taken on hunting trips by clients.
Similarly, at least one commenter noted
that firearms acquired as part of
teaching and safety instruction activities
would not be covered under the
proposed definition of personal
collection and therefore, according to
the commenter, an owner whose firearm
ownership grew because of these
activities and who then sold some
firearms would not be exempt from
being engaged in the business even
though that person might not have
acquired the firearms for purposes of
resale with the predominant intent to
earn a profit.
Another commenter stated that the
definition of personal collection is so
narrowly defined it would exclude
transfers of firearms to law enforcement
and make ‘‘the somewhat common ‘Gun
Buy-Back’ scheme unlawful.’’ The
commenter suggested the following
scenario: ‘‘An estate may include any
number of firearms. The inheritor
receives what previously may have been
considered a personal collection.
Whatever the size or value, the new
owner has no association with any
‘study, comparison, exhibition, or
hobby’ and would like to be rid of them.
Currently, some new owners transfer
their firearms to municipal police at a
local ‘gun buy-back event.’ ’’ But under
the new definition, the commenter
added, ‘‘[t]ransferring any number of
firearms for even limited pecuniary gain
(even directly to law enforcement in
exchange for marginally valued gift
cards) would be a [F]ederal crime. Byrne
grants could no longer fund these
activities.’’
Other commenters also noted that the
proposed definition means that firearms
acquired by an individual for any other
purpose, such as for self-defense, would
not be part of a personal collection.
Commenters stated that studies show
that about two-thirds of Americans
report owning firearms primarily for
‘‘defense’’ or ‘‘protection.’’ Without
including firearms acquired for selfdefense as part of a personal collection,
commenters believed that ATF is trying
to create a third classification of owned
firearms, i.e., firearms that are owned by
non-licensees but are not acquired for
‘‘study, comparison, exhibition, or for a
hobby.’’ In essence, commenters argued
that the definition is incorrectly limited
to firearms that are for noncommercial,
recreational enjoyment.
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
Some commenters, including some
gun collectors’ associations, argued that
the proposed definition erodes statutory
protections for nonbusiness conduct by
conflating ‘‘sales, exchanges, or
purchases of firearms for the
enhancement of a personal collection’’
and ‘‘for a hobby.’’ In other words, the
proposed definition includes ‘‘hobby’’
within ‘‘personal collection’’ rather than
it being its own safe harbor.
Commenters stated that the ‘‘for a
hobby’’ provision and the ‘‘for a
personal collection’’ provision are two
separate and distinct items, meaning
that a person who purchases or sells
firearms occasionally as a collector or
for a hobby is not a firearms dealer and
not required to be licensed, and that
‘‘personal collection’’ and ‘‘hobby’’ must
have distinct meanings.
Commenters provided suggestions on
how the term ‘‘hobby’’ could be defined.
One commenter suggested the definition
be broader to mean ‘‘a group [of]
firearms that a person accumulates for
any reason, other than firearms
currently in the business inventory of a
current licensee.’’ One commenter,
while supporting ATF in considering
the ‘‘totality of the circumstances when
determining if one is ‘engaged in the
business,’ ’’ suggested the rule ‘‘could
benefit from specific examples that help
collectors and hobbyists understand
when they may incite the need for
licensure and to help confirm the intent
of the rule.’’
In a similar vein, another commenter
in support of the rule provided a
suggested clarification of when a gun
sale would be part of a hobby. They said
the rule parenthetically describes
‘‘hobby’’ in the definition of ‘‘personal
collection’’ as follows: ‘‘(e.g.,
noncommercial, recreational activities
for personal enjoyment, such as
hunting, or skeet, target, or competition
shooting).’’ As a result, the commenter
suggested the rule ‘‘could clarify that, to
be covered by the exception, a hobbyist
may only engage in gun sales to serve
an interest in such ‘noncommercial,
recreational activities for personal
enjoyment, such as hunting, or skeet,
target, or competition shooting.’ ’’ The
same commenter also suggested that the
rule ‘‘should clarify that the hobby
exception to the ‘engaged in the
business’ definition does not cover an
individual whose hobby is gun selling
to generate profit.’’
A different commenter in support of
the rule proposed other clarifying
language to create a rebuttable
presumption for when a sale or transfer
of a firearm is presumed to be part of a
hobby. The proposed addition would
specify that a person who meets all of
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
the following criteria will be presumed
to be selling or transferring firearms as
part of a hobby: when the collection (A)
has been appraised by an expert who is
qualified to evaluate firearms; (B) has
been documented by photographs that
show each firearm and its serial
number; (C) has been catalogued by
serial numbers and other identifying
features; (D) has been insured by an
insurance company that covers firearms;
(E) has been displayed in a secure
location that is not accessible to
unauthorized persons; and (F) has not
been used for hunting, sporting, or selfdefense purposes. The commenter
proposed that this presumption would
help infrequent sellers or those who
transfer firearms for personal reasons
distinguish between regular commercial
sales and ‘‘occasional’’ or ‘‘hobby’’ sales.
The same commenter also suggested
adding a similar rebuttable presumption
providing that a person is presumed to
be selling or transferring firearms for
hunting, sporting, or self-defense
purposes when the person sells or
transfers a firearm that is suitable for
hunting certain game animals,
participating in certain shooting
competitions, or providing protection
against certain threats. The commenter
also suggested a presumption based on
a threshold number of sales per year as
an additional way to help distinguish
infrequent sellers. This suggested
presumption would read, ‘‘a person who
sells or transfers five or fewer firearms
per calendar year shall be presumed to
be selling or transferring firearms
occasionally. This presumption may be
rebutted by evidence that shows that the
person is engaged in the business of
dealing in firearms. A person who sells
or transfers more than five firearms per
calendar year shall be presumed to be
engaged in the business of dealing in
firearms. This presumption may be
rebutted by evidence that shows that the
person is not engaged in the business of
dealing in firearms.’’
Other commenters stated that the
portion of the definition of ‘‘personal
collection’’ stating that licensees can
only consider firearms as a part of their
personal collection if they are stored
separately from and not comingled with
business inventory and appropriately
tagged as ‘‘not for sale’’ would be
difficult to operationalize and would
make things complicated not only for
the business but also for the employees
of that business. These commenters
stated that the rule does not allow for
licensed (or otherwise lawfully
permitted) concealed carry activities.
For instance, a business could be cited
for a violation if an employee carries
their personal firearm to work on their
PO 00000
Frm 00071
Fmt 4701
Sfmt 4700
29037
person if the employee temporarily puts
it in desk drawer or work bench.
Additionally, to avoid potential
liability, they opined that the employee
would have to tag their personal firearm
as not for sale. These commenters
argued that ATF should either remove
the requirement for FFLs to store
personal collections separately from
business inventory or clearly exclude
firearms owned by persons and carried
on or about the person for self-defense.
Another commenter stated that the
rule inappropriately requires FFLs going
out of business to ‘‘dispose’’ of the
firearms in their business inventory to
themselves in order for such firearms to
be considered part of their personal
collection. They added that such a
transfer to a personal collection happens
as a matter of law once the license is
given up, because there is no more
business inventory, because the firearms
business has ceased.
Department Response
The Department agrees that collectors
who purchase firearms for a personal
collection are permitted under the GCA,
as amended, to occasionally sell them to
enhance their collection or liquidate
them without being required to obtain a
license. However, firearms that are
purchased by collectors or hobbyists for
the purpose of resale with the intent to
predominantly earn a profit cannot be
said to primarily have been
accumulated for study, comparison,
exhibition, or for a hobby.213 They are
considered commercial firearms or
firearms obtained for financial gain, not
part of a personal collection. Many of
the criticisms of the definition of
‘‘personal collection’’ have one
misconception in common: that any
person who amasses multiple firearms
without a license and without criminal
purpose has, by definition, a ‘‘personal
collection,’’ or is a ‘‘collector’’ under the
statute.214 But that is not correct. This
213 See The Federal Firearms Owner Protection
Act: Hearing on S. 914 Before the S. Comm. on the
Judiciary, 98th Cong. 50–51 (1983) (response of
Robert E. Powis, Deputy Assistant Secretary, Dep’t
of the Treasury, to questions submitted by Sen.
Hatch) (‘‘The proposed definition states that the
term [‘‘with the principal objective of livelihood
and profit’’] means that the intent underlying the
sale or disposition of firearms is predominantly one
of obtaining livelihood and necessary gain, as
opposed to other intentions such as improving or
liquidating a personal firearms collection. It does
not require that the sale or disposition of firearms
is, or be intended as, a principal source income or
a principal business activity. This provision would
make it clear that the licensing requirement does
not exclude part-time firearms businesses as well as
those firearms collectors or hobbyists who also
engage in a firearms dealing business.’’).
214 Under the GCA, 18 U.S.C. 921(a)(13), the term
‘‘collector’’ means ‘‘any person who acquires, holds,
E:\FR\FM\19APR3.SGM
Continued
19APR3
29038
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
assertion is akin to saying that any
person who walks around with change
in their pockets for daily use has a coin
collection or is a coin collector.
The Department has revised the
definition of ‘‘personal collection’’ in
the final rule to make it clear that
firearms a person obtains predominantly
for a commercial purpose or for
financial gain are not within that
definition. This distinguishes such
firearms from personal firearms a person
accumulates for study, comparison,
exhibition, or for a hobby, which are
included in the definition of ‘‘personal
collection,’’ but which the person may
also intend to increase in value.
Nonetheless, the Department agrees that
collecting ‘‘curios or relics’’ (as defined
in 27 CFR 478.11), ‘‘collecting unique
firearms to exhibit at gun club events,’’
‘‘historical re-enactment,’’ and
‘‘noncommercial firearms safety
instruction’’ should be added to the
specific examples of firearms acquired
for a ‘‘personal collection,’’ and has
added them to this final rule.
The Department disagrees that the
definition of ‘‘personal collection’’ is so
narrowly defined that it would preclude
personal firearms that are inherited from
being sold under a common government
‘‘gun-buy-back’’ program. First, the
occasional sale of inherited firearms to
a government agency is not conduct that
would likely fall within any
presumption or otherwise rise to the
level of being engaged in the business of
dealing in firearms. Second, sales of
inherited firearms, whether or not they
are part of a personal collection, are
generally not made by a person who is
devoting time, attention, and labor to
dealing in firearms with a predominant
intent to profit. To make this clear, the
Department has added liquidation
transfers or sales of inherited firearms as
conduct that does not support a
presumption of being engaged in the
business. The Department also included
reliable evidence that a person was
liquidating inherited firearms in the
types of evidence that can be used to
rebut any presumption. See
§ 478.13(e)(5)(i), (f). For these reasons, a
person would not be presumptively
engaged in the business if they only sold
or disposes of firearms as curios or relics.’’ A
firearm is a ‘‘curio’’ or ‘‘relic’’ when it: (1) is ‘‘of
special interest to collectors by reason of some
quality other than is associated with firearms
intended for sporting use or as offensive or
defensive weapons’’; and (2) either (a) was
manufactured at least 50 years prior to the current
date, (b) was certified by a museum curator to be
a curio or relic of museum interest, or (c) derives
a substantial part of its monetary value from the fact
that it is novel, rare, bizarre, or because of its
association with some historical figure, period, or
event. 27 CFR 478.11.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
inherited firearms to a government
agency as part of a ‘‘gun-buy-back’’
program, regardless of whether the
firearms fell within the definition of
‘‘personal collection.’’
The Department disagrees with
commenters who said that the definition
of ‘‘personal collection’’ is too vague
and acknowledges that the definition
does not include firearms owned by
commercial entities and used for
commercial business purposes. The
definition is from standard dictionary
definitions, and firearms acquired by
commercial entities are not ‘‘personal’’
or a ‘‘collection,’’ and cannot be said to
be part of ‘‘personal collection.’’ 215
That, however, does not necessarily
mean commercial entities that own
firearms are engaged in the business of
dealing in firearms under the statute or
this rule. When a company, such as an
armored car company or hunting
outfitter, purchases firearms for a
business inventory, their predominant
intent is not likely to be earning a profit
by repetitively purchasing and reselling
firearms. While the operations of each
company must be examined on a caseby-case basis to determine, for example,
if they are engaged in the business of
dealing in firearms on a part-time basis,
such companies generally do not need
to be licensed.
The Department also disagrees with
commenters who indicated that
‘‘personal collection’’ is too narrow
because it does not include firearms
purchased for self-defense. The
dictionary definition of ‘‘collection’’
means ‘‘an accumulation of objects
gathered for study, comparison, or
exhibition or as a hobby.’’ 216 This
common definition is consistent with
how the GCA views a ‘‘collection.’’ The
GCA, 18 U.S.C. 921(a)(13), defines the
term ‘‘collector’’ as ‘‘any person who
acquires, holds, or disposes of firearms
as curios or relics, as the Attorney
General shall by regulation define.’’ The
regulations have long further defined
the term ‘‘curios or relics’’ as ‘‘[f]irearms
which are of special interest to
collectors by reason of some quality
other than is associated with firearms
intended . . . as offensive or defensive
weapons.’’ For this reason, the
definition of ‘‘personal collection’’ in
this rule does not include firearms that
have no special interest to the collector
215 See
footnote 88, supra.
Merriam-Webster Online
Dictionary, https://www.merriam-webster.com/
dictionary/collection (last visited Mar. 7, 2024); see
also Collection, Brittanica Online Dictionary,
https://www.britannica.com/dictionary/collection
(last visited Mar. 7, 2024) (‘‘a group of interesting
or beautiful objects brought together in order to
show or study them or as a hobby’’).
216 Collection,
PO 00000
Frm 00072
Fmt 4701
Sfmt 4700
or hobbyist other than as weapons for
self-defense or defense of others, as has
been clarified in the final rule.217 At the
same time, the Department recognizes
that 18 U.S.C. 921(a)(21)(C) allows
persons to make occasional sales,
exchanges, or purchases of firearms ‘‘for
a hobby.’’ For this reason, the
Department has defined the term
‘‘personal collection’’ more broadly than
just a collection of curios or relics, and
has included firearms for
‘‘noncommercial, recreational activities
for personal enjoyment, such as
hunting, skeet, target, or competition
shooting, historical re-enactment, or
noncommercial firearms safety
instruction.’’
Moreover, by definition, all firearms
are ‘‘weapons’’ that will, are designed
to, or may readily be converted to expel
a projectile, and are therefore
instruments of offensive or defensive
combat.218 18 U.S.C. 921(a)(3)(A). Some
firearms that can be used for personal
defense may also be collectibles or
purchased for a hobby, while others
may not. Additionally, including all
firearms usable for self-defense in the
definition of ‘‘personal collection’’ is
inconsistent with the statutory scheme
217 See, e.g., Tyson, 653 F.3d at 202–03 (‘‘Tyson
called himself a firearms ‘collector,’ which, if true,
would also have shielded him from criminal
trafficking liability. See 18 U.S.C. 921(a)(21)(C)
(stating that one 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’ is not a ‘dealer in firearms’).
These were lies designed to game the system. After
all, none of the firearms purchased by Tyson were
antiques and his behavior was decidedly
inconsistent with that of a collector.’’); Idarecis, 164
F.3d 620, 1998 WL 716568, at *3 (unpublished table
decision) (‘‘[Defendant] nevertheless argues that the
definition of a gun ‘collection’ in § 921(a)(21)(c)
should be read more broadly than the definition of
a gun ‘collector’ in order to encompass the guns
[Defendant] owned and sold. We cannot say that the
district court’s failure to instruct the jury on the
collection exemption pursuant to § 921(a)(21)(C)
was plain error. There is no case authority to
suggest that there is a distinction between the
definition of a collector and of a collection in the
statute.’’); Palmieri, 21 F.3d at 1269 (‘‘[A] ‘collector’
is defined as ‘any person who acquires, holds, or
disposes of firearms as curios or relics . . . . ’ Id.
sec. 921(a)(13). Section 922(a) requires inquiry into
both the defendant’s conduct and status. If the
conduct constituted engaging in the business of
dealing in firearms, then it is illegal unless the
defendant is a licensed dealer. On the other hand,
sales by a licensed or unlicensed collector from a
personal collection in furtherance of a hobby are
not illegal. Once the conduct is deemed equivalent
to the business of dealing, however, collector status
will not shield a defendant from liability under
§ 922(a).’’).
218 See Lunde Arms Corp. v. Stanford, 107 F.
Supp. 450, 452 (S.D. Cal. 1952), aff’d, 211 F.2d 464
(9th Cir. 1954) (‘‘To be a firearm an implement must
be a weapon. . . . A weapon is defined in
Webster’s New International Dictionary, 2nd
edition, as: ‘An instrument of offensive or defensive
combat[.]’ ’’).
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
of the GCA. The GCA places restrictions
on dealing in firearms, but permits
individuals to make ‘‘occasional sales,
exchanges, or purchases of firearms for
the enhancement of a personal
collection or for a hobby’’ or sell all or
part of a personal collection. 18 U.S.C.
921(a)(21)(C). Including all firearms
usable for self-defense in the definition
of ‘‘personal collection’’ would allow
the limited definitional exclusions for
enhancing and liquidating a personal
collection to swallow the rule that
dealers in firearms must be licensed,
because one could nearly always claim
that a firearm was purchased or sold to
improve or liquidate the firearms one
keeps for self-defense. That assertion is
not consistent with the common
definitions of ‘‘collection’’ or ‘‘hobby.’’
In addition, it would potentially create
similar problems with the GCA
provision that places limitations on the
disposition of firearms transferred by
licensees to their ‘‘personal collection.’’
18 U.S.C. 923(c). It could also create a
conflict with the provision of the United
States Sentencing Guidelines that
allows persons convicted of certain
firearms violations in some situations to
receive a reduction in their sentencing
offense level if they possessed firearms
‘‘solely for lawful sporting purposes or
collection.’’ 219 U.S.S.G. 2K2.1(b)(2).
Whether a firearm is part of a personal
collection or for a hobby depends on the
kind and type of firearms,220 and courts
219 See United States v. Miller, 547 F.3d 718, 721
(7th Cir. 2008) (‘‘Miller concedes that he kept the
shotgun for security against intruders, rather than
as part of a collection. It follows that § 2K2.1(b)(2)
does not reduce Miller’s offense level.’’); United
States v. Bertling, 510 F.3d 804, 807, 811 (8th Cir.
2007) (defendant was not entitled to sentencing
guidelines calculation reduction for sporting
purposes or collection where he possessed a
handgun for personal protection); United States v.
Halpin, 139 F.3d 310, 310–11 (2d Cir. 1996)
(possession or use of a gun for purposes of personal
protection, or protection of others, does not qualify
a defendant for a sentence reduction for sporting
purposes or collection); United States v. Dudley, 62
F.3d 1275, 1277 (10th Cir. 1995) (same); United
States v. Gresso, 24 F.3d 879, 881–82 (7th Cir. 1994)
(‘‘[T]he Sentencing Commission allows a reduction
in penalty for certain types of possession; these
favored uses [of sporting purposes or collection] do
not include self-protection. It is easy to understand
why self-protection is not included. Attempting to
distinguish as a practical matter between defensive
and potentially offensive purposes might be next to
impossible.’’); United States v. Cousens, 942 F.2d
800, 803–04 (1st Cir. 1991) (same).
220 Cf. United States v. Hanson, 534 F.3d 1315,
1319 (10th Cir. 2008) (‘‘[T]he type of gun here,
which is most commonly used for self-protection,
weighs against Mr. Hanson’s claim that he
purchased it entirely for a sporting purpose.’’);
United States v. Wilder, 12 F. App’x 297, 299 (6th
Cir. 2001) (some of the defendant’s firearms were
not suited for hunting or target practice, and so the
U.S.S.G. 2K2.1(b)(2) sentence reduction did not
apply); United States v. Lewitzke, 176 F.3d 1022,
1028 (7th Cir. 1999) (affirming the district court’s
finding that defendant’s guns were not of the type
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
have also looked to the nature and
purpose for which they are
accumulated.221 This is not to say
individuals or companies cannot buy or
sell firearms that are primarily for selfdefense or protection of others under
this rule. It just means that those other
personal firearms are not necessarily
part of a ‘‘personal collection,’’ and
persons who buy or sell such firearms
cannot avail themselves of the statutory
exception for personal collections in 18
U.S.C. 921(a)(21)(C) unless the firearms
are of a type and purpose to qualify as
personal collection firearms. To make
this point clear, the definition of
‘‘personal collection’’ has been revised
to state that ‘‘[i]n addition, the term
shall not include firearms accumulated
primarily for personal protection:
Provided, that nothing in this definition
normally used for target shooting and therefore
weighed against granting the reduction); United
States v. Hause, 26 F. App’x 153, 154 (4th Cir.
2001) (same with inexpensive handgun that was not
the sort of firearm that would be considered
collectible).
221 See United States v. Fifty-Two Firearms, 362
F. Supp. 2d 1308, 1314–15 (M.D. Fla. 2005)
(‘‘[Defendant] did not merely make occasional sales
or exchanges of firearms to enhance his personal
collection or for a hobby. Rather, he possessed a
significant number of inexpensive shotguns, rifles,
and handguns for resale.’’); Hannah’ 2005 WL
1532534, at *3 (rejecting a defendant’s argument
that purchases and sales of firearms were made for
the enhancement of his personal collection or for
a hobby where ‘‘[n]one of the firearms had any
historical value’’); cf. United States v. Baker, 501
F.3d 627, 629 (6th Cir. 2007) (affirming the district
court’s decision not to apply sentencing guideline
2K2.1(b)(2) because ‘‘the gun was not ‘stored in a
manner showing that it was valued or treasured,’
nor was it ‘polished and treated as one would treat
something that was part of a collection’ ’’); United
States v. Denis, 297 F.3d 25, 33–34 (1st Cir. 2002)
(same where a rifle was stored loaded and near cash
to protect marijuana sales, rather than kept for
sporting purposes as alleged); United States v.
Clingan, 254 F.3d 624, 626 (6th Cir. 2001)
(upholding denial of the collection sentence
reduction, and noting that ‘‘[n]one of the weapons
were antiques or of other special value’’); United
States v. Miller, 224 F.3d 247, 251 (3d Cir. 2000)
(affirming the district court’s denial of the
2K2.1(b)(2) sentence reduction to the defendant’s
sentence for dealing in firearms without a license
under 18 U.S.C. 922(a)(1)(A) because the firearms
sold were not ‘‘solely for sporting purposes or
collection’’ where the defendant was convicted for
firearms trafficking); United States v. Zakaria, 110
F.3d 62, 1997 WL 139856, at *3 (4th Cir. 1997)
(unpublished table decision) (‘‘In the present case,
there was substantial evidence showing that Zakaria
purchased the firearms with the sole intent of
selling them to his cousin for illegal export to
Pakistan; not for placing them in his private
collection.’’); United States v. Andrews, 45 F.3d
428, 1994 WL 717589, at *3 (4th Cir. 1994)
(unpublished table decision) (denying sentence
reduction, saying ‘‘[a]lthough Andrews possessed a
large number of guns that were unloaded and on
display in his den, they generally were common
shotguns and rifles typically not ‘collected’ in the
narrow sense of being ‘collectors’ items’’’); United
States v. Gonzales, 12 F.3d 298, 301 (1st Cir. 1993)
(same with respect to accumulation by a felon of ‘‘a
small arsenal of handguns’’ allegedly for sporting
purposes or collection).
PO 00000
Frm 00073
Fmt 4701
Sfmt 4700
29039
shall be construed as precluding a
person from lawfully acquiring firearms
for self-protection or other lawful
personal use.’’ § 478.11.
The Department has made it explicit
in this final rule that firearms acquired
for a hobby—including noncommercial,
recreational activities for personal
enjoyment, such as hunting, or skeet,
target, or competition shooting, or
historical re-enactments—may be part of
a ‘‘personal collection.’’ Therefore,
reliable evidence of occasional sales of
such firearms only to obtain more
valuable, desirable, or useful firearms
for the person’s personal collection
would not support a presumption and
may be used to rebut any EIB
presumption.222 See § 478.13(e)(2), (f).
However, as stated previously, the
Department will not set a minimum
threshold number of firearms to
determine when a person is engaged in
the business or occasionally selling
firearms to enhance a personal
collection. While not included in the
regulatory text, the plain and ordinary
meaning of the term ‘‘occasional’’
should be read to mean ‘‘infrequent or
irregular occurrence,’’ 223 and to exclude
firearm sales, exchanges, or purchases
that are routinely or regularly made
(even on a part-time basis).
The Department agrees with the
comment that the phrase ‘‘or for a
hobby’’ in 18 U.S.C. 921(a)(21)(C) has a
meaning independent of the term
‘‘collection.’’ The rule therefore
incorporates that phrase into the
definition of ‘‘personal collection,’’ and
expressly recognizes that firearms that
may not be considered ‘‘collectibles’’ are
also included in the definition of
‘‘personal collection.’’ Under this
combined definition, firearms acquired
‘‘for a hobby’’ are, for example, those
acquired for ‘‘noncommercial,
recreational activities for personal
enjoyment, such as hunting, skeet,
target, or competition shooting,
historical re-enactment, or
noncommercial firearms safety
instruction.’’
The Department agrees with
commenters that the requirement, in the
definition of ‘‘personal collection of a
licensee,’’ that licensees must segregate
business inventory from personal
firearms in the proposed rule was not
222 See, e.g., Approximately 627 Firearms, 589 F.
Supp. 2d at 1135 (‘‘[Claimant] offered credible
testimony that he was an avid hunter, and that
‘maybe 20 to 25’ of the firearms at issue were his
personal guns. The firearms which [Claimant] held
for personal use are not subject to forfeiture simply
because the vast majority of seized firearms were
‘involved in’ [dealing without a license].’’ (citation
omitted)).
223 See footnote 123, supra.
E:\FR\FM\19APR3.SGM
19APR3
29040
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
meant to apply to personal firearms
ordinarily carried by the licensee. It was
meant to apply only to personal firearms
that are stored or displayed on the
licensee’s business premises, which
should not be commingled with
business inventory. For this reason, the
applicable language in this final rule’s
definition of ‘‘personal collection of
licensee’’ has been revised to clarify that
it applies only to personal firearms
‘‘when stored or displayed’’ on the
business premises.
The Department disagrees that
transfer of firearms in a business
inventory to a personal collection (or
otherwise as a personal firearm) by an
FFL ‘‘happens as a matter of law’’ when
the FFL goes out of business. Under the
GCA, 18 U.S.C. 923(c), a business
inventory of firearms held by a licensee
only becomes part of a ‘‘personal
collection’’ (or otherwise a personal
firearm) if the firearms were transferred
from the licensee’s ‘‘business inventory
into such licensee’s personal collection’’
(or other personal firearms) while the
person is licensed, and one year has
passed from the time of transfer.
Additionally, such disposition or any
other acquisition cannot have been
made by the licensee for the purpose of
willfully evading the restrictions placed
on licensees. Under this rule, the
licensee must take affirmative steps to
accomplish this task.224 It does not
occur automatically by operation of law,
and it would frustrate the operation of
the GCA for such restrictions to apply
to a licensee one day before
discontinuance of business but not one
day after.
13. Definition of ‘‘Responsible Person’’
khammond on DSKJM1Z7X2PROD with RULES3
Comments Received
Some commenters generally agreed
with the Department’s proposed
definition of ‘‘responsible person,’’
stating it is important for accountability
and oversight. Other commenters stated
that the definition of ‘‘responsible
person’’ needed more clarity because,
224 27 CFR 478.11 (definition of ‘‘personal
collection’’ requires that for a firearm to be in a
‘‘personal collection,’’ the acquisition of the firearm
must be recorded in the licensee’s acquisition book,
recorded as a disposition from the licensee’s
inventory to a personal collection, maintained and
stored separately for one year, and not have been
acquired or transferred with the intent to willfully
evade the GCA); cf. Zakaria, 110 F.3d 62, 1997 WL
139856, at *2 (holding that licensee’s sale to his
cousin was from his business inventory as a matter
of law, saying ‘‘[w]e find that the district court
reasonably interpreted 18 U.S.C. 923(c) (1994) and
27 CFR 178.125a (1996) to contain a default
provision which provides that the sale of firearms
held for less than one year which are not properly
recorded pursuant to 27 CFR 178.125a(a), regardless
of how acquired, are to be considered to be from
the licensee’s business inventory.’’).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
without it, there may be unintended
consequences for individuals engaged in
legitimate firearms transactions, further
complicating what they referred to as an
already complex regulatory landscape.
For instance, one commenter, a large
FFL with thousands of employees,
stated the definition of ‘‘responsible
person’’ is overbroad and could capture
hundreds of employees in its company.
As examples, they listed logistics and
shipping associates; marketing and sales
associates; value stream managers;
group and team leads; associates
responsible for establishing and
disseminating standard work and job
instructions as they pertain to firearms
manufacture, destruction, transfer, and
testing; customer service associates;
engineers; and product and project
managers involved in firearms design
and manufacture. The commenter added
that, were all these employees to be
considered responsible persons, it
would become extremely burdensome to
add them to their license as well as
timely update the license as people join
or leave the company. The commenter,
therefore, suggested that the designation
of a responsible person should be based
on (1) the person’s responsibilities, and
(2) the licensee’s designation of the
person as a responsible person.
Another commenter stated that the
proposed regulatory definition of
‘‘responsible person’’ is contrary to the
statute at 18 U.S.C. 923(d)(1)(B), which
they said describes an applicant for a
license to include, ‘‘in the case of a
corporation . . . any individual
possessing, directly or indirectly, the
power to direct or cause the direction of
the management and policies of the
corporation, partnership, or
association.’’ The commenter stated that
the proposed regulatory definition adds
words that are not in section
923(d)(1)(B), specifically ‘‘business
practices of a corporation, partnership,
or association insofar as they pertain to
firearms.’’ The commenter argued that
‘‘practice’’ is the ‘‘actual performance’’
of something or even ‘‘a repeated
customary action,’’ regardless of
whether the action is permitted by or
contrary to the organization’s
management or policies. Despite the
Department’s explanation that store
clerks or cashiers cannot make
management or policy decisions with
respect to firearms and are unlikely to
be considered a ‘‘responsible person,’’
the commenter asked whether gun store
clerks who direct ‘‘business practices’’
each time they perform their job duties
could be captured under the regulatory
definition. The commenter asserted that
the Department was trying to capture
PO 00000
Frm 00074
Fmt 4701
Sfmt 4700
more people as responsible persons than
Congress intended by adding those
emphasized phrases, which the
commenter characterized as amorphous
and unexplained.
Another commenter also stated the
definition is too broad on grounds that
the words ‘‘indirectly’’ and ‘‘cause the
direction’’ are unclear terms. The
commenter suggested the Department
adopt the definition of ‘‘responsible
person’’ from the explosives context,
where it is defined in 18 U.S.C. 841(s)
as ‘‘an individual who has the power to
direct the management and policies of
the applicant pertaining to explosive
materials.’’
Department Response
The Department disagrees that the
definition of ‘‘responsible person’’ is
overbroad; it merely establishes by
regulation the longstanding definition
used on ATF Form 7/7CR, Application
for Federal Firearms License, based on
statutory language in 18 U.S.C.
923(d)(1)(B). The Department declines
to fully adopt the definition set forth in
the Federal explosives laws at 18 U.S.C.
841(s), because, although it is similar, it
does not include persons who indirectly
possess the power to direct or cause the
direction of the management and
policies of an entity, as identified in
section 923(d)(1)(B). The Department
does not intend, by means of this rule,
to change how persons apply the
current definition of ‘‘responsible
person’’ on ATF Form 7/7CR.
Nonetheless, the Department agrees
with commenters that the term
‘‘responsible person’’ would benefit
from some additional clarity, as follows.
First, to help ensure that persons do not
interpret the term ‘‘business practices’’
to cover sales associates, logistics
personnel, human resources personnel,
engineers, and other employees who
cannot make management or policy
decisions on behalf of the licensee with
respect to the firearms business, the
Department has removed the term
‘‘business practices’’ from the definition
of ‘‘responsible person’’ in the final rule
and intends to remove the term
‘‘business practices’’ from ATF Form 7/
7CR in the future. Second, to ensure that
persons understand the term
‘‘applicant’’ in 18 U.S.C. 923(d)(1)(B) to
include as ‘‘responsible persons’’ sole
proprietors and individuals with
authority to make management or policy
decisions with respect to firearms for
companies (including limited liability
companies) the definition in this final
rule includes sole proprietorships and
companies. This will make it clear that
all licensees (including sole proprietors
and limited liability companies) must
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
inform ATF of responsible persons who
have the authority to make management
or policy decisions with respect to
firearms, and ensure they undergo a
background check. At the same time, the
Department does not intend to include
in the definition of responsible persons
those employees who have no authority
to make management or policy
decisions that impact the firearms
portion of a licensed business.
14. Definition of ‘‘Predominantly Earn a
Profit’’
khammond on DSKJM1Z7X2PROD with RULES3
a. Overbreadth
Comments Received
Numerous commenters expressed
concern over the scope of the term
‘‘predominantly earn a profit.’’ Some
commenters raised questions regarding
‘‘intent to earn a profit,’’ noting that it
is only logical for a person selling a
good, like a firearm, to want to earn a
profit and that it would be ridiculous to
expect any private seller to sell a firearm
for less than its expected value. For
instance, one commenter stated they
had a small gun collection of primarily
curio and relic firearms and would set
a sales price based on their perception
of the firearm’s market value. This
person stated that while they might
make some money, their motivation is
not to make a profit (noting that their
last sale was to pay a medical bill) but
they believe they would be required to
get an FFL under the rule.
In a similar vein, some commenters
opined that they would have to sell
their firearms at a loss to avoid
generating a ‘‘profit’’ and that the
proposed rule would prevent an owner
from receiving fair market value for
their firearms. Similarly, other
commenters pointed out how a person
might avoid the ‘‘intent’’ requirement.
One commenter asked if a person who
states that their primary goal is not to
earn a profit and acts as a nonprofit
organization can, as a result, sell as
many guns as they like without
becoming licensed. Another commenter
noted that under IRS rules of ‘‘income,’’
an even exchange of goods means there
is no income or profit, and that if there
is no profit, there is no business activity.
This commenter believed that, if the
buyer and seller determine the value of
the items and make an even exchange,
then the buyer should not be captured
under the definition of ‘‘predominantly
earn a profit.’’ Other commenters
questioned who would determine who
made a ‘‘profit’’ where a trade involved
no cash, but a person instead traded a
gun and a laser sight for a different gun.
Another commenter critiqued the
definition, stating that it has been
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
expanded to include any pecuniary
gain, which they stated is overbroad.
The commenter argued that the
definition fails to recognize that all sales
have some motive of pecuniary gain;
otherwise a seller would give away or
destroy their firearm. They stated that
not only does the GCA expressly allow
non-licensees to make occasional sales,
but nothing in the GCA prohibits nonlicensees from attempting to derive
pecuniary gain from their occasional
sales. One organization argued that the
definition would apply even when a
person is selling a firearm on
consignment because, if a person
consigned their firearm to an FFL, that
person would be reselling with the
intent to predominantly earn a profit
and therefore would need to be
licensed, even though the transaction is
facilitated by an FFL.
Department Response
The Department disagrees that the
rule’s definition of ‘‘predominantly earn
a profit’’ is overbroad. The definition
merely implements the statutory
definition ‘‘to predominantly earn a
profit’’ in 18 U.S.C. 921(a)(22), which
defines that term, in relevant part, to
mean 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.’’ The Department agrees that
some persons who sell firearms do not
have the predominant intent to profit
through repetitive purchase and resale
even if they do intend to obtain
pecuniary gain from firearms sales (e.g.,
where the intent to obtain such gain is
a secondary motive). However, even if a
person has a predominant intent to earn
a profit, it does not automatically follow
that they are always engaged in the
business. A predominant intent to profit
through repetitive resale of firearms is
only one element of being engaged in
the business.
Under the BSCA, a person’s intended
use for the income they receive from the
sale or disposition of firearms is not
relevant to the question of whether they
intended to predominantly obtain
pecuniary gain. If a person must sell
their previously acquired firearms to
generate income for subsistence, such as
to pay medical or tuition bills, they are
still subject to the same considerations
as persons who intend to sell their
firearms to go on a vacation, increase
their savings, or buy a sports car. If
persons repetitively resell firearms and
actually obtain pecuniary gain, whether
or not it was for support or subsistence,
that gain is evidence demonstrating the
PO 00000
Frm 00075
Fmt 4701
Sfmt 4700
29041
intent element of being engaged in the
business. However, the Department
emphasizes that a single or isolated sale
of firearms that generates pecuniary gain
would not alone be sufficient to qualify
as being engaged in the business
without additional conduct indicative of
firearms dealing. For example, a person
who bought a firearm 40 years ago and
now sells it for a substantial profit to
augment income during retirement is
not engaged in the business because the
person’s intent was not to earn that
pecuniary gain through repetitive
purchases and resales of firearms.
With regard to the comment about
nonprofit organizations, they can also
have the predominant intent to earn a
profit from the sale or disposition of
firearms. They just do not distribute
their profits to private owners (although
their employees can receive
compensation).225 In response to
commenters who questioned whether a
like-kind exchange would result in a
profit, or whether the IRS would
consider it ‘‘profit,’’ the Department
reiterates that the relevant standard is
not whether an actual profit is earned
under the definition of ‘‘engaged in the
business.’’ The standard is whether the
person who exchanged the firearms for
money, goods, or services had the
predominant intent to earn a profit—
meaning to obtain pecuniary gain—
through repetitive firearms purchases
and resales.
The Department disagrees with some
commenters who said that a person
always has a predominant intent to earn
a profit when selling or disposing of a
firearm. For example, a person may
wish to get rid of unsuitable or damaged
firearms quickly, so the person intends
to sell them at a loss for less than fair
market value. In that case, there is only
an intent to minimize a pecuniary loss,
not obtain a pecuniary gain. Likewise, a
person who only transfers firearms: as
bona fide gifts; occasionally to obtain
more valuable, desirable, or useful
firearms for the person’s personal
collection; occasionally to a licensee or
to a family member for lawful purposes;
to liquidate (without restocking) all or
part of a personal collection; or to
liquidate firearms that are inherited, or
225 See Myths About Nonprofits, Nat’l Council of
Nonprofits, https://www.councilofnonprofits.org/
about-americas-nonprofits/myths-about-nonprofits
(last visited Mar. 7, 2024) (‘‘The term ‘nonprofit’ is
a bit of a misnomer. Nonprofits can make a profit
(and should try to have some level of positive
revenue to build a reserve fund to ensure
sustainability.) The key difference between
nonprofits and for-profits is that a nonprofit
organization cannot distribute its profits to any
private individual (although nonprofits may pay
reasonable compensation to those providing
services).’’).
E:\FR\FM\19APR3.SGM
19APR3
29042
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
pursuant to court order, does not
usually have a predominant intent to
earn a profit from those activities. This
is true even if the seller has a secondary
motive to obtain pecuniary gain from
those sales. To make this clear, the final
rule now expressly states that any such
evidence may be used to rebut the
presumptions. See § 478.13(e), (f).
The Department agrees with
commenters who suggested that a
person who consigns firearms for sale
(consignor) may have a predominant
intent to earn a profit from the sale of
the firearms; however, that does not end
the inquiry because that person is often
not devoting time, attention, and labor
to dealing in firearms as a regular course
of trade or business. The person engaged
in the business is the seller who accepts
the firearms on consignment
(consignee), is paid to take the firearms
into a business inventory for resale, and
determines the manner in which to
market and resell them on the
consignor’s behalf.226 Like consignmenttype auctioneers, firearms consignment
businesses must be licensed because
they are devoting 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.
b. Government Proof of Intent To Profit
Through Repetitive Purchase and Resale
khammond on DSKJM1Z7X2PROD with RULES3
Comments Received
Other commenters raised concerns
that the proposed definition of
‘‘predominantly earn a profit’’ does not
require a person to have actually
obtained pecuniary gain. Some
congressional commenters stated,
‘‘under the proposed rule, the ATF
would require someone to prove he or
she is not a firearms dealer in instances
where no firearms are actually
exchanged or sold’’ and opined that that
situation was not consistent with the
statute.
Some commenters stated that even
though the proposed rule incorporates
to ‘‘predominantly earn a profit’’ from
the BSCA, the proposed definition
includes language that directly
contradicts the statute and legislative
history of the GCA. They stated that
Congress made clear that it is not
necessary for the Government to prove
profit in cases involving the repetitive
purchase and disposition of firearms for
226 See, e.g., United States v. Strunk, 551 F. App’x
245, 246 (5th Cir. 2014) (Defendant ‘‘without being
licensed, sold firearms entrusted to him by others
for the purpose of sale. Such conduct is
unquestionably prohibited by the legislation’s
text.’’).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
criminal purposes or terrorism, meaning
that it is necessary for the Government
to prove profit in all other cases. Thus,
they argued that the added phrase ‘‘[f]or
purposes of this definition, a person
may have the intent to profit even if the
person does not actually obtain
pecuniary gain from the sale or
disposition of firearms’’ and explanation
from ATF that one can be a dealer
without ever making a purchase or sale
are both contrary to the statute.
Commenters stated that ATF may not
relieve itself of the congressionally
imposed burden to prove profit.
Another commenter pointed out that
eliminating the need for profit is in
tension with the concept of being in a
business; if a business does not make a
profit, then they cease to exist.
Moreover, at least one commenter
disagreed with all the cases that were
cited in support of the claim that the
Government does not need to prove that
the defendant actually profited. The
commenter claimed that three of the
cases cited—United States v. Wilmoth,
636 F.2d 123 (5th Cir. Unit A Feb.
1981), United States v. Mastro, 570 F.
Supp. 1388 (E.D. Pa. 1983), and United
States v. Shirling, 572 F.2d 532 (5th Cir.
1978)—were decided before there was
any statutory mention of ‘‘profit’’ as it
relates to dealing. They noted that two
other cases—Focia, 869 F.3d 1269 and
United States v. Allah, 130 F.3d 33 (2d
Cir. 1997)—were not on point because
in both cases the Government had
shown that defendants profited.
Department Response
The Department disagrees with
commenters who said that the GCA
requires that a person actually obtain
pecuniary gain. The only ‘‘profit’’
element in the GCA—both before and
after the BSCA was enacted—is the
intent to profit through the repetitive
purchase and resale of firearms. This is
because the statutory terms ‘‘to
predominantly earn a profit’’ through
the repetitive purchase and resale of
firearms in 18 U.S.C. 921(a)(22), and
‘‘with the principal objective of
livelihood and profit’’ in 18 U.S.C.
921(a)(23), are both defined to mean
‘‘the intent underlying the sale or
disposition of firearms is predominantly
one of obtaining . . . pecuniary gain.’’
One does not need to realize a profit to
have the intent to profit.
The Department does not agree with
commenters who argued that the
proviso concerning the disposition of
firearms for criminal purposes
demonstrates otherwise. The statement
that ‘‘proof of profit shall not be
required’’ in that proviso requires
neither proof of profit nor proof of
PO 00000
Frm 00076
Fmt 4701
Sfmt 4700
intent to profit for persons who engage
in the regular or repetitive purchases
and dispositions of firearms for criminal
purposes or terrorism. See United States
v. Fifty-Two Firearms, 362 F. Supp. 2d
1308, 1324 (M.D. Fla.), adopted by 362
F. Supp. 2d 1323 (M.D. Fla. 2005)
(‘‘[P]roof of profit motive is not required
as to a person who engages in the
regular and repetitive purchase and
disposition of firearms for criminal
purposes or terrorism.’’ (citing 18 U.S.C.
922(a)(22) and Eleventh Circuit Pattern
Jury Instruction No. 34.1). Reading that
proviso to, by negative implication,
require proof of profit—and intent to
profit—with respect to other forms of
engaging in the business would be
contrary to the plain text of the
definition of ‘‘to predominantly earn a
profit,’’ which refers to the ‘‘intent
underlying the sale or disposition of
firearms.’’ 18 U.S.C. 921(a)(22); see also
id. 921(a)(23) (definition of ‘‘with the
principal objective of livelihood and
profit,’’ similar). It would also be
contrary to decades of Federal case law
on 18 U.S.C. 922(a)(1).227
Some commenters asserted that,
because some of the criminal cases cited
in the proposed rule referenced the fact
that the defendant actually profited
from firearms sales, the cases support
their conclusion that actual profit must
be proven in an engaged in the business
case. The Department disagrees. Of
course, proof of actual profit may be
presented in a case, but that does not
mean it is required. Proof of actual
profit is merely cited by courts in cases,
such as Focia, 869 F.3d at 1282
(defendant ‘‘immediately turned around
and sold them at a steep profit’’), and
Allah, 130 F.3d at 44 (defendant ‘‘had
several people bring him ‘dough’ from
selling guns for him ‘in the streets’ ’’), as
evidence that supported findings that
the defendant had the requisite intent to
profit. But evidence of actual profit is
not necessary where the totality of the
facts otherwise demonstrates the
predominant intent to profit. For
example, if the defendant admitted to an
undercover officer that he wanted ‘‘to
make a whole lot of money’’ from
reselling the firearms to the officer, that
evidence would likely be sufficient to
prove a predominant intent to earn a
profit from those sales. Moreover, where
a person engages in the regular and
repetitive purchase and disposition of
firearms for criminal purposes or
terrorism, no proof of profit, including,
as explained above, the intent to profit,
is required at all in an engaged in the
business case. See 18 U.S.C. 921(a)(22).
227 See
E:\FR\FM\19APR3.SGM
footnote 96, supra.
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
c. Suggestions on Meaning of Profit
khammond on DSKJM1Z7X2PROD with RULES3
Comments Received
Numerous commenters stated that the
definition of ‘‘predominantly earn a
profit’’ with its presumptions will
capture practically all firearms owners
who wish to sell their personal or
inherited firearms because the value of
firearms typically increases over time
and will thus always result in a profit.
Several commenters stated that profit
should be defined to avoid
misinterpretation while others asked
how profit should be calculated or made
suggestions. For example, one
commenter asked if the labor to
customize a firearm or any additional
parts that are added should be included
in a calculation of profit.
Similarly, numerous commenters
pointed out that determining profit does
not account for inflation and indicated
that it should. Commenters provided
examples of how they would not earn a
profit, or would make a minimal profit,
from the sale of a firearm due to
inflation. For example, one commenter
posited that if a person purchased a
firearm for $600 ten years ago and sold
it in the present for $750, this could be
viewed as making a profit, but it would
actually be a loss in real terms because
the purchasing power of $600 was
greater ten years ago than the
purchasing power of $750 is today due
to inflation. At least one commenter
asserted that ATF’s proposed definition
of ‘‘profit’’ is problematic under the U.S.
tax code, as inflation is not allowed to
be accounted for in the ATF definition,
even though it is an adopted measure of
the price of all goods.
Gun collectors’ associations said the
definition does not take into account
any other expense or time value of
money associated with the sale of the
firearm, which is a part of any normal
calculation of ‘‘profit’’ and hence is
beyond proper basis of an interpretive
regulation. Additionally, they stated
that the costs gun collectors incur to
attend events should be factored into
any reasonable definition of ‘‘profit.’’
Similarly, to account for the change in
time in the fair market value of goods,
another commenter proposed adding
language providing that ‘‘[i]f a private
individual sells a firearm that they have
purchased for more than the original
purchase price, they are not considered
to be selling the firearm for the purpose
of primarily making a profit if the fair
market price of the firearm has
increased since the original date of
purchase.’’
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
Department Response
The Department agrees that a person
who liquidates inherited firearms from
a personal collection at fair market
value, absent additional circumstances
indicating otherwise, typically does not
have a predominant intent to profit from
those sales. While the person may have
an intent to receive pecuniary gain
when they sell these firearms and may
or may not have a predominant intent
to profit, the person would not be
‘‘engaged in the business’’ because
liquidating this one set of inherited
firearms does not constitute dealing as
a regular course of trade or business.
Nevertheless, because the Department
believes that persons in such a scenario
typically do not have a predominant
intent to profit, the Department has
incorporated, as conduct that does not
support a presumption, and as rebuttal
evidence, a person who only
‘‘liquidate[s] firearms [t]hat are
inherited.’’ § 478.13(e)(5)(i), (f).
In response to commenters who said
that any profit should account for
inflation, or expenses incurred, again,
the statute does not require proof of
actual profit. The statute’s and rule’s
focus is on the person’s predominant
intent to profit, not on whether a person
actually profits. Because the focus is on
a person’s intent, it makes no difference
whether the costs or inflation
mentioned by the commenters are
included in the sales price or in
assessing actual profit.
The Department disagrees with the
commenter who suggested that a private
individual automatically does not have
an intent to profit if they sell a firearm
that was purchased for more than the
original purchase price if the fair market
price of the firearm has increased since
the original date of purchase. The
Department declines to make this a
blanket exception or rebuttal evidence
to the current presumptions because the
fair market value of the firearm may
have increased substantially more than
the original purchase price. The details
of any particular situation may vary,
and those facts may impact the
determination of intent. Based on these
facts, the seller may or may not have
had a predominant intent to earn a
profit from that sale.
d. Other Suggestions Related to
Definition of ‘‘Predominantly Earn a
Profit’’
Comments Received
Many commenters proposed various
changes to the definition of the term
‘‘predominantly earn a profit’’ that they
felt would narrow the scope of when a
person has intent to predominantly earn
PO 00000
Frm 00077
Fmt 4701
Sfmt 4700
29043
a profit such that they are ‘‘engaged in
the business’’ of dealing in firearms.
Proposed exceptions included
excluding when a person earns less than
$5,000 per year or when they sell fewer
than ten guns a month. One commenter
suggested that certain scenarios be
excluded because while there may be
monetary gain there is no desire to
increase the collection or buy firearms.
These scenarios include liquidation at
fair market value of inherited firearms
or firearms passed down through a
family member, liquidation of firearms
at fair market value due to financial
hardship or disability, and liquidation
of firearms at fair market value due to
loss of interest or change in a hobby.
Similarly, one commenter pointed out
that ‘‘predominantly’’ under 26 U.S.C.
118(c)(3) means ‘‘80 percent or more’’
and argued that ATF’s proposed
definition should be consistent with this
statutory provision in the Internal
Revenue Code. Therefore, the
commenter suggested that ATF’s
definition of dealer should be amended
to someone who engages in selling or
disposing of firearms ‘‘where the intent
is to obtain a pecuniary gain in 80 or
more of the total transactions involving
firearms as defined by’’ 18 U.S.C. 921.
Another commenter suggested that
the term be revised to be clear that a
collector can liquidate all or part of their
collection by having a table at a gun
show without requiring them to become
a Type 01 FFL. Still another commenter
suggested that the text should make
clear the sources or methods used to
acquire the firearm that is subsequently
resold to ‘‘predominantly earn a profit.’’
Department Response
The Department disagrees that the
scope of the PEP presumptions should
be limited to when a person earns less
than $5,000 per year from selling
firearms, or when they sell fewer than
ten guns per month. The amount of
money a person makes when intending
to earn a profit through repetitively
purchasing and reselling firearms may
be relevant in determining whether a
person is engaged in the business. The
fact that a person earns a large amount
of profit from repetitively reselling
firearms may be evidence that a person
had a predominant intent to profit from
those sales. However, there is no
statutory requirement that a person
make a certain amount of money (or any
money at all) to have a predominant
intent to profit. Persons who operate a
part-time firearms business that earns
less than $5,000 per year, or even a
firearms business that loses money due
to poor salesmanship or lack of demand,
would still be engaged in the business
E:\FR\FM\19APR3.SGM
19APR3
29044
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
if they devote time, attention, and labor
to dealing with the predominant intent
to profit through repetitive purchases
and resales of firearms. As stated
previously, it is the seller’s intent to
predominantly earn a profit that
determines whether a person needs a
license, not the number of sales or
amount of profit.
The Department disagrees that the
sale of firearms at fair market value due
to financial hardship or disability is
evidence sufficient to exclude a person
from being considered engaged in the
business, or to rebut the presumptions.
The statute’s definition of ‘‘engaged in
the business’’ does not create an
exception for people who intend to
engage in firearms dealing to earn
income for support or subsistence; the
definition as amended by the BSCA
focuses only on a person’s devotion of
time, attention, and labor to that
business and intent to earn a profit, not
the uses to which they put any resulting
profit or income. As a result, providing
evidence that a person is engaging in the
business of firearms dealing for
livelihood reasons does not rebut any of
the elements that constitute being
engaged in the business.
As to the suggestion that the term
‘‘predominantly’’ be defined
consistently with 26 U.S.C. 118(c)(3) as
‘‘80 percent or more,’’ such that 80
percent of the transactions must be for
pecuniary gain, the Department declines
to do this. First, 26 U.S.C. 118(c)(3) is
a definition of ‘‘predominantly’’ that is
used to determine whether a regulated
public utility that provides water or
sewage disposal services may exclude
certain amounts expended on those
services from their gross income. This
calculation has no connection or
similarity to intent, let alone the context
of firearms sales. Second, the GCA
contains no such limitation. A person
may have the predominant intent to
profit from the sale or offer to sell a
single firearm, even if the person has no
such intent with respect to other
firearms being sold.228
In response to a commenter who
suggested that the regulations be
changed to make it clear that a collector
can liquidate all or part of their
collection by having a table at a gun
show without a license, the Department
228 The term ‘‘predominant’’ is commonly defined
as ‘‘more noticeable or important, or larger in
number, than others.’’ Predominant, Cambridge
Online Dictionary, https://dictionary.
cambridge.org/us/dictionary/english/predominant
(last visited Mar. 17, 2024); see also Predominant,
Oxford English Dictionary, https://www.oed.com/
dictionary/predominant_adj?tab=meaning_and_
use#28860543 (last visited Mar. 17, 2024) (‘‘Having
ascendancy, supremacy, or prevailing influence
over others; superior, predominating.’’).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
has revised the final rule to state that
reliable evidence that the person resells
firearms only occasionally to obtain
more valuable, desirable, or useful
firearms for their personal collection, or
to liquidate a personal collection, does
not support a presumption and can be
used to rebut any presumption.
§ 478.13(e)(2) and (4), (f).
15. Presumptions That a Person Intends
to Predominantly Earn a Profit
Comments Received
Commenters stated that none of the
individual presumptions that a person
has the intent to predominantly earn a
profit are supported by the Federal
statute and raised concerns that they
generally penalize entirely innocent and
natural conduct of non-licensee sellers.
Commenters stated these criteria are
overbroad and fail to differentiate
between genuine business activity and
casual or incidental actions related to
firearms. They stated that it is unfair for
ATF to presume an intent to profit in
scenarios where no such intent exists
and that these presumptions make it
effectively impossible for an unlicensed
person to sell their firearm without
running afoul of the rule. Indeed, one
commenter stated that all avenues to
make a personal sale were cut off and
that he ‘‘cannot fathom how [he is]
supposed to sell ANY firearm without
being presumed to be engaged in the
business under these rules. This rule
says that [he] can sell part of [his]
collection, but [he] cannot see a way to
do so without being presumed to be
engaged in the business under this
rule.’’ At least one commenter stated
that all the presumptions ignore the
statutory requirement that the intent
‘‘underlying the sale or disposition of
firearms is predominantly one of
obtaining pecuniary gain.’’
Similarly, one commenter noted that
determining when someone acts to
‘‘predominantly earn a profit’’ requires
not determining that a profit was made,
but rather, the underlying motivating
factor for that person’s actions. The
commenter disagreed that any of the
presumptions listed are indicators of
such motivation; rather, they said, these
presumptions reflect efficient and
timely ways to sell a firearm and do not
speak at all to the person’s motivation
when buying the firearm initially. For
instance, they said, a person who wants
to sell their car will take all actions
possible to get the best price for it, such
as advertising, providing maintenance
records, renting space to list it online or
a visible place to park it. A person
wanting to sell their firearm would take
similar steps, but these actions that
PO 00000
Frm 00078
Fmt 4701
Sfmt 4700
trigger the presumptions do not shed
light on the motivation for the purchase
or transaction.
A few other commenters were
concerned about the fact that they have
owned firearms for a long time and are
reaching an advanced age at which they
will need to sell them. One such
commenter stated, ‘‘The idea of a profit
is to sell something for more than it was
purchased for. In my collection I have
firearms that were obtained over 40
years ago. Inflation has raised their
value so that any sale will make a profit.
This means I am a dealer.’’ Another
explained that he is not a collector per
se, but is a firearms competitor who
thus has a number of firearms that ‘‘one
day I must dispose of due to my
advancing age. This would eliminate me
from making private sales from my own
holdings. The sale of which would
generate a ‘profit’ since all were bought
years ago when prices were much lower.
The only choice this would leave me
would be to sell on concession through
a dealer . . . if I could find one willing
to take the goods.’’
Commenters stated that many
businesses have a large inventory of
firearms for business purposes but are
not licensed; these include armored car
services, security companies, farmers,
ranchers, and commercial hunting
operations. If ‘‘predominantly earn a
profit’’ is separate from ‘‘engaged in the
business’’ as a set of presumptions, the
commenters added, then a security
company keeping track of its firearm
inventory and the cost of obtaining
those firearms for tax or other reasons
would be captured under any of the
presumptions listed under
‘‘predominantly earn a profit.’’ Or a
hunting outfitter with a large inventory
of firearms for client use would easily
be captured under a ‘‘predominatelyearn-a-profit’’ presumption if they have
security services like monitored alarms
or cameras. The commenters concluded
that the rule might therefore have the
unintended consequence of reducing
public safety if some people avoid
certain security measures, such as
monitored alarms, to avoid being
presumed to be engaged in the business
because they qualified for one of the
‘‘predominantly earn a profit’’
presumptions.
One comment noted that ‘‘while this
set of presumptions is separate from the
presumptions that establish that a
person meets the definition of ‘engaged
in the business,’ evidence of the
conduct described in this set of
presumptions can serve to rebut
evidence of conduct that, under
paragraph (c)(4) (now § 478.13(e)) of the
Proposed Rule’s definition of ‘engaged
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
in the business,’ is presumed not to be
engaged in the business.’’ They
suggested that ATF further clarify this.
Department Response
The Department disagrees that the
presumptions that separately address
the BSCA’s new intent element—‘‘to
predominantly earn a profit’’ through
the repetitive purchase and resale of
firearms—penalize innocent and natural
conduct of sellers who are not engaged
in the business. Nothing in this rule
creates any new penalties. The PEP
presumptions serve only to establish the
intent element. Even when that element
is satisfied, a person would not be
engaged in the business unless the other
statutory requirements are present,
including the requirements that the
person ‘‘devote[ ] time, attention, and
labor to dealing in firearms as a regular
course of trade or business’’ and that the
person is engaging, or intends to engage,
in ‘‘the repetitive purchase and resale of
firearms.’’ 18 U.S.C. 921(a)(21)(C).
As the preamble and regulatory text
explain, the EIB presumptions are not
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. See § 478.13(g). There are
many other fact patterns that could
support a finding that a person is
engaged in the business requiring a
license. The presumptions are tools that
assist persons, including firearms
sellers, investigators, and fact finders, to
understand a set of common situations
that have been found over the course of
decades to indicate that a person is
engaged in the business. Similarly, these
PEP presumptions are not the only fact
patterns that could support a finding
that a person has a predominant intent
to earn a profit, but they are tools to
assist in assessing the element of intent.
At the same time, there are other fact
patterns, such as where a person
advertises a valuable collectible firearm
for sale from a personal collection that
could generate a substantial profit, that
would not require a license. The fact
that the collector, or even a company,
intends to earn a profit from the sale or
disposition of a firearm is not, by itself,
dispositive as to whether that person is
engaged in the business of dealing in
firearms requiring a license. These
presumptions apply only to an
individual’s or entity’s predominant
motivation in selling the firearm, and
like other presumptions, they may be
refuted with reliable evidence to the
contrary.
The Department disagrees that these
presumptions do not address a person’s
motivation. First, as stated previously,
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
actual profit is not a requirement of the
statute—it is only the predominant
intent to earn a profit through the
repetitive purchase and resale of
firearms that is required. Indeed, a
person may repeatedly advertise and
display firearms for sale, and therefore
demonstrate a predominant intent to
earn a profit from repeatedly reselling
the firearms purchased, but never
actually find a buyer. Second, as stated
previously, intent appropriately may be
inferred from a person’s words or
conduct demonstrating such intent.229
The motivation to predominantly obtain
pecuniary gain from the repetitive sale
or disposition of firearms can be
demonstrated when a person takes
certain preliminary steps to earn a
profit, such as those reflected in the PEP
presumptions. Generally, persons who
do not intend to profit from firearms
sales are not going to expend time,
attention, labor, and money to
repetitively advertise, secure display
space, maintain profit documentation,
hire security, set up business accounts,
or apply for business licenses. And even
if they do expend such time, attention,
and labor without a predominant intent
to earn a profit, the person can bring
forward reliable rebuttal evidence to
refute the presumed intent.
The Department disagrees with the
commenter who stated that a collector
who holds firearms in a personal
collection for many years would always
show a profit due to inflation when they
are sold, and would therefore
automatically be considered a dealer. As
stated previously, a showing of actual
profit is not dispositive as to whether a
person is engaged in the business.
Rather, it is the predominant intent of
obtaining pecuniary gain from the
repetitive purchase and resale or
disposition of firearms that matters. See
18 U.S.C. 921(a)(22). However, a person
who is occasionally selling firearms
from a personal collection to enhance it,
or who liquidates it, typically does not
have that intent, which is why this final
rule states that reliable evidence of
those activities and intent does not
support a presumption and may be used
to rebut any presumption. See
§ 478.13(e), (f).
The Department agrees that security
companies, farmers, ranchers, and
hunting outfitters that do not purchase
firearms primarily for resale would be
unlikely to have a predominant intent to
earn a profit from liquidating their
businesses’ firearms, particularly since
these firearms have likely lost their
value over time due to constant use and
handling. Non-firearms-dealing
229 See
PO 00000
footnote 186, supra.
Frm 00079
Fmt 4701
Sfmt 4700
29045
businesses may simply want to quickly
sell them in bulk to a licensee for less
than fair market value, in order to
purchase new firearms. However, even
if such businesses were to resell their
firearms with a predominant intent to
profit, that would not automatically
mean that they were engaged in the
business of dealing in firearms. The
intent to profit is only one element of
being engaged in the business; the other
elements of dealing would also have to
be established. Therefore, if these
businesses engaged in conduct that falls
under one of the PEP presumptions and
are presumed to have a predominant
intent to profit, that does not mean they
are also necessarily presumed to be
engaged in the business of dealing in
firearms.
The PEP presumption on
recordkeeping is about keeping records
to document, track, or calculate profits
and losses from firearms purchases and
resales, not about general recordkeeping
of a firearms inventory or merely the
cost of obtaining the firearms.
Nonetheless, to avoid confusion as to
when it applies, this PEP presumption
has been revised to read, ‘‘[m]akes and
maintains records to document, track, or
calculate profits and losses from
firearms repetitively purchased for
resale.’’ § 478.13(d)(2)(iii). Therefore, as
revised, the presumption is clarified to
show that it does not include persons
who merely keep track of their firearms
or what they spend on them.
The Department does agree that the
PEP presumption on securing a business
security service to protect inventory is
somewhat overbroad as drafted in the
NPRM, and has therefore limited it in
this final rule to maintaining security
for both firearms assets and repetitive
firearms transactions. See
§ 478.13(d)(2)(v). While some businesses
may purchase firearms, and eventually
liquidate them, such activity may be for
reasons completely unrelated to any
profit motive for the firearms
transactions. In contrast, if they secure
business security services to protect
both their firearms assets and
transactions, they are presumed to have
a predominant intent to profit from
those transactions. The focus of the
licensing provisions in the GCA is on
firearms transactions, not merely storing
or maintaining firearms as assets. So, for
example, if a business or other person
merely purchases firearms for their own
use, but not to enter into transactions
involving those firearms, they would
not fall under this presumption because
it is unlikely they would hire business
security to protect firearms transactions.
The Department declines to adopt a
commenter’s suggestion that evidence of
E:\FR\FM\19APR3.SGM
19APR3
29046
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
conduct identified in the PEP
presumptions be used to ‘‘rebut’’
conduct not presumed to be engaged in
the business (listed in paragraph (c)(4)
of the NPRM’s definition of engaged in
the business, and now in § 478.13(e)).
Section 478.13(e) is not a list of
rebuttable presumptions. Rather, it is a
nonexhaustive list of conduct that does
not support a presumption of engaging
in the business. As such, reliable
evidence that a person is or was
engaging only in such conduct can be
used to rebut any presumption. In
addition, the rule has been revised to
state that the examples of rebuttal
evidence set forth in the rule are not an
exhaustive list of evidence a person may
present to rebut the presumptions. See
§ 478.13(g).
khammond on DSKJM1Z7X2PROD with RULES3
16. PEP Presumption—Promotion of a
Firearms Business
Comments Received
Several commenters disagreed with
the inclusion of ‘‘[a]dvertises, markets,
or otherwise promotes a firearms
business (e.g., advertises or posts
firearms for sale, including on any
website, establishes a website for
offering their firearms for sale, makes
available business cards, or tags firearms
with sales prices), regardless of whether
the person incurs expenses or only
promotes the business informally’’ as a
presumption in determining whether a
person has the intent to predominantly
earn a profit.
First, commenters noted that Congress
explicitly rejected limitations on the
private transfers of firearms pursuant to
classified ads and gun shows, implying
that ATF cannot now include in its rule
a presumption that advertising or
promoting a firearms business shows
predominant intent to profit.
Additionally, commenters stated that
such advertisements in a classified
advertisement hardly qualify someone
as having such intent and that this is
criminalizing protected behavior. For
instance, the commenters said, if a
person is liquidating a personally
owned NFA weapon because of a move
to a State where possession of the item
would be unlawful, they believed that
the presumption would capture such a
person who posts an advertisement on
the internet to sell their NFA weapon
even if they lose money on the sale. In
fact, stated one commenter, the
presumption is so broad it could apply
to posting even a single firearm for sale
on a website, which is a common
occurrence where the seller did not
purchase the firearm with intent to
profit and is most likely losing money
on the sale. The commenter stated that
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
there is ‘‘no indicia that a seller who
posts on a website is doing so for
pecuniary gain’’ so ‘‘the presumption
lacks any connection to the statutory
definition of ‘predominantly earn a
profit.’ ’’
Similarly, a couple of gun collectors’
associations stated this first
presumption essentially limits all sales
to word of mouth if a seller does not
want to be captured under the
presumption. A third association added,
‘‘[m]ost who collect firearms or engage
in the sale of firearms for a hobby are
willing to buy or willing to sell, but this
in and of itself [does] not establish by
a preponderance that they are doing so
to ‘predominately earn a profit’. . . .
The changes in the law did not provide
that a person could not advertise a
firearm for sale, put a price tag on it,
place it for sale on the internet, or rent
a table at a gun show.’’ In another
commenter’s view, the presumptions
also preclude word-of-mouth sales.
They stated that the definition of
‘‘engaged in the business’’ does not
require that a firearm actually be sold,
so long as the person holds themselves
out as a dealer. So, they added, ‘‘[i]n
other words, if I converse with another
person and offer to sell a personal
firearm or represent to that person that
I have a willingness, and ability, to
purchase and/or sell other personal
firearms [which occurs regularly if one
is a collector], I am a Dealer. I would ask
how, exactly, a person who wanted to
actively seek out and add firearms to
his/her collection would do so if you are
not allowed to actually converse about
it or negotiate with the owner of that
firearm? . . . You can’t ‘spread the
word’ among other people as that
activity also presumes you are a dealer.’’
One company raised a concern over
whether certain brand ambassadors that
promote company products, or
associates that go to trade shows who
promote their company, would now be
presumed to be engaged in the business
of dealing in firearms.
In contrast, another commenter made
a suggestion to strengthen this
presumption with regard to online sales
advertising because they found, through
their own research, that the number of
online sales advertisements for firearms
through sites such as Armslist was
overwhelmingly listed by unlicensed
sellers rather than licensed dealers.
They suggested that ATF should also
consider stating that any person who
engages in online conduct that falls
within this presumption on more than
one discrete occasion will qualify for a
rebuttable presumption that the person
is ‘‘engaged in the business’’ of firearms
dealing. ‘‘Put differently,’’ they
PO 00000
Frm 00080
Fmt 4701
Sfmt 4700
explained, ‘‘the [I]nternet is the
epicenter of the unregulated firearm
sales market—and repeatedly
advertising for sales online should be
presumptively considered to be holding
oneself out as a dealer. Plainly
describing such an additional rebuttable
presumption . . . would make it much
clearer that a person’s second or
subsequent use of online advertising,
marketing, or posting of firearms for sale
puts the burden on the seller to provide
rebuttal evidence demonstrating that
their multiple online advertisements are
not engaging in the business of firearms
dealing.’’
Department Response
The Department disagrees that the
presumption that a person demonstrates
a predominant intent to profit from
selling firearms if the person
‘‘advertises, markets, or otherwise
promotes a firearms business’’ is
unfounded. Advertising or promoting a
firearms business has long been
recognized as a primary way of
increasing sales and profits 230 and
nothing in this rule prohibits or
criminalizes isolated private transfers of
firearms using classified advertisements
and at gun shows. The presumption is
narrowly tailored based on the
Department’s regulatory and
enforcement experience, court decisions
with similar fact patterns, and the
investigations and prosecutions it has
brought over the years. Because
promoting a firearms business requires
investing time and money, persons
typically do not engage in such
activities without intending to profit
from resulting sales and recoup
potential advertising costs in the
process. As a result, advertising or
promoting a firearms business is activity
that indicates a person has a
predominant intent to profit from
firearms sales. This presumption does
not prevent or hinder individuals from
advertising to promote occasional
private transactions, as intent to
230 See, e.g., The Importance of Marketing for
Your Firearms Company, The Coutts Agency,
https://couttsagency.com/digital-marketing-forfirearms-companies (last visited Mar. 18, 2024)
(‘‘Whether you’re an established name in the
firearms manufacturing sector or you’re a new
firearm company looking to find your niche on the
national level, marketing is how you’ll achieve your
goals.’’); Joshua Claflin, Maximizing ROI With
Effective Firearms Marketing Tactics (The Complete
Guide), Garrison Everest (Nov. 24, 2023), https://
www.garrisoneverest.com/firearms-marketing/
maximizing-roi-with-effective-firearms-marketingtactics-complete-guide (‘‘Marketing serves as the
bridge between firearms businesses and their target
audience. It’s not just about promoting products;
rather, it’s about building firearm brand recognition,
establishing trust, and nurturing long-term
customer relationships.’’).
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
predominantly earn a profit is just one
element of being engaged in the
business.
Nonetheless, the Department
acknowledges commenters’ worries that
an advertisement for an isolated
firearms sale might cause them to be
presumed to have a predominant intent
to profit through the repetitive purchase
and resale of firearms. Therefore, to
increase the likelihood that promoting
or advertising a firearms business as
covered by this presumption relates to
persons who predominantly intend to
earn pecuniary gain from the sale of
firearms, the presumption has been
revised to add the words ‘‘repetitively or
continuously’’ before ‘‘advertises,
markets, or otherwise promotes a
firearms business.’’ § 478.13(d)(2)(i).
Thus, persons who do not repetitively
or continuously advertise or otherwise
promote a firearms business are
excluded from the presumption that
they predominantly intend to profit
from repetitive sales of firearms. Of
course, like the other presumptions, this
one may be rebutted with reliable
evidence to the contrary.
With regard to employees of licensees
who promote a firearms business, such
individuals do not need to be licensed
because businesses ‘‘carry out
operations through their employees,’’
and no transfer or disposition of
firearms occurs when they are
temporarily assigned firearms for
business purposes. ATF Ruling 2010–1,
Temporary Assignment of a Firearm by
an FFL to an Unlicensed Employee, at
2 (May 20, 2010), https://www.atf.gov/
firearms/docs/ruling/2010-1-temporaryassignment-firearm-ffl-unlicensedemployee/download. These employees
operate under the license of the
business, and the business sells firearms
under the requirements of the GCA (e.g.,
background checks). However, a
contractor who is not an employee
would demonstrate a predominant
intent to earn a profit from firearms
sales by promoting another person’s
firearms business, or posting firearms
for sale for someone else, particularly a
company. This does not mean that such
persons are themselves engaged in the
business, but they are promoting a
firearms business with the predominant
intent to earn a profit from the sale or
distribution of those firearms, and
thereby assisting another person
engaging in the business of dealing in
firearms without operating under their
license.
The Department also disagrees with
the alternative suggestion that any
person who advertises firearms online
on more than one discrete occasion
should qualify for a rebuttable
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
presumption that the person is ‘‘engaged
in the business’’ of firearms dealing. The
presumption relates to advertising a
‘‘business,’’ and the Department
recognizes that persons who wish to
dispose of all or part of a personal
collection, or ‘‘trade up’’ to enhance
their personal collection, for example,
are likely to occasionally offer for resale
firearms from their personal collection
online. To be engaged in the business,
the Department believes those offers
must be accompanied by additional
evidence. That could include repetitive
offers for resale within 30 days after the
firearms were purchased, or within one
year after purchase if the firearms are
new or like-new in their original
packaging or the same make and model,
or a variant thereof. That is not to say
that other fact patterns will not
demonstrate engaging in the business;
however, the Department has carefully
considered these issues and narrowly
tailored the presumptions in this rule
based on its regulatory and enforcement
experience, court decisions with similar
fact patterns, and the investigations and
prosecutions it has brought over the
years.
17. PEP Presumption—Purchases or
Rents Physical Space
Comments Received
Commenters disagreed with this PEP
presumption that purchasing, renting, or
otherwise securing or setting aside
permanent or temporary physical space
to display firearms at gun shows or
elsewhere is an indication of intent to
profit. Commenters stated this
presumption is contrary to the statutory
protection for those who wish to sell all
or part of a personal collection and
contrary to Congress’s intent in passing
18 U.S.C. 923(j), which permits
licensees to temporarily conduct
business at certain gun shows. Citing
FOPA’s legislative history, S. Rep. No.
98–583 (1984), one commenter stated
that Congress’s intent in passing section
923(j) was to put licensed dealers at
parity with non-licensees, whom
Congress assumed could already sell at
gun shows. Further, another commenter
stated that, ‘‘[t]he act of renting space at
a gun show is obviously protected under
the BSCA if the person is only making
‘occasional sales, exchanges, or
purchases’ or if the person is using the
space to sell ‘all or part of his personal
collection of firearms.’ ’’
At least one commenter indicated that
collectors or individuals often rent
temporary physical space at gun shows
to dispose of any excess guns such as
World War II firearms, like Mausers,
and to complete firearms transactions
PO 00000
Frm 00081
Fmt 4701
Sfmt 4700
29047
face-to-face. Likewise, at least one
commenter stated that often private
persons display firearms at a gun show,
and they will have FFLs process the
transactions. This does not demonstrate
that these private persons are dealers
with an intent to profit, they said. At
least one commenter said that a space to
store firearms is not an indicator of
intent to profit or being engaged in the
business; rather, that person might
simply want to store their firearms
safely.
One commenter stated that these
criteria are so broad ‘‘that a seller of
popcorn who rents a table at a gun show
would presumptively be engaged in the
business of selling firearms under the
proposed rule.’’ Another commenter
went so far as to state that this
presumption ‘‘would turn literally every
gun owner who has ever sold a gun into
an unlicensed firearms dealer’’ because
everyone who possesses firearms sets
aside physical space to display or store
them.
Department Response
The Department agrees with
commenters that collectors may secure
or set aside physical space in which to
store firearms from their personal
collections that they offer for resale,
including at a gun show. For this
reason, the presumption in the final rule
deletes the words ‘‘or store,’’ and
replaces the phrase ‘‘otherwise secures
or sets aside’’ with ‘‘otherwise
exchanges (directly or indirectly)
something of value to secure,’’ to ensure
that merely setting aside space to store
or display firearms is not included in
the presumption, and that only persons
who secure space at a cost in order to
profit from firearm sales are included.
See § 478.13(d)(2)(ii). In this regard, the
Department continues to believe that it
is appropriate to presume that persons
who repetitively or continuously secure
permanent or temporary physical space
at a cost to display firearms they offer
for resale primarily intend to earn a
profit from those sales. This is true even
if the firearms are sold at a gun show,
and nothing in the GCA purports to
authorize non-licensees to rent space at
a gun show to deal in firearms without
a license. The GCA provision addressing
guns shows, 18 U.S.C. 923(j), authorizes
licensees to conduct operations
temporarily at gun shows under certain
limited conditions, not non-licensees.
Again, this does not mean that a
collector who occasionally sells a
firearm from a personal collection at a
gun show is required to be licensed. The
presumption means only that the
collector likely has a predominant
intent to obtain pecuniary gain from the
E:\FR\FM\19APR3.SGM
19APR3
29048
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
sale of that firearm. To be considered a
dealer, evidence would be required to
show that the collector has devoted
time, attention, and labor to dealing in
firearms as a regular course of trade or
business. And if a proceeding were to be
brought against a collector, that person
could refute the presumption with
reliable evidence to the contrary.
To make this clear, the final rule has
been revised to state that certain
conduct, including liquidating a
personal collection or occasionally
reselling firearms to improve a personal
collection, is conduct that does not
support a presumption that a person is
engaged in the business. See
§ 478.13(e)(2) and (4). Additionally, to
increase the likelihood that this
presumption targets persons who
predominantly intend to earn pecuniary
gain from the sale of firearms, the
Department has revised the
presumption to add the words
‘‘repetitively or continuously’’ before
‘‘purchases, rents, or otherwise
exchanges (directly or indirectly)
something of value to secure permanent
or temporary physical space to display
firearms they offer for resale.’’ See
§ 478.13(d)(2)(ii). The word
‘‘continuously’’ was added to cover
instances where a person buys a single
location and occupies it for this purpose
over an extended period. This
presumption includes nontraditional
commercial arrangements to secure
display space (such as charging a higher
membership or admission fee in
exchange for ‘‘free’’ display space, or
authorizing attendance at a gun show or
sales event in exchange for something
else). The phrase ‘‘directly or
indirectly’’ was added to include
indirect exchanges and clarify that
nontraditional commercial
arrangements are included. The
presumption excludes persons who do
not repetitively or continuously
purchase, rent, or otherwise exchange
something of value to secure physical
space to display firearms they offer for
resale. Of course, like the other
presumptions, this one may be rebutted
with reliable evidence to the contrary.
See § 478.13(f).
khammond on DSKJM1Z7X2PROD with RULES3
18. PEP Presumption—Records of
Profits and Losses
Comments Received
Numerous commenters objected to
including records to calculate profits or
losses from firearms purchases and sales
as a presumption that determines one
has intent to earn a profit as a dealer in
firearms because it is a common
behavior for any firearms owner to keep
such records. The commenters stated
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
that the presumption is overbroad based
on their belief that a person who keeps
any sort of records of firearms, often for
insurance purposes just like they would
for a car or home, would be considered
a dealer. They noted that keeping such
records is important not only for
insurance purposes but also to help
with recovery of a stolen firearm. Some
commenters also thought that this
presumption could hurt collectors who
have a Type 03 license because they are
required to keep a collector’s bound
book where they record their purchases
and sales. They noted that, under this
presumption, ATF could presume they
have the wrong type of license and they
would be forced to get a dealer’s license.
Similarly, some commenters noted that
the IRS requires investors or collectors
to keep information on purchase history
including acquisition date,
improvement to the asset and cost of the
asset to determine taxable gain upon
sale. An additional commenter stated
that businesses like a security company
would keep track of their firearms
inventory and track the cost of obtaining
those firearms for tax and other reasons,
but the law surely does not presume
such a company is a firearms dealer.
The commenters appeared to indicate
that keeping such documentation for a
transaction does not necessarily make
the person a dealer. At least one
commenter stated this presumption
discourages the very behavior (i.e.,
personal recordkeeping) that ATF
should want to encourage while other
commenters noted that the Personal
Firearms Record, P3312.8, that ATF
encourages people to keep for purposes
of protecting their property and to aid
in recovery of stolen firearms, could
now be used against them to make them
a dealer. One of these commenters
added that even a licensed collector of
curios and relics ‘‘would risk liability
under this presumption, because they
are in fact required by ATF to maintain
such documentation. However, the
NPRM will presume that even these
FFLs simply have the wrong FFL
(collector, not dealer).’’
Department Response
The Department disagrees that
keeping records to calculate profits and
losses does not indicate a predominant
intent to earn a profit from the sale or
disposition of firearms. The point of
making or maintaining such a record is
to document profits or other pecuniary
gain from firearms transactions.
However, to further clarify this point,
and to address comments regarding
businesses that purchase and use
firearms for purposes other than resale,
the final rule revises this PEP
PO 00000
Frm 00082
Fmt 4701
Sfmt 4700
presumption to say that the person
‘‘[m]akes and maintains records to
document, track, or calculate profits and
losses from firearms repetitively
purchased for resale,’’ not merely to
document profits and losses from
firearms purchased for other
commercial (or noncommercial)
purposes. § 478.13(d)(2)(iii).
The commenter is incorrect that the
collector bound book, maintained by
Type 03 licensed collectors of curios or
relics pursuant to 27 CFR 478.125(f), is
a record that documents profits and
losses from firearms purchases and
sales. The format for that record in
§ 478.125(f)(2) does not require any
information concerning the purchase or
sales prices of the curio or relic
firearms, or profits and losses from
those sales. Another commenter is
incorrect that ATF Form 3312.8,
Personal Firearms Record (revised Aug.
2013), https://www.atf.gov/firearms/
docs/guide/personal-firearms-recordatf-p-33128/download, is a record of
profits and losses. It does not document
profits and losses from the purchase and
resale of firearms, nor does it document
the sales price—it documents only the
cost of the firearm(s) at the time the
person acquired them and the person or
entity to whom the firearms are
transferred, if any. Contrary to
commenters’ assertions, individuals can
certainly make and maintain records of
their personal inventories of firearms for
insurance purposes without
documenting profits and losses from
firearms transactions. The presumption
requires the latter, which is rebuttable
by reliable evidence to the contrary.
Finally, in response to the comment
that tracking profits is necessary for tax
purposes, the Internal Revenue Code
taxes only income from capital gains on
personal property, meaning a positive
difference between the purchase price
and the sales price.231 Money or other
benefits a person receives from sales of
depreciated personal firearms would not
be reported as income (or treated as a
capital gain for tax purposes). Thus, the
primary reason for a person to track, for
tax purposes, funds a person receives
from selling firearms would likely be to
account for pecuniary gain they
predominantly intend to make from the
sales. To the extent that the pecuniary
gain is recorded for tax purposes from
appreciating collectible or hobby
firearms, or to record capital losses on
firearms sales, that evidence can be used
to rebut the presumption that the
pecuniary gain recorded was the
231 See Topic No. 409, Capital Gains and Losses,
IRS, https://www.irs.gov/taxtopics/tc409 (last
updated Jan. 30, 2024).
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
person’s predominant intent.232 But it is
inconsistent with the case law and
ATF’s regulatory and enforcement
experience (and common sense) to say
that maintaining these types of financial
records is not indicative of profitmotivated business activity.
khammond on DSKJM1Z7X2PROD with RULES3
19. PEP Presumptions—Secures
Merchant Services for Payments and
Business Security Services
Comments Received
Commenters disagreed with, and
stated they were confused by, the
presumptions that a person is intending
to predominantly earn a profit as a
dealer in firearms if they use a digital
wallet or use the services of a credit
card merchant to accept payments, or if
they hire business security services,
such as a monitored security system or
guards for security. At least one
commenter argued that the presumption
for using third-party services to ‘‘make[ ]
or offer[ ] to make payments’’ seems to
target buyers of firearms who make
electronic payments rather than
purported dealers who accept electronic
payments when they sell the firearms.
They noted that one case that the
Department cited in footnote 97 of the
NPRM, United States v. Dettra, 238 F.3d
424, 2000 WL 1872046, at *2 (6th Cir.
2000) (unpublished table decision),
focuses on a defendant selling firearms,
i.e., accepting payments, rather than
making payments. The commenter
opined that the presumption is
overbroad because it could make a
dealer out of anyone who makes
electronic payments for firearms using a
business account. This would capture
any business that purchases .22LR rifles
for instructional purposes. The
commenter said that even if the
presumption is meant to target people
who accept payments, the language is
still overbroad. The commenter offered
a particular hypothetical in which, they
said, it would seem that ATF would
presume a dentist has intent to earn
profit as a firearms dealer if the dentist
sells a patient a firearm after a visit,
tacks it onto the dental bill, and accepts
credit card payment for that entire bill.
Because the presumption could include
a case such as the hypothetical dentist,
they argued that it is clear the
presumption is overbroad. They claimed
every eBay seller must worry about
becoming a dealer under this
presumption. Another commenter stated
that electronic transactions are
commonplace even for occasional
232 This evidence could include, for example, that
the 28 percent collectibles capital gains tax was
paid on income earned from those sales, as reported
on IRS Form 8949.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
firearms transactions. The commenter
stated that the Department should not
focus on a specific method of payment
but rather focus on other factors such as
the frequency, volume, and commercial
nature of sales as well as the person’s
intent to earn a profit.
Some commenters were of the
opinion that having a security service to
protect one’s firearms is simply a means
of responsible firearm ownership and
that they are now being penalized for
the use of a digital payment app for a
single firearms transaction. At least one
commenter disagreed with the
characterization in footnote 98 of the
NPRM where the Department stated,
‘‘for profit business are more likely to
maintain, register, and pay for these
types of alarms rather than individuals
seeking to protect personal property.’’
The commenter stated that it is fairly
common for individuals to have a
personal security system in their home
that can cost as little as $100 per year
after initial installation, and that such a
system is not necessarily an item
reserved for business owners alone.
Similarly, other commenters stated that
the presumption for using security
services needs to be clarified because it
seems entirely too broad. They argued
that a plain reading of the presumption
is that intent to predominantly earn a
profit exists when the person selling a
firearm has an alarm system at their
business to protect any business assets.
For example, they questioned whether a
gas station with a centralized alarm
service where the owner keeps a firearm
that is the gas station’s property is
considered a dealer because the station
has an intent to predominantly earn a
profit for an entirely unrelated
transaction (such as selling gas). The
commenters also questioned whether a
company that keeps its company
firearms in a securely monitored
warehouse would be considered a
dealer if it one day sells its old firearms
to a dealer so it can buy new ones for
its employees. The commenters argued
this could extend even to a sheriff’s
department with a security system when
it trades in old duty guns. One
commenter characterized the projected
outcomes in these scenarios as
nonsensical and overbroad, and
questioned whether the security
services presumption was instead meant
to cover firearms transactions and
business assets that include firearms
rather than, as the commenter had read
the NPRM, security services purchased
to secure any business assets.
Department Response
The Department agrees with
commenters that the presumption about
PO 00000
Frm 00083
Fmt 4701
Sfmt 4700
29049
securing merchant services, such as
electronic payment systems, is meant to
be directed at firearms sellers, not at
individual firearms purchasers. For this
reason, the phrase ‘‘makes or offers to
make payments’’ has been deleted from
the presumption, which now applies
only to merchant services ‘‘through
which the person intends to repetitively
accept payments for firearms
transactions.’’ § 478.13(d)(2)(iv).
The Department disagrees that
individual firearms sellers that use
online services, such as eBay, purchase
or secure ‘‘merchant services as a
business.’’ These sellers are not securing
merchant services as a business, and the
online companies often distinguish
between the services they provide to
merchants and the services they provide
to individuals seeking to sell personal
items.233
Additionally, the manner in which
merchants accept payments is a strong
indicator of a predominant intent to
earn a profit. Private citizens generally
do not sign up for credit card processing
services. Merchants are persons engaged
in a profit-making business, and those
services are designed to accept
payments on behalf of profit-seeking
sellers,234 though individual firearms
sellers may also have an intent to earn
a profit when selling online. Again, this
does not mean that a person is ‘‘engaged
in the business’’ requiring a license
when they occasionally sell a firearm
from a personal collection with the
intent to profit. That person must also
devote time, attention, and labor to
dealing in firearms as a regular course
of trade or business. For this reason, the
Department does not believe the
merchant service PEP presumption is
overbroad, especially as revised in this
final rule in light of comments received.
And, as with the others, the
presumption may be refuted with
reliable evidence to the contrary (e.g., by
the hypothetical dentist).
Some commenters also
misunderstood the security service
presumption, which applies only to
‘‘business security services . . . to
protect business assets or transactions,’’
not to personal security services. The
Department recognizes that some
233 See, e.g., eBay for Business, eBay, https://
www.ebay.com/sellercenter/ebay-for-business (last
visited Mar. 26, 2024).
234 See, e.g., Venmo for Business, Venmo, https://
venmo.com/business/profiles/ (last visited Mar. 26,
2024); Sell in person with Shopify Point of Sale,
Shopify, https://www.shopify.com/pos/free-trial/
sell-retail; Your unique business. Our all-in-one
solution, PayPal, https://www.paypal.com/us/
webapps/mpp/campaigns/business/contact (last
visited Mar. 26, 2024); I’m a Small Business Using
Zelle, Zelle, https://www.zellepay.com/faq/smallbusiness-using-zelle (last visited Mar. 26, 2024).
E:\FR\FM\19APR3.SGM
19APR3
29050
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
individuals have a central-station
monitoring system, but the regulatory
text is clear that it applies only to a
central-station monitoring system
registered to a business. In addition,
what is being protected are business
assets that include firearms or
transactions that include firearms.
Nonetheless, to reduce the concern that
a business not engaged in the business
of dealing in firearms would be
considered to have the predominant
intent to earn a profit by securing
business security services, the
Department has revised the
presumption to replace the word ‘‘or’’
with ‘‘and’’ so the presumption applies
only where business security services
have been secured to protect both
firearms ‘‘business assets’’ and firearms
‘‘transactions.’’ See § 478.13(d)(2)(v).
This clarifies the scope of the
presumption in response to commenter
concerns.
khammond on DSKJM1Z7X2PROD with RULES3
20. PEP Presumptions—Establishes a
Business Entity, Trade Name, or
Account, or Secures or Applies for a
Business License
Comments Received
For these two presumptions under
‘‘predominantly earn a profit,’’
commenters argued that they were too
broad and that whether a person
establishes a business entity or has a
business license has nothing to do with
intent to predominantly earn a profit.
Some commenters asserted that a lot of
people have an all-purpose business
license that could be for any number of
purposes. Some States require multi-use
licenses, the commenters said, such as
combined resale and use ones. In those
cases, a company that simply uses
firearms as part of their business
operations, rather than dealing in
firearms as their business, would have
a business license and be presumed to
be dealing in firearms. Having one,
these commenters argued, does not
necessarily mean that a person has
intent to earn a profit as a dealer in
firearms. One commenter believed that
a business that sells gun accessories
would be forced to register as a licensee.
Another suggested that the presumption
would also treat other businesses that
have firearms, like a security company,
as dealers merely because they have a
business license or are established as a
business entity in an arena other than
firearms sales.
Another commenter, who identified
as a firearm owner, stated that a true
FFL is a legal business but that a trade
or transaction between two law-abiding
citizens does not constitute a reason for
one to obtain an FFL. One commenter
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
noted that the case, United States v.
Gray, 470 F. App’x 468, 469–70 (6th Cir.
2012), cited in the NPRM in support of
the business entity presumption,
involved facts much more indicative of
unlicensed dealing than simple use of a
business name. The commenter said the
circumstances of that case stand in stark
contrast to a situation where an owner
of an antique store who decides to sell
the family’s World War I-era firearm at
the store and could now be captured as
a dealer under this presumption.
Department Response
The Department disagrees that the
business entity and business license
presumptions have nothing to do with
an intent to predominantly earn a profit
from its firearm sales or dispositions.
Establishing a business entity or account
‘‘through which the person makes or
offers to make firearms transactions’’ is
often a preliminary step to engaging in
the business of dealing in firearms with
the predominant intent to earn a profit.
A separate business entity can
potentially provide liability protection,
which is particularly advantageous
when selling dangerous instruments,
like firearms. A business entity or
account can make it easier to sell
firearms for a profit and may provide
certain discounts or benefits when
doing so. Likewise, a business license to
sell firearms or merchandise that
includes firearms is direct evidence of
an intent to earn a profit from repeated
firearms transactions. Indeed, a firearms
business cannot operate lawfully
without it.235 While the Department
agrees that there may be businesses that
primarily sell merchandise other than
firearms, such as an antique store, such
businesses are profit-seeking, and are
likely to sell any firearms at least on a
part-time basis with the predominant
intent to earn a profit. As stated
235 See, e.g., State of Maryland, Obtain Licenses
or Permits, https://businessexpress.maryland.gov/
start/licenses-and-permits (last visited Apr. 2, 2024)
(‘‘State and local governments require many
industries to have permits or licenses to operate. A
business license is required for most businesses,
including retailers and wholesalers. A trader’s
license is required for buying and re-selling
goods.’’); State of Colorado, Do I Need a Business
License, https://www.coloradosbdc.org/do-i-need-abusiness-license/ (last visited Apr. 2, 2024) (‘‘In
Colorado, if you are selling tangible goods, you are
required to collect State Sales Tax and will need a
Sales Tax License.’’); State of Michigan, Who Needs
a Sales Tax License, https://www.michigan.gov/
taxes/business-taxes/sales-use-tax/resources/whoneeds-a-sales-tax-license (last visited March 2,
2024) (‘‘[R]etailers must be licensed to collect tax
from their customers and remit the sales tax to the
State of Michigan’’); State of Ohio, Licenses &
Permits, https://ohio.gov/jobs/resources/licensesand-permits (last visited Apr. 2, 2024) (‘‘Businesses
are required to register with the Ohio Secretary of
State to legally conduct business in the state—this
is commonly called a business license.’’).
PO 00000
Frm 00084
Fmt 4701
Sfmt 4700
previously, even part-time firearms
businesses are required to be
licensed.236 Again, intent to
predominantly earn a profit is just one
element of engaging in the business.
In response to commenters who said
that some States may have general
business licenses that are required to
engage in any business, the presumption
would apply only if the license allowed
them to sell firearms as part of their
business operation. Of course, if they do
not resell firearms, then that business
would not be presumed to have a
predominant intent to profit from
firearms purchases and resales. To the
extent commenters asserted that there
are licensed businesses that may
technically be licensed to sell firearms,
but primarily buy and use firearms, and
do not devote time, attention, and labor
to dealing in firearms as a regular course
of business, they can offer reliable
rebuttal evidence, as with any of the
presumptions.
21. PEP Presumption—Purchases a
Business Insurance Policy
Comments Received
A few commenters, including an FFL,
stated that one cannot presume that a
person or company has intent to earn a
profit and is engaged in the business of
dealing in firearms merely because they
have a business insurance policy that
covers firearms. They noted that many
non-firearms businesses, whether it be a
hunting outfitter or an armored security
company, have one or more firearms
owned by the entity or business. If the
business has insurance for its property,
which would cover the firearms owned
and used by the business, it is not clear
why this should result in a presumption
that a completely unrelated transaction
is an indication of intent to
predominantly to earn a profit. The
commenters said that these are not the
types of entities meant to be FFLs.
Department Response
The Department notes that most
firearms businesses purchase business
insurance policies that cover their
firearms inventory in the event of theft
or loss, which, unfortunately, is not
uncommon. The Department also agrees
with commenters that a business
insurance policy may also be purchased
by a variety of companies that purchase
and use firearms and are not necessarily
primarily intending to profit from
236 See 27 CFR 478.11 (definition of ‘‘dealer’’
includes those engaged in the business on a parttime basis); In the Matter of SEL.L. Antiques,
Application No. 9–87–035–01–PA–00725 (Phoenix
Field Division, July 14, 2006) (denied applicant for
license that repetitively sold modern firearms from
unlicensed storefront).
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
selling or disposing of their business
inventory. For example, a firearms
business inventory maintained by a
security company whose guards use the
firearms daily, or a hunting outfitter that
rents firearms on its business premises,
likely have firearms that have lost their
value over time due to constant use and
handling. The company may decide to
sell these firearms simply to upgrade
from old to new firearms without
intending to earn a profit. In addition to
these considerations, as discussed in
detail earlier in this preamble (see
Section IV.C.5.a (Department Response)
of this preamble, supra), ATF examined
records of cases and investigations it
initiated between 2018 and 2023 for
examples of fact patterns that align with
the rebuttable presumptions in the
proposed rule. The agency did not find
examples other than the criminal case
cited in the NPRM involving business
insurance. 88 FR 62006 n.101. For these
reasons, the Department has revised the
final rule to remove this presumption.
See § 478.13(d)(2).
khammond on DSKJM1Z7X2PROD with RULES3
22. Concerns With Disposition of
Business Inventory After Termination of
License
Comments Received
Commenters stated that while they
thought it was notable that the
Department addressed the disposition of
an FFL’s business inventory upon
license revocation or termination, they
did not think that ATF struck the ‘‘right
balance’’ between law enforcement
concerns and business owners so that a
licensee can avoid financial ruin after
having its license terminated. One
commenter said the Department created
a ‘‘Catch-22’’ situation regarding
transfers because, in the commenter’s
opinion, ‘‘1. Former inventory not
transferred to a personal collection may
never be transferred; 2. Former
inventory that was unlawfully
transferred may never be transferred;
and 3. Former inventory that was
transferred cannot be transferred for one
year.’’ (Emphasis omitted.) Other
commenters stated that the additional
requirements that establish how to
dispose of remaining inventory are
unwarranted burdens that make it more
challenging to wind down operations in
an efficient manner. They stated that the
process should be more streamlined to
ensure fairness and flexibility. At least
one commenter criticized the 30-day
period in which a licensee is expected
to liquidate their inventory, stating that
it would take a minimum of 90 or 120
days. Similarly, another commenter
stated it was completely unreasonable
that an FFL who has voluntarily
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
surrendered their license or has had it
revoked would have to wait a year
before they could start selling their
inventory privately.
One commenter said the proposed
rule was arbitrary and had conflicting
standards within the proposed text
regarding disposition of inventory. In
this commenter’s opinion, ‘‘a person or
company no longer having an FFL (and
persons acting on their behalf) may
transfer their remaining firearms
inventory to another third-party current
FFL for liquidation under section
478.78, but may not do so under section
478.11. The result is an arbitrary and
confusing conflict . . . .’’ At least one
commenter thought the rule would
make it impossible for an FFL who has
had their license revoked to keep their
inventory while at least one other
commenter thought the impact of the
rule would mean they could never sell
their inventory if a former licensee then
needed a license to liquidate the
inventory. Another commenter believed
this portion of the rule should have
more detail and be clearer because
without it there is an increased chance
of non-compliance and confusion
among FFLs. At least one commenter
objected to the 30-day time frame the
rule would add to §§ 478.57 and 478.78,
stating that no such timeline is required
by the GCA.
One commenter noted that, if a former
FFL transferring their business
inventory to another FFL is not
considered ‘‘engaged in the business,’’
then there would be no reason for ATF
to limit the time period for when such
transactions can take place. In other
words, they indicated that for such a
transaction, the former FFL still seems
to be ‘‘engaged in the business’’;
otherwise, there would not be a time
limit on when they could act. If that is
the case, the commenter stated, the rule
does not make clear the effect of a
former licensee transferring their
firearms to another licensee and
questioned whether an FFL could face
revocation for facilitating others
‘‘engaging in the business’’ without a
license.
Finally, another commenter stated
that the rule fails to adequately address
the potential for exploitation of
inventory liquidation by former
licensees. ‘‘While it is important to
outline lawful ways for former licensees
to dispose of their inventory upon
license revocation or termination, the
rule does not establish sufficient
safeguards to prevent the diversion of
firearms into the illegal market,’’ they
wrote. The commenter added that this
oversight leaves room for abuse.
PO 00000
Frm 00085
Fmt 4701
Sfmt 4700
29051
Department Response
A license may be terminated for a
number of reasons, whether it is a
voluntary surrender of license or an
involuntary termination due to license
revocation or denial upon renewal. The
regulations in the past have not clearly
addressed lawful methods for disposing
of business inventory before or after
license termination. In the case of a
licensee who does not dispose of its
business inventory prior to license
termination, both the former licensee
and law enforcement are placed in a
difficult situation. Because this
inventory consists of firearms
repetitively purchased for resale with
predominant intent to profit, it was
clearly purchased as part of a regular
course of business or trade. If the former
licensee now sells the firearms after
termination of the license to dispose of
inventory, the former licensee could be
engaging in the business of dealing in
firearms without a license and violating
the law. Particularly in the case of
former licensees whose licenses were
revoked or denied due to willful
violations, such persons would unjustly
profit from their illegal actions. Further,
allowing such sales would mean that a
significant number of firearms would be
sold without background checks or the
ability to trace them if later used in
crimes. This is an outcome the BSCA
was intended to reduce by amending the
definition of ‘‘engaged in the business’’
to increase licensure of persons engaged
in the business with a predominant
intent to earn a profit. See Section II.D
of this preamble.
The Department disagrees that
licensees face financial ruin if their
license is terminated and they cannot
sell their inventory. As an initial matter,
licensees who voluntarily terminate
their firearms license have the option of
waiting to surrender their license until
after they have liquidated their
inventory. The final rule allows former
licensees that did not have the
opportunity to properly dispose of their
business inventory before license
termination to do so after termination by
either selling their remaining ‘‘former
licensee inventory’’ to an active licensee
within 30 days after license termination,
or transferring the former licensee
inventory to a responsible person who
may lawfully possess those firearms.
See §§ 478.11 (definition of ‘‘former
licensee inventory’’), 478.57(b),
478.78(b). The new term ‘‘former
licensee inventory’’ is necessary to
clarify that business inventory
transferred to a responsible person after
license termination is not a ‘‘personal
collection’’ within the meaning of 18
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
29052
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
U.S.C. 921(a)(21)(C), and accordingly,
former licensees or responsible persons
who devote time, attention, and labor to
selling ‘‘former licensee inventory’’ as a
regular course of trade or business to
predominantly earn a profit will be
presumed to be engaged in the business
of dealing in firearms. See 18 U.S.C.
922(a)(1)(A), 923(a). If a former licensee
needs more time in which to sell their
business inventory to an active licensee,
the Director may authorize an additional
period of time for good cause.
The Department acknowledges that
some commenters were confused about
the relationship between the
presumption based on liquidation of
business inventory in the definition of
‘‘engaged in the business,’’ now in
§ 478.13(c)(4) of the final rule, and
provisions about the discontinuance of
business and operations by licensees
after notice in §§ 478.57 and 478.78.
Those proposed provisions were meant
to be read together. Like the two
discontinuance provisions at §§ 478.57
and 478.78, the two liquidation-ofbusiness inventory presumptions
distinguish between pre-termination
and post-termination disposal of
business inventory.
If the former licensee disposes of the
business inventory properly before
license termination, they will have
several options for disposing of the
firearms, one of which is to transfer
firearms from the business inventory to
their personal collection or otherwise as
a personal firearm so long as they meet
two conditions, i.e., that they retain the
firearms for at least one year from the
date or transfer and they do not transfer
the firearms to willfully evade the
restrictions placed on licensees. See 18
U.S.C. 923(c). The corresponding
presumption related to firearms
transferred before license termination
aligns with these requirements. See
§ 478.13(c)(5). If the former licensee (or
responsible person acting on behalf of
the former licensee) sells a firearm: (a)
after license termination that was
transferred to the former licensee’s
personal collection or otherwise as a
personal firearm, but (b) before one year
has passed from the date of that transfer,
or (c) the sale is other than as an
occasional sale to a licensee, that sale
would fall under § 478.13(c)(5) and the
person would be presumed to be dealing
without a license. However, once the
year has passed from the transfer date,
they may occasionally sell firearms
properly transferred to their personal
collection or otherwise as personal
firearms to anyone without falling under
this presumption, unless the transfer
was made to willfully evade the
restrictions placed on licensees.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
If the former licensee did not dispose
of business inventory before license
termination, it becomes ‘‘former
licensee inventory’’ (see new definition
under § 478.11, below), and the former
licensee has two options to dispose of
it within 30 days after license
termination: liquidate to a licensee, or
transfer to a responsible person of the
former licensee. Under revised
§§ 478.57(c) and 478.78(c), the date,
name, and address of this responsible
person (which can include a sole
proprietor or an individual who is
acting on behalf of a business entity)
must be recorded as the transferee of
such firearms in the licensee’s
disposition record prior to delivery of
the records by the end of the 30 days,
in accordance with 18 U.S.C. 923(g)(4)
and 27 CFR 478.127.237 If the recipient
responsible person thereafter sells the
transferred former licensee inventory,
other than as an occasional sale to a
licensee, they will fall under
§ 478.13(c)(4) and be presumed to be
dealing without a license.
To make this relationship between the
post-termination discontinuance
provision and the related presumption
more clear, the presumption, which is
located in the final rule at § 478.13(c)(4),
has been revised to state that it does not
apply when the business inventory is
being liquidated to a licensee either
within 30 days of termination of license,
or occasionally thereafter, in accordance
with § 478.57 or § 478.78, as the case
may be. The presumption now further
states that it does not matter whether
such firearms were transferred to a
responsible person after the license was
terminated under 27 CFR 478.57(b)(2) or
478.78(b)(2); the presumption would
apply if those transferred firearms are
subsequently resold outside the 30-day
window other than as an occasional sale
to a licensee. The Department has
changed the term ‘‘personal inventory’’
to ‘‘former licensee inventory’’ to make
it easier to distinguish between the
former licensee’s personal collection
firearms and other personal firearms,
which a former licensee may treat the
237 This is consistent with the requirement for
licensees to record the personal information of an
individual authorized to receive firearms on behalf
of a business entity. See ATF Form 4473, at 4 (Aug.
2023), https://www.atf.gov/firearms/docs/4473-part1-firearms-transaction-record-over-counter-atfform-53009/download (‘‘When the transferee/buyer
of a firearm is a corporation, company, association,
partnership, or other such business entity, an officer
authorized to act on behalf of the business must
complete section B of the form with his/her
personal information, sign section B, and attach a
written statement, executed under penalties of
perjury, stating: (A) the firearm is being acquired for
the use of and will be the property of that business
entity; and (B) the name and address of that
business entity.’’).
PO 00000
Frm 00086
Fmt 4701
Sfmt 4700
same way as other non-licensees, and
the business inventory transferred to
themselves that must be treated
differently from personal collection
firearms and other personal firearms.
See §§ 478.57(b)(2), 478.78(b)(2).
The Department disagrees that the
limited 30-day period for liquidation to
an active licensee is inconsistent with
the GCA. While the Department
recognizes that such sales may be
conducted to predominantly earn a
profit, the recipient licensee will be
recording them in its business inventory
and running NICS background checks
when those firearms are further
distributed into commerce. The final
rule also makes clear that any such
transfers of remaining inventory within
the 30-day period must appropriately be
recorded as dispositions in the
licensee’s records prior to delivering the
records after discontinuing business
consistent with 27 CFR 478.127. See
§§ 478.57(c), 478.78(c). This will ensure
that any liquidated/transferred firearms
may be traced if they are later used in
a crime. The rule is therefore necessary
to prevent former licensees from selling
off numerous business inventory
firearms at retail without abiding by
these important requirements of the
GCA. It also provides a reasonable
‘‘winding down’’ period that is fully
consistent with the relinquishment of
licensee records requirement under the
GCA. See 18 U.S.C. 923(g)(4) (records
this chapter requires to be kept shall
reflect when a firearms or ammunition
business is discontinued, and, if
succeeded by a new licensee, shall be
transferred to that successor; where the
discontinuance is absolute, the records
shall be transferred within 30 business
days to the Attorney General).238
Licensees who are terminating their
license should begin the winding-down
process well before the license is
terminated. Otherwise, they run the risk
of having unsold inventory they cannot
easily sell without either engaging in the
unlicensed business of dealing in
firearms after they terminate their
license, or being able to sell only on
occasion to a licensee. Selling before
license termination also ensures that
background checks are run on
purchasers, and dispositions are
appropriately recorded.
The Department disagrees with the
comment that the rule fails to address
the potential for exploitation of
inventory liquidation by former
licensees. The rule addresses the
238 This provision is also consistent with the 30day winding down period for licensees who incur
firearms disabilities under the GCA during the term
of their current license. See 27 CFR 478.144(i)(1).
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
potential for diversion in several ways.
Consistent with 18 U.S.C. 923(c), it
limits the ability of former licensees to
liquidate business inventory firearms by
establishing two rebuttable
presumptions that a person is engaged
in the business when those firearms are
sold—§ 478.13(c)(4) and (5). With regard
to firearms transferred by a licensee to
a personal collection prior to license
termination, the presumption still
applies even if one year has passed from
the transfer if the transfer or any other
acquisition was made for the purposes
of willfully evading the restrictions
placed upon licensees. 18 U.S.C. 923(c).
Moreover, as provided by amended
§§ 478.57 and 478.78, after license
termination, former licensees have
limited sales options that would avoid
the presumption in § 478.13(c)(4), such
as sales to an active licensee where the
risk of diversion is limited.
23. Concerns With the Procedure To
Transfer of Firearms Between FFLs
Comments Received
khammond on DSKJM1Z7X2PROD with RULES3
Some commenters remarked on the
requirement that FFLs follow
verification and recordkeeping
procedures in 27 CFR 478.94 and
subpart H of part 478 instead of using
ATF Form 4473 for transfers between
licensees. At least one commenter
thought this provision should be made
clearer to avoid interruptions in the
transfer of firearms, while another
thought the proposed changes were
unnecessarily complex and increased
the risk for administrative errors. This
commenter stated that ‘‘[l]icensees
should be allowed to use the existing
streamlined form, which is already
widely used and understood by both
licensees and the ATF.’’ At least one
commenter stated that a phrase in the
proposed amendment to § 478.124—‘‘for
the sole purpose of repair or
customizing’’—should be deleted
because it is not part of 18 U.S.C.
922(a)(2)(A). That statutory provision
only provides, in relevant part, that
‘‘this paragraph [prohibiting transfer in
interstate commerce to a non-licensee]
and subsection (b)(3) shall not be held
to preclude [an FFL] from returning a
firearm or replacement firearm of the
same kind and type to a person from
whom it was received.’’
Department Response
The Department disagrees that the
changes proposed to be made to 27 CFR
478.124(a) are unnecessarily complex
and increase the chance for
administrative errors. To the contrary,
licensees know that ATF Form 4473
documents the transfer of a firearm from
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
a licensee to an unlicensed person. It is
not intended to be used by a licensee to
purchase personal firearms. 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.
The well-established procedure for
licensees to purchase firearms is
through the verification and
recordkeeping procedures in 27 CFR
478.94 and subpart H of 27 CFR part
478.
Regarding the comment that the
phrase ‘‘for the sole purpose of repair or
customizing’’ should be stricken from
§ 478.124(a), that provision allowing a
limited exception to the requirement to
complete an ATF Form 4473 has long
been found in the regulations and this
rule does not change that proviso in any
manner. Allowing licensees to sell or
otherwise dispose of firearms without
completion of this form or recording
NICS checks on the form would
undermine the purposes of the GCA and
BSCA. Crime gun traces would not be
able to be completed, and there would
be no way to verify that the identity of
firearms purchasers had been checked,
or that background checks had been
properly run. The Department therefore
disagrees with the comment seeking to
remove this phrase.
D. Concerns With the Economic
Analysis
1. Need for Rule
Comments Received
One commenter stated that the
Department’s need for this rulemaking
was contrived without the Department
providing any facts or persuasive
arguments. The commenter specifically
challenged the statement in the
preamble that ‘‘ATF has observed a
significant level of noncompliance with
the GCA’s licensing requirements even
prior to the BSCA,’’ and asked for the
number of incidents of noncompliance
and by what standard that level of
noncompliance was determined to be
‘‘significant’’ enough to justify
rulemaking. The commenter also stated
that a rulemaking should not be justified
by a presidential executive order,
‘‘which is not now nor has it ever been
a reason for rulemaking sufficient for
APA purposes.’’ The same commenter
also stated that the agency has not
identified any market failure
demonstrating that, in the absence of the
rule, the free market will fail to reach
the optimal number of gun sales outside
of current FFL dealers.
PO 00000
Frm 00087
Fmt 4701
Sfmt 4700
29053
Department Response
The Department disagrees that the
need for this regulation was ‘‘contrived
without any facts or persuasive
arguments.’’ The Department has
explained the public safety need for this
rule and has extensively laid out and
discussed the facts and arguments
supporting that need in both the NPRM
and in this final rule. For reference,
those discussions are included in the
Background discussion in Section II.D
of this preamble, in the Benefits section
of the Executive Order 12866 economic
analysis in Section VI.A.7 of this
preamble, throughout Section III of this
preamble (which includes the
Department’s discussion of proposed
revisions from the NPRM), elsewhere in
the Department’s responses to
comments under Section IV of this
preamble, and in other portions of this
preamble. This rulemaking implements
certain statutory changes enacted by
Congress in the BSCA, which Congress
passed in the interest of public safety
after at least one mass shooting in which
the perpetrator purchased a firearm
from an unlicensed dealer. In addition,
this final rule implements the
Department’s response to Executive
Order 14092, which was also issued to
implement and enforce the BSCA’s
statutory changes and public safety
goals.
The public safety justifications
referenced above include the accounts
and analysis of ATF agents and
investigators with years of experience
enforcing the relevant provisions of the
GCA, who reported significant levels of
firearms dealing that was not in
compliance with pre-BSCA statutory
licensing requirements. More specific
data or statistics regarding such
noncompliance, as requested by the
commenter, are not readily available
and not needed in light of the
Department’s experience and the other
public safety justifications underlying
this rule.
Finally, the Department is not
required to identify any market failure
demonstrating that, ‘‘in the absence of
the rule, the free market will fail to
reach the optimal number of gun sales
outside of current FFL dealers.’’ For
example, OMB Circular A–4 (2003)
specifically recognizes that ‘‘[c]orrecting
market failure’’ is ‘‘not the only reason’’
for regulation, and allows regulations
based on other social purposes.239 In
239 Off. of Mgmt. & Budget, Exec. Off. of the
President, OMB Circular No. A–4, at 5 (2003)
(‘‘OMB Circular A–4’’), https://
www.whitehouse.gov/wp-content/uploads/legacy_
drupal_files/omb/circulars/A4/a-4.pdf. Because the
E:\FR\FM\19APR3.SGM
Continued
19APR3
29054
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
addition, Executive Order 12866,
Regulatory Planning and Review, 58 FR
51735 (Sept. 30, 1993), permits agencies
to promulgate rules that are necessary to
interpret the law or are necessary due to
compelling need, which includes when
private markets are not protecting or
improving public health and safety.
This rule is necessary on both grounds.
As explained throughout this preamble,
there is a public safety need for this
rulemaking. This position on public
safety is supported by the facts and
arguments laid out by the Department
and affirmed by the hundreds of
thousands of public comments ATF
received in support of this rulemaking
that specifically explained that the rule
is needed for public safety (in many
cases emphasizing that the rule is the
minimum action needed to address
public safety). See Sections IV.A.1–2, 4–
7 of this preamble.
2. Population Accuracy
khammond on DSKJM1Z7X2PROD with RULES3
Comments Received
Various commenters objected to the
Department’s calculation of the
population impacted by this
rulemaking. Some of these commenters
argued that the Department’s high
population estimate (328,296, which
was derived from the Russell Sage
Foundation (‘‘RSF’’) survey) should be
used as the primary cost estimate,
including one commenter who opined
that the RSF-derived estimate was more
accurate because, they stated, the
Department’s subject matter expert
(‘‘SME’’)-derived estimate uses a single,
private party firearm sales website as
the primary source of unlicensed
firearms seller numbers. This same
commenter added that the RSF survey
considered multiple mediums of firearm
sales.
In addition, various commenters
opined that the Department’s
population estimates were not accurate
or requested more ‘‘accurate’’ numbers.
A couple of commenters provided
critiques of the methodology used to
generate population estimates. These
commenters opined that the Department
NPRM was published in September 2023, prior to
the November publication of the 2023 version of
OMB Circular A–4, the Department based its
Executive Order 12866 economic analysis in the
NPRM on the 2003 guidance. Although the
November 2023 version of OMB Circular A–4
supersedes the version from 2003, OMB allowed
agencies to continue following the 2003 version in
final rules published prior to January 1, 2025, if
their NPRM relied on the 2003 version and was
published prior to February 29, 2024. See Off. of
Mgmt. & Budget, Exec. Off. of the President, OMB
Circular No. A–4, at 93 (2023), https://
www.whitehouse.gov/wp-content/uploads/2023/11/
CircularA-4.pdf. Accordingly, the Department is
continuing to follow the 2003 version of OMB
Circular A–4 in this final rule.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
should use standards accepted by
scientific, peer-reviewed journals as the
basis for estimating the relevant
population. Furthermore, they opined
that the Department’s population
estimates should have used statistical
calculations such as ‘‘[c]onfidence
intervals, [p]-[v]alues, and K-values.’’
Primarily, these commenters objected to
the Department’s SME estimate that
Armslist may constitute 50 percent of
the market share for online non-FFL
sales, contending that this estimate is
not supported by data and that using an
SME-derived estimate is biased and
unsupported. One commenter stated
that Gunbroker.com is the largest online
marketplace where people perform
private firearms transactions and
suggested that the impacted population
would be higher if the Department
included individuals conducting private
sales on that website. Another
commenter went further, stating that
‘‘the number put forth by ATF, an
estimation of 24,540 to 328,926
unlicensed persons who could be
considered ‘engaged in the business’ of
dealing firearms, is at worst a shot in the
dark, and at best, an educated guess.’’
This commenter noted that there are
‘‘numerous other venues in which
firearms are sold, including
GunBroker.com, as well as social media
platforms such as Facebook, where
clever sellers can get around the
Facebook Marketplace rules against
selling firearms.’’
Finally, one commenter opined that
this rule will affect all persons who own
firearms in the United States and even
some portions of the population that
have never owned a firearm. None of
these commenters provided data
recommendations or alternate sources of
relevant data except as noted above.
Department Response
The Department does not agree that
the SME/online sample and the SMEderived primary estimate it put forth in
the NPRM are less viable than the RSF
survey-derived estimate it also included
for comparison. Each estimate is
necessarily imperfect due to the paucity
of data on how many unlicensed
persons currently sell firearms and how
many such persons would need to be
licensed under this rule. The estimates
from each source the Department used
have different limitations, which is why
the Department included them both as
potential alternatives. The SME-derived
estimate is based on historical data and
experience with unlicensed sales
activities, combined with sampling from
an online sales site and ATF’s law
enforcement and regulatory experience.
The Department thus considers its SME-
PO 00000
Frm 00088
Fmt 4701
Sfmt 4700
derived estimate to be a more reliable
data source for this purpose than the
RSF survey. The RSF survey was not
limited to capturing sales by unlicensed
persons, which is the population
potentially impacted by this rule.
Rather, the authors sought to establish
the total number of citizens who sold
their firearms over a given period, not
the current number of unlicensed sellers
who are engaged in the business of
firearms dealing or who are making
sales on publicly accessible
marketplaces and platforms. As a result,
the population set derived from the RSF
results is significantly higher and
includes people who would not be
covered by the rule. The Department
thus considers the SME-derived
estimate to be more realistic.
It is because the RSF survey used a
larger sample that the Department
provided the RSF population estimates
in the NPRM analysis as an alternative
unlicensed seller population set (and
continues to do so in this final rule).
However, in order to be able to
meaningfully compare results from the
two starting sets of unlicensed seller
population estimates (SME-derived and
RSF-derived), the Department applied
the same treatment regarding the rule’s
potential impact to both numbers. This
included applying the same SME
estimates to both starting populations to
determine, for each group, the
proportion of unlicensed sellers affected
by various provisions of the rule. For
example, the Department applied the
same SME estimate of the proportion of
unlicensed sellers estimated to be
engaged in the business without a
license under the rulemaking
(approximately 25 percent) to each
starting population, as well as the same
estimate of the proportion of those
sellers who are likely to be either
unwilling or unable to become licensed
as an FFL as a result of the rule (10
percent). Because there is no other
source of data on the size of these
groups of currently unlicensed dealers
likely to be impacted by this rule, the
Department used the best estimates from
SMEs as the percentages for each, and
then applied those estimates to both
starting population sets for consistent
treatment and comparable outcomes. In
the NPRM, the Department explained
these estimates, solicited public
comment on them, requested alternative
data sources and models, and welcomed
more accurate data on the number of
unlicensed persons selling firearms.
However, the Department did not
receive any specific information—
including any alternative data sources
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
or models—or more accurate numbers
in response.
At this time, the Department does not
consider any peer-reviewed statistical
sample to be possible, much less
perfectly accurate. Typically, peerreviewed journal articles use research
data they gather themselves or a
database, such as for the U.S. Census,
from which to extrapolate a number,
such as a covered population. The
Department noted, and continues to
note, that it is currently not possible for
the Department to base population
estimates in this rule on a peer-reviewed
statistical sample because there is no
database that could be used to
extrapolate a population as specific as
unlicensed individuals who may be
selling firearms, let alone one that
includes data on factors from which to
determine the population of such
individuals who may be engaged in the
business as a dealer under the
definitions included in this rule. The
very limited options for source data
make it impossible to arrive at a more
precise number than is currently
reflected in this rule. The Department
reiterates, however, that this rule will
not impact all individuals who own a
firearm, nor will it require everyone
who sells a firearm to become a licensed
dealer.
While the journal and news articles
cited by the commenters may estimate
the population of individuals who own
a firearm, these numbers are still
estimates and are not any more accurate
than the Department’s estimates (as
requested or suggested by these
commenters), nor do they pertain more
specifically to the situation covered by
this rule. Based on the little information
available, the Department used a related
literature review, and combined
professional expertise and an online site
sample to provide two estimates on
population. OMB Circular A–4
encourages agencies to use the ‘‘best
reasonably obtainable scientific,
technical, and economic information
available,’’ including peer-reviewed
literature ‘‘where available.’’ 240 The
Department did so using the two
estimates described above: one (the RSF
survey) gleaned from a peer-reviewed
journal article about survey results that
correlated with the data set relevant to
this rule more than any other article the
Department was able to find; and
another gleaned from SME knowledge
and experience, and sampling from a
website (Armslist) that identifies which
sellers are licensed and is recognized as
240 OMB Circular A–4, at 17, https://
www.whitehouse.gov/wp-content/uploads/legacy_
drupal_files/omb/circulars/A4/a-4.pdf.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
being a popular online site used by the
potentially affected population to sell
firearms.
As for the comments suggesting that
ATF incorporate another online site,
GunBroker, into the analysis, the
Department concurs that a subset of
non-FFL sellers on GunBroker may also
be considered ‘‘engaged in the business’’
despite already transferring firearms
advertised online through an FFL
intermediary. However, the Department
already accounted for the existence of
online platforms other than the one it
sampled (Armslist) by assigning a 50
percent share of the market to all other
platforms, including GunBroker.
Nonetheless, in response to the
comments, ATF requested further SME
estimates of the relative proportions of
Armslist and GunBroker sales as part of
the total, as well as social media.
Website traffic data for GunBroker and
Armslist and additional and more
specialized SME opinions were
incorporated into the model and
informed the Department’s assumptions.
As a result, the Department has revised
its estimate of the portion of unlicensed
population making sales through
Armslist from the initial 50 percent of
the online marketplace to 30 percent,
adjusting the estimate of total
unlicensed sellers that use nontraditional mediums accordingly. These
changes are reflected in Section VI.A.2
of this preamble.
3. Sample Size and Confidence Interval
Comments Received
One commenter stated that the
Department did not specify the
methodology used to determine and
collect the sample size included in the
NPRM. In particular, they stated the
Department did not specify whether the
sampling obtained on Armslist was
collected ‘‘randomly, stratified random,
[or] non-random.’’ Furthermore, this
commenter stated that the Department
did not include the results of the
sampling for public inspection and that
the commenter was thus unable to
verify the Department’s claim that the
sample size has a 95 percent confidence
interval. Another commenter recognized
that the Department used a sample size
generator to estimate a sample size but
stated that the confidence interval
cannot be calculated without knowing
the standard deviation of a sample. One
commenter questioned how the
Department derived its estimate of
individuals ‘‘engaged in the business’’
from the sample collected from Armslist
when Armslist does not indicate
whether sellers meet the statutory
definition of being ‘‘engaged in the
PO 00000
Frm 00089
Fmt 4701
Sfmt 4700
29055
business.’’ This commenter stated that
not providing the methodology through
which the Department made this
calculation was a violation of the APA
and the Small Business Regulatory
Enforcement Fairness Act (‘‘SBREFA’’).
Department Response
The Department decided to take a
random sample from among the firearms
listings on Armslist to use in its survey.
A sample-size calculator was then used
to determine the statistically valid
sample size from those listings, as
explained in more detail in both the
NPRM and this final rule under the
methodology section (Section VI.A.2) of
this preamble. A standard deviation was
not separately calculated because the
Department assumed a normal
distribution, which is in accordance
with usual practice when there is no
reason to anticipate that the data may
skew in one direction or another and the
sample is used to calculate a population
rather than a regression or other
statistically driven analysis. Therefore,
in accordance with standard practice, to
estimate the sample size, the
Department assumed the largest
standard deviation (0.5 or 50 percent) to
obtain the most conservative (largest)
sample size. While the sample is one
unit of measurement at a single point in
time over a several-day period, the
Department verified its viability by
taking another sample after the
comment period closed, to determine
that the overall population remained
stable over time.
The Department acknowledges that
there are inherent limitations to the
lower estimate. However, the
Department’s prior experience helped
inform its estimate as well. As
explained in the NPRM’s Benefits
section, the Department previously
provided guidance in 2016 to sellers,
clarifying the circumstances in which
they would need to obtain a license as
a dealer under the previous statutory
definition, which focused on similar
factors to those included in this rule.
Thereafter, the Department encountered
an increase of only 567 new FFL
applications. This and similar historical
data support the SME estimates arising
from the combined information and
Armslist sampling. Furthermore,
regardless of the sales or transaction
volume of firearms, the number of FFLs
has been relatively stable over time.
The Department derived its estimate
of unlicensed individuals by
extrapolating from Armslist listings.
Armslist uses the categories of ‘‘private
party’’ ‘‘and ‘‘premium vendors.’’ When
the Department reviewed the entries, it
found that the premium vendors were
E:\FR\FM\19APR3.SGM
19APR3
29056
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
all listed as FFLs. Therefore, the sample
did not include entries categorized as
premium vendors. Although the
‘‘private party’’ sales did not indicate
whether they were FFLs or unlicensed
sellers, other information included in
the listings indicated that ‘‘private
party’’ sellers were likely to be homebased individuals rather than FFLs with
funds to advertise on the website.
Nonetheless, the Department could not
be certain, so the sample from Armslist
(and thus the estimated population of
unlicensed sellers) might be larger than
the actual number of unlicensed sellers.
Because the population estimate was
being used to estimate impact and
potential cost for purposes of this
rulemaking, the Department erred on
the side of overinclusiveness (thus
generating a potentially larger overall
population of unlicensed sellers, higher
cost estimates, and potentially more
impacted persons) rather than
underinclusiveness (by instead trying to
remove some of the private party sellers
that could potentially be FFLs).
Generally, the Department
incorporated a model where the relative
size of the total online marketplace was
derived from the estimated size and
characteristics of Armslist. From there,
the Department made estimates
regarding the total unlicensed market
both online and offline, before filtering
for intention and incentives. Again, as
there is no definitive source of accurate
data from which to generate these
numbers and resulting estimates, the
Department was forced to use available
data, public comments, and internal
surveys of SMEs who have specialized,
often decade-long experience with the
industry to meet its standard of best
available information.
khammond on DSKJM1Z7X2PROD with RULES3
4. Russell Sage Foundation Model
Calculation
Comments Received
One commenter argued that the
population derived from the Russell
Sage Foundation (‘‘RSF’’) survey data
(the NPRM’s high estimate) was
overcalculated, including transactions
that the commenter did not believe
required a license, such as ‘‘family,
friends, gifts, inheritance, trades, and
other.’’ This commenter further
suggested that the portion of the total
unlicensed seller population considered
to be engaged in the business in both the
RSF and SME-derived models should be
less than 10 percent, not the 25 percent
estimated by the SMEs. Furthermore,
they stated the Department incorrectly
used the overall percentage of RSF
survey dispositions over the course of
five years rather than ‘‘annualizing’’ that
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
survey result over the course of five
years.
One commenter could not recalculate
how the Department used the RSF
survey to calculate percentages. Another
commenter estimated that the affected
population of individuals is 478,000
and that the methodology used by the
Department over-estimated the
population by a minimum of 45 percent.
Overall, this commenter estimated that
this rule will have a marginal increase
of 150,000 new FFLs. The commenter,
however, did not point to or provide a
data source for their numbers. One
commenter challenged the RSF data,
claiming the model is based on a ‘‘small
sample size of just 2,072 gun-owning
respondents, providing questionable
representativeness.’’ Moreover, by
analyzing ‘‘outdated 2015 survey data,’’
the commenter suggested that the study
fails to account for increases in the rates
of American gun ownership in recent
years, and that the Department therefore
undercounted the number of sellers this
rule would affect. The commenter cited
a 2020 Gallup study 241 that estimated
that what the commenter described as a
‘‘whopping 32 percent’’ of adults own
firearms, not 22 percent as estimated in
the 2015 RSF survey data.
Department Response
The Department partially agrees with
the commenter’s suggestion that
firearms transfers listed in the RSF
survey that involve ‘‘family, friends,
gifts, inheritance, trades, and other’’
should not be included in the
Department’s estimate. The RSF survey
did not include sufficient information
about private transactions between
friends and families, as gifts,
inheritances, or other similar transfers,
from which the Department could assess
whether any of those transferors might
have been engaged in the business as a
dealer. However, the rule specifically
excludes these categories of
transactions—e.g., transactions between
family, as gifts, or due to inheriting
firearms—when they are not made
repetitively with predominant intent to
profit. In the Department’s experience,
most such transactions have not
involved a dealer engaged in the
business of dealing in firearms as
defined in this rule. Therefore, the
Department did not include RSF survey
results involving private transactions
between friends and families in the
NPRM. However, transactions such as
trading or bartering, or sales conducted
241 What Percentage of Americans Own Guns?,
Gallup: The Short Answer (Nov. 13, 2020)
(summarizing Gallup’s crime poll for September 30
to October 15, 2020), https://news.gallup.com/poll/
264932/percentage-americans-own-guns.aspx.
PO 00000
Frm 00090
Fmt 4701
Sfmt 4700
through FFLs, such as wholesale and
retail dealers, are more likely to include
transactions involving qualifying
‘‘engaged in the business’’ dealers, so
the Department included them to
calculate the RSF survey-generated
population estimate it used in the
NPRM. The Department explained this
in the NPRM and does so again in this
final rule under Section VI.A of this
preamble.
Although a commenter suggested that
ATF’s SME-derived estimate that 25
percent of the population of unlicensed
sellers would be engaged in the business
under this rule was too high, they did
not provide a basis for their
recommended estimate of 10 percent.
The commenter suggested that ATF’s
estimate of the unlicensed seller
population was too high, but even if that
were true, it would not affect what
percentage of such unlicensed sellers
would be determined to be engaged in
the business under this rule. In
addition, the commenter suggested that
the estimate of those engaged in the
business under this rule should not
include unlicensed sellers who solicit
background checks from FFLs, but the
Department disagrees with this, as
discussed in detail in Section IV.D.10 of
this preamble. As a result, the
Department continues to use the SMEderived estimate of 25 percent for the
population of currently unlicensed
sellers who would be deemed engaged
in the business under this rule.
The Department concurs with the
commenter’s understanding that, in the
RSF survey, the sales rate of personal
firearms was 5 percent over the course
of five years rather than 5 percent over
one year as initially interpreted by the
Department. Accordingly, the
Department recalculated its estimate,
using a personal sales rate of 5 percent
over the course of five years, or 1
percent annually.
The RSF survey contained many
percentages and descriptions of
different types of firearms transactions.
As explained in response to comments
under Section IV.D.1–2 of this
preamble, the RSF survey and resulting
journal article were not designed to
capture or address information
specifically relevant to this rule. As a
result, the data the Department could
glean from the RSF survey, while useful
in some respects, were not directly on
point for purposes of making estimates
related to the area affected by this rule.
In addition, the RSF survey results are
compiled in a way that does not provide
accurate data on, or align with, issues
related to whether a seller or transaction
might be among the total potentially
affected population base or might be
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
among the portion that could qualify as
engaged in the business under this rule.
This is not a flaw in RSF’s data but is
a result of different focuses between
RSF’s article and this rule.
Because this rule is focused on
dispositions (or ‘‘sales’’) of firearms, the
Department used only survey results
and percentages outlined in the
Dispositions portion of the RSF survey
journal article on page 51 and made its
best effort to include categories that
were potentially likely to contain
relevant kinds of transactions, while
excluding categories that were less
likely to contain such transactions. The
Department therefore continues to use
those NPRM percentages as derived
from the RSF survey to determine the
high population estimate in this final
rule.
The Department acknowledges that
the estimated populations are estimates
using the best available information and
are not perfect. However, the
Department disagrees that there will
now be 478,000 individuals who must
be licensed. The commenter who made
that assertion did not provide a source
or data to support this estimate. As
explained above, there is no definitive
source of accurate data from which to
generate these numbers and resulting
estimates. As a result, the Department
used available data combined with
public comments and internal surveys
of SMEs with specialized, often
decades-long experience with the
industry, to meet its standard of best
available information. Nonetheless, as
discussed elsewhere in this preamble
and based on comments pointing out
calculation errors from using the RSF
survey, the Department has reduced the
overall high estimated population of the
estimated affected individuals. For more
information, please see the discussion
under Section VI.A.2 (Population) of
this preamble.
Finally, the Department concurs that
the percentage of individuals owning a
firearm in the United States may have
changed since 2015 and, as a result,
now uses the 32 percent estimate from
the more recent Gallup study the
commenter cited. Nonetheless, the
Department disagrees that the sample
size of gun owners in the RSF survey is,
as the commenter suggested, ‘‘too
small,’’ with ‘‘just 2,072 gun-owning
respondents.’’ The RSF study surveyed
3,949 persons; of that number, 2,072
respondents stated they owned firearms.
The RSF sample size of 3,949 is larger
than the sample size in the Gallup study
of 1,049 survey respondents cited by the
commenter. However, while both
samples are statistically viable sample
sizes, the Department has elected to use
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
the commenter’s suggestion of the more
recent Gallup study.
5. Inability To Comply
Comments Received
One commenter suggested that the
Department did not account for
individuals who wish to become an FFL
but are not otherwise able to obtain a
license due to State or local zoning
ordinances, or even restrictions from a
Homeowner’s Association (‘‘HOA’’).
This commenter further suggested that
the Department should calculate a loss
of social welfare due to the indirect
reduction of firearm sales resulting from
this rule and indirect requirements
stemming from local restrictions. One
commenter suggested that there may be
individuals who, after publication of
this final rule, will choose to leave the
market of selling firearms altogether so
as to avoid coming under scrutiny under
this new definition.
Department Response
The Department concurs that there
may be individuals who are restricted
from engaging in commercial activity
from their homes or other spaces by
State, county, and local laws or
ordinances, or by residential HOAs.
Individuals who fall under this category
may apply for a zoning permit or
variance through their local
jurisdictions, or may arrange to conduct
sales from a rented business premises or
other space that permits commercial
activity instead. But some may
nonetheless choose not to continue
making supplemental income through
firearm sales activity from residential
spaces. However, the Department notes
that these persons, if making
commercial sales from such locations,
were most likely already prohibited
from such sales before this rule was
issued, unless they had requested a
permit, variance, or other appropriate
exception. Zoning ordinances and HOA
restrictions on commercial activity often
include limitations on foot traffic,
number of employees, or the amount of
interference with neighbors.242 Most of
these zoning restrictions are not
predicated on whether a resident is
formally established as a business,
whether they sell firearms versus some
other product (although there may also
be additional ordinances specifically
242 See Van Thompson, Zoning Laws for Home
Businesses, Hous. Chron.: Small Business, https://
smallbusiness.chron.com/zoning-laws-homebusinesses-61585.html (last visited Mar. 7, 2024);
A.J. Sidransky, Home-Based Businesses: Challenges
for Today’s Co-ops, Condos and HOAs, New Eng.
Condominium (Oct. 2016), https://
newenglandcondo.com/article/home-basedbusinesses.
PO 00000
Frm 00091
Fmt 4701
Sfmt 4700
29057
addressing firearms), or whether they
are determined by Federal law to be
engaged in the business as a firearms
dealer. But the Department has no
source (and no commenter provided
any) from which to gather data on the
number of people who might have been
permitted to sell firearms under their
zoning or HOA requirements before this
rule and would now be unable to
continue selling firearms for this reason.
However, there may also be other
subsets of individuals who are affected
by this rule and may choose to leave the
firearm sales market for personal
reasons. For example, some people may
not want to go through the process of
getting a license or some may not agree
with it on principle and would rather
forego firearms sales than comply. The
Department acknowledges that there
may be individuals who leave the
market for a variety of reasons,
including zoning ordinances, licensing
requirements, or personal philosophy.
Although the Department does not have
data from which to extrapolate an
estimated percentage for each such
group, based on past experience with
parallel requirements and SME
expertise, the Department has combined
these groups into a single estimate for
individuals who may leave the firearm
sales market for personal reasons, which
is now accounted for in the economic
analyses in Section VI.A of this
preamble.
6. Costs of the Rule
a. Accuracy of Costs
Comments Received
Other commenters stated that it was
unclear how accurate the costs and time
burdens were that ATF calculated for
the rule asserted that ATF
underestimated costs, or alleged that
ATF’s estimates were ‘‘random’’ or had
no ‘‘data to support them.’’ Another
commenter asked how many of the
30,806 Armslist listings were, for
example, selling inherited firearms,
whether any of the listings were
misclassified as ‘‘private’’ when they
actually involved a licensed dealer, or
whether the 30,806 listings were
representative of the typical number of
listings at any given time. This
commenter also asked whether the
average of 2.51 listings per seller was
skewed by a minority of extreme
outliers. One commenter suggested that
the population characteristics derived
from Armslist could not be used to
generalize the potentially affected
population that use non-traditional
mediums (such as other online
platforms) outside Armslist.
E:\FR\FM\19APR3.SGM
19APR3
29058
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
One commenter stated that, based on
their calculations, the rule would ‘‘cost
private citizens about $338 to obtain a
new license, and $35 to $194 annually
to maintain the license.’’ Additionally,
in the commenter’s opinion, this new
rule would cost the government ‘‘$116
million to process new licenses.’’
Another commenter provided their own
cost estimate of the rule and estimated
that the 10-year annualized cost would
be $18,813,987.17 or 14.7 times more
expensive than ATF’s primary estimate.
Another commenter noted that the
Department rounded cost estimates,
including rounding wages from $16.23
to $16, which they stated could result in
a 6 percent difference in total amounts.
This commenter argued that costs
considered in rulemakings should not
be rounded (or should be rounded to the
penny) to avoid the rounding errors
that, they stated, were present in the
Department’s analysis.
A few commenters stated that the
Department did not include compliance
costs such as alarms, cameras, gun safes,
secure record storage, and secure doors.
One of these commenters further
estimated that such security items cost
them $1,000, plus monthly monitoring
charges of $40. An additional and
separate gun safe can range from $1,000
to $3,000, they stated, and a security
door would cost between $800 and
$1,000. Furthermore, this commenter
stated that the Department did not
include liability insurance, much less
labeling costs. Another commenter
suggested that the Department did not
include business start-up costs such as
attorney drafting of articles of
incorporation or other legal advice. One
commenter suggested that the rule
would increase litigation costs. Another
commenter suggested that the
Department’s estimate of the costs
should include the costs of obtaining a
State dealer’s license and local and State
business licenses, because, they said,
people who now get licensed at the
Federal level to engage in the business
of dealing firearms will also have to be
licensed as a business and as a dealer at
the State level.
Department Response
The Department disagrees that ATF’s
estimated costs are ‘‘random’’ or are not
supported by data. They are, however,
estimates. Wherever possible, the
Department used publicly available
information to calculate costs and time
burdens. Where relevant, the
Department included footnotes and
explanations regarding the calculations.
Where applicable, the Department
provided (and continues to provide)
sources and methodologies
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
demonstrating its means of determining
the overall cost of the rule. Sources of
data included, but were not limited to,
fees required by ATF to apply for a
license, costs for having photographs or
fingerprints commercially taken (as
posted by private companies), and
similar costs of obtaining a license.
However, despite best efforts, the
Department acknowledges that not all
licensing costs, like time burdens, could
be substantiated in the same manner by
third-party or publicly available data. In
these cases, ATF made estimates based
on its experience, such as the time
needed to obtain fingerprints or
passport photographs.
In the NPRM, the Department
welcomed comments as to any
assumptions made, and in particular
solicited input about any countervailing
costs or time estimates that commenters
felt the Department could not or did not
consider. In this final rule, the
Department considered the suggestions
it received in response and, where
appropriate, updated the overall costs of
the rule, including by incorporating new
data or updating to a more appropriate
source. For example, the final rule uses
wage inflation per the Bureau of Labor
Statistics (‘‘BLS’’) rather than BLS’s
Consumer Product Index to update
household income, based on a
commenter’s suggestion and further
Department assessment.
The Department acknowledges that
estimates that round to the penny might
differ from estimates that do not.
However, the Department disagrees that
rounding to the penny provides the
public a more accurate total cost of the
rule in this context because, as
discussed above, there is an inherent
lack of precise numbers that arises from
estimating a total population or total
cost without a comprehensive database,
registry, survey, or other source of
accurate data. OMB Circular A–4 allows
agencies to make predictions and
estimates during the rulemaking process
and provides guidance for accuracy in
making such estimates. It instructs
agencies to make their estimates based
on the precision of the underlying
analysis. For example, OMB Circular A–
4, section G (Precision of Estimates)
suggests that an estimate of $220 million
implies rounding to the nearest $10
million.243 In accordance with this
guidance and to avoid misrepresenting
the Department’s estimates as a more
precise cost value than they are (as
rounding to the penny would indicate),
243 See OMB Circular A–4, at 46, https://
www.whitehouse.gov/wp-content/uploads/legacy_
drupal_files/omb/circulars/A4/a-4.pdf.
PO 00000
Frm 00092
Fmt 4701
Sfmt 4700
the Department continues to choose to
round estimates to the dollar.
In response to comments on the
Armslist sampling, the agency
acknowledges that Armslist does not
label vendors based on whether they are
engaged in the business of firearms
dealing or not. Armslist uses the
categories of ‘‘private party’’ and
‘‘premium vendors.’’ When the
Department reviewed the entries, it
found that the premium vendors were
all listed as FFLs. Therefore, the sample
did not include entries categorized as
premium vendors. Although the
‘‘private party’’ sales did not indicate
whether they were by FFLs or
unlicensed sellers, other information
included in the listings indicated that
‘‘private party’’ sellers were likely to be
unlicensed individuals rather than FFLs
with funds to advertise on the website.
Nonetheless, the Department cannot
be certain, so the sample size from
Armslist (and thus the estimated
population of unlicensed sellers) might
be larger than the actual number of
unlicensed sellers. However, even if we
assume all the private party sellers on
Armslist are unlicensed (which we
cannot conclusively ascertain), not all
unlicensed sellers of firearms will
qualify as being ‘‘engaged in the
business’’ under this rule. Some portion
of them will be persons selling without
the requisite intent to profit and only
occasionally, selling inherited firearms,
selling to upgrade a personal collection,
selling to exchange for a curio or relic
they prefer, selling to acquire a firearm
for hobbies like hunting, or other similar
situations. Many persons fitting into
various of these categories will be
unaffected by this rule to the extent that
they would potentially not meet the
requirements to be engaged in the
business as a dealer, depending on the
specifics of their operation.
Because of the known existence of
such sellers in potentially large
numbers, and to account for the
uncertainty of the number of
individuals sampled who might simply
be engaging in activities not affected by
this rulemaking, the Department
estimated that, of all private sellers of
firearms, 25 percent might be deemed to
be ‘‘engaged in the business’’ and the
other 75 percent will not be affected.
In response to the comment asking
whether the average of 2.51 listings per
seller was skewed by a minority of
extreme outliers, the Department used
this number as an average per seller in
order to estimate the number of sellers
in the sample set of listings from
Armslist. The number of firearms per
seller was otherwise not relevant to the
Department’s calculations. The sampled
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
sellers on Armslist in the private sales
category varied in the number of
firearms they had listed for sale, skewed
to mostly selling one firearm or to a few
selling multiple firearms. This partially
informed the Department’s estimate that
approximately 75 percent of the
population of currently unlicensed
sellers would not be deemed engaged in
the business under this rule and
accordingly would not need to obtain a
license.
With respect to the comment about
whether Armslist could be used as a
proxy for other sellers on other online
platforms, the Department is unclear
how sellers of firearms on Armslist
might have significantly different
characteristics than those of firearms
sellers on other online platforms.
Generally, there are two types of sellers
on online platforms, licensed (FFLs) and
unlicensed persons. While there may be
differences in certain terms and
conditions on given websites—for
example, GunBroker requires that
firearm transactions be mediated
through a local FFL while Armslist does
not—those aspects of online sales are
not relevant to determining the affected
population or calculating the costs of
this rule. The terms and conditions that
online platforms offer are also not
impacted by this rule and will continue
to be set at the discretion of the entities
operating such platforms. Sellers on
online platforms such as Armslist may
continue to perform in-person
transactions simply by making a phone
call to perform a NICS background
check for a buyer and will not be
required to use a local FFL to complete
a firearms transaction like sellers on
GunBroker. These characteristics that
may differentiate between online
platforms do not affect the costs or the
impacts to sellers due to the
requirements of this rule.
The Department disagrees that items
such as alarms, cameras, gun safes, or
other security measures are costs under
this rule. Although it recommends FFLs
consider purchasing such items for
security purposes and theft avoidance,
the Department does not require—in
this rule or anywhere else—that they
purchase such items. Therefore, the
Department is not including these costs
in this rule. The Department also did
not include litigation costs because
possible future lawsuits are speculative.
The Department disagrees that the
costs of the rule should include costs for
all persons who are dealing in firearms
to also obtain State dealer’s licenses and
State and local business licenses.
Persons who are purchasing and
reselling firearms in a State have always
been required to follow State and local
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
laws regarding licensing and business
operations. The fact that the statute is
now further defining the circumstances
in which such individuals will be
required to be licensed at the Federal
level does not change State licensing
requirements.244 This regulation does
not change the GCA statutory definition,
as amended by the BSCA, and it does
not require any State to adopt any
presumptions or other clarifying
provisions under Federal law into their
State requirements. So, in general, State
licensing requirements or costs are not
affected by this rule. However, ten
States and the District of Columbia tie
their dealer licensing requirements to
the definition of dealer at 18 U.S.C. 921
or the dealer licensing requirements at
18 U.S.C. 923 (though not to any ATF
regulations) or require that a person
with a Federal firearms license for
dealing must also get a State dealer’s
license. As a result, in those 11
jurisdictions, firearms sellers who must
get a Federal firearms license for dealing
due to the changes in the BSCA and,
therefore, this rule, will likely also need
to obtain State dealer licenses for the
same reason. The Department has added
those costs in the economic analysis
under Section VI.A.3 of this preamble.
b. Derivation of Leisure Wage Rate
Comments Received
Some commenters had questions or
concerns about the leisure wage rate.
One commenter asked why ATF
referred to the Department of
Transportation (‘‘DOT’’) guidance as a
method of determining a leisure wage
rate. A few commenters opined that the
calculated leisure wage rate was too
low. One of these commenters estimated
that a $16 leisure wage would not result
in a livable household income. Another
commenter suggested that an average
occupational wage rate of $34 per hour
was more realistic since individuals
would be considered engaged in the
business of dealing in firearms and not
engaged in leisure time.
Another commenter stated that the
Department underestimated the leisure
wage rate, which should have been
adjusted from $16 to $19.48 to account
for wage inflation between April 2020
and the present (which this commenter
calculated to September 2023). This
commenter used the BLS’s Consumer
Price Index (‘‘CPI’’) as a means of
244 See 27 CFR 478.58 (Federal license confers no
right or privilege to conduct business or activity
contrary to State or other law, grants no immunity
for violations of State or other law, and State or
other law grants no immunity under Federal law or
regulations.).
PO 00000
Frm 00093
Fmt 4701
Sfmt 4700
29059
calculating wage increases over time to
$19.48.
Department Response
The Department assumes that
currently unlicensed persons who may
be affected by this rule are not already
engaged in a full-time occupation of
selling firearms for their income
because, if they were, they would
already either be licensed in compliance
with the GCA as it existed before the
BSCA or working for such a licensee.
The Department therefore also assumes
these persons are not paying themselves
a specific wage from their monetary gain
from selling their firearms as, typically,
a sideline. In other words, the changes
enacted by this rule are not likely to
cause individuals to qualify as being
engaged in the business based on having
a full-time or part-time job, including a
job working for an FFL, where they get
paid salaries or hourly wages as part of
an occupation. Instead, the firearms
sales activities that would require
unlicensed individuals to obtain a
license as a result of this rule likely
constitute a supplemental source of
income or a side business. Such
activities are not correlated to an actual
wage because they are typically done on
the side and this rule does not require
FFLs to pay themselves an occupational
wage. The affected dealers typically
have another job that generates an
occupational wage, receive retirement
pay, or receive similar primary income.
As a result, ATF used a leisure wage to
calculate the cost of their non-work time
spent on dealing, rather than an
occupational wage.
As such, the BLS does not track or
assign a specific wage in this context, as
there is no wage involved. Nonetheless,
the Department recognizes that the rule
imposes an opportunity cost of time on
persons who will now need to apply for
and maintain a license in order to
continue dealing in firearms. In the
NPRM, the Department therefore
assigned a monetary value to that
unpaid, hourly burden, as a comparison
in ‘‘cost,’’ even though these persons are
not likely paying themselves an hourly
wage for such duties. As a result, the
Department opted to use a ‘‘leisure’’
wage rather than a retail wage and
continues to do so in this final rule. The
Department used DOT’s guidance on the
value of travel time to calculate a leisure
wage rate in the NPRM. During the final
rulemaking process, however, the
Department determined that the
methodology used by the Department of
Health and Human Services (‘‘HHS’’) to
calculate the cost of time that persons
use to perform actions that are not part
of an official occupation is a more
E:\FR\FM\19APR3.SGM
19APR3
29060
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
accurate measure of the relevant leisure
wage rate than the DOT methodology
used in the NPRM. As a result, the
Department has used HHS’s
methodology to derive the leisure wage
it used for this final rule. Because HHS’s
methodology relies on BLS data that is
updated on a monthly basis, the
Department does not need to use an
inflation-adjusted wage rate as
suggested by the commenter.
Using this methodology, the
Department raised the leisure wage rate
to $23 an hour, which is higher than the
$19 suggested by the commenter. For
more discussion on how the new wage
of $23 per hour was derived, see Section
VI.A.3 of this preamble.
c. Hourly Burden
Comments Received
One commenter suggested that the
Department underestimated the hourly
burdens to complete a Form 7
application and to undergo a licensing
inspection. This commenter estimated
that it would take more than one hour
to read, understand, and complete a
Form 7. In addition, they said, the
estimated hourly burdens should
include the time needed to closely read
and understand hundreds of pages of
Federal laws and regulations, which
they estimated would take at least 22
hours (100,000 words at 75 words per
minute). They also estimated that it
would take an additional 5.5 hours to
read Form 7 and acknowledge it via
signature prior to the license being
issued, and 4.5 hours to do a renewal
Form. Therefore, this commenter
estimated that the per FFL cost should
be $1,165, to account for 27.5 hours of
work, at an average hourly occupational
wage rate of $34 per hour, in addition
to the $230 cost of items such as the
Form 7 application fee, fingerprints, and
photographs.
khammond on DSKJM1Z7X2PROD with RULES3
Department Response
The Department concurs with the
commenter that the estimated time for
inspections was underestimated and has
revised the amount of time needed to
perform an inspection. From additional
research it conducted based on the
comment, ATF found that ATF Industry
Operations Investigators (‘‘IOIs’’) report
an average of 15 hours for an initial
inspection and 34 hours for a
compliance inspection, as opposed to
the three hours for each inspection
estimated under the NPRM. These
averages account for all sizes of licensee
operations, some of which may take far
less time to inspect and others of which
may take far more time, depending on
various factors about the licensee’s
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
operations. Accordingly, the
Department has revised and updated the
hourly burdens for initial and
compliance inspections in Section VI.A
of this preamble.
However, the Department disagrees
with the commenter regarding the
hourly burden to complete a Form 7.
First, the Form 7 application itself is
only four pages long and the questions
for the person establishing the license
are on only pages 1 and 2. They also
primarily pertain to the individual’s
personal demographics and what type of
license the individual is requesting.245
For ease of access, pages 3 and 4 include
the responsible person questionnaire
that an applicant can fill out about
another person if the applicant is
applying for an FFL license to include
more than one person. Form 7 also
includes instructions and definitions of
terms, to make filling out the form easier
and faster. They are for reference, as
needed, and do not necessitate reading
and studying in such a way that would
require significant additional time. In
addition, the Department’s hourly
burden calculation does not need to
account for a person taking any time to
read regulations and laws. Most persons
who need to fill out Form 7 are unlikely
to need to read regulations or laws in
order to do so. Moreover, the
Department prepares guidance
documents that summarize the relevant
regulations, and those guidance
documents are freely available online
and do not necessitate any reading and
studying that would require significant
additional time. In addition, if a person
did wish to read the regulation, the
relevant regulatory text is about five
pages long at 12-point font and does not
require significant additional time to
read. Nonetheless, the Department has
added familiarization costs to the costs
outlined in Section VI.A.3 of this
preamble.
The Department also notes that Form
7 has undergone public review and
OMB review through the required
Paperwork Reduction Act process,
including detailed explanations for the
time burden the Form entails. Those
vetted and approved numbers form the
basis for estimates included in the
NPRM and now in the final rule
regarding this Form. Therefore, hourly
burdens to complete Form 7 and travel
times to obtain items such as forms,
fingerprints, and photographs have not
been modified because Form 7 can be
requested by mail or downloaded via
the internet. Furthermore, fingerprints
245 Application for Federal Firearms License, ATF
Form 7 (5300.12)/7CR (5310.16) (revised Oct. 2020),
https://www.atf.gov/file/61506/download.
PO 00000
Frm 00094
Fmt 4701
Sfmt 4700
and photographs are commercially
available throughout the United States
for employment or passport purposes.
The Department has determined that
travel times and mileage costs have been
appropriately calculated.
d. Office Hours/Business Operational
Costs
Comments Received
One commenter suggested that the
Department failed to include business
operational costs stemming from
maintaining at least one hour of
operation or availability every week, as
they believe Form 7 requires. This
commenter estimated that, based on a
wage rate of $34 an hour, maintaining
business operations for one hour a week
for 52 weeks would cost an individual
52 hours, or $1,768 in wages. They also
suggested that the cost of becoming a
licensee and maintaining a license to
deal in firearms should include hourly
burdens of 40 hours a week for 50
weeks, allowing for two weeks of
vacation.
Another commenter suggested that
this rule did not include expenses or
time burden associated with selling a
firearm. This commenter further
suggested that these expenses should be
subtracted from any ‘‘profit’’ from a sale.
A third commenter suggested that ATF
should include the time factor to run a
business operation, and another
commenter suggested including
insurance and retirement as costs to
comply with the rule.
Department Response
The Department disagrees with the
commenter’s analysis regarding
operational costs. Neither this rule, nor
any existing Federal firearms regulation,
requires that a licensed dealer maintain
full-time business hours, much less hire
staff or provide benefits. As discussed in
more detail under Section IV.D.6.b of
this preamble, unlicensed sellers who
would be affected by this rule would not
have been engaging in the business as
their full-time occupation; full-time
firearms sellers were clearly already
covered by the GCA licensing
requirements before the BSCA and this
rule and are thus not counted in the
affected population. Therefore, the
unlicensed sellers who would be
affected by this rule would not have
been earning a wage from such activities
or paying staff. This rule does not
change that, nor does it require that
such sellers begin engaging in such
activities as part of obtaining a license
to deal in firearms. As a result, the
Department is not requiring or
anticipating that these individuals will,
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
as a result of this rule, begin paying
themselves an occupational wage with
benefits. In addition, the Department
acknowledges that Form 7 requires that
an applicant list at least one business
hour per week during which they are
available and may be contacted for
information or scheduling purposes in
the event the newly licensed individual
needs to be inspected. But there is no
requirement that the affected individual
engage in or maintain actual business
operations or otherwise actively sell
firearms during this time (or during any
other specified time or frequency); that
individual would be able to maintain
the operational hours and frequency
that they had prior to being licensed.
Therefore, no additional operational
opportunity costs were assessed in this
final rule.
The time burden associated with the
sale of a firearm or to run a business
operation is not included because these
actions are not required by this rule and
are otherwise considered to be ‘‘sunk’’
costs. The same is true for other
operational costs, including insurance
and retirement benefits. Because the
rule does not require that a business
operator incur any such costs, it is
reasonable to presume that, to the extent
such costs are incurred, the business
operator was already incurring them
before the rule, or will only incur them
thereafter on a voluntary basis. This rule
only requires individuals that are
engaged in the business of dealing in
firearms to apply for and maintain a
license to be a dealer in firearms. The
only costs this rule requires to be
incurred are costs to become a licensed
dealer and costs to maintain that
license. While the Department agrees
that an individual may have expenses
and time burdens with respect to the
actual sale of a firearm or to operate a
business, these actions are not required
by the Department, are voluntary, and
are not considered costs of this rule.
this preamble, the Department included
the RSF estimate for comparative
purposes so people could see the
possible options but believes that the
more accurate estimate is the lower
SME-based estimate. As mentioned
above, the SME-derived estimate is
based on real historical data and
experience with relevant sales activities,
combined with sampling from an online
sales site and ATF’s law enforcement
and regulatory experience. The
Department thus considers it to be a
more reliable data source for this
purpose than the RSF survey and
therefore uses the SME-derived estimate
as the primary estimate for this
rulemaking.
7. Impact on Jobs and Economy
Comments Received
e. Costs to the Government
One commenter suggested that
requiring additional firearms sellers to
become licensed will increase the prices
of firearms sold in the marketplace. This
commenter further estimated that the
total U.S. firearms market was $32.1
billion as of 2022 and that this rule,
based on their own estimates, would
cause a 0.099 percent increase in
firearm prices across the overall
firearms market. The commenter used
an internal model to compare the cost
of the rule to their estimated increase in
prices; from that, they estimated that the
increased prices they assessed would
result in 0.89 percent fewer firearm
sales, which would in turn result in
fewer jobs, including jobs represented
by newly licensing these sellers as FFLs.
Based on their internal modeling, this
commenter estimated that this rule will
indirectly result in a loss of 350 direct
retail jobs. The commenter went on to
estimate that, including supplier jobs,
the rule will indirectly result in over
550 fewer jobs and a total of $26.5
million in lost wages and benefits.
Finally, this commenter estimated that
the American economy would be $70
million smaller.
Comments Received
Department Response
One commenter calculated the annual
Government cost as derived from the
RSF survey—the ‘‘high’’ population
estimate—and estimated that, using the
upper population estimate, the
Government cost is about 14.7 times
higher than the Department’s estimated
Government cost.
The Department disagrees with the
commenter’s assessment of the effect
this rule will have on the price of
firearms and the effect on the U.S.
firearms market and overall economy.
The Department has reviewed the
literature provided by the commenter
and determined that the estimated
impacts on the economy, retail jobs,
wages, and subsequent taxes detailed by
the commenter’s internal literature are
largely not connected to the market
impacted by this rule. The literature
cited by this commenter primarily
focused on existing licensees, their
Department Response
The Department agrees that using the
population estimates derived from the
RSF survey would result in a higher
government cost estimate. However, for
reasons discussed in Section IV.D.2 of
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
PO 00000
Frm 00095
Fmt 4701
Sfmt 4700
29061
retail jobs, and their firearms market.
The literature does not cover
unregulated persons who sell firearms
on the secondary market. While there
may be some effects due to an increase
in the number of licensed FFLs, the new
licensees that would be generated by
this rule have already been selling, and
would continue to sell, firearms on the
secondary market, and thus would not
impact the primary market. Based on
the totality of public comments and the
Department’s experience and analysis,
the Department has no basis to believe
that persons obtaining new licenses
under the clarifications in this rule
would enter the primary firearms
market industries of manufacturing
firearms, becoming intermediaries, or
engaging in retail sales of new firearms.
Instead, the majority of the unlicensed
sellers who would need to obtain a
license pursuant to this rule already
obtain firearms through existing retail
FFLs and subsequently resell them on
the secondary market. Some also
acquire firearms through estate sales or
other secondary sources. Since this
buying and further reselling secondary
market has been and will continue to
operate, the Department does not
estimate a significant impact on the
firearms industry as suggested by this
commenter.
8. Impact on Existing FFLs
Comments Received
Some commenters suggested that the
rule would cause windfall gains to
current FFLs under the belief that the
rule would require all firearm
transactions to be done through an
existing FFL. Other commenters
claimed that the rule would make it
harder to lawfully transfer firearms due
to the costs of obtaining and
maintaining an FFL. Several individuals
claimed that the rule would cause more
so-called ‘‘mom-and-pop’’ businesses to
go out of business.
Department Response
The Department acknowledges that
this rule will create more FFLs, which
will result in an increase in the amount
of licensed competition. However,
competition from these new licensees
does not equate to an increase in sales
competition, nor is the competition
new, because those same people who
will be required to obtain licenses under
the rule are currently selling as
unlicensed dealers. And they are
operating at an unfair advantage. As one
set of commenters pointed out, ‘‘[a]s
recognized in the Proposed Rule, these
requirements would come at modest
cost to most people falling under the
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
29062
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
clarified definition. Furthermore,
requiring regulatory compliance by
dealers operating on the margin of the
current scheme would have the
equitable effect of subjecting them to the
same requirements as current FFLs
engaged in substantially similar
business activities.’’ These sellers would
have already existed in the marketplace
under the baseline prior to this rule, but
they have been operating and competing
with FFLs in a largely unregulated
state—without being subject to the laws
and regulations under which FFLs are
required to operate. Rather than adding
competition to existing FFLs, clarifying
when sellers are likely to be engaged in
the business under this rule and would
need to become licensed would increase
equity in the marketplace by extending
costs and obligations incumbent upon
all existing FFLs to include currently
unlicensed sellers that are acting as
dealers in firearms.
There may be additional positive
market effects on FFLs as a result of
their serving as an intermediary for
private party firearm transactions at a
greater rate, but the Department finds
this effect difficult to estimate based on
the lack of existing data sources and
subject matter expertise. However, the
Department disagrees that this rule will
cause more ‘‘mom-and-pop’’ businesses
to go out of business. The majority of
existing licensees are considered to be
small businesses and will continue to
operate as small businesses.
Furthermore, as other commenters have
pointed out and as discussed in
Sections IV.D.10.c and IV.D.12 of this
preamble, many States already require
background checks for all private party
transactions and any costs associated
with such background checks are not
due to this rule. Finally, a newly
licensed seller who might newly need to
undertake background checks may do so
under FBI processes by making a simple
phone call for free. The Department
included these qualitative effects of the
rule.
suggested the selling FFL would
experience an adverse price when
liquidating their existing inventory.
Another commenter suggested that
the adverse price response described
above would be large. The same
commenter also suggested that those
who choose to surrender their FFLs
must still liquidate their businessowned firearm assets within 30 days,
with the same adverse price response of
those who have had their license
revoked, rather than engage in an
‘‘orderly, lawful liquidation’’ as ATF
estimates.
9. License Revocation Costs
10. Benefits of the Rule
Comments Received
One commenter questioned ATF’s
assumption that, upon revocation of a
license, the underlying market value of
the revoked FFL’s existing inventory of
firearms would be unchanged when
sold or transferred to another FFL’s
inventory. This commenter suggested
that during a comprehensive sale or
transfer of an existing FFL’s inventory to
another FFL, the selling FFL would
need to liquidate their existing
inventory at a loss to the purchasing
FFL. In other words, the commenter
a. Costs Outweigh the Benefits
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
Department Response
The Department estimated that the
rule would likely have a qualitative
impact on FFLs that fail to comply with
existing regulations and requirements,
mainly due to the rule’s clarification of
what must occur with their existing
inventory when their license is
terminated. FFLs that have had their
licenses terminated before this rule were
already not permitted to engage in
unlawful means of disposing of their
remaining inventory, but the rule makes
the lawful options clearer. However,
ATF revokes or denies renewal of FFL
licenses very rarely, with a de minimis
0.093 percent of all active FFLs being
revoked annually as described below in
Section VI.A.4 of this preamble.
Furthermore, the economic impact of
transferring inventory to another FFL is
unclear, given the range in volume and
value of firearm inventories. Public
comment was specifically sought on
these topics, but the Department did not
receive any data. In addition, the
disposal requirements are not expected
to have an adverse cost impact on FFLs
that choose to cancel or not renew their
licenses. Because such FFLs do so
voluntarily, they know in advance that
they will need to dispose of their
inventory and thus do not have the
same disruption and urgency that
disposition due to a license revocation
would potentially carry.
Comments Received
A couple of commenters opined that
the costs of this rule outweigh the
benefits. Of those two commenters, one
calculated a 188 percent increase in
Form 7 applications but stated there
would be less than a 0.2 percent
increase in background checks resulting
from that increase in FFLs. Further, this
commenter suggested that the ‘‘actual
number of firearm transactions at
licensed dealers is likely a good bit
higher’’ because ‘‘[m]ultiple guns can
PO 00000
Frm 00096
Fmt 4701
Sfmt 4700
transfer based off of one background
check.’’
One commenter asserted that ATF
incorrectly included individuals who
sell firearms through existing licensees
and, therefore, no benefit should accrue
from such individuals because these
firearm transactions are already subject
to the background check process. The
commenter further stated that the
Department failed to account for sellers
that currently undergo background
checks for all private transactions, as
required by certain States. This
commenter estimated that 50 percent of
the population lives in States that
already require background checks and
thus implied that any benefits derived
from the rule are not as abundant as
stated by the Department.
Department Response
The Department disagrees that the
benefits of the rule are outweighed by
the costs, as outlined in the economic
analysis in Section VI.A.6 of this
preamble. The value society places on
the qualitative social benefits of the rule
cannot be quantitatively represented in
a way that would allow them to be
compared to the quantitative costs of
licensing more people, so the
comment’s comparison of the two is not
accurate or appropriate. People know
that society has placed a high positive
value on increasing the licensure of
sellers who engage in the business of
dealing, in aid of public safety, because
Congress passed a law to change the
definition for that purpose. In addition,
hundreds of thousands of commenters
on this rule have also expressed that
they place a high positive value on
increasing licensure for public safety
needs. But people cannot place a
numerical value on the qualitative
benefits flowing from those statutory
changes and thus from this rule.
However, there are quantitative benefits
that relate to the subject indirectly. The
Department does not have sufficient
data from which to assess these indirect
benefits and has thus not included or
relied on them as quantitative benefits
resulting from this rule. However, the
Department is including some
quantitative illustrative considerations
in response to this comment as they
shed some light on the indirect benefits.
For example, there are studies that have
examined the economic costs of gun
violence. Those studies have
demonstrated that the annual healthcare
and medical costs of firearms violence
alone run into the billions.246 Therefore,
246 See, e.g., Everytown for Gun Safety, The
Economic Cost of Gun Violence (July 19, 2022),
https://everytownresearch.org/report/the-economic-
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
even a marginal decrease in firearms
violence as a result of this rule would
constitute a large enough quantitative
benefit from the rule to offset the
estimated costs of the rule.
The Department further disagrees that
there is a marginal decrease in returns
with respect to the costs attributed to
this rule. This rule is primarily intended
to implement the BSCA and to
accordingly reduce the means by which
a prohibited person can obtain firearms,
including those subsequently used in a
crime. The ratio between the number of
Form 7 applications versus the number
of background checks versus how many
firearms a buyer can purchase under
one background check is not relevant in
determining benefits. In other words,
benefits stem from having more firearms
sellers be licensed, for multiple public
safety reasons (as discussed in this
section and Section IV.D.10 of this
preamble)). These benefits are not solely
the result of increasing background
checks, so the perceived increase in the
number of background checks does not
offset the rule’s benefits. In addition,
even comparing the number of
background checks with and without
the rule would not be accurate because
there are other factors involved. For
example, although some prohibited
persons do attempt to purchase firearms
from FFLs, many currently buy from
unlicensed dealers. Imposing a
requirement that those dealers now be
licensed would likely deter more
prohibited persons from trying to
purchase firearms, which would
decrease the number of background
checks. The number of firearms that are
being purchased and resold per
transaction is also not relevant. Multiple
cost-of-gun-violence/ (estimating $1.57 billion in
directly measurable medical costs to taxpayers due
to firearms violence, including immediate and longterm medical care, mental health care, and
ambulance and patient transport (not including
costs to families, survivors, and employers);
Nathaniel J. Glasser et al., Economics and Public
Health: Two Perspectives on Firearm Injury
Prevention, 704 Annals Am. Acad. Pol. & Soc. Sci.
44 (‘‘The direct and associated medical care costs
of firearm injury are high. In 2019, medical costs
associated with firearm fatalities totaled an
estimated $233million (CDC 2022). For nonfatal
firearm injuries in 2019, the estimated 12-month
attributable medical care cost was $24,859 per
patient (Peterson et al. 2019; Peterson, Xu, and
Florence 2021). While further research is needed to
estimate long-term-care costs, the annual direct
medical cost of firearm injuries has been
conservatively estimated to exceed $2.8 billion
(CDC 2022).’’); Government Accountability Office,
Firearm Injuries: Health Care Service Needs and
Costs (2021), https://www.gao.gov/assets/gao-21515.pdf (finding that initial inpatient costs from
firearms violence in 2016 and 2017 were more than
$1 billion, plus another 20 percent for physician
costs, and additional first-year costs of $8,000 to
11,000 each for 16 percent of such patients, and
stating that there are additional costs thereafter).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
transactions already occur pursuant to a
single background check and neither the
BSCA nor this rule are directed at
reducing firearm transactions. The
commenter’s comparison of the number
of firearms that are purchased and
resold per transaction therefore also
does not result in an offset of the rule’s
benefits.
An increase in background checks is
not the only benefit accrued from
requiring that persons engaged in the
business as dealers obtain a license.
Increasing the number of licensed
dealers also results in an increase in
sellers who maintain firearms
transaction records, submit multiple
sales reports, report theft and losses of
firearms, and respond to crime gun trace
requests. These activities are directly
correlated with an increase in the
number of prohibited persons who are
denied firearm purchases, law
enforcement’s ability to investigate and
retrieve lost or stolen firearms before
they can be used in crimes or trafficked,
and law enforcement’s ability to trace
firearms that have been used in crimes
and use them to find the perpetrators,
among other benefits. This is
particularly beneficial for States that
have higher rates of straw purchasing or
are otherwise larger sources of firearms
trafficking, but it benefits society as a
whole because each of these actions
help law enforcement reduce criminal
activities and opportunities.
Furthermore, the Department believes
that this rule will increase background
checks, primarily in States that have
less stringent background check
requirements, which reduces the
potential sources of firearms trafficking.
The Department concurs with the
statement that the economic analysis
model failed to account for sellers that
currently undergo background checks
for all private transactions, as required
by certain States, but disagrees that the
fact that some States currently require
background checks for private firearm
transfers reduces the benefits accrued
from this rule. While the Department
acknowledges that certain States already
require background checks, States that
currently do not require background
checks pose a greater risk to public
safety. These States tend to have higher
rates of straw purchasing or otherwise
are sources of firearms trafficking.
Although State requirements that all
sales undergo background checks could
be relevant in general terms, they do not
reduce the benefits accrued from this
rule because relatively few States have
universal background check
requirements, because State background
checks differ with respect to their
thoroughness and which databases are
PO 00000
Frm 00097
Fmt 4701
Sfmt 4700
29063
utilized, and because the benefits of
increasing licensees are not solely due
to an increase in background checks.
Please see Section VI.A.7 of this
preamble for more information about
States and firearms trafficking.
The Department further disagrees that
the benefits derived from the rule
should be reduced to account for
unlicensed persons who sell firearms or
obtain background checks through
existing FFLs (either voluntarily or due
to State requirements).
As a result of the comments on this
topic, the Department has added a
discussion of State background checks,
tracing, and firearms trafficking to the
Benefits discussion in Section VI.A.6 of
this preamble to supplement the
Department’s position that the benefits
of this rule outweigh the costs.
b. Lack of Benefits From Licenses
Comments Received
One commenter argued that benefits
attributed to this rule ‘‘do not flow from
licenses’’; rather, the rule’s benefits are
derived from the act of undergoing
background checks and maintaining
records. This commenter also stated that
the Department failed to use denied
background checks and responsiveness
to traces as a benefit to the rule,
suggesting, according to the commenter,
that this rule does not address public
safety as stated by the Department.
Department Response
The Department disagrees that the act
of obtaining and maintaining a license
does not directly contribute to the safety
and welfare of the public. Congress
chose to make the dealer the ‘‘principal
agent of federal enforcement’’ in
‘‘restricting [criminals’] access to
firearms.’’ Huddleston v. United States,
415 U.S. 814, 824 (1974). As the
Supreme Court explained in a later case,
Abramski, 573 U.S. at 172–73:
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 wouldbe 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. Other provisions then require
the dealer to check and make use of certain
identifying information received from the
buyer. Before completing any sale, the dealer
must ‘‘verif[y] the identity of the transferee
by examining a valid identification
document’’ bearing a photograph.
§ 922(t)(1)(C). In addition, the dealer must
procure the buyer’s ‘‘name, age, and place of
residence.’’ § 922(b)(5). And finally, the
dealer must (with limited exceptions not at
issue here) submit that information to the
National Instant Background Check System
E:\FR\FM\19APR3.SGM
19APR3
29064
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
(NICS) to determine whether the potential
purchaser is for any reason disqualified from
owning a firearm. See §§ 922(t)(1)(A)–(B).
The benefits of this rule therefore
stem from bringing potential purchasers
onto a licensed business premises to
prevent prohibited persons from
obtaining firearms, channeling the
commerce in firearms through licensed
dealers so that State and local law
enforcement can regulate firearms
commerce in their borders, and allowing
the tracing of crime guns. Making it
harder for prohibited persons to obtain
firearms makes it less likely that such
persons will use a firearm in a crime. To
the extent that a firearm purchased
through an FFL is used in a crime, that
firearm can then be traced by law
enforcement. Furthermore, should
firearms be stolen from an FFL, there are
requirements that thefts be reported so
that ATF and local law enforcement can
analyze theft patterns for future
reduction purposes. This approach
helps to ensure that regulated firearms
continue to be used for legal purposes
and not criminal activities.
c. Lack of Empirical Data
khammond on DSKJM1Z7X2PROD with RULES3
Comments Received
Some commenters asserted that the
proposed rule would not improve
public safety, and cited statistics to
support their view. One commenter
stated that the proposed rule would not
hinder criminals or save lives. In
support of that view, the commenter
stated that the State of Washington’s per
capita gun murder rate increased by
more than 26 percent following its 2014
passage of universal background checks
(‘‘UBCs’’) versus an unnamed
neighboring State that the commenter
stated had no such increase and no UBC
requirement. Another commentator
stated that numerous studies, including
in peer-reviewed journals, found that
the correlation between gun control
measures and reduction in gun violence
is negligible. See Michael Siegel et al.,
The Relationship Between Gun
Ownership and Firearm Homicide Rates
in the United States, 1981–2010, 103
Am. J. Pub. Health 2098 (2013) (cited by
the commenter as in the Journal of the
American Medical Association instead).
Another commenter stated that the
Bureau of Justice Statistics shows that
less than 1 percent of individuals obtain
firearms at gun shows. Finally, some
commenters believed the proposed rule
itself is reactive or lacks supporting
evidence, analysis, or well-considered
evidence to show that it will have a
meaningful impact on crime reduction
or improve public safety.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
Similar to the comments on the
population estimates, one commenter
stated that the benefits lacked empirical
data that would demonstrate the effects
on public safety. The commenter
referenced a peer-reviewed study that
stated that each percentage point
increase in gun ownership increased the
homicide rate by 0.9 percent. One
commenter questioned the lack of
quantifiable benefits, including the lack
of tracing data.
Many commenters who supported the
proposed rule referenced research
showing that one in five firearms are
sold without a background check 247 and
further stated that allowing firearms to
be purchased without a background
check is a significant threat to public
safety. One commenter reinforced this
sentiment by citing an article from
Bloomberg.248 Some commenters stated
that firearms that are purchased without
a background check cannot be later be
traced. Many public commenters agreed
with the rule and suggested that
requiring background checks for sales of
firearms increases public safety.
Department Response
The Department disagrees that there is
no quantitative data to support the
analysis in the NPRM and the public
safety justification for the provisions of
this rule; on the contrary, there is much
data in support. Such data include the
National Firearms Commerce and
Trafficking Assessment (‘‘NFCTA’’)
referenced by one commenter and
released by ATF as a two-volume report
in May 2022 and January 2023.249 That
report revealed, for example, that even
though only 3 percent (41,810) of crime
guns traced between 2017 and 2021
were acquired from licensees at a gun
show, the percentage of those traces
increased year-over-year by 19 percent.
And as ATF noted in the report, ‘‘[i]t is
important to recognize that this figure
247 German Lopez, Study: 1 in 5 gun purchases
reportedly go through without a background check,
Vox (Jan. 4, 2017), https://www.vox.com/policyand-politics/2017/1/4/14153594/gun-backgroundcheck-study (discussing a study published in the
Annals of Internal Medicine).
248 Brentin Mock, Mapping How Guns Get
Around Despite Background Check Laws,
Bloomberg (Oct. 22, 2015), https://
www.bloomberg.com/news/articles/2015-10-22/40percent-of-gun-owners-got-them-withoutbackground-checks.
249 ATF, National Firearms Commerce and
Trafficking Assessment: Firearms in Commerce
(May 5, 2022), https://www.atf.gov/firearms/docs/
report/national-firearms-commerce-and-traffickingassessment-firearms-commerce-volume/download;
ATF, National Firearms Commerce and Trafficking
Assessment (NFCTA): Crime Gun Intelligence and
Analysis, Volume Two (Jan. 11, 2023), https://
www.atf.gov/firearms/national-firearms-commerceand-trafficking-assessment-nfcta-crime-gunsvolume-two.
PO 00000
Frm 00098
Fmt 4701
Sfmt 4700
does not represent the total percentage
of recovered crime guns that were sold
at a gun show during the study period
as private citizens and unlicensed
dealers sell firearms at gun show
venues. National data, however, are not
available on unregulated firearm
transfers at gun shows.’’ 250
Furthermore, the Department
disagrees with the commenter’s
interpretation of the article in the
American Journal of Public Health. The
commenter argued that the article found
that any correlation between gun control
measures and reduction in gun violence
is negligible. But the article states,
‘‘[g]un ownership was a significant
predictor of firearm homicide rates
(incidence rate ratio = 1.009; 95%
confidence interval = 1.004, 1.014). This
model indicated that for each
percentage point increase in gun
ownership, the firearm homicide rate
increased by 0.9%.’’ Siegel, Ross, &
King, supra, at 2098. The Department
interprets this article to suggest that for
every percent increase in gun
ownership, there is almost a comparable
(almost 1:1 ratio) increase in firearm
homicide, which is not negligible. In
other words, for every percent increase
in firearms ownership, there was an
almost equal percentage increase in
firearm homicide.
However, the Department concurs
with many of the statistics provided by
the commenters and has incorporated
those statistics into the economic
analysis in Section VI.A of this
preamble. Additionally, the Department
used information provided by the
commenters to illustrate the
effectiveness of tracing data to help
determine firearms trafficking or straw
purchasing patterns. Finally, the
Department compared commenters’
statistics on States that require
background checks for all private
firearms transactions to States that have
the highest and lowest time-to-crime
statistics and determined that States
with the least restrictive background
check requirements may be larger
sources of firearms trafficking and straw
purchases. For more details, see Section
VI.A.7 of this preamble, which
discusses the benefits of the rule.
250 ATF, National Firearms Commerce and
Trafficking Assessment (NFCTA): Crime Gun
Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the
United States and Its Territories 14 (Mar. 27, 2024),
https://www.atf.gov/firearms/docs/report/nfctavolume-ii-part-iii-crime-guns-recovered-and-tracedus/download.
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
11. Federalism Impact
khammond on DSKJM1Z7X2PROD with RULES3
Comments Received
One commenter estimated that this
rule will increase the number of FFL
dealers nationwide by 903 percent.
Many States will have a subsequent
‘‘massive burden’’ due to this increase,
the commenter concluded. This
commenter also suggested that due to
the burden this rule will have on States,
the Department should have included a
federalism summary impact statement
as to how these new licensees will affect
State regulatory agencies. This
commenter suggested that this rule will
have a significant impact on States
because many States license FFLs
themselves, separately from the Federal
licensing scheme. In addition, another
commenter stated that the proposed rule
presented a potential conflict in which
an individual might be engaged in a
business operation requiring a license
under Federal law but might not be
required to obtain a license under State
law. The commenter added that this
would create potential problems for
people who are legally required to hold
an FFL, but then are prohibited from
operating or possessing such a license
under local ordinances. They also stated
that ATF is seeking to broadly regulate
a field that states have already
addressed in different ways.
Another commenter challenged the
NPRM’s statement that ‘‘[t]his
rulemaking would not result in the
expenditure by State, local, and Tribal
governments, in the aggregate, or by the
private sector, of $100 million or more
in any one year, and it will not
significantly or uniquely affect small
governments.’’ They claimed that ATF
failed to consider the impact of its
expansion of mandatory background
checks for firearm transactions on State,
local, and Tribal government budgets, as
those political entities may have to
expand their staffing and infrastructure
to respond to a greater number of
declined background checks.
Department Response
The Department disagrees that a
federalism impact statement is needed
for this rulemaking under Executive
Order 13132. Nothing in this rule
changes how State and local authorities
conduct background checks or
otherwise regulate persons engaged in a
firearms business. This rule, which
implements the GCA, and the changes
made to it by the BSCA, does not
preempt State laws or impose a
substantive compliance cost on States.
Under 18 U.S.C. 927, no provision of the
GCA ‘‘shall be construed as indicating
an intent on the part of Congress to
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
occupy the field in which such
provision operates to the exclusion of
the law of any State on the same subject
matter, unless there is a direct and
positive conflict between such provision
and the law of the statute so that the two
cannot be reconciled or consistently
stand together.’’ State and local
jurisdictions are therefore free to create
their own definitions of terms such as
‘‘engaged in the business’’ to be applied
for purposes of State or local law within
their respective jurisdictions. They are
free to mandate their own requirements
concerning the licensing of firearms
dealers.
State licensing schemes for retail
dealers in firearms (or merchandise that
includes firearms) stand on their own
and are not dependent on Federal law.
If persons have been engaged in a
firearms business requiring a State or
local business license, then they should
have acquired the State or local business
license regardless of the new rule. In
fact, as set forth below, the new rule
looks to whether a person ‘‘[s]ecures or
applies for a State or local business
license to purchase for resale or to sell
merchandise that includes firearms’’ to
help determine whether a person is
engaged in the business requiring a
license under Federal law, 18 U.S.C.
922(a)(1) and 923(a). See 27 CFR
478.13(d)(2)(vii) (definition of
‘‘predominantly earn a profit’’) (final
rule).
The Department disagrees with the
estimate that the rule will significantly
or uniquely affect small governments
due to increased background checks by
local authorities since 22 States already
require background checks for private
party sales. Of the States that do not
currently require background checks for
all private sales, only three States
(Florida, Tennessee, and Utah) 251 do
not rely on Federal law enforcement for
their background checks and are ‘‘point
of contact’’ States in which designated
State agencies conduct NICS checks.
12. Regulatory Flexibility Act
Comments Received
Various commenters stated that this
rule, by increasing operational and
administrative costs, will have a
significant and disproportionate impact
on, or otherwise destroy, small
businesses (some of which have
operated for decades) or even destroy a
sector of business. One commenter
stated that the proposed rule
inappropriately did not contain an
251 FBI, How We Can Help You: NICS
Participation Map (Feb. 1, 2024), https://
www.fbi.gov/how-we-can-help-you/more-fbiservices-and-information/nics/about-nics.
PO 00000
Frm 00099
Fmt 4701
Sfmt 4700
29065
analysis under the Regulatory
Flexibility Act (‘‘RFA’’). The same
commenter opined that small businesses
may not have the resources or
infrastructure to comply with enhanced
recordkeeping requirements. Another
commenter opined that with more
people applying for a license, existing
FFLs that operate a brick-and-mortar
store will go out of business.
One commenter requested various
data regarding the analysis performed
under the RFA. This commenter stated
that ATF may not have properly
considered small entities and further
asked a series of questions:
1. ATF did not list a cost per
business. . . . What is the average
additional cost a small business would
incur as a result of this rule?
2. Why did the ATF not include [the
additional cost] in the published rule?
3. What alternatives [for small
businesses] did ATF consider?
a. What would have been [the
alternatives’] impact on small entities?
b. Why were these alternatives
deemed insufficient?
c. Why did the ATF not explain the
alternatives in its original RFA analysis?
4. ATF anticipates that nearly 25,000
new individuals or entities must register
as a firearm dealer. Of these entities,
how many does the ATF anticipate will
stop selling firearms?
5. What impact will this rule have on
existing FFL dealers, many of whom are
small businesses and how did ATF
assess the costs of this rule on large
entities, compared to the 25,000 new
small businesses it created?
6. What impact does the ATF believe
adding 25,000 new FFL dealers will
have on the price of firearms?
7. Why did ATF not explain this
rule’s impact on the 25,000 businesses?
Department Response
The Department disagrees that this
rule will destroy a whole sector of
business (i.e., the firearms industry).
FFL dealers are a subsector of the
firearms industry, and the impact on
some dealers will not destroy that
subsector or the entire firearms
industry. The firearms industry is
significantly large and robust, and the
impact of this rule affects only a small
portion of one subsector of it. In any
event, as stated above in Section IV.D.8
of this preamble, the Department
believes that, rather than adding
competition to existing FFLs, requiring
sellers engaged in the business under
this rule to become licensed adds equity
to the marketplace by spreading costs
and obligations incumbent upon all
existing FFLs to include currently
unlicensed sellers that are acting as
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
29066
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
dealers in firearms. There may be
additional positive market effects on
FFLs as a result of them serving as an
intermediary for private party firearm
transactions at a greater rate, but the
Department finds this effect difficult to
estimate based on the lack of existing
data sources and subject matter
expertise. Finally, the Department does
not believe the congressionally
mandated recordkeeping requirements
constitute a significant burden for a
small business. Many existing FFLs are
small businesses and already comply
with the recordkeeping requirements.
Regarding the first and second
questions on small business impacts,
the Department did not distinguish
between the cost of individuals
complying with this rule versus small
businesses complying with this rule. For
the purposes of this rule and Final
Regulatory Flexibility Act analysis, the
Department assumed individuals
becoming licensed will become small
businesses and the cost per person (or
small business) is outlined in Section
VI.A.3 of this preamble, discussing
‘‘Costs for Unlicensed Persons
Becoming FFLs.’’ The Department did
not determine that there were additional
costs beyond those individuals (or
newly formed businesses) complying
with this rule; therefore, no other costs
were attributed to small businesses that
were not already outlined in Section
VI.A.3 of this preamble.
Regarding the third question on
consideration of alternatives, the
Department considered alternatives in
the NPRM (88 FR 62016 and 62017) and
discusses them in the final rule in
Section VI.A.8 of this preamble. No
separate alternative was considered for
small business specifically because it
was assumed that all individuals
complying with this rule will become
small businesses. Other alternatives
suggested during the comment period
and the Department’s response to such
suggestions are discussed in Section
IV.D.13 of this preamble. All
alternatives (including the proposed
alternative) were considered alternatives
for small business compliance. All
impacts considered in the alternatives
and all impacts under this rule were
considered to be alternatives and
regulations for small business
compliance. Alternatives such as lower
fees or guidance were deemed
insufficient for various reasons,
including that fees are imposed by
statutory requirement and guidance
alone would result in insufficient
compliance. These alternative
discussions are outlined below in
Section VI.A.8 of this preamble
(‘‘Alternatives’’) and above in the
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
Department’s response to comments
received on alternatives in Section
IV.D.13 of this preamble. The
Department did not discuss alternatives
targeted at small businesses separately
from alternatives aimed at all affected
parties because they were deemed to be
one and the same.
Regarding the fourth question, on the
estimated number of individuals leaving
the market: of the individual or new
entities affected by this rule, the
Department estimates in this final
analysis that 10 percent of affected
individuals (or potential entities) may
opt to stop selling firearms. Discussions
on that are located in Sections IV.D.2
(‘‘Population Accuracy’’), IV.D.4
(‘‘Russell Sage Foundation Model
Calculation’’), and VI.A.2
(‘‘Population’’) of this preamble.
Regarding the fifth question, as
responded to in Section IV.D.8 (‘‘Impact
on Existing FFLs’’) of this preamble,
there may be some impact on existing
FFLs as there will now be more licensed
dealers. However, these newly licensed
dealers have been selling firearms prior
to this rule, and most of them will
continue to sell firearms regardless of
this rule, so the impact on existing FFLs
will not be significant since the overall
number of firearm transactions are
unlikely to be significantly affected. For
a more detailed discussion, please see
Section IV.D.8 of this preamble.
Regarding the sixth question, the
Department does not anticipate a
significant impact on the prices of
firearms. The firearm transactions
affected by this rule are primarily
firearms sold on the secondary market
(i.e., previously purchased firearms for
resale). Furthermore, sales of these
firearms have been and will continue to
occur regardless of the implementation
of this rule; therefore, no impact on the
prices was considered. The Department
further notes that this rule is not
affecting the manufacture or importation
of firearms, so supply is considered to
be stable.
Regarding the seventh question, the
Department considered the impact of
this rule on all unlicensed sellers (or
newly created businesses) and
addressed cost under Section VI of this
preamble. As mentioned above, no
distinction was made between small
businesses because it was assumed that
all unlicensed sellers (or businesses)
affected by this rule are small.
13. Alternatives
Comments Received
One commenter opined that only
retailers of firearms who own brick-andmortar stores should be required to have
PO 00000
Frm 00100
Fmt 4701
Sfmt 4700
a license. Another commenter suggested
using a minimum threshold number and
accounting for inflation to define a
dealer. One commenter suggested a
stricter background check for all
firearms transactions. Another suggested
that ATF charge a $10 per application
fee for a dealer’s license, not $200. Two
commenters suggested a plethora of
alternatives, including education for
individuals and local law enforcement.
One of those two commenters also
suggested revisions to the NFA and GCA
for items such as increasing the fees of
NFA weapons, and the other commenter
suggested that the Department track and
report on citizens using firearms to
prevent a crime or protect themselves.
One commenter suggested that, rather
than expanding the Federal licensing
requirements, ATF should institute a
permitting system where purchasers
could use a firearms ID or demarcation
on their license to provide proof of
ability to purchase firearms.
A commenter recommended leaving
the regulations as they are but suggested
adding straw purchases because ‘‘ATF
has estimated that 50 percent of the
illegal firearms market is conducted
through straw purchases.’’ Another
commenter agreed and said that rather
than implementing universal
background checks, ATF should focus
on cracking down on illegal straw
purchases.
Department Response
The Department disagrees that only
retailers who operate out of brick-andmortar stores should be required to have
licenses. Currently, a portion of ATF’s
existing FFLs include high-volume
sellers of firearms who do not operate in
brick-and-mortar store locations; they
should not be excluded from licensing
requirements simply because they sell
from other locations or through other
mediums. There are unlicensed sellers
who operate out of brick-and-mortar
locations and others who do not; the
law requires any such sellers who
qualify as engaged in the business as a
dealer to be licensed. The BSCA does
not distinguish on the basis of where the
sales occur—and the rule provides
details to aid people in understanding
that approach. The BSCA was enacted
with the intent to increase, not reduce,
the population of regulated dealers.
Therefore, this alternative has not been
included in the analysis.
As explained in detail in the NPRM,
the Department considered, but did not
propose, a specific number of firearms
sales as a threshold for being engaged in
the business as a dealer. Although some
commenters suggested this alternative
again, they did not provide any
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
information or reasons to overcome or
refute the explanations and evidence
cited in the NPRM discussion on this
topic. As those reasons still hold true,
the Department continues to decline to
adopt this alternative.
The Department understands that
some commenters consider the license
fee of $200 and other costs related to
obtaining a license too costly for some
people transacting in firearms as part of
a hobby or to enhance a personal
collection. However, the Department
does not set the application fee or the
costs of obtaining photographs or
fingerprints. The application fee is set
by statute and the Department cannot
change it.252 The other costs (such as for
photographs or fingerprints) are set by
private companies and similarly cannot
be changed by the Department.
Nonetheless, the rule does not require
occasional sellers of firearms as part of
a hobby or to enhance personal
collections to obtain a license, so the
costs of complying with this rule would
not present a burden to them. Instead,
the rule impacts persons who have been
engaging in certain repetitive firearms
dealing that demonstrates they are
engaged in the business as a firearms
dealer and should be licensed. For these
reasons, the Department declines to
pursue alternatives to licensing fees.
The Department previously
considered and rejected guidance as an
alternative means of implementing the
statutory changes to the definition of
‘‘engaged in the business.’’ The
Department does not believe guidance
would be an effective method, based
partly on prior experience with
guidance on this topic. ATF’s 2016
guidance, for example, outlined the
general factors and examples of being
engaged in the business under the
statutory definition of that term in effect
at the time,253 but compliance with that
guidance document was voluntary and
it was not included in the Code of
Federal Regulations for broader
distribution to the public. Therefore, the
guidance resulted in only a brief
increase in the number of persons
engaged in the business becoming
licensed dealers. Although this increase
of 567 additional dealers illustrated that
people would try to comply with the
licensing requirement when they better
understood the requirement, this
approach was not effective enough, by
252 Application fees for firearms regulated under
the GCA are set by 18 U.S.C. 923(a). Rates for the
NFA special (occupational) tax (SOT) are
established by 26 U.S.C. 5801(a).
253 See ATF Publication 5310.2, Do I Need a
License to Buy and Sell Firearms? (2016), https://
www.govinfo.gov/content/pkg/GOVPUB-J38-PURLgpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
itself, to address the problem of
unlicensed dealing.
A regulation is much more effective at
achieving compliance with the GCA, as
amended by the BSCA, than guidance
that is both voluntary and distributed by
ATF at gun shows or other venues when
the agency is present (or found online
if people search for it). People recognize
that a regulation sets the requirements
they must follow and affects all those
participating in the topic area; they also
know where to look for a regulation.
Now that the BSCA has redefined
‘‘engaged in the business,’’ there is even
more of a need to ensure that unlicensed
people who meet the definition of that
term understand that they are violating
the law if they do not obtain a license.
And if the Department does not update
its regulations, they would not
accurately reflect the statutory text and
would thus create confusion.
As a result, the Department did not
select the alternative to publish only
guidance documents in lieu of this
regulation because guidance alone
would be insufficient as a means to
inform the public in general, rather than
solely the currently regulated
community. Guidance would not have
the same reach and attention as a
regulation, and it would not be able to
change existing regulatory provisions on
the subject of ‘‘engaged in the business’’
or impact intersecting regulatory
provisions. The Department considers it
necessary to use a regulatory means of
putting sellers who continuously or
repetitively engage in firearm sales on
notice regarding the impacts the statute
will have on them, and to clarify the
parameters of the new definition. For
more detail, please refer to Section
VI.A.8 of this preamble.
The Department did not consider the
remaining alternatives proposed by
commenters, such as creating and
including educational training, cracking
down on straw purchases, or adopting a
buyer permitting system, because they
are outside the scope of this rulemaking
and the Department’s NPRM. ATF will
provide training and outreach as it
routinely does, but such activities are
not included in a regulation.
V. Final Rule
Subsections in Section V
A. Definition of ‘‘Dealer’’
B. Definition of Engaged in the Business—
‘‘Purchase,’’ ‘‘Sale,’’ and ‘‘Something of
Value’’
C. Definition of ‘‘Engaged in the Business as
a Dealer in Firearms Other Than a
Gunsmith or Pawnbroker’’
D. Definition of ‘‘Engaged in the Business’’ as
Applied to Auctioneers
PO 00000
Frm 00101
Fmt 4701
Sfmt 4700
29067
E. Presumptions That a Person Is Engaged in
the Business
F. Definition of ‘‘Personal Collection (or
Personal Collection of Firearms, or
Personal Firearms Collection)’’
G. Definition of ‘‘Responsible Person’’
H. Definition of ‘‘Predominantly Earn a
Profit’’
I. Disposition of Business Inventory After
Termination of License
J. Transfer of Firearms Between FFLs and
Form 4473
K. Effect on Prior ATF Rulings
L. Severability
A. Definition of ‘‘Dealer’’
The rule finalizes, with minor edits,
the amendments proposed in the NPRM
to the definition of ‘‘dealer’’ in 27 CFR
part 478, which clarify that this term
includes such activities wherever, or
through whatever medium, they are
conducted. In this regard, the
Department replaced the words ‘‘may be
conducted’’ with ‘‘are conducted’’ to
help ensure that the definition is not
interpreted as authorizing a firearms
business to operate at unqualified gun
shows, events, or other locations, where
such activities could not serve as a
proper business premises at which a
license could be issued under the GCA.
B. Definition of Engaged in the
Business—‘‘Purchase,’’ ‘‘Sale,’’ and
‘‘Something of Value’’
To conform with designation of
paragraphs elsewhere in this rule, the
final rule redesignates paragraphs (a)
through (f) of the ‘‘engaged in the
business’’ definition in § 478.11 to
paragraphs (1) through (6) and
continues the numerical designation in
new paragraphs thereafter. The rule
finalizes the definitions of ‘‘Purchase,’’
‘‘Sale,’’ and ‘‘Something of value’’ with
minor amendments. First, for
consistency across those who deal in
firearms, the definitions were moved in
the definition of ‘‘engaged in the
business’’ to a new paragraph (7), to
apply, not only to the definition of
‘‘dealer in firearms other than a
gunsmith or pawnbroker,’’ but generally
to all persons engaged in the business of
dealing in firearms. This includes
importers and manufacturers who are
authorized by 27 CFR 478.41(b) to
engage in business on the licensed
premises as a dealer in the same type of
firearms authorized by the license to be
imported or manufactured. Second, in
the definitions of ‘‘purchase’’ and
‘‘sale,’’ the words ‘‘an agreed’’ were
inserted before ‘‘exchange for something
of value’’ to clarify that the transaction
must be intentional. Such transactions
include indirect exchanges of something
of value. Third, the Department revised
the term ‘‘sale’’ to change ‘‘providing
E:\FR\FM\19APR3.SGM
19APR3
29068
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
to’’ to ‘‘disposing of’’ to be more
consistent with the statutory language,
and for further clarity, to define the term
‘‘resale’’ as ‘‘selling a firearm, including
a stolen firearm, after it was previously
sold by the original manufacturer or any
other person.’’ Finally, the phrase ‘‘legal
or illegal’’ was added at the end of the
definition of ‘‘something of value’’ to
make clear that the item or service
exchanged for a firearm could be one
that is unlawful to possess or transfer
(e.g., a controlled substance).
C. Definition of ‘‘Engaged in the
Business as a Dealer in Firearms Other
Than a Gunsmith or Pawnbroker’’
The rule finalizes the definition of
‘‘engaged in the business’’ of wholesale
or retail dealing in a new section of the
regulation at § 478.13, instead of
keeping the definition under the overall
definitions section at § 478.11, due to its
length. In conjunction with this change,
the final rule has also moved the
definition of ‘‘predominantly earn a
profit’’ to § 478.13 because it is an
element of the definition of ‘‘engaged in
the business as a dealer.’’ As a result of
consolidating the two definitions into
one integrated section, the rule also
eliminated duplication of identical
paragraphs on rebuttal evidence, the
non-exhaustive nature of the listed
rebuttal evidence, and applicability to
criminal proceedings, which were
previously located in each definition. In
conjunction with these changes, the
final rule has also included crossreferences to these definitions in
§ 478.11.
khammond on DSKJM1Z7X2PROD with RULES3
D. Definition of Engaged in the Business
as Applied to Auctioneers
The rule finalizes the definition of
‘‘engaged in the business’’ of wholesale
or retail dealing with minor edits to
make clear that estate-type auctioneers
may assist in liquidating all firearms as
a service on commission without a
license, not merely those in a personal
collection (as that term is defined in this
rule). Additionally, the final rule
addresses the concerns of estate-type
auctioneers by limiting the caveat for
possession of the firearms prior to the
auction of the firearms to those that are
‘‘for sale on consignment.’’
E. Presumptions That a Person Is
Engaged in the Business
The rule finalizes the presumptions
that a person is ‘‘engaged in the
business’’ of dealing in firearms at
wholesale or retail by making the
following changes: (1) in the
introductory paragraph (a), separating
the definition of ‘‘engaged in the
business’’ in that paragraph from a new
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
paragraph (b), ‘‘fact-specific inquiry,’’
which sets forth the factual analysis
courts have historically applied to
determine whether a person falls within
the definition in paragraph (a);
including in paragraph (b) the example
to compare a single firearm transaction,
or offer to engage a transaction, in
which a person represents to others ‘‘a
willingness and ability’’ to purchase
more firearms for resale, which may
require a license, with ‘‘a single isolated
firearm transaction without such
evidence’’ that would not require a
license; and adding the following at the
end of the same paragraph (b): ‘‘At all
times, the determination of whether a
person is engaged in the business of
dealing in firearms is based on the
totality of the circumstances’’; (2)
revising the sentence at the beginning of
the presumptions to move the phrase
‘‘[i]n civil or administrative
proceedings’’ to the beginning of the
sentence, and adding ‘‘it is shown that’’
before ‘‘the person—’’; (3) adding the
prefix ‘‘re’’ before ‘‘sell’’ and ‘‘sale’’ in
the various presumptions to more
closely track the statutory definition of
‘‘engaged in the business’’ in 18 U.S.C.
921(a)(21)(C); (4) adding to the EIB
presumption on willingness and ability
to purchase and sell more firearms the
parenthetical ‘‘(i.e., to be a source of
additional firearms for resale)’’ to clarify
what it means to represent to potential
buyers or otherwise demonstrate a
willingness and ability to purchase and
resell additional firearms; (5) removing
the EIB presumption relating to gross
taxable income to address concerns
raised by commenters about how it
would apply in certain low-income
situations; (6) revising the EIB
presumption on certain types of
repetitive transactions to add the word
‘‘repetitively’’ before ‘‘resells or offers
for resale’’ to more closely track the
statutory language in 18 U.S.C.
921(a)(21)(C); (7) revising the same EIB
presumption to make it applicable to
firearms that cannot lawfully be
purchased, received, or possessed under
Federal, State, local, and Tribal law, not
merely under Federal law (as the
citations made it appear to
commenters), and to explain that
firearms not identified as required
under 26 U.S.C. 5842 are among the
types of firearms that cannot lawfully be
possessed; (8) revising the EIB
presumption on repetitively selling
firearms in a short period of time to
include a time limitation of one year
with respect to repetitive resales or
offers for resale of firearms that are new
or like new, and those that are the same
make and model; in addition, revising
PO 00000
Frm 00102
Fmt 4701
Sfmt 4700
and limiting the presumption for
firearms that were the ‘‘same or similar
kind’’ to those firearms that are of the
‘‘same make and model, or variants
thereof’’; (9) revising the EIB
presumption on liquidation of businessinventory firearms by a former licensee
that were not transferred to a personal
collection prior to license termination,
to reference the rules pertaining to
liquidation of former licensee inventory
in §§ 478.57 and 478.78 to ensure that
they are read consistently with each
other; (10) revising the EIB presumption
on liquidation of firearms transferred to
a personal collection or otherwise as a
personal firearm prior to license
termination, to reference the rules
pertaining to the sale of such firearms in
18 U.S.C. 923(c) and 27 CFR 478.125a(a)
to ensure that they are read consistently
with each other; (11) adding explanatory
headers for the paragraphs in the
regulatory text; (12) clarifying, in a new
paragraph, that the list of conduct not
supporting a presumption that a person
is ‘‘engaged in the business’’ is also
evidence that may be used to rebut any
presumption should an enforcement
proceeding be initiated; and (13)
expanding the list of conduct that does
not support a presumption to not only
include firearms resold or otherwise
transferred as bona fide gifts and those
sold occasionally to obtain more
valuable, desirable, or useful firearms
for the person’s personal collection, but
also those sold ‘‘[o]ccasionally to a
licensee or to a family member for
lawful purposes’’; ‘‘[t]o liquidate
(without restocking) all or part of the
person’s personal collection’’; ‘‘[t]o
liquidate firearms that are inherited’’ or
‘‘[p]ursuant to a court order; or ‘‘[t]o
assist in liquidating firearms as an
auctioneer when providing auction
services on commission at an estate-type
auction.’’
F. Definition of ‘‘Personal Collection (or
Personal Collection of Firearms, or
Personal Firearms Collection)’’
The rule finalizes the definition of
‘‘Personal collection (or personal
collection of firearms or personal
firearms collection)’’ with some
additional clarifying edits. First, headers
were added to each main paragraph for
clarity. Second, a parenthetical was
added to clarify that ‘‘collecting curios
or relics’’ and ‘‘collecting unique
firearms to exhibit at gun club events’’
are examples of firearms accumulated
‘‘for study, comparison, exhibition,’’
and that ‘‘historical re-enactment’’ and
‘‘noncommercial firearms safety
instruction’’ are examples of firearms
accumulated ‘‘for a hobby.’’ Third, to
clarify the nature of the firearms not
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
included in the definition of ‘‘personal
collection’’ due to the fact that they
were purchased for the purpose of resale
with the predominant intent to earn a
profit, the following was added to
examples in the parenthetical:
‘‘primarily for a commercial purpose or
financial gain, as distinguished from
personal firearms a person accumulates
for study, comparison, exhibition, or for
a hobby, but which the person may also
intend to increase in value).’’ Fourth, to
clarify that firearms accumulated
primarily for self-protection are not
included in the definition of ‘‘personal
collection,’’ but can be purchased for
personal use, the following was added:
‘‘In addition, the term shall not include
firearms accumulated primarily for
personal protection: Provided, that
nothing in this definition shall be
construed as precluding a person from
lawfully acquiring a firearm for selfprotection or other lawful personal
use.’’ Finally, minor edits were made to
the definition of personal collection as
it pertains to licensees, to explain that
licensees may transfer firearms to a
personal collection ‘‘or otherwise as a
personal firearm,’’ and that the
separation requirement for personal
firearms applies ‘‘[w]hen stored or
displayed on the business premises,’’ as
distinguished from those personal
firearms that are being carried by the
licensee for self-protection.
G. Definition of ‘‘Responsible Person’’
The rule finalizes, with minor
changes, the amendments proposed in
the NPRM to the definition of
‘‘responsible person’’ in 27 CFR part
478. The proposed definition was
revised to remove the term ‘‘business
practices,’’ which term was considered
confusing and overbroad to some
commenters. It was also changed to
explain that sole proprietorships and
companies are included in the list of
businesses that have responsible
persons and to indicate that both the
individual sole proprietor and their
authorized employees are responsible
persons. This change ensures that
individual sole proprietors (who are
always responsible for the management
and policies of their firearms
businesses), companies, and their
authorized employees will be identified
as responsible persons when submitting
an Application for License, Form 7/7CR,
and undergo the required background
check.
H. Definition of ‘‘Predominantly Earn a
Profit’’
The rule moves the definition of
‘‘predominantly earn a profit’’ into a
stand-alone section with the definition
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
of ‘‘engaged in the business’’ at § 478.13.
The rule also breaks down the definition
of ‘‘predominantly earn a profit’’ into
subparagraphs for ease of reference and
finalizes that definition with minor
edits to the last sentence in the first
paragraph. Specifically, the final rule
adds the word ‘‘intended’’ before
‘‘pecuniary gain,’’ consistent with the
statutory language. The rule also
finalizes the introductory paragraph to
the ‘‘Presumptions’’ subsection with
minor edits. Specifically, the sentence at
the beginning of the paragraph was
revised to move the phrase ‘‘[i]n civil or
administrative proceedings’’ to the
beginning of the sentence; the phrase
‘‘from the sale or disposition’’ of
firearms was changed to ‘‘the repetitive
purchase and resale’’ of firearms, to
more closely track the statutory
language; and ‘‘it is shown that’’ was
added before ‘‘the person.’’
Additionally, the following clarifying
edits were made to the set of
presumptions in the definition of
‘‘predominantly earn a profit’’: (1) the
term ‘‘repetitively’’ was added into
various presumptions to better focus
them on persons who are reselling
firearms with the requisite intent under
the statute; (2) in the PEP presumption
on marketing, the words ‘‘or
continuously’’ were inserted at the
beginning to include advertising that is
perpetual, and the phrase ‘‘on any
website’’ was revised to ‘‘through the
internet or other digital means’’; (3) the
PEP presumption on purchasing or
renting space was revised by adding
‘‘repetitively or continuously’’ to the
beginning to better demonstrate the
requisite intent, and by removing the
phrases ‘‘or otherwise secures or sets
aside’’ and ‘‘or store,’’ and replacing
those phrases with ‘‘or otherwise
exchanges (directly or indirectly)
something of value to secure,’’ to focus
the presumption on firearms that are
displayed for resale by a person who has
paid for that service, and to make clear
that the item or service exchanged for a
firearm could be either a direct or an
indirect form of payment (e.g., payment
of cash or an indirect membership or
admission fee); (4) the PEP presumption
on maintaining records was revised to
make clear that ‘‘repetitive’’ firearms
purchases for resale are being tracked;
(5) the PEP presumption on purchasing
or otherwise securing merchant services
was limited to those through which a
person intends to repetitively accept
payments for firearms transactions, to
focus on the seller as opposed to the
purchaser or end user of firearms who
makes or offers to make payments for
firearms transactions, and to add the
PO 00000
Frm 00103
Fmt 4701
Sfmt 4700
29069
word ‘‘repetitive’’ before ‘‘firearms
transactions’’ to further support the
intent element of the statute; (6) the PEP
presumption on securing business
security services was limited to those
services intended ‘‘to protect firearms
assets and firearms transactions,’’ to
focus on businesses that conduct
transactions involving firearms rather
than those that may purchase security
services solely to protect or store their
business inventory for company use;
and (7) the PEP presumption on
business insurance policies was
removed to address commenter
concerns and because information
indicated it was not commonly found in
ATF cases.
I. Disposition of Business Inventory
After Termination of License
Several changes were made to the
liquidation provisions on the
disposition of business inventory by a
former licensee after termination of
license, 27 CFR 478.57 and 478.78.
Specifically, with respect to business
inventory that remains after license
termination, the term ‘‘personal
inventory’’ was replaced with the term
‘‘former licensee inventory’’ to better
explain the business nature of this
inventory. A definition of ‘‘[f]ormer
licensee inventory’’ was added to 27
CFR 478.11, which includes a sentence
to explain that ‘‘[s]uch firearms differ
from a personal collection and other
personal firearms in that they were
purchased repetitively before the license
was terminated as part of a licensee’s
business inventory with the
predominant intent to earn a profit.’’
The liquidation provisions at 27 CFR
478.57(c) and 478.78(c) now expressly
require that transfers of firearms in a
former licensee inventory must be
appropriately recorded as dispositions
in accordance with 27 CFR 478.122(b)
(importers), 478.123(b) (manufacturers),
or 478.125(e) (dealers) prior to
delivering the records after
discontinuing business consistent with
27 CFR 478.127. This will allow former
licensee inventory to be traced if later
used in crime and is consistent with the
existing delivery of records requirement
in 18 U.S.C. 923(g)(4) and 27 CFR
478.127. The liquidation provisions also
expressly state, in §§ 478.57(b)(2) and
478.78(b)(2), that transferring former
licensee inventory to a responsible
person of the former licensee within 30
days after license termination does not
negate the fact that the firearms were
repetitively purchased, and were
purchased with the predominant intent
to earn a profit. Finally, the liquidation
provisions now expressly recognize that
a responsible person of a former
E:\FR\FM\19APR3.SGM
19APR3
29070
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
licensee may occasionally sell a firearm
even after the 30-day liquidation period
to a licensee without being presumed to
be engaged in a firearms business. See
§§ 478.57(c), 478.78(c).
J. Transfer of Firearms Between FFLs
and Form 4473
The rule finalizes the provision on the
proper procedure for licensee transfers
of firearms to other licensees, 27 CFR
478.124(a), with a minor edit to add the
phrase ‘‘or otherwise as a personal
firearm’’ after ‘‘personal collection.’’
The rule makes it clear that Form 4473
may not be used by sole proprietors
when they transfer to themselves other
personal firearms that are not in a
‘‘personal collection’’ as defined in this
rule. § 478.124(a).
khammond on DSKJM1Z7X2PROD with RULES3
K. Effect on Prior ATF Rulings
ATF publishes formal rulings and
procedures to promote uniform
understanding and application of the
laws and regulations it administers, and
to provide uniform methods for
performing operations in compliance
with the requirements of the law and
regulations. ATF Rulings represent
ATF’s guidance as to the application of
the law and regulations to the entire
state of facts involved, and apply
retroactively unless otherwise indicated.
The following ruling is hereby
superseded: ATF Ruling 96–2, Engaging
in the Business of Dealing in Firearms
(Auctioneers) (Sept. 1996), https://
www.atf.gov/file/55456/download.
L. Severability
Based on the comments received in
opposition to this rule, there is a
reasonable possibility that this rule will
be subject to litigation challenges. The
Department has determined that this
rule implements and is fully consistent
with governing law. However, in the
event any provision of this rule, an
amendment or revision made by this
rule, or the application of such
provision or amendment or revision to
any person or circumstance, is held to
be invalid or unenforceable by its terms,
the remainder of this rule, the
amendments or revisions made by this
rule, and the application of the
provisions of such rule to any person or
circumstance shall not be affected and
shall be construed so as to give them the
maximum effect permitted by law. The
Supreme Court has explained that
where specific provisions of a rule are
unlawful, severance is preferred when
doing so ‘‘will not impair the function
of the [rule] as a whole, and there is no
indication that the regulation would not
have been passed but for its inclusion.’’
K Mart Corp. v. Cartier, Inc., 486 U.S.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
281, 294 (1988); see also Sw. Elec. Power
Co. v. EPA, 920 F.3d 999, 1033 (5th Cir.
2019) (vacating only challenged
portions of a rule). It is the intent of the
Department that each and every
provision of this regulation be severable
from each other provision to the
maximum extent allowed by law.
For example, if a court invalidates a
particular subpart of § 478.78 of the
final rule concerning the liquidation or
transfer procedure of former licensees,
that invalidation would have no effect
on other subparts of § 478.78 or the rest
of the final rule and its provisions,
which should remain in effect. The
Department’s intent that sections and
provisions of the final rule can function
independently similarly applies to the
other portions of the rule.
VI. Statutory and Executive Order
Review
Subsections in Section VI
A. Executive Orders 12866, 13563, and 14094
B. Executive Order 13132 (Federalism)
C. Executive Order 12988 (Civil Justice
Reform)
D. Regulatory Flexibility Act
E. Small Business Regulatory Enforcement
Fairness Act of 1996
F. Congressional Review Act
G. Unfunded Mandates Reform Act of 1995
H. Paperwork Reduction Act of 1995
A. Executive Orders 12866, 13563, and
14094
Executive Order 12866 (Regulatory
Planning and Review) directs agencies
to assess the costs and benefits of
available regulatory alternatives and, if
regulation is necessary, to select
regulatory approaches that maximize
net benefits (including potential
economic, environmental, public health
and safety effects, distributive impacts,
and equity). Executive Order 13563
(Improving Regulation and Regulatory
Review) emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. Executive
Order 14094 (Modernizing Regulatory
Review) amends section 3(f) of
Executive Order 12866.
OMB has determined that this
proposed rule is a ‘‘significant
regulatory action’’ under Executive
Order 12866, as amended by Executive
Order 14094, though it is not a
significant action under section 3(f)(1)
of Executive Order 12866. Accordingly,
the rule has been reviewed by OMB.
While portions of this rule merely
incorporate the BSCA’s statutory
definitions into ATF’s regulations, this
rule will likely result in additional
unlicensed persons becoming FFLs to
the extent that currently unlicensed
PO 00000
Frm 00104
Fmt 4701
Sfmt 4700
persons intend to regularly purchase
and resell firearms to predominantly
earn a profit.
1. Need for Federal Regulation
This final rule implements the BSCA
by incorporating statutory definitions
into ATF’s regulations and clarifying the
criteria for determining when a person
is ‘‘engaged in the business’’ requiring a
license to deal in firearms. The
rulemaking is necessary to implement a
new statutory provision that alters the
definition of being engaged in the
business as a wholesale or retail
firearms dealer; to clarify prior
regulatory provisions that relate to that
topic; and to establish by regulation
practices and policies on that issue. In
addition to establishing specific, easyto-follow standards regarding when
buying and selling firearms
presumptively crosses the threshold
into being ‘‘engaged in the business,’’
the rule also recognizes that individuals
are allowed by law to occasionally buy
and sell firearms for the enhancement of
a personal collection or a legitimate
hobby without the need to obtain a
license. As discussed in detail under
this rule’s Background discussion
(Section II.D of this preamble), in the
Benefits section of this economic
analysis (Section VI.A.7 of this
preamble), throughout Section III
discussing each revision as it was
originally proposed, in the Department’s
responses to comments under Section
IV of this preamble, and in other
portions of this rule, the changes in this
rule—like the statutory provisions they
implement—were designed to address
public safety needs. Specifically, this
rulemaking implements the statutory
changes enacted by Congress in the
BSCA, which Congress passed in the
interest of public safety after at least one
mass shooting in which the perpetrator
purchased a firearm from an unlicensed
dealer. Congress was also concerned
with prohibited persons receiving
firearms without background checks
and significant increases in straw
purchasing and firearms trafficking, all
of which increase public risk of gun
violence and occur more frequently
when persons dealing in firearms are
unlicensed. Unlicensed dealers also
hinder law enforcement efforts to track
and curb these prohibited and
endangering activities. Congress deemed
those public safety needs compelling
enough, and the private market response
insufficient, such that it was necessary
to pass a law to address them. This rule
is necessary to further address those
same public safety needs and
implement Congress’s statutory
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
response. Executive Order 12866 254
permits agencies to promulgate rules
that are necessary to interpret the law or
are necessary due to compelling need,
which includes when private markets
are not protecting or improving public
health and safety. This rule is necessary
on both grounds. The Department
considered other alternatives to
rulemaking and determined they would
be insufficient to meet its articulated
public safety needs or to fully interpret
and implement the law.
2. Population
This rule implements a statutory
requirement that affects persons who
repetitively purchase and resell
firearms, including by bartering, and are
required to be, but are not currently,
licensed. As described in the preamble
of this final rule, these may be persons
who purchase, sell, or transfer firearms
from places other than traditional brickand-mortar stores, such as at a gun show
or event, flea market, auction house, or
gun range or club; at one’s home; by
mail order, or over the internet (e.g., an
online broker, online auction); through
the use of other electronic means (e.g.,
text messaging service or social media
raffle); or at any other domestic or
international public or private
marketplace or premises. A person may
be required to have a license to deal in
firearms regardless of where, or the
medium through which, they purchase
or sell (or barter) firearms, including
locations other than a traditional brickand-mortar store.
Furthermore, because those willfully
engaged in the business of dealing in
firearms without a license are violating
Federal law, these individuals often take
steps to avoid detection by law
enforcement, making it additionally
difficult for the Department to precisely
estimate the population. Therefore, for
purposes of this analysis, the
Department used information gleaned
from Armslist, an online broker website
that facilitates the sales or bartering of
firearms, as a means of estimating a
population of unlicensed persons
selling firearms using online
resources.255 The Department focused
its efforts on estimating an affected
population using Armslist since that
website is considered to be the largest
source for unlicensed persons to sell
firearms on the internet.256
254 See also OMB Circular A–4 at 5, https://
www.whitehouse.gov/wp-content/uploads/legacy_
drupal_files/omb/circulars/A4/a-4.pdf.
255 See www.armslist.com.
256 Colin Lecher & Sean Campbell, The Craigslist
of Guns: Inside Armslist, the online ‘gun show that
never ends,’ The Verge (Jan. 16, 2020). https://
www.theverge.com/2020/1/16/21067793/guns-
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
Out of a total listing of 30,806 entries
in the ‘‘private party’’ category
(unlicensed users) on Armslist, the
Department viewed a random sample 257
of 379 listings, and found that a given
seller on Armslist had an average of
three listings per seller.258 Based on
approximately 30,806 ‘‘private party’’
(unlicensed) sales listings on Armslist,
the Department estimates that there are
approximately 12,270 unlicensed
persons who sell on that website alone,
selling an average of approximately
three firearms per user.259 The
Department estimates that Armslist may
hold approximately 30 percent of the
market share among websites that
unlicensed sellers may frequent. This
means the 12,270 estimated unlicensed
persons on Armslist would be about 30
percent of all such online sellers, and
that the estimated number of unlicensed
sellers on all such websites would
therefore be approximately 40,900
nationwide. The estimate of Armslist’s
market share is based on ATF Firearms
Industry Programs Branch (‘‘FIPB’’)
expert opinion, news reports,260 and
public web traffic lists.261 This estimate
of the online market share proportion
held by Armslist has been revised
downward from the initial estimate of
50 percent used in the NPRM, based on
public comment and additional data
sources that supported attributing a
larger share of the unlicensed firearm
market to GunBroker than had originally
been estimated. GunBroker had been
originally included with other smaller
platforms within the remaining (nonArmslist) 50 percent of the online
online-armslist-marketplace-craigslist-sales-buycrime-investigation (‘‘Over the years, [Armslist] has
become a major destination for firearm buyers and
sellers.’’); Tasneem Raja, Semi-Automatic Weapons
Without a Background Check Can Be Just A Click
Away, National Public Radio (June 17, 2016),
https://www.npr.org/sections/alltechconsidered/
2016/06/17/482483537/semi-automatic-weaponswithout-a-background-check-can-be-just-a-clickaway (‘‘Armslist isn’t the only site of its kind,
though it is considered to be the biggest and most
popular.’’).
257 In accordance with standard practice, to
estimate the sample size, the Department assumed
the largest standard deviation (0.5 or 50 percent) to
obtain the most conservative (largest) sample size.
258 Using an online sample size calculator, the
Department determined that a statistical sample for
a universe of 30,806 listings would require a sample
size of 379, using a 95 percent confidence level and
a confidence interval of five. A random sample of
379 was gathered between March 1 and 2, 2023.
Sample Size Calculator, Calculator.net (last
accessed April 8, 2024), https://www.calculator.net/
sample-size-calculator.html.
259 12,270 unlicensed individuals = 30,806
‘‘private party’’ unlicensed listings on Armslist/2.51
average listings per user.
260 See footnote 256, supra.
261 Such lists are available at https://
www.similarweb.com/website/armslist.com/
#overview.
PO 00000
Frm 00105
Fmt 4701
Sfmt 4700
29071
market. However, due to the new
estimates of GunBroker’s proportion of
the online market share, the Department
has increased its estimated total market
share for the non-Armslist platforms
(inclusive of GunBroker) to 70 percent
of the online marketplace.
To better estimate both online and
offline sales, the Department assumes,
based on best professional judgment of
FIPB SMEs 262 and with limited
available information, that the national
online marketplace estimate above
might represent 40 percent of the total
national firearms market, which would
also include in-person, local, or other
offline transactions like flea markets,
State-wide exchanges, or consignments
to local FFLs within each of the 50
States. This estimate of the online
marketplace has been revised upwards
from the 25 percent estimate that was
published in the NPRM to 40 percent in
the final rule, based on more in-depth
SME questioning in the course of
reviewing each aspect of the models due
to public comments about other parts of
the models. Given the lack of data on
the question of online avenues for
unlicensed firearm sales, and the illicit
nature of firearms trafficking, the
limited empirical inputs that exist must
be contextualized using qualitative and
subjective assessments by industry
experts. ATF also solicited additional
opinions from the public and
incorporated those that were found to be
credible into the Department’s
population model.
While the above analysis would bring
the total estimated market of unlicensed
sellers to approximately 102,250
persons,263 this figure must be reduced
by the estimated subset of this
population of persons who occasionally
sell their firearms without needing to
obtain a license (e.g., as part of their
hobby or enhancement of their personal
collection). The Department assumes
this subset of unlicensed sellers
constitutes the majority of the
unlicensed seller market, based on
estimates from FIPB SMEs. Based on
limited available information, the best
assessment from FIPB SMEs is that,
based on their long-time experience
with the firearms industry, at least 25
percent of the estimated total number of
262 Experts were identified within ATF and
interviewed in a group setting to reach a consensus.
These conclusions were validated based on best
professional estimates by additional ATF personnel,
who are familiar with the field and with the
industry, until a reasonable estimate was accepted
by all of them. See OMB Circular A–4 at 41.
263 The Department’s online estimate of 40,900
individuals is equal to at least 40 percent of the
national firearms market. Thus, 100 percent of that
estimated firearms market would be 40,900/.4 =
102,250.
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
29072
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
unlicensed sellers may be considered
‘‘engaged in the business’’ under this
rule and would subsequently need to
become an FFL in order to continue
repetitively selling firearms. The actual
number may be higher or lower, and the
Department does not have data to
support a higher number, but FIPB
SMEs do expect their estimate to be
conservative and closer to the lower end
of a possible range. Using the
information gleaned from Armslist and
multiplying it according to these
estimated percentages, the Department
estimates that 25,563 unlicensed
persons may be classified as engaged in
the business of firearms dealing and
thus affected by this rule, an upward
revision from the 24,540 estimate
included in the NPRM.
Finally, the Department has
introduced an additional assumption
into its revised model: the proportion of
unlicensed persons who would be
considered ‘‘engaged in the business’’
under this rule but who are unwilling or
unable to become FFLs and will instead
choose to cease their dealing in firearms
altogether. These persons may choose
this option due to the new
requirements, other disincentives such
as costs or discomfort with inspections,
prohibitions or restrictions in their
respective State or local laws,
ordinances or HOA rules, or other
reasons. Based on the public’s responses
to previously published firearms rules
and regulations, Department SMEs
estimate that this group constitutes
approximately 10 percent of all
currently unlicensed sellers who would
be required to obtain a license under
this rule. Removing this segment from
the total population of 25,563 persons
affected by this rule results in an
estimated 23,006 unlicensed persons
engaged in the business of firearms
dealing who would, under the rule,
apply for licenses in order to continue
repetitively selling firearms.
Because there is no definitive data on
this topic, the actual number of
unlicensed sellers may be higher.
Therefore, the Department also
calculated a second possible estimate
using information published by RSF
based on a survey it conducted
regarding a similar, but differently
sourced, estimated population of private
sellers of firearms.264 This survey
showed that 22 percent of the U.S. adult
population owned at least one firearm
264 Azrael, D., Hepburn, L., Hemenway, D., &
Miller, M. (2017). The stock and flow of U.S.
firearms: Results from the 2015 National Firearms
Survey. The Russell Sage Foundation Journal of the
Social Sciences 3(5), 38–57 (pp. 39 and 51). https://
www.jstor.org/stable/10.7758/rsf.2017.3.5.02.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
(56.84 million adults).265 In the NPRM,
the Department used this 22 percent
figure, applied to the U.S. Census as a
basis for the population, to calculate
this second population estimate of
individuals owning firearms. However,
one public commenter suggested the
Department use a more recent survey
(Gallup Survey, published in 2020),
which showed that the number of U.S.
adults owning firearms was 32
percent.266 The Department concurred
and has updated the estimated
population of individuals owning a
firearm from 22 to 32 percent (82.7
million individuals) in this second
model.267 However, the Department
continues to use the RSF survey data for
the remaining estimates, such as
number of transactions, because the
Department still considers that survey to
provide the best available data, and no
other sources were provided by public
commenters.
The RSF survey found that 5 percent
of the total population transferred
firearms in some manner over the
course of five years, or an annualized
total of 1 percent of owners (826,699
individuals).268 Of the owners that
transferred a firearm, 71 percent did so
by selling (586,956 individuals). Of
those that sold a firearm, 51 percent
(299,348 individuals) sold through
various mediums (e.g., online,
pawnshop, gun shop) other than
through or to a family member or friend
(which likely would not be affected by
this rule).269 Of the owners that
265 Id.
at 39.
percentage of Americans own guns?,
Gallup: The Short Answer (Nov. 13, 2020), https://
news.gallup.com/poll/264932/percentageamericans-own-guns.aspx.
267 82,699,849.92 (rounded to 82,699,950, or 82.7
million) owners of firearms = 258,343,281
individuals living in the United States multiplied
by 32 percent.
268 826,699 individuals transferring a firearm =
82,699,850 individuals owning a firearm multiplied
by 1 percent.
269 The RSF survey did not distinguish
individuals who sold to family or friends on a
recurring basis from those who made an occasional
sale; nor did it distinguish between those who did
so with intent to earn a profit from those who did
not. As noted earlier in the preamble, a person who
makes only occasional firearms transfers, such as
gifts, to immediate family (without the intent to
earn a profit or circumvent requirements placed on
licensees), generally does not qualify as a dealer
engaged in the business. Although it is possible that
some portion of the RSF set of family and friend
transferors might qualify as dealers if they engage
in actions such as recurring transfers, transfers to
others in addition to immediate family, or transfers
with intent to profit, the survey did not provide
enough information for the Department to make that
determination. Therefore, the Department erred on
the side of caution by assuming, for the purpose of
this analysis, that the persons identified on the RSF
survey as engaging in transfers to family and friends
would likely not be affected by this rule, since, in
general, such transfers are less likely to be recurring
or for profit.
266 What
PO 00000
Frm 00106
Fmt 4701
Sfmt 4700
transferred a firearm, an additional 10
percent (82,670) did so by trading or
bartering rather than selling. Thus,
taking the 299,348 that sold and the
82,670 that traded or bartered according
to these survey results, the total number
of unlicensed persons that might
transfer a firearm through a manner that
could be affected by this rule is 382,018.
Of the 382,018 unlicensed persons
selling, trading, or bartering firearms
under this RSF-derived estimate, the
Department continues to estimate (as it
did in the SME-derived estimate
described above) that 25 percent (or
95,505 unlicensed individuals) may be
engaged in the business of firearms
dealing with an intent to profit and thus
potentially affected by this rule.
Consistent with the modification
introduced in the SME-derived model,
the Department also reduced this
estimate by 10 percent to account for the
proportion of unlicensed persons
unwilling or unable to become FFLs as
required by this rule. This brings the
estimated population of unlicensed
persons ‘‘engaged in the business’’ who
would obtain licenses in order to
continue selling under this rule to
85,954 using this RSF/Gallup-derived
model.
In sum, based on the limited available
sources of information, the Department
estimates that either 23,006 or 85,954
could represent the number of currently
unlicensed persons who might be
engaged in the business as defined in
this rule, and who would obtain a
license to continue engaging in the
business of dealing in firearms in
compliance with the rule. The SMEderived estimate of 23,006 is based on
real historical data and experience with
relevant sales activities, combined with
sampling from an online sales site and
ATF’s law enforcement and regulatory
experience. Because of this, the
Department considers the SME-derived
estimate to be a more reliable data
source than the RSF/Gallup estimate
and uses it as the primary estimate.
Nevertheless, for purposes of this final
analysis, the Department provides the
estimated costs under both population
estimates.
The first cost that may apply to both
estimated populations is the cost of
initial familiarization with the final
rule. Given the widespread attention,
awareness, and publicly available
discourse on these and other firearm
regulations, and the nature of the
firearms community, existing firearms
owners would not need to spend a
greater amount of time researching
regulations and becoming updated on
these topics than they already do as a
regular course of activity. The
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
Department therefore assumed
familiarization costs would be minimal
for existing firearm owners and
particularly for the affected population
of sellers. Nevertheless, because of
widespread attention and ATF outreach,
among other efforts, the Department has
costed a familiarization burden of
approximately 12 minutes on all
unlicensed sellers to account for the
time they might spend gleaning
guidance or accessing online blogs to
determine whether the rule applies to
them. Based on HHS’s methodology for
leisure time, the Department attributes a
rounded value of $23 per hour for the
estimated 12 minutes spent gaining
familiarization with the rule, which
amounts to an individual burden of $5
per unlicensed seller. Under the SME
model, this cost would fall on all
102,250 sellers, while under the RSF
model it would fall on all 382,018
sellers. Familiarization costs would
amount to $470,350 in the first year of
implementation under the primary SME
model, and $1,757,283 in the first year
under the alternative RSF model.
khammond on DSKJM1Z7X2PROD with RULES3
3. Costs for Unlicensed Persons
Becoming FFLs
As stated earlier, consistent with the
statutory changes in the BSCA, this rule
implements a new statutory provision
that requires individuals to become
licensed dealers if they devote 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
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
resale of firearms. Costs to become an
FFL include an initial application on
Form 7, along with fingerprints,
photographs, and a qualification
inspection. This application requires
fingerprints and photographs from the
person applying and, in the case of a
corporation, partnership, or association,
from any other individual who is a
responsible person of that business
entity.
For purposes of this analysis, the
Department assumes that most, if not
all, unlicensed persons may be
operating as sole proprietors because
this new requirement would likely
affect persons who have other sources of
income and currently view dealing in
firearms as a supplemental source of
income not subject to a licensing
requirement. Besides the initial cost of
becoming an FFL, there are recurring
costs to maintaining a license. These
costs include renewing the license on a
Federal Firearms License Renewal
Application, ATF Form 8 (5310.11)
(‘‘Form 8’’) every three years,
maintaining acquisition and disposition
(‘‘A&D’’) records, maintaining ATF
Forms 4473, and undergoing periodic
compliance inspections.
This rule, which further implements
the statutory changes in the BSCA,
would affect certain currently
unlicensed persons who purchase and
resell firearms with the intent to
predominantly earn a profit (as defined),
not those who are already licensed.
Because affected unlicensed persons
will need a license to continue to
PO 00000
Frm 00107
Fmt 4701
Sfmt 4700
29073
purchase and resell firearms, the
Department estimates that the
opportunity costs of acquiring a license
would be based on their free time or
‘‘leisure time.’’ For this final rule, the
Department has updated its estimate of
the cost for leisure time below, relying
on a new HHS methodology for
calculating that cost, rather than the
DOT methodology it used in the
NPRM.270 The Department considers the
HHS methodology to more accurately
measure the value of ‘‘leisure time,’’ for
the purposes of this rule, than the DOT
methodology used in the NPRM.
Accordingly, consistent with HHS’s
methodology, the Department used the
BLS median weekly income for full-time
employees as the base for calculating
the pre-tax hourly wage. The
Department then used the proportion
between Census publications on median
household income and median
household income after taxes to
estimate the percent of State and
Federal taxes (14 percent). This percent
was deducted from the hourly pre-tax
wage to derive the post-tax hourly wage,
which becomes the leisure wage under
the HHS methodology. Table 1 outlines
the leisure wage.
BILLING CODE 4410–FY–P
270 U.S. Dep’t of Health and Human Servs.,
Valuing Time in the U.S. Department of Health and
Human Services Regulatory Impact Analyses:
Conceptual Framework and Best Practices 40–41
(June 2017), https://aspe.hhs.gov/sites/default/files/
private/pdf/257746/VOT.pdf.
E:\FR\FM\19APR3.SGM
19APR3
29074
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
Table 1. Leisure Wage Rate for Individuals
Numerical
Inputs
Median Weekly
Wage
Median Hourly
Wage
$1,085
$27
Real Median
Household
Income Pre-Tax
$74,580
Real Median
Household
Income Post-Tax
$64,240
State and Federal
Taxation
14 percent
khammond on DSKJM1Z7X2PROD with RULES3
Leisure Wage
Rounded Leisure
Wage Rate
Based in part on HHS’s methodology
for leisure time, the Department
attributes a rounded value of $23 per
hour for time spent buying and reselling
(including bartering) firearms on a
repetitive basis. The same hourly cost
applies to persons who will become
licensed as a firearms dealer who would
not have become licensed without the
clarifications provided by this rule. This
could include persons who begin selling
firearms after the final rule’s effective
date and understand from the rule that
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
$23.36
Source
News Release, BLS, Usual Weekly
Earnings for Wage and Salary
Workers - Fourth Quarter 2022 (Jan.
19, 2023),
https://www.bis.gov/news.release/arch
ives/wkveng 01192023.pdf
Median Weekly Wage / 40 hours per
week
U.S. Census Bureau, Median
Household Income After Taxes Fell
8.8% in 2022 (Sept. 12, 2023),
https://www .census.gov/library/stories
/2023/09/median-householdincome.html
U.S. Census Bureau, Median
Household Income After Taxes Fell
8.8% in 2022 (Sept. 12, 2023),
https://www .census.gov/library/stories
/2023/09/median-householdincome.html
$64,240 post-tax median income/
$74,580 pre-tax median income= 86
percent; 14 percent State and Federal
Taxes = 100 percent - 86 percent
$23.36 Post-tax median wage= $27
Median hourly wage * (100 percent 14 percent State and Federal Taxes)
$23.00
they qualify as firearms dealers (as
defined by the statute and regulations),
or persons who were previously selling
without a license and now realize they
must acquire one to continue selling
because their firearms transactions
qualify them as dealers.
In addition to the cost of time, there
are other costs associated with applying
to become an FFL. To become an FFL,
persons need to apply on a Form 7 and
submit payment to ATF for fees
associated with the Form 7 application.
Furthermore, these unlicensed persons
PO 00000
Frm 00108
Fmt 4701
Sfmt 4700
will need to obtain documentation,
including fingerprints and photographs,
undergo a background investigation,
and submit all paperwork via mail.
While not a cost attributed towards their
first-year application to become an FFL,
an FFL will need to reapply to renew
their license every three years on a Form
8 renewal application to ensure that that
they can continue to sell firearms
thereafter. Table 2 outlines the costs to
become an FFL and the costs to
maintain a license.
E:\FR\FM\19APR3.SGM
19APR3
ER19AP24.070</GPH>
Inputs for
Leisure Wage
Rate
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
29075
Table 2. Cost Inputs to Become an FFL and Maintain a License
Cost Input
Cost
Form 7 Application
Cost
Fingerprint Cards
Fingerprint Cards
(Commercial)
Average Cost for
Fingerprint Cards
$24 Various
$12 See Above
Mailing and Shipping Prices, USPS,
https://www.usps.com/business/prices.htm
$1 (last visited Mar. 30, 2024)
Passport Photos, CVS,
https://www .cvs.com/photo/passport-photos
$17 (last visited April 5, 2024)
Passport Photos, Walgreens,
https://photo. walgreens.com/store/passport$17 photos (last visited April 5, 2024)
Postage
Photograph
FFL Renewal Cost
(Form 8)
$90 FFLC
For purposes of this rule, the
Department assumes that unlicensed
persons applying for a license as a result
of this rule are likely to file for a Type
01 Dealer license.271 This license costs
$200 and requires the submission of a
Form 7 application; every three years
thereafter, the licensee must pay $90 to
renew the license using Form 8.
Applicants also need to obtain and
submit fingerprints in paper format. The
unlicensed person can obtain
fingerprint cards for free from the
Department and travel to select law
enforcement offices that perform
fingerprinting services (usually also for
free). Or the unlicensed person may pay
a fee to various market entities that offer
fingerprinting services in paper format.
The average cost found for market
services for fingerprinting on paper
cards is $24 (rounded).
Because it is not clear whether an
unlicensed person would choose to
obtain fingerprint cards from the
Department and go to a local law
enforcement office that provides
fingerprinting services or use
commercial services to obtain cards and
fingerprinting services, an average cost
of $12 was used. In addition to paper
fingerprint cards, the unlicensed person
must also submit a photograph
appropriate for obtaining a passport.
The average cost for a passport photo is
$17 (rounded). Once they complete the
application and gather the
documentation, unlicensed persons
must submit the Form 7 package by
mail. The Department rounds the firstclass stamp rate of $0.63 to $1 for
calculating the estimated mailing cost.
In addition to the direct costs
associated with compiling
documentation for a Form 7 application,
the Department estimates the time
burdens related to obtaining and
maintaining a Federal firearms license.
Table 3 outlines the hourly burdens to
apply, obtain, and maintain a license.
271 A Type 01 Dealer license is used to purchase
and resell firearms at wholesale or retail.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
PO 00000
Frm 00109
Fmt 4701
Sfmt 4700
E:\FR\FM\19APR3.SGM
19APR3
ER19AP24.071</GPH>
BILLING CODE 4410–FY–C
khammond on DSKJM1Z7X2PROD with RULES3
Source
Application for Federal Firearms License, ATF
(Oct. 2020),
https://www.atf.gov/firearms/docs/form/form7-7-cr-application-federal-firearms-license-atf$200 form-531012531016/download
Distribution Center Order Form, ATF (Jan. 25,
2024), https://www.atf.gov/distribution-center$0 order-form
29076
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
Table 3. Hourly Burdens to Apply, Obtain, and Maintain a License
Activity Type
Hourly
Burden
Application for Federal Firearms License
1 (atf.gov)
0.5 0MB 1140-0019 Justification
Form 7 Application
Form 8 Application
Time to Travel to and
obtain F ingerorints
Time to Travel to and
obtain Photograph
A&D Records
Form 4473
Qualification Inspection
Time
Compliance Inspection
Time
As stated above, hourly burdens
include one hour to complete a Form 7
license application and the time spent
to obtain the required documentation.
For purposes of this analysis, the
Department assumes that vendors that
offer passport photograph services are
more readily available than places that
provide fingerprinting services;
therefore, the Department estimates that
it may take 30 minutes (0.5 hours) to
travel to a vendor and obtain a passport
Source
1
NIA
0.5 NIA
0.05 0MB 1140-0032 Justification
0.5 0MB 1140-0020
Department internal case management
15 system
Department internal case management
34 system
photograph, and up to one hour to travel
to and obtain fingerprinting services.
Other time burdens may include 0.05
hours (three minutes) to enter and
maintain A&D records for each firearm
transaction (0.3 hours for 6
transactions); 0.5 hours for maintaining
a Form 4473 for each firearm sale (1.5
hours for 3 firearms); and 15 to 34 hours
for an inspection (qualification or
compliance, respectively).272
The Department then multiplied each
of these hourly burdens by the $23
hourly leisure wage rate to account for
the value of time spent applying for and
obtaining a license using a Form 7
(including any other actions related to
obtaining a license), then added the cost
per item to determine a cost per action
taken. Table 4 outlines the first-year
costs to apply for an FFL.
Table 4. First-Year Costs to Obtain a Type 01 FFL
Form 7
Fingerprints
Passport Photo
Postage
Form 4473
A&D Records
Qualification
Inspection
First Year Cost
02:22 Apr 19, 2024
Jkt 262001
Hourly
Cost per
Activity
1.5
0.3
$23
$23
$23
$23 NIA
$23
$23
15
$23
1
1
0.5
NIA
272 These inspection times are an average of all
currently regulated FFLs, including small and large
VerDate Sep<11>2014
Hourly
Wage Rate
Cost Item
$23
$23
$12
Frm 00110
Fmt 4701
$200
$12
$17
$1
$35
$7
$345
dealers and manufacturers, and are not necessarily
PO 00000
Sfmt 4725
Rounded
Cost for
Each
Activity
$0
$223
$35
$29
$1
$35
$7
$345
$675
representative of the time involved in inspecting
small dealers.
E:\FR\FM\19APR3.SGM
19APR3
ER19AP24.073</GPH>
Hourly
Burden
ER19AP24.072</GPH>
khammond on DSKJM1Z7X2PROD with RULES3
Cost Item
29077
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
cost. In addition to their initial cost, the
newly created FFL would need to
maintain a Form 4473 and A&D records
(two entries per firearm: one entry to
purchase and one entry to sell) for every
firearms transaction, undergo periodic
Overall, the Department estimates that
it would cost an unlicensed person $675
in terms of time spent and fees paid to
apply under a Form 7 to become a Type
01 FFL. The Department considers the
$675 to be an unlicensed person’s initial
compliance inspections, and renew
their license every three years (ATF
Form 8 application). Table 5 outlines
the cost per recurring activity to
maintain an FFL.
Table 5. Recurring Costs to Maintain an FFL
Number of
Hourly
Entries or
Burden
Applications
khammond on DSKJM1Z7X2PROD with RULES3
Form8
Renewal
Cost
Form 4473
A&D
Records
Inspection
Time
Recurring
Costs
02:22 Apr 19, 2024
Cost Item
Rounded
Cost for
Each
Activity
1
3
0.5
0.5
$23
$23
$12
$35
6
0.05
$23
$7
$7
1
34
$23
$782
$782
$90
$102
$35
Varies by Year
While renewing a license under a
Form 8 application occurs every three
years, there are additional costs
associated with Form 4473 and A&D
records that may occur more often.
There are also costs from compliance
inspections that may occur periodically.
The Department notes that an FFL’s
actual number of firearms sales may
range from zero sales to more than three
per year. Persons engaged in the
business of dealing in firearms can sell
anywhere from a few firearms to
hundreds per year, depending on the
size of their operation and other factors.
Information on these factors or on the
number of sellers who might be at each
level is not available. However, the
average number of listings per seller on
Armslist was three. So, for purposes of
this economic analysis only, the
Department uses three firearms (six
A&D entries) per year to illustrate the
potential costs that a person may incur
as a result of this rule. Although a
person might not resell a given firearm
in the same year they purchase it, for
the purposes of these estimates the
Department includes both ends of the
firearm transaction because the person
could buy and sell the same firearm, or
buy one and sell a different one in a
given year.
As for compliance inspections, based
on information gathered from ATF’s
Office of Field Operations, the
VerDate Sep<11>2014
Hourly Hourly
Wage Cost
Rate
Jkt 262001
frequency of such inspections varies
depending on the size of the area of
operations and the number of FFLs per
area of operations. Overall, the
Department estimates that it inspects
approximately 8 percent of all existing
FFLs in any given year. In the chart
above, ATF has indicated the cost of an
inspection, which would normally not
occur more than once in a given year
per FFL. ATF performs compliance
inspections annually, so while every
single FFL does not necessarily undergo
a compliance inspection every year, this
analysis includes an annual cost for
inspections to account for a subset of
the total number of affected FFLs that
may be inspected in any given year (8
percent). The Department estimates that
it would cost $782 for the time an
individual will spend on a compliance
inspection in a given subsequent year.
Therefore, this individual would incur
annually recurring costs that could
range from a low of $42 a year to
complete Forms 4473 and maintain
A&D records, to a high of $926 to
include that $42, Form 8 renewal costs
($102), and compliance inspection time
($782).273
273 The
Department notes that the high $926
estimate may be higher than actual costs because it
assumes that an FFL would simultaneously renew
their license (which occurs every three years) in the
same year that they perform a compliance
inspection, which typically occurs only
periodically.
PO 00000
Frm 00111
Fmt 4701
Sfmt 4700
In addition to the cost burdens of
becoming licensed at the Federal level,
persons who are currently engaged in
the business as a dealer without a
license under the Federal definition
may reside in a State that either defines
a dealer at the State level by linking it
to the Federal statutory definition, or
that requires any Federal dealer licensee
to also become licensed as a dealer with
the State. While this rule does not
impose costs on States and does not
directly impact whether persons must
be licensed under State requirements, in
the case where States have tied their
dealer licensing requirements to Federal
statutory licensing requirements, this
rule indirectly causes new Federal
licensees in those States to also incur
State dealer licensing costs because they
are incurred due to BSCA’s amendments
to the GCA. The Department accounts
for such costs for that segment of the
affected population in this final rule.
The Department found that State-level
licensing linked to or contingent on
Federal firearms licensing was required
by State and local laws in ten states and
the District of Columbia (DC).274 Five of
274 Giffords Law Center surveyed all 50 States and
the District of Columbia to determine which States
have laws regulating firearms dealers. They
determined that 26 States and DC have such laws.
Of those with laws regulating dealers, Giffords Law
Center found that 16 States and DC require persons
dealing in firearms to obtain a State dealers license.
E:\FR\FM\19APR3.SGM
Continued
19APR3
ER19AP24.074</GPH>
Cost Item
29078
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
those States and DC required licensing
for dealing in any type of firearms, and
the other five States required licensing
only for dealing in handguns. For the
purposes of this analysis, the
Department grouped all such States
together as imposing additional
licensing costs, so that all 11
jurisdictions were included in the cost
analysis where data was available. The
respective populations of each of these
jurisdictions as a percentage of the total
U.S. population were aggregated to a
total of 29.08 percent. This total was
applied to the populations estimated to
be EIB under both the primary SME
model and the alternative RSF model to
estimate how many sellers affected by
this rule at the Federal level would
incur the additional State licensure
costs as well. The respective State
populations were also used as weights
to their respective licensure costs,
which ranged from 50 cents to $300 a
year, in order to determine a weighted
average cost per seller, which was
$73.37 per year, rounded to $73.00 for
calculations. The Department estimated
a processing time of one hour of leisure
time, since the application forms ranged
from one to five pages, while
maintaining the same dollar postage
cost as for FFLs. Both photograph and
fingerprint costs were assumed to be
accounted for when securing both for
FFL applications, as they are frequently
secured in pairs. These costs are
outlined in Table 6.
Table 6. State dealer licensing costs flowing from this rule
12-Year
Cost275
Annualized
12 year
Percent of
us
Population
khammond on DSKJM1Z7X2PROD with RULES3
Alabama
California
Connecticut
Delaware
District of
Columbia
Illinois
New Hampshire
Pennsylvania
Washington
Indiana
Wisconsin
Total
Average
$ 6.00
$1,380.00
$400.00
$1,370.00
$3,600.00
$0.50
$115.00
$33.33
$114.17
$300.00
1.499
11.800
1.076
0.295
0.206
$750.00
$1,200.00
$120.00
$1,500.00
$120.00
$120.00
$62.50
$100.00
$10.00
$125.00
$10.00
$10.00
$880.50
3.824
0.411
3.881
2.300
2.025
1.759
29.08
The $73.37 average State costs,
rounded to $73, were combined with
the hour burden and postage cost,
resulting in a total per-seller cost of $97.
This total per-seller cost was applied to
29.08 percent of the EIB population,
resulting in an estimated 6,689 sellers
under the SME-derived model and
24,992 sellers under the RSF-derived
model. This adds a total of $648,862 and
$2,424,237 in annual costs for State
dealer licenses, respectively.
4. Costs for FFLs After Termination of
License
See Giffords Law Center to Prevent Gun Violence,
Gun Dealers, https://giffords.org/lawcenter/gunlaws/policy-areas/gun-sales/gun-dealers/ (last
accessed Mar. 30, 2024). The Department
researched requirements it could access online for
those 16 States and DC and determined that 10 of
those 16 States, and DC, either link their definition
of a dealer at the State level to the Federal
definition of dealer or require a person selling
firearms with a Federal firearms license for dealers
to also obtain a State dealers license. The
Department used the information on those 10 States
and DC to calculate the costs in this section.
275 Several States had 3- or 6-year renewal
windows/validity periods rather than annual
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
This rule is also designed to enhance
compliance by former FFLs who no
longer hold their licenses due to license
revocation, denial of license renewal,
license expiration, or surrender of
license but nonetheless engage in the
business of dealing in firearms. Under
existing standards, such persons
sometimes transfer their inventory to
their personal collections instead of
selling or otherwise disposing of the
firearms to a licensed importer, licensed
manufacturer, or licensed dealer for
PO 00000
Frm 00112
Fmt 4701
Sfmt 4700
Weighted
Average: 12Year
annualized
$0.75
$1,357.00
$35.87
$33.68
$61.80
$239.00
$41.10
$38.81
$287.50
$20.25
$17.59
$2,133.35
$73.37
sale, auction, or pawn redemption. This
rule clarifies what dispositions of
former licensee inventory former FFLs
may make after their license is
terminated. The former licensee may
transfer their business inventory within
30 days, or occasionally thereafter, to
another licensee if they meet the
requirements set out in the new
provisions under 27 CFR 478.57 or
478.78. Another possibility is that the
licensee may transfer their business
inventory within 30 days to themselves
in a personal capacity—called a ‘‘former
licensee inventory’’ in the final rule.
After that time, the firearms may be sold
licensing costs. Using a 10-year horizon
underestimates the cost burden in those cases,
particularly for the States that had a 6-year validity
window. The Department therefore calculated the
total for 12 years for each State before annualizing
them to find the weighted average.
E:\FR\FM\19APR3.SGM
19APR3
ER19AP24.075</GPH>
State
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
only occasionally to a licensee or the
former dealer risks being presumed to
be ‘‘engaged in the business’’ of dealing
without a license. In that case, former
FFLs who sell such firearms would
potentially be in violation of the
statutory prohibitions (18 U.S.C.
922(a)(1)(A) and 923(a), (c)) on
unlicensed dealers.
The various means by which a license
can be terminated—revocation of a
license, denial of license renewal,
license expiration, or surrender of
license—present two categories of
affected populations. Group 1,
comprising individuals who have their
license revoked or are denied license
renewals, could be described as former
FFLs who have failed to comply with
existing regulations and requirements to
a degree that resulted in the revocation
or denial of their licenses. This rule is
likely to have a qualitative impact on
this group because a revocation or
denial may not provide ample
opportunity for an orderly and planned
liquidation or transfer of inventory
before losing the license, which may
therefore be disruptive. Based on data
from the FFLC, such FFL license
revocations and non-renewals are rare,
with an annual average of 76 licenses
revoked or denied renewal over the past
five years (with a range between 14 and
180),276 or a de minimis percentage of
0.093 percent of all active FFLs.277
Furthermore, the economic impact of
transferring inventory to another FFL
instead of the former FFL holder
retaining the inventory is unclear, as the
on FFL revocations and denials of
renewal has been updated from the NPRM to cover
2018 through 2023.
277 The Department did not reduce the estimated
number of persons affected by this EIB rule to
account for this reduction of FFLs that may have
their license revoked, denied, expired, or
surrendered because historically, the number of
FFLs has been stable over time. This means that the
increase and decrease of FFLs have been relatively
equal to each other. Because the Department is not
calculating an increase of population over time, the
Department did not calculate a decrease of
population over time. Additionally, for the existing
number of FFLs, the number of revoked/denied
renewals annually is 0.093 percent of all active
FFLs. Therefore, applying this percentage to the
estimated EIB population above (23,006) will affect
a very small number (21) of the estimated EIB FFL
population. For both of these reasons, the
Department believes that any change in cost would
be de minimis and would overestimate a decrease
in population where the population has been held
as constant in this analysis.
khammond on DSKJM1Z7X2PROD with RULES3
276 Data
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
underlying market value of the
inventory is unchanged by this rule’s
requirements. Additional factors
surrounding the potential cost of no
longer being able to transfer one’s
business inventory after the first 30 days
post-license termination are also
unknown and presumed to be similarly
de minimis. Therefore, the Department
believes there are no quantitative
impacts associated with this population.
Although ATF requested public
comments on the potential impacts on
former FFLs with revoked licenses, ATF
did not receive any data from which to
assess such potential costs.
Group 2, comprising individuals who
surrender their license or let it expire,
captures those who no longer have a
license for discretionary or lawful
reasons. This group also comprises
former FFLs that choose to close or to
sell their business to another party.
They are similarly excluded from
expected impacts attributable to this
rule: because the closure is planned, it
is likely that the FFL will include
reasonable considerations for orderly,
lawful liquidation or inventory transfer
as part of closing or selling their
enterprise. Such considerations are also
likely to occur ahead of, rather than
subsequent to, the expiration or
surrender of their license. As a result,
the Department assumes that the
options that exist under current
standards—transferring business
inventory to the licensee’s personal
collection or selling business inventory
to another FFL—would similarly be
freely available to Group 2 FFLs under
this rule. As a result, we are excluding
both groups from the affected
population.
5. Government Costs
In addition to the private costs to
unlicensed persons, ATF will incur
additional work due to the increase in
Form 7 and Form 8 applications for
unlicensed persons who become FFLs,
which would be offset by the fees
received with FFL applications ($200)
and renewals ($90). Based on
information gathered from the FFLC,
which processes and collects the fees for
FFL applications, various contractors
and Federal Government employees
process Form 7 and 8 applications,
verify and correct applications, and
PO 00000
Frm 00113
Fmt 4701
Sfmt 4700
29079
further process them for background
checks and approval.
Based on information provided by the
FFLC, the average hourly rate for
contracting staff, including benefits, is
$13.29.278 To determine the wage rates
for Federal employees, the Department
used the wage rates set forth in the
General Schedule (‘‘GS’’). At any level
within the GS, step 5 is used as an
average wage rate per activity.
Government processing activities range
from an entry level Federal employee
between a GS–5/7, upwards to a GS–
13.279 To account for fringe benefits
such as insurance, the Department
estimated a Federal load rate using the
methodology outlined in the
Congressional Budget Office’s report
comparing Federal compensation to
private sector compensation. It states
that total compensation to Federal
workers, factoring in both wages and
benefits, is 17 percent higher than for
similar private sector workers’ benefits
(or a multiplier factor of 1.17).280 The
Department calculated private sector
benefits from the BLS (in 2022) and
determined that the overall private
sector benefits are 41.9 percent in
addition to an hourly wage, or a load
rate of 1.419. This makes the Federal
load rate 1.66 above the hourly wage
rate (after applying the 1.17
multiplier).281
Table 7 outlines the Government costs
to process a Form 7 application to
become an FFL.
278 The Department notes that because the
contracting salary is a loaded wage rate, a base wage
rate (not including benefits) was not included in
Table 7 below.
279 Off. of Pers. Mgmt, OPM Salary Table 2023
For the Locality Pay Area of Washington-BaltimoreArlington, DC–MD–VA–WV–PA (effective Jan.
2023), https://www.opm.gov/policy-data-oversight/
pay-leave/salaries-wages/salary-tables/pdf/2023/
DCB_h.pdf.
280 Cong. Budget Off., Comparing the
Compensation of Federal and Private-Sector
Employees, 2011 to 2015 (Apr. 2017), https://
www.cbo.gov/system/files/115th-congress-20172018/reports/52637-federalprivatepay.pdf.
281 1.66 Federal load rate = 1.416 private industry
load rate * 1.17 multiplier factor. BLS Series ID
CMU2010000000000D,CMU2010000000000P
(Private Industry Compensation = $37.15)/BLS
Series ID CMU2020000000000D,
CMU2020000000000P (Private Industry Wages and
Salaries = $26.23) = 1.416. BLS average 2021. U.S.
Bureau of Labor Statistics (2021), Database for
Employee Compensation, https://data.bls.gov/cgibin/srgate.
E:\FR\FM\19APR3.SGM
19APR3
29080
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
Table 7. Hourly Burden and Costs to Process a New Application for an FFL
Government Costs to Process
FFL Applications
Hourly
Burden
Average Contracting Time to
Prepare and Enter Application
Processing Time for New
Applications
Processing Time for
Fingerprint Cards
Qualification Inspection Time
(Includes Travel)
Subtotal
Fees Received from New
Application
Total
Based on the hourly burdens and the
hourly wage rates for various contract
and Federal employees, the Department
estimates that it would take on average
20.5 hours to process a Form 7
application, at a cost of $1,303 per
application. This would be offset by the
new $200 application (Form 7) fee paid
to the government, for an overall net
cost to the government of $1,103 per
application as a result of this rule. Form
8 application renewals are estimated to
cost $71 every three years (or $1,303
less the $1,062 inspection time and the
$170 fingerprint costs). However, the
cost to review a Form 8 application
0.5
Staffing
Level
Hourly
Wage
Contracting
Staff
NIA
1 GS 10
2 GS12
GS 5/7 to
17 GS 13
Loaded
Hourly
Wage
Rounded
Cost
$7
$13.29
$38.85
$64.49
$51.15
$84.91
$37.65
$62.50
$64
$170
$1,062
$1,303
($200)
$1,103
($71) is offset by the renewal fee of $90
(which is set by statute), making the net
cost or overall savings to Government
for this rule $19 per FFL renewal
(subsequently represented in this
analysis as ¥$19).
In addition to processing Form 7
applications, ATF IOIs will need to
perform qualification and compliance
inspections. The qualification
inspection occurs once during the
application process and is accounted for
in Table 7 above. But, as discussed
above, there is a recurring compliance
inspection after the person becomes a
licensee. For both the qualification and
compliance inspections, the Department
notes that the respective 17-hour or 36hour inspection time estimates for the
Government are more than the
inspection time for the private sector, as
discussed above, because the
Department is including travel time for
an IOI to travel to the person’s location.
Based on the hourly burdens and wage
rates of IOIs, the Department anticipates
that it costs ATF $2,250 to perform a
compliance inspection.
Table 8 outlines the recurring
Government costs to inspect an FFL.
Table 8. Recurring Government Costs to Inspect an FFL
To summarize the overall Government
costs, Table 9 outlines the Government
36
Hourly
Wage
Loaded
Hourly
Wage
Rounded
Cost
$37.65
$62.50
$2,250
costs to process Form 7 applications,
process Form 8 renewal applications,
and conduct FFL compliance
inspections.
khammond on DSKJM1Z7X2PROD with RULES3
Table 9. Summary of Government Costs per Action
Government Costs per Unlicensed Individual
Per Application Cost
Per Renewal Cost
Per Compliance Inspection Cost
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
PO 00000
Frm 00114
Fmt 4701
Sfmt 4725
Cost
E:\FR\FM\19APR3.SGM
$1,103
-$19
$2,250
19APR3
ER19AP24.078</GPH>
Compliance Inspection Time
Staffing
Level
GS 5/7
to GS 13
ER19AP24.077</GPH>
Hourly
Burden
ER19AP24.076</GPH>
Government Annually
Recurring Costs
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
The Department estimates that the
Government costs of this rule include
the initial application cost that occurs in
the first year (including the qualification
inspection), renewal costs that typically
occur every three years after the first
year, and the cost for the Government to
conduct a compliance inspection of an
FFL in a given year (the Government
currently conducts compliance
inspections of approximately 8 percent
of FFLs per year).
6. Total Cost
The total costs take into account the
familiarization burden, State and
Federal private licensing costs, and
Government costs to process and
support the increase in licensing of this
rule, as described above in Section
VI.A.3 and VI.A.5 of this preamble. The
Department estimates that the initial
application cost (Form 7 and initial
inspection) occurs in the first year, that
renewal costs (Form 8 renewals) occur
every three years after the first year, and
that completion and maintenance of
Forms 4473 and A&D records and
compliance inspection costs (for a
subset of FFLs affected by this rule)
occur annually. Tables 10 to 13
illustrate the quantitative 10-year
familiarization, Federal, and State
licensing costs of this final rule. As
discussed above, qualitative costs have
been identified but were unable to be
29081
quantified for the de minimis proportion
of FFLs that will have their licenses
revoked for failure to comply with
existing regulations. Qualitative costs
have also been identified but not
quantified for the estimated 10 percent
of unlicensed sellers currently engaged
in the business (or between 2,550 and
9,550 individuals) that are assumed to
be unwilling or unable to become
licensed as required by this rule. These
individuals are expected to cease selling
firearms altogether by choice or as a
result of State or local restrictions acting
as obstacles to their becoming FFLs.
Tables 10 and 11 provide the 10-year
costs using the SME-derived estimate.
BILLING CODE 4410–FY–P
Table 10. Total 10-Year Licensing Costs of Rule Based on SME-Derived Estimate
Year
Familiarization FFL Costs
1
2
3
4
5
6
7
8
9
10
$470,350
Total
$470,350
State FL
Government
Cost
Total
$15,529,219
$648,862
$25,375,894
$42,024,325
$2,405,925
$648,862
$4,142,250
$7,197,037
$2,405,925
$4,752,562
$648,862
$648,862
$4,142,250
$3,705,131
$7,197,037
$9,106,555
$2,405,925
$648,862
$4,142,250
$7,197,037
$2,405,925
$4,752,562
$648,862
$648,862
$4,142,250
$3,705,131
$7,197,037
$9,106,555
$2,405,925
$648,862
$4,142,250
$7,197,037
$2,405,925
$648,862
$4,142,250
$7,197,037
$4,752,562
$648,862
$3,705,131
$9,106,555
$44,222,455
$6,488,620
$61,344,787
$112,526,202
1
2
3
4
5
6
7
8
9
10
Total
Annualized
VerDate Sep<11>2014
02:22 Apr 19, 2024
Discount 7%
Total Undiscounted Discount 3%
$42,024,325
$40,800,315
$39,275,070
$7,197,037
$6,783,897
$6,286,170
$7,197,037
$6,586,308
$5,874,926
$9,106,555
$8,091,056
$6,947,347
$7,197,037
$6,208,227
$5,131,388
$7,197,037
$6,027,405
$4,795,689
$9,106,555
$7,404,463
$5,671,105
$7,197,037
$5,681,407
$4,188,741
$7,197,037
$5,515,929
$3,914,711
$9,106,555
$6,776,132
$4,629,311
$112,526,212
$99,875,142
$86,714,460
$11,708,413
$12,346,188
Jkt 262001
PO 00000
Frm 00115
Fmt 4701
Sfmt 4725
E:\FR\FM\19APR3.SGM
19APR3
ER19AP24.079</GPH>
khammond on DSKJM1Z7X2PROD with RULES3
Year
ER19AP24.080</GPH>
Table 11. Total 10-Year Costs of Rule Based on SME-Derived Estimate282
29082
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
Tables 12 and 13 provide the 10-year
licensing costs using the RSF-derived
estimate.
Table 12. Total 10-Year Licensing Costs of Rule Based on RSF-Derived Estimate
State
Government
Licensing
Familiarization FFL Costs
Undiscounted
Cost
1
$1,757,283
$58,019,288
$2,424,237 $94,807,814
$157,008,621
2
$8,987,121
$2,424,237
$4,142,250
$15,553,608
$8,987,121
$2,424,237
$4,142,250
$15,553,608
3
4
$17,754,480 $2,424,237
$2,509,115
$22,687,832
5
$8,987,121
$2,424,237
$4,142,250
$15,553,608
$8,987,121
$2,424,237
$4,142,250
$15,553,608
6
7
$17,754,480 $2,424,237
$2,509,115
$22,687,832
$8,987,121
$2,424,237
$4,142,250
$15,553,608
8
9
$8,987,121
$2,424,237
$4,142,250
$15,553,608
10
$17,754,480 $2,424,237
$2,509,115
$22,687,832
Total
$1,757,283 $165,205,454 $24,242,370 $127,188,659
$318,393,766
Year
Table 13. Total 10-Year Licensing Costs of Rule Based on RSF-Derived Estimate283
Total
Annualized
khammond on DSKJM1Z7X2PROD with RULES3
BILLING CODE 4410–FY–C
Overall, thetotal familiarization,
Federal, and State licensing costs of this
rule are $112.52 million over 10 years,
which are annualized to $11.70 million
at three percent discounting and $12.34
million at seven percent discounting
under the SME-derived estimate.
Meanwhile, under the RSF-derived
estimate, the total familiarization,
282 The ‘‘Undiscounted’’ column represents totals
from the underlying costs. Consistent with guidance
provided by OMB in Circular A–4, the ‘‘3 Percent
Discount Rate’’ and ‘‘7 Percent Discount Rate’’
columns result from applying an economic formula
to the number in each row of this ‘‘Undiscounted’’
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
By ensuring that ATF’s regulatory
definitions conform to the BSCA’s
statutory changes and can be relied
upon by the public, this final rule will
provide significant public safety
benefits. The rule clarifies that persons
who intend to predominantly earn a
profit from the repetitive purchase and
resale of firearms are engaged in the
business of dealing in firearms. It also
clarifies that such sellers must be
licensed in order to continue selling
firearms, even if they are conducting
column to show how these future costs over time
would be valued today; they do not contain totals
from other tables.
283 The ‘‘Undiscounted’’ column represents totals
from the underlying costs. Consistent with guidance
provided by OMB in Circular A–4, the ‘‘3 Percent
Discount Rate’’ and ‘‘7 Percent Discount Rate’’
columns result from applying an economic formula
to the number in each row of this ‘‘Undiscounted’’
column to show how these future costs over time
would be valued today; they do not contain totals
from other tables.
Federal, and State licensing costs of the
rule are $318.39 million over 10 years,
which are annualized to $33.69 million
at three percent discounting and $36.29
million at seven percent discounting.
7. Benefits
PO 00000
Frm 00116
Fmt 4701
Sfmt 4700
E:\FR\FM\19APR3.SGM
19APR3
ER19AP24.082</GPH>
1
2
3
4
5
6
7
8
9
10
Discounted 3 %
Discounted 7%
Total Undiscounted
$157,008,621
$152,435,554
$146,737,029
$15,553,608
$14,660,767
$13,585,124
$15,553,608
$14,233,755
$12,696,377
$22,687,832
$20,157,844
$17,308,438
$15,553,608
$13,416,679
$11,089,508
$15,553,608
$13,025,902
$10,364,026
$22,687,832
$18,447,283
$14,128,841
$15,553,608
$12,278,162
$9,052,341
$15,553,608
$11,920,545
$8,460,132
$22,687,832
$16,881,877
$11,533,343
$318,393,766
$287,458,372
$254,955,161
$33,698,891
$36,299,879
ER19AP24.081</GPH>
Year
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
such transactions on the internet or
through other mediums or forums. As
part of the license application, those
dealers will undergo a background
check, as will those who subsequently
purchase a firearm from the licensed
dealers.
The background check process for
license applicants helps ensure that
persons purchasing and selling
(including bartering) firearms with the
intent to earn a profit are not themselves
prohibited from receiving or possessing
firearms. It also correspondingly
reduces the risk that those sellers engage
in selling firearms to persons who are
prohibited from receiving or possessing
such firearms under Federal, State,
local, or Tribal law—including violent
criminals—because those prospective
purchasers will also be subject to a
background check. The NFCTA, a study
conducted by ATF and a team of
academic and other subject matter
experts, concluded that ‘‘[i]ndividuals
who are prohibited due to their criminal
records or other conditions are unlikely
to purchase directly from a licensed
federal firearms dealer. Instead,
prohibited persons determined to get
crime guns acquire them through
underground crime gun markets that
involve unregulated transactions with
acquaintances and illicit ‘street’
sources.’’ 284 By clarifying when a
person is engaged in the business of
dealing in firearms, the rule helps
ensure such persons obtain licenses and
comply with the safeguards in the GCA.
This thereby promotes public safety by
reducing the number of firearms
transferred to violent criminals and
others whom Congress has determined
are prohibited from receiving or
possessing firearms. In particular, these
safeguards reduce the danger to public
safety that results when firearms are
trafficked to criminals who are likely to
use them to commit violent crimes.
Finally, beyond reducing unlicensed
dealing of firearms to violent criminals,
the safeguards applicable to licensees
also help prevent the acquisition of
firearms by those who may use a firearm
to harm themselves,285 or who allow
khammond on DSKJM1Z7X2PROD with RULES3
284 ATF,
National Firearms Commerce and
Trafficking Assessment (NFCTA): Crime Gun
Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the
United States and Its Territories 41 (Mar. 27, 2024),
https://www.atf.gov/firearms/docs/report/nfctavolume-ii-part-iii-crime-guns-recovered-and-tracedus/download.
285 For example, in 2021, there were an average
of 127.2 suicides per day among U.S. adults,
including 17.5 per day among veterans and 109.6
per day among non-veteran adults. Firearms were
involved in 73.4% of deaths among veteran men,
and 51.7% of veteran women. See U.S. Dep’t of
Veterans Affairs, 2023 National Veteran Suicide
Prevention Annual Report 15, 27 (Nov. 2023).
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
children to access them because they
cannot make proper decisions
concerning the acquisition, use, storage,
and disposition of firearms and
ammunition.286
The rule will also benefit public
safety by enhancing ATF’s ability to
trace firearms recovered in criminal
investigations. The GCA requires
licensees to maintain records when they
transfer a firearm to an unlicensed
purchaser, commonly referred to as both
the ‘‘first retail purchaser’’ and, if they
are the only known sale, the ‘‘last
known purchaser’’ (the tracing process
may also identify additional unlicensed
purchasers beyond this first retail
purchaser, in which case one of these
unlicensed purchasers would become
the last known purchaser instead).
When a firearm is recovered in a
criminal investigation and submitted for
tracing, ATF is often able to identify the
last known purchaser through records
maintained by the licensee, providing
crucial leads in the underlying criminal
investigation. When a firearm is
transferred by an unlicensed person,
however, such records rarely exist and,
if such records do exist, they are not
accessible to ATF through the tracing
system. By helping increase compliance
with the GCA’s licensing and
recordkeeping requirements, the rule
will enhance ATF’s capacity to
complete crime-gun traces, thereby
expanding the evidentiary leads ATF
provides to law enforcement
investigating crimes involving firearms,
particularly violent offenses such as
homicide, aggravated assault, armed
robbery, and armed drug trafficking.
Moreover, because unlicensed dealers
who are engaged in the business of
selling firearms often deal in used
firearms, the rule will also enhance the
tracing of crime guns that have been
recovered after an initial retail sale by
an FFL. By facilitating licensure of those
who engage in the business of dealing
firearms through purchasing and
reselling used firearms, the rule will
enhance the tracing system’s capacity to
identify ‘‘secondary purchasers’’ of
crime guns. This capacity will be
enhanced because new licensees will be
required by the GCA to maintain records
on sales of used firearms that are
accessible to the Department when
conducting a trace on a crime gun.
When a used ‘‘firearm re-enters
286 In Huddleston, the Supreme Court examined
the legislative history of the GCA and determined
that ‘‘[t]he principal purposes of the federal gun
control legislation . . . was to curb crime by
keeping firearms out of the hands of those not
legally entitled to possess them, because of age,
criminal background, or incompetency.’’ 415 U.S. at
824.
PO 00000
Frm 00117
Fmt 4701
Sfmt 4700
29083
regulated commerce, the tracing process
may identify additional unlicensed
purchasers beyond the first retail
purchaser.’’ 287
Crime-gun tracing is one of the most
valuable and effective services ATF
provides to law enforcement agencies—
nationally and internationally—in
investigating crimes involving firearms.
As one public commenter noted, law
enforcement agencies submitted a total
of ‘‘1,922,577 crime guns for the
Department to trace between 2017 and
2021.’’ Largely as a result of the records
the GCA requires licensees to maintain,
‘‘ATF was able to determine the
purchaser in 77 percent (1,482,861)’’ of
those trace requests.288 By clarifying
when a Federal firearms license is
required, the rule will promote
compliance by increasing licensure of
those engaged in the business of dealing
in firearms, and correspondingly
increase the availability of GCArequired records from those newly
licensed dealers. As a result, the rule
will enhance the capacity of the
Department to successfully complete
crime-gun traces for law enforcement
partners globally.
The benefits to public safety of crimegun tracing are substantial. For example,
in fiscal year 2022, the Department
performed over 623,000 crime-gun
traces.289 Of these, 27,156 were deemed
‘‘urgent,’’ which included firearms used
in criminal activities such as mass
shootings, homicides, bank robberies,
and other immediate threats to officer
and public safety.290 Tracing also allows
ATF to determine if there are straw
purchasing patterns or individuals
operating as straw purchasers. Straw
purchasers—individuals without a
criminal record who purchase firearms
for drug dealers, violent criminals, or
persons who are prohibited by law from
receiving firearms—are the lynchpin of
most firearms trafficking operations.291
Straw purchasers, often acquiring a
relatively small number of firearms in
each transaction, make it possible for
firearms traffickers to effectively
circumvent the background check and
287 ATF, National Firearms Commerce and
Trafficking Assessment (NFCTA): Crime Gun
Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the
United States and Its Territories 23 (Mar. 27, 2024),
https://www.atf.gov/firearms/docs/report/nfctavolume-ii-part-iii-crime-guns-recovered-and-tracedus/download.
288 Id. at 2.
289 ATF, Fact Sheet—eTrace: Internet-Based
Firearms Tracing and Analysis (Apr. 2023), https://
www.atf.gov/resource-center/fact-sheet/fact-sheetetrace-internet-based-firearms-tracing-and-analysis.
290 Id. at 1.
291 The BSCA amended the GCA to expressly
prohibit straw purchasing of firearms. See 18 U.S.C.
932.
E:\FR\FM\19APR3.SGM
19APR3
29084
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
recordkeeping requirements of Federal
law to get guns into the hands of
criminals. Straw purchasers may
acquire firearms directly for prohibited
persons or purchase them for other
middlemen on behalf of violent
criminals.
After a trace is conducted on a
recovered crime gun, ATF is able to
determine whether the purchaser was
also the possessor of the firearm when
it was used in a crime, or whether the
purchaser is different from the
possessor. Traces where the purchaser
and possessor are different provide
leads to help determine whether the
possessor or others in a trafficking
distribution network utilized one or
more straw purchasers to acquire
firearms. Table 14 shows the share of
traced guns attributed to these potential
purchaser and possessor relationships.
Table 14. Percentage of Traced Crime Guns by Purchaser and Possessor
Relationships, 2017 - 2021 292
12.20%
58.40%
29.40%
Purchaser and Possessor are the same
Purchaser and Possessor are different
Purchaser known, Possessor unknown
In Table 14 above, in most traces, the
purchaser of the traced crime gun was
different from the possessor or the
purchaser of the traced crime gun is
known but the possessor is unknown.
These two categories amount to a total
of 87.8 percent of successfully traced
crime guns.
Finally, the Department notes that,
when a firearm is recovered in a
criminal investigation and submitted for
tracing, transactions in which the
purchaser of the firearm was subject to
a background check tend to have a
longer time-to-crime. As stated in the
NFCTA, ‘‘a short [time-to-crime] can be
an indicator of illegal firearms
trafficking.’’ 293 A time-to-crime
recovery of three years or less is
generally considered a ‘‘short’’ time-tocrime,294 indicating that at time the
firearm was purchased, the purchase
was more likely to be associated with
firearm trafficking, straw-purchasing, or
other intended criminal use. Again, by
clarifying when a Federal firearms
license is required, the rule will
facilitate increased licensure of those
engaged in the business of dealing in
firearms. This, in turn, will result in
those newly licensed dealers conducting
more purchaser background checks,
which, the longer time-to-crime data
indicates, will deter violent felons,
traffickers, and other prohibited persons
from obtaining firearms from those
dealers.295 FFLs who have a large
number of traced firearms with short
time-to-crime statistics may undergo
more inspections, because certain FFL
practices might be making them more
susceptible to straw purchasing
activities.
The longer time-to-crime for
recovered crime guns in which the
purchaser was subject to a background
check is demonstrated by a review of
state laws and geographic recovery data
by city. Table 15 provides time-to-crime
statistics by State.
Table 15. Shortest Time-to-Crime States versus Longest Time-to-Crime States
Median TTC (Years)
1.6
2
2.1
2.2
2.2
State
Virginia
Michigan
Arizona
Missouri
Mississippi
State
Hawaii
Connecticut
New York
New Jersey
Marvland
Median TTC (Years)
7.5
5.9
5.7
5.3
5
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
293 ATF, National Firearms Commerce and
Trafficking Assessment (NFCTA): Crime Gun
Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the
United States and Its Territories 23 (Mar. 27, 2024),
https://www.atf.gov/firearms/docs/report/nfctavolume-ii-part-iii-crime-guns-recovered-and-tracedus/download.
PO 00000
Frm 00118
Fmt 4701
Sfmt 4700
294 See generally id. at 35 (A ‘‘[s]hort TTC
suggests that traced crime guns were rapidly
diverted from lawful firearms commerce into
criminal hands and represents a key indicator of
firearm trafficking. Between 2017 and 2021, half of
traced crime guns were purchased and recovered
within three years of the last known sale.’’).
295 See id. at 41.
E:\FR\FM\19APR3.SGM
19APR3
ER19AP24.084</GPH>
292 ATF, National Firearms Commerce and
Trafficking Assessment (NFCTA): Crime Gun
Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the
United States and Its Territories 26 (Mar. 27, 2024),
https://www.atf.gov/firearms/docs/report/nfctavolume-ii-part-iii-crime-guns-recovered-and-tracedus/download.
ER19AP24.083</GPH>
khammond on DSKJM1Z7X2PROD with RULES3
Table 16 provides time-to-crime
statistics by city of recovery.
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
29085
Table 16. Shortest Time-to-Crime Cities versus Longest Time-to-Crime Cities
City
Richmond, VA
Detroit, MI
Columbia, SC
Phoenix, AZ
Memphis, TN
Saint Louis, MO
1.5
1.6
1.7
1.8
1.9
1.9
As explained by one public
commenter, of the States and cities that
have shorter time-to-crime statistics,
only Virginia and Michigan also
currently require background checks for
all private party transactions.296 The
commenter further stated that all of the
States and cities with longer time-tocrime statistics already require
background checks for private party
transactions. Consistent with the
findings of the NFCTA, this data
suggests that background checks tend to
inhibit or otherwise deter prohibited
persons from purchasing firearms and
then subsequently using them in crime.
In addition to making more records of
transactions occurring on the secondary
market readily available for tracing
purposes, this rule—by increasing the
number of properly licensed dealers
who conduct background checks before
selling a firearm—also helps ensure that
prohibited persons are denied access to
firearms, as suggested above. Based on
FBI information, there were 131,865
prohibited persons in 2022 and 153,565
prohibited persons in 2021 who were
denied the ability to purchase a firearm
after a NICS background check.297 The
Department notes that these numbers
are under-reported since there are a
number of States that do not rely on the
FBI to perform their background checks.
Nonetheless, this data suggests that
requiring firearms to be sold on the
regulated market has a preventative
effect, as the process to obtain a firearm
sold on the regulated market can deter
khammond on DSKJM1Z7X2PROD with RULES3
296 According
to the commenter, which provided
information current as of 2022, the following States
require background checks for all private party
firearms transactions: CA, CO, CT, DC, DE, HI, IL,
MA, MD, MI, MN, NE, NJ, NM, NV, NY, OR, PA,
RI, VA, VT, WA. See https://www.regulations.gov/
comment/ATF-2023-0002-354412.
297 FBI, Crim. Just. Info. Servs. Div., National
Instant Criminal Background Check System 2022
Operational Report 32 (Nov. 2022), https://
www.fbi.gov/file-repository/nics-2022-operationsreport.pdf/view.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
City
NewYork,NY
Baltimore, MD
San Jose, CA
San Bernardino, CA
San Diego, CA
Los Angeles, CA
or prevent prohibited persons from
acquiring and possessing firearms.
The U.S. Sentencing Commission has
reported that ‘‘88.8 percent of firearm
offenders sentenced under § 2K2.1 298
[of the November 2021 United States
Sentencing Commission Guidelines
Manual] were [already] prohibited from
possessing a firearm’’ under 18 U.S.C.
922(g). These individuals would thus
have been flagged in a background
check, and therefore would have been
prohibited from buying a firearm from a
licensed dealer after their first offense.
As a result, they would not have been
able to commit the subsequent firearms
offense(s) with those firearms if the
seller had been licensed. In addition,
the U.S. Sentencing Commission
reported that firearms offenders
sentenced under section 2K2.1 ‘‘have
criminal histories that are more
extensive and more serious than other
offenders,’’ and that they are ‘‘more than
twice as likely to have a prior
conviction for a violent offense
compared to all other offenders.’’ 299
In another report on ‘‘armed career
criminals’’ (those who, at the time of
sentencing, have three or more prior
convictions for violent offenses, serious
drug offenses, or both), the Commission
found that a substantial share of such
‘‘armed career criminals’’ (83 percent in
fiscal year 2019) had prior convictions
for at least one violent offense, as
opposed to solely serious drug offense
convictions. This included ‘‘57.7
percent who had three or more [prior
violent] convictions.’’ 300 In other
298 Section 2K2.1 provides sentencing guidelines
for ‘‘Unlawful Receipt, Possession, or
Transportation of Firearms or Ammunition;
Prohibited Transactions Involving Firearms or
Ammunition.’’
299 U.S. Sent’g Comm’n, What Do Federal
Firearms Offenses Really Look Like? 2 (July 2022),
https://www.ussc.gov/sites/default/files/pdf/
research-and-publications/research-publications/
2022/20220714_Firearms.pdf.
300 U.S. Sent’g Comm’n, Federal Armed Career
Criminals: Prevalence, Patterns, and Pathways 9
(Mar. 2021), https://www.ussc.gov/sites/default/
PO 00000
Frm 00119
Fmt 4701
Sfmt 4700
Median TTC
(Years)
6.3
5.3
4.6
4.2
4.2
4.2
words, many persons who are
prohibited by law from possessing
firearms, including the more serious
‘‘armed career criminals,’’ were able to
obtain guns and continued to commit
more violent offenses after they would
have been flagged by a background
check and denied a firearm if
purchasing from a licensed dealer.
Such violence has a significant
adverse effect on public safety. By
increasing the number of licensed
dealers who are required to conduct
background checks on unlicensed
transferees, this rule helps prevent
firearms from being sold to felons or
other prohibited persons, who may then
use those firearms to commit crimes and
acts of violence, or themselves become
sources of firearms trafficking.
Furthermore, these licensed dealers
must also maintain firearms transaction
records, which will help with criminal
investigations and tracing firearms
subsequently used in crimes.
In 2016, ATF distributed and
discussed the above-mentioned
‘‘engaged in the business’’ guidance at
gun shows to ensure that unlicensed
dealers operating at gun shows became
licensed, and portions of that previous
guidance are incorporated in this rule.
The 2016 guidance was particularly
directed at encouraging unlicensed
persons who sell firearms for a
supplemental source of income to
continue selling firearms, but as
licensed dealers. Based on data from the
FFLC, ATF found that, within one year
after releasing the guidance, there was
an increase of approximately 567 Form
7 applications to account for unlicensed
persons selling at gun shows. This
previous experience demonstrates that,
when ATF clarified the licensing
requirements, some unlicensed market
participants immediately recognized the
need to obtain a license to avoid
enforcement action. Although the
files/pdf/research-and-publications/researchpublications/2021/20210303_ACCA-Report.pdf.
E:\FR\FM\19APR3.SGM
19APR3
ER19AP24.085</GPH>
Median TTC
(Years)
29086
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
guidance alone did not achieve the full
effects that would result from having
these requirements in a regulation, the
response illustrated that persons
engaged in the business of dealing in
firearms will comply with Federal
licensing requirements and that there
will be an increase in dealers as
awareness of those licensing
requirements increases. This both
enhances public safety by increasing
sellers’ ability to identify prohibited
persons and keep them from purchasing
firearms and increases the likelihood
that more prohibited persons will be
deterred from attempting to purchase
firearms.
Finally, providing a clear option for
FFLs to transfer their business inventory
to another FFL when their license is
terminated helps to ensure that these
business inventories of firearms are
traceable and do not become sources of
trafficked firearms.
8. Alternatives
In addition to the requirements
outlined in this rule, the Department
considered the following alternative
approaches:
Alternative 1. A rulemaking that
focuses on a bright-line numerical
threshold of what constitutes being
engaged in the business as a dealer in
firearms. As discussed above, in the
past, it has been proposed to the
Department that a rulemaking should
set a specific threshold or number of
sales per year to define ‘‘engaged in the
business.’’ The Department considered
this alternative in the past and again as
part of developing this rulemaking.
However, the Department chose not to
adopt this alternative for a number of
reasons stated in detail above.301 In
summary: courts have held even before
the passage of the BSCA that the sale or
attempted sale of even one firearm is
sufficient to show that a person is
‘‘engaged in the business’’ if that person
represents to others that they are willing
and able to purchase more firearms for
resale; a person could structure their
transactions to avoid the minimum
threshold by spreading out sales over
time; and firearms could be sold by
unlicensed persons below the threshold
number without records, making those
firearms unable to be traced when they
are subsequently used in a crime.
Finally, at this time, the Department
does not believe there is a sufficient
evidentiary basis to support setting a
specific minimum number of firearms
301 The relevant discussion is set forth in Section
II.A, ‘‘Advance Notice of Proposed Rulemaking
(1979),’’ and in more detail in Section III.D,
‘‘Presumptions that a Person is ‘Engaged in the
Business,’ ’’ of this preamble.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
bought or sold that, without
consideration of additional factors,
would establish that a person is
‘‘engaged in the business.’’
The Department believes replacing
this rule with a simple numerical
threshold would not appropriately
address the statutory language regarding
the requisite intent predominantly to
earn a profit and would have
unintended effects, such as those
summarized in the previous paragraph,
which would impact personal firearms
transactions and decrease public safety
and law enforcement’s ability to trace
firearms used in crimes.
Alternative 2. Publishing guidance
instead of revising the regulations.
Under this alternative, rather than
publishing regulations further defining
‘‘engaged in the business,’’ the
Department would publish only
guidance documents to clarify the topics
included in this rule. Although the
Department has determined that it will
also update existing guidance
documents to answer any questions that
the firearms industry may have, the
Department has also determined that
issuing only guidance would be
insufficient to address the issues
discussed above. A regulation is much
more effective at achieving compliance
with the GCA, as amended by the BSCA,
than guidance, which is both voluntary
and distributed by ATF at gun shows or
other venues when the agency is
present, or found online if people search
for it. People recognize that a regulation
sets the requirements they must follow
and affects all those participating in the
topic area, and they also know where to
look for a regulation. Now that the
BSCA has redefined the term ‘‘engaged
in the business,’’ there is even more of
a need to ensure that unlicensed people
who meet the definition of that term
understand that they are violating the
law if they do not obtain a license. And
if the Department does not update its
regulations, they would not accurately
reflect the statutory text and would thus
create confusion.
As a result, the Department did not
select the alternative to publish only
guidance documents in lieu of
regulations. Guidance alone would be
insufficient as a means to inform the
public in general, rather than solely the
currently regulated community; it
would not have the same reach and
attention as a regulation; it would not
benefit from the input of public review
and comment to aid in accounting for
possible unintended impacts or
interpretations; and it would not be able
to change existing regulatory provisions
on the subject of ‘‘engaged in the
business’’ or impact intersecting
PO 00000
Frm 00120
Fmt 4701
Sfmt 4700
regulatory provisions. In addition, the
Department can incorporate existing
guidance in a rule based on its
experience or in response to comments.
When an agency establishes or revises
requirements that were previously
established pursuant to a rulemaking
process, it must do so through a
regulation issued in compliance with
the requirements of the Administrative
Procedure Act and certain executive
orders. Guidance does not meet these
requirements. Therefore, although the
Department considered this alternative,
it determined it was not in the best
interest of the public.
Alternative 3. No action. Rather than
promulgating a regulation, the
Department could instead take no action
to further clarify the BSCA’s
amendments to the GCA. However, the
Department considered this alternative
and decided against it for a number of
reasons. First, Congress, through the
BSCA, determined that there was a need
to revise the definition of ‘‘engaged in
the business’’ for the first time in almost
40 years. While that by itself does not
preclude the Department from using its
discretion not to promulgate a formal
rule, it indicates an important change to
the landscape of who must have a
license to deal in firearms and warrants
consideration of what that means to
persons who have been operating under
the previous definition. It has potential
effects on those who have not
considered themselves to fall under the
definition before but now would need to
obtain a license. The change to the
definition removed any consideration of
an individual’s intent to obtain
‘‘livelihood’’ from the ‘‘engaged in the
business’’ analysis, and it is reasonable
to expect that those who transact in
firearms have questions about how to
interpret and apply this change. This
includes how it affects other aspects of
existing laws and regulatory provisions
that govern such transactions, as well as
how other BSCA amendments, such as
the new international trafficking
provisions, might apply to the dealer
requirements. For these reasons, the
Department determined that taking no
action was not a viable alternative.
Second, as the various enforcement
actions and court decisions cited above
demonstrate, ATF observed a significant
level of noncompliance with the GCA’s
licensing requirements even prior to the
BSCA. And third, on March 14, 2023,
President Biden issued Executive Order
14092, requiring the Attorney General to
report on agency efforts to implement
the BSCA, develop and implement a
plan to clarify the definition of who is
engaged in the business of dealing in
firearms, ‘‘including by considering a
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
rulemaking,’’ and prevent former FFLs
whose licenses have been revoked or
surrendered from continuing to engage
in the business of dealing in firearms.302
The alternative of taking no action
would not generate direct monetary
costs because it would leave the
regulatory situation as it is. Because the
costs and benefits of this alternative
arise from the statute itself, the
Department did not include an
assessment of them in this rulemaking.
B. Executive Order 13132 (Federalism)
This regulation will not have
substantial direct effects on the States,
the relationship between the Federal
Government and the States, or the
distribution of power and
responsibilities among the various
levels of government. Therefore, in
accordance with section 6 of Executive
Order 13132 (Federalism), the Attorney
General has determined that this
regulation does not have sufficient
federalism implications to warrant the
preparation of a federalism summary
impact statement.
khammond on DSKJM1Z7X2PROD with RULES3
C. Executive Order 12988 (Civil Justice
Reform)
This regulation meets the applicable
standards set forth in sections 3(a) and
3(b)(2) of Executive Order 12988 (Civil
Justice Reform).
D. Regulatory Flexibility Act
The Regulatory Flexibility Act
(‘‘RFA’’) establishes as a principle of
regulatory issuance that agencies shall
endeavor, consistent with the objectives
of the rule and of applicable statutes, to
fit regulatory and informational
requirements to the scale of the
businesses, organizations, and
governmental jurisdictions subject to
regulation. To achieve this principle,
agencies are required to solicit and
consider flexible regulatory proposals
and to explain the rationale for their
actions to assure that such proposals are
given serious consideration. Public Law
96–354, section 2(b), 94 Stat. 1164
(1980).
Under the RFA, the agency is required
to consider whether this rule will have
a significant economic impact on a
substantial number of small entities.
Agencies must perform a review to
determine whether a rule will have such
an impact. If the agency determines that
it will, the agency must prepare a
regulatory flexibility analysis as
described in the RFA.
Pursuant to 5 U.S.C. 604(a), the final
regulatory flexibility analysis must
contain:
302 88
FR 16528.
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
• A statement of the need for, and
objectives of, the rule;
• A statement of the significant issues
raised by the public comments in
response to the initial regulatory
flexibility analysis, a statement of the
assessment of the agency of such issues,
and a statement of any changes made in
the proposed rule as a result of such
comments;
• The response of the agency to any
comments filed by the Chief Counsel for
Advocacy of the SBA in response to the
proposed rule, and a detailed statement
of any change made to the proposed rule
in the final rule as a result of the
comments;
• A description of and an estimate of
the number of small entities to which
the rule will apply or an explanation of
why no such estimate is available;
• A description of the projected
reporting, recordkeeping, and other
compliance requirements of the rule,
including an estimate of the classes of
small entities that will be subject to the
requirement and the type of professional
skills necessary for preparation of the
report or record; and
• A description of the steps the
agency has taken to minimize the
significant economic impact on small
entities consistent with the stated
objectives of applicable statutes,
including a statement of the factual,
policy, and legal reasons for selecting
the alternative adopted in the final rule
and why each one of the other
significant alternatives to the rule
considered by the agency that affect the
impact on small entities was rejected.
The RFA covers a wide range of small
entities. The term ‘‘small entities’’
comprises small businesses, not-forprofit organizations that are
independently owned and operated and
are not dominant in their fields, and
governmental jurisdictions with
populations of less than 50,000. 5 U.S.C.
601(3)–(6). The Department determined
that the rule affects a variety of
currently unlicensed persons engaged in
the business of selling firearms, and
assumed that all of these sellers would
become small businesses upon the
licensure required by this rule (see the
section below titled ‘‘A description of
and an estimate of the number of small
entities to which the rule will apply or
an explanation of why no such estimate
is available’’). Based on the
requirements above, the Department
prepared the following regulatory
flexibility analysis assessing the impact
on small entities from the rule.
A statement of the need for, and
objectives of, the rule.
See Section VI.A.1 of this preamble
for discussion on the need for this
PO 00000
Frm 00121
Fmt 4701
Sfmt 4700
29087
regulation and the objectives of this
rule.
A statement of the significant issues
raised by the public comments in
response to the initial regulatory
flexibility analysis, a statement of the
assessment of the agency of such issues,
and a statement of any changes made in
the proposed rule as a result of such
comments.
See Section IV.D.13 of this preamble
for public comments regarding the RFA.
Responses to those public comments are
included with each topic.
The response of the agency to any
comments filed by the Chief Counsel for
Advocacy of the SBA in response to the
proposed rule, and a detailed statement
of any change made to the proposed rule
in the final rule as a result of the
comments.
There were no comments filed by the
Chief Counsel for Advocacy of the SBA
in response to the proposed rule.
Therefore, no changes were made in the
final rule as a result of such comments.
A description of and an estimate of
the number of small entities to which
the rule will apply or an explanation of
why no such estimate is available.
Persons affected by this rule are not
currently considered small businesses
or small entities but will become small
businesses upon implementation of this
rule if they obtain licenses and continue
selling firearms as dealers. However, the
Department assumes that, should an
individual be considered ‘‘engaged in
the business’’ due to factors related to
their sale of firearms and not simply to
enhance their personal collection, there
may be an impact on their revenue. Due
to limitations on data, the Department is
unable to determine the extent to which
the licensing costs will impact their
firearms sales revenue. As discussed in
the primary analysis (Section VI.A.2 of
this preamble), the Department
estimated 10 percent of those affected
by this rule would cease dealing in
firearms for various reasons. To the
extent such individuals are currently
functioning as small businesses, even
though not licensed, this could be
deemed to represent an adverse
regulatory impact on small businesses
and their ability to operate as dealers.
A description of the projected
reporting, recordkeeping and other
compliance requirements of the rule,
including an estimate of the classes of
small entities which will be subject to
the requirement and the type of
professional skills necessary for
preparation of the report or record.
Persons affected by this rule will need
to apply for a license using Form 7,
undergo an initial inspection, undergo
background checks, maintain Form 4473
E:\FR\FM\19APR3.SGM
19APR3
29088
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
records of firearms transactions, and
periodically undergo a compliance
inspection. No professional skills are
required to fulfill these tasks.
A description of the steps the agency
has taken to minimize the significant
economic impact on small entities
consistent with the stated objectives of
applicable statutes, including a
statement of the factual, policy, and
legal reasons for selecting the alternative
adopted in the final rule and why each
one of the other significant alternatives
to the rule considered by the agency
which affect the impact on small
entities was rejected.
See Sections IV.D.13 and VI.A.8 of
this preamble. No separate distinction
was made in alternatives for small
businesses, specifically, because the
Department determined that all
unlicensed sellers affected by this rule
will become small businesses once they
are licensed.
E. Small Business Regulatory
Enforcement Fairness Act of 1996
This rule is likely to have a significant
economic impact on a substantial
number of small entities under SBREFA,
5 U.S.C. 601 et seq. Accordingly, the
Department prepared an initial
regulatory flexibility analysis for the
proposed rule and prepared an FRFA for
the final rule. 5 U.S.C. 603–04.
Furthermore, a small business
compliance guide will be published as
required by SBREFA.
khammond on DSKJM1Z7X2PROD with RULES3
F. Congressional Review Act
Pursuant to the Congressional Review
Act, 5 U.S.C. 801 et seq., OMB’s Office
of Information and Regulatory Affairs
has determined this rule does not meet
the criteria in 5 U.S.C. 804(2). This rule
will not result in an annual effect on the
economy of $100 million or more; a
major increase in costs or prices; or
significant adverse effects on
competition, employment, investment,
productivity, innovation, or on the
ability of United States-based
enterprises to compete with foreignbased enterprises in domestic and
export markets. While there may be
impacts on employment, investment,
productivity, or innovation, these
impacts will not have a significant
impact on the overall economy.
G. Unfunded Mandates Reform Act of
1995
This rule would not result in the
expenditure by State, local, and Tribal
governments, in the aggregate, or by the
private sector, of $100 million or more
in any one year, and it will not
significantly or uniquely affect small
governments. Twenty-two States already
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
require background checks for private
party sales, and of the 28 States that do
not, only three states (Florida,
Tennessee, and Utah) do not rely on
Federal law enforcement for their
background checks. While these three
States may be affected by this rule to the
extent they have to conduct increased
background checks, the Department did
not determine that this rule will have an
impact of $100 million or more in any
year to any of these States. Therefore, no
actions were deemed necessary under
the provisions of the Unfunded
Mandates Reform Act of 1995, Public
Law 104–4, 109 Stat. 48.
H. Paperwork Reduction Act of 1995
Under the Paperwork Reduction Act
of 1995 (‘‘PRA’’), 44 U.S.C. 3501–21,
agencies are required to submit to OMB,
for review and approval, any reporting
requirements inherent in a rule. The
collections of information contained in
this rule are collections of information
which have been reviewed and
approved by OMB in accordance with
the requirements of the PRA and have
been assigned an OMB Control Number.
As defined in 5 CFR 1320.3(c),
‘‘collection of information’’ comprises
reporting, recordkeeping, monitoring,
posting, labeling, and other similar
requirements. The collections of
information in this rule are mandatory.
The title and description of each
information collection, a description of
those who must collect the information,
and an estimate of the total annual
burden follow. The estimate covers the
time for reviewing instructions,
searching existing sources of data,
gathering and maintaining the data
needed, and completing and reviewing
the collection.
Title: Application for a Federal
Firearms License—ATF Form
7(5310.12)/7CR (5310.16).
OMB Control Number: OMB 1140–
0018.
Summary of the Collection of
Information: 18 U.S.C. 922 specifies a
number of unlawful activities involving
firearms in interstate and foreign
commerce. Some of these activities are
not unlawful if the persons taking the
actions are licensed under the
provisions of section 923. Some
examples of activities that are not
unlawful if a person has a license
include: engaging in the business of
dealing, shipping, receiving, and
transporting firearms in interstate or
foreign commerce, including the
acquisition of curio or relic firearms
acquired by collectors from out-of-State
for personal collections. This collection
of information is necessary to ensure
that anyone who wishes to be licensed
PO 00000
Frm 00122
Fmt 4701
Sfmt 4700
as required by section 923 meets the
requirements to obtain the desired
license.
Need for Information: Less frequent
collection of this information would
pose a threat to public safety. Without
this information collection, ATF would
not be able to issue licenses to persons
required by law to have a license to
engage in the business of dealing in
firearms or shipping or transporting
firearms in interstate or foreign
commerce in support of that business,
or acquire curio and relic firearms from
out of State.
Proposed Use of Information: ATF
personnel will analyze the submitted
application to determine the applicant’s
eligibility to receive the requested
license.
Description of the Respondents:
Individuals or entities wishing to engage
in the business of dealing, shipping,
receiving, and transporting firearms in
interstate or foreign commerce, as well
as acquiring firearms classified as curios
and relics for personal collections.
Number of Respondents: 13,000
existing. New respondents due to the
rule: 24,540.
Frequency of Response: one time.
Burden of Response: one hour.
Estimate of Total Annual Burden:
24,540 hours (incremental change).
Title: Application for a Federal
Firearms License—Renewal Application
ATF Form 8 (5310.11).
OMB Control Number: OMB 1140–
0019.
Summary of the Collection of
Information: 18 U.S.C. chapter 44
provides that no person may engage in
the business of importing,
manufacturing, or dealing in either
firearms, or ammunition, without first
obtaining a license to do so. These
activities are licensed for a specific
period. The benefit of a collector’s
license is also provided for in the
statute. In order to continue to engage in
the aforementioned firearms activities
without interruption, licensees must
renew their FFL by filing Federal
Firearms License (‘‘FFL’’) RENEWAL
Application-ATF Form 8 (5310.11) Part
II, prior to its expiration.
Need for Information: Less frequent
use of this information collection would
pose a threat to public safety, since the
collected information helps ATF to
ensure that the applicants remain
eligible to renew their licenses.
Proposed Use of Information: ATF
Form 8 (5310.11) Part II, is used to
identify the applicant and determine
their eligibility to retain the license.
Description of the Respondents:
Respondents desiring to update the
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
responsible person (RP) information on
an existing license must submit a letter
in this regard, along with the completed
FFL renewal application to ATF.
Number of Respondents: 34,000
existing. New respondents due to the
rule: 24,540.
Frequency of Response: every three
years and periodically.
Burden of Response: 0.5 hours.
Estimate of Total Annual Burden:
12,270 hours (incremental change).
Title: Firearms Transaction Record—
ATF Form 4473 (5300.9) and Firearms
Transaction Record Continuation Sheet.
OMB Control Number: OMB 1140–
0020.
Summary of the Collection of
Information: The subject form is
required under the authority of 18
U.S.C. 922 and 923 and 27 CFR 478.124.
These sections of the GCA prohibit
certain persons from shipping,
transporting, receiving, or possessing
firearms. All persons, including FFLs,
are prohibited from transferring firearms
to such persons. FFLs are also subject to
additional restrictions regarding the
disposition of a firearm to an unlicensed
person under the GCA. For example, age
and State of residence also determine
whether a person may lawfully receive
a firearm. The information and
certification on the Form 4473 are
designed so that a person licensed
under 18 U.S.C. 923 may determine if
the licensee may lawfully sell or deliver
a firearm to the person identified in
section B of the Form 4473, and to alert
the transferee/buyer of certain
restrictions on the receipt and
possession of firearms. The Form 4473
should only be used for sales or
transfers of firearms where the seller is
licensed under 18 U.S.C. 923. The seller
of a firearm must determine the
lawfulness of the transaction and
maintain proper records of the
transaction.
Need for Information: The
consequences of not conducting this
collection of information, or conducting
it less frequently, are that the licensee
might transfer a firearm to a person who
is prohibited from possessing firearms
under Federal law. The collection of
this information is necessary for
compliance with the statutory
requirements to verify the eligibility of
a person receiving or possessing
firearms under the GCA. There is no
discretionary authority on the part of
ATF to waive these requirements.
Respondents are required to supply this
information as often as necessary to
comply with statutory provisions. The
form is critical to the prevention of
criminal diversion of firearms and
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
enhances law enforcement’s ability to
trace firearms that are recovered in
crimes.
Proposed Use of Information: A
person purchasing a firearm from an
FFL must complete section B of the
Form 4473. The buyer’s answers to the
questions determine if the potential
transferee is eligible to receive the
firearm. If those answers indicate that
the buyer is not prohibited from
receiving a firearm, the licensee
completes section C of the Form 4473
and contacts the NICS or the State point
of contact to determine if the firearm
can legally be transferred to the
purchaser.
Description of the Respondents:
Unlicensed persons wishing to purchase
a firearm.
Number of Respondents: 17,189,101
existing. New respondents due to the
rule: 24,540.
Frequency of Response: periodically.
Burden of Response: 0.5 hours.
Estimate of Total Annual Burden:
12,270 hours (incremental change).
Title: Records of Acquisition and
Disposition, Dealers of Type 01/02
Firearms, and Collectors of Type 03
Firearms [Records of Acquisition and
Disposition, Collectors of Firearms].
OMB Control Number: OMB 1140–
0032.
Summary of the Collection of
Information: The recordkeeping
requirements as authorized by the GCA,
18 U.S.C. 923, are for the purpose of
allowing ATF to inquire into the
disposition of any firearm received by a
licensee in the course of a criminal
investigation.
Need for Information: Less frequent
collection of this information would
pose a threat to public safety as the
information is routinely used to assist
law enforcement by allowing them to
trace firearms in criminal investigations.
Proposed Use of Information: This
collection of information grants ATF
officers the authority to examine a
collector’s records for firearms traces or
compliance inspections, per 27 CFR
478.23(c)(1), (2).
Description of the Respondents:
Federal Firearms Licensees.
Number of Respondents: 60,790
existing. New respondents due to the
rule: 24,540.
Frequency of Response: annually
recurring.
Burden of Response: three minutes to
maintain A&D records and one hour to
perform an inspection.
Estimate of Total Annual Burden:
24,540 hours in inspection time
(incremental change) and 3,681 hours
maintaining A&D records (incremental
change).
PO 00000
Frm 00123
Fmt 4701
Sfmt 4700
29089
ATF asks for public comment on the
proposed collection of information to
help determine how useful the
information is; whether the public can
help perform ATF’s functions better;
whether the information is readily
available elsewhere; how accurate
ATF’s estimate of the burden of
collection is; how valid the methods for
determining burden are; how to improve
the quality, usefulness, and clarity of
the information; and how to minimize
the burden of collection.
If you submit comments on the
collection of information, submit them
following the ‘‘Public Participation’’
section under the SUPPLEMENTARY
INFORMATION heading. You need not
respond to a collection of information
unless it displays a currently valid
control number from OMB. Before the
requirements for this collection of
information become effective, ATF will
publish a notice in the Federal Register
of OMB’s decision to approve, modify,
or disapprove the proposed collection.
Disclosure
Copies of the proposed rule, the
comments received in response to it,
and this final rule are available through
the Federal eRulemaking portal, at
www.regulations.gov (search for RIN
1140–58), and for public inspection by
appointment during normal business
hours at: ATF Reading Room, Room 1E–
063, 99 New York Ave. NE, Washington,
DC 20226; telephone: (202) 648–8740.
List of Subjects in 27 CFR Part 478
Administrative practice and
procedure, Arms and munitions,
Exports, Freight, Imports,
Intergovernmental relations, Law
enforcement officers, Military
personnel, Penalties, Reporting and
recordkeeping requirements, Research,
Seizures and forfeitures, Transportation.
Authority and Issuance
For the reasons discussed in the
preamble, the Department amends 27
CFR part 478 as follows:
PART 478—COMMERCE IN FIREARMS
AND AMMUNITION
1. The authority citation for 27 CFR
part 478 continues to read as follows:
■
Authority: 5 U.S.C. 552(a); 18 U.S.C. 847,
921–931; 44 U.S.C. 3504(h).
2. Amend § 478.11 by:
a. Revising the definition of ‘‘Dealer’’;
b. In the definition of ‘‘Engaged in the
business’’:
■ i. Redesignating paragraphs (a)
through (f) as paragraphs (1) through (6);
■ ii. Revising newly redesignated
paragraph (3); and
■
■
■
E:\FR\FM\19APR3.SGM
19APR3
29090
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
iii. Adding paragraph (7);
c. Adding definitions of ‘‘Former
licensee inventory’’, ‘‘Personal
collection (or personal collection of
firearms, or personal firearms
collection)’’, and ‘‘Predominantly earn a
profit’’ in alphabetical order;
■ d. Revising the definition of
‘‘Principal objective of livelihood and
profit’’; and
■ e. Adding definitions of ‘‘Responsible
person’’ and ‘‘Terrorism’’ in
alphabetical order.
The revisions and additions read as
follows:
■
■
§ 478.11
Meaning of terms.
khammond on DSKJM1Z7X2PROD with RULES3
*
*
*
*
*
Dealer. Any person engaged in the
business of selling firearms at wholesale
or retail; any person engaged in the
business of repairing firearms or of
making or fitting special barrels, stocks,
or trigger mechanisms to firearms; or
any person who is a pawnbroker. The
term shall include any person who
engages in such business or occupation
on a part-time basis. The term shall
include such activities wherever, or
through whatever medium, they are
conducted, such as at a gun show or
event, flea market, auction house, or gun
range or club; at one’s home; by mail
order; over the internet (e.g., online
broker or auction); through the use of
other electronic means (e.g., text
messaging service, social media raffle,
or website); or at any other domestic or
international public or private
marketplace or premises.
*
*
*
*
*
Engaged in the business—* * *
(3) Dealer in firearms other than a
gunsmith or a pawnbroker. The term
‘‘engaged in the business as a dealer in
firearms other than a gunsmith or a
pawnbroker’’ shall have the same
meaning as in § 478.13.
*
*
*
*
*
(7) Related definitions. For purposes
of this definition—
(i) The term ‘‘purchase’’ (and
derivative terms thereof) means the act
of obtaining a firearm in an agreed
exchange for something of value;
(ii) The term ‘‘sale’’ (and derivative
terms thereof) means the act of
disposing of a firearm in an agreed
exchange for something of value, and
the term ‘‘resale’’ means selling a
firearm, including a stolen firearm, after
it was previously sold by the original
manufacturer or any other person; and
(iii) The term ‘‘something of value’’
includes money, credit, personal
property (e.g., another firearm or
ammunition), a service, a controlled
substance, or any other medium of
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
exchange or valuable consideration,
legal or illegal.
*
*
*
*
*
Former licensee inventory. Firearms
that were in the business inventory of a
licensee at the time the license was
terminated. Such firearms differ from a
personal collection and other personal
firearms in that they were purchased
repetitively before the license was
terminated as part of a licensee’s
business inventory with the
predominant intent to earn a profit.
*
*
*
*
*
Personal collection (or personal
collection of firearms, or personal
firearms collection)—(1) General
definition. Personal firearms that a
person accumulates for study,
comparison, exhibition (e.g., collecting
curios or relics, or collecting unique
firearms to exhibit at gun club events),
or for a hobby (e.g., noncommercial,
recreational activities for personal
enjoyment, such as hunting, skeet,
target, or competition shooting,
historical re-enactment, or
noncommercial firearms safety
instruction). The term shall not include
any firearm purchased for the purpose
of resale with the predominant intent to
earn a profit (e.g., primarily for a
commercial purpose or financial gain, as
distinguished from personal firearms a
person accumulates for study,
comparison, exhibition, or for a hobby,
but which the person may also intend
to increase in value). In addition, the
term shall not include firearms
accumulated primarily for personal
protection: Provided, that nothing in
this definition shall be construed as
precluding a person from lawfully
acquiring firearms for self-protection or
other lawful personal use.
(2) Personal collection of licensee. In
the case of a firearm imported,
manufactured, or otherwise acquired by
a licensed manufacturer, licensed
importer, or licensed dealer, the term
shall include only a firearm described in
paragraph (1) of this definition that
was—
(i) Acquired or transferred without the
intent to willfully evade the restrictions
placed upon licensees under 18 U.S.C.
chapter 44;
(ii) Recorded by the licensee as an
acquisition in the licensee’s acquisition
and disposition record in accordance
with § 478.122(a), § 478.123(a), or
§ 478.125(e) (unless acquired prior to
licensure and not intended for sale);
(iii) Recorded as a disposition from
the licensee’s business inventory to the
licensee’s personal collection or
otherwise as a personal firearm in
accordance with § 478.122(a),
PO 00000
Frm 00124
Fmt 4701
Sfmt 4700
§ 478.123(a), or § 478.125(e) (unless
acquired prior to licensure and not
intended for sale);
(iv) Maintained in such personal
collection or otherwise as a personal
firearm (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; and
(v) Stored separately from, and not
commingled with the business
inventory. When stored or displayed on
the business premises, the personal
collection and other personal firearms
shall be appropriately identified as ‘‘not
for sale’’ (e.g., by attaching a tag).
*
*
*
*
*
Predominantly earn a profit. The term
‘‘predominantly earn a profit’’ shall
have the same meaning as in § 478.13.
Principal objective of livelihood and
profit. 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: Provided,
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.
*
*
*
*
*
Responsible person. Any 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.
*
*
*
*
*
Terrorism. For purposes of the
definitions ‘‘predominantly earn a
profit’’ and ‘‘principal objective of
livelihood and profit,’’ the term
‘‘terrorism’’ means activity, directed
against United States persons, which—
(1) Is committed by an individual who
is not a national or permanent resident
alien of the United States;
(2) Involves violent acts or acts
dangerous to human life which would
be a criminal violation if committed
within the jurisdiction of the United
States; and
(3) Is intended—
(i) To intimidate or coerce a civilian
population;
(ii) To influence the policy of a
government by intimidation or coercion;
or
(iii) To affect the conduct of a
government by assassination or
kidnapping.
*
*
*
*
*
■ 3. Add § 478.13 to subpart B to read
as follows:
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
§478.13 Definition of ‘‘engaged in the
business as a dealer in firearms other than
a gunsmith or a pawnbroker.’’
(a) Definition. 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. The term shall not
include 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 the person’s
personal collection of firearms. In
addition, the term shall not include an
auctioneer who provides only auction
services on commission to assist in
liquidating firearms at an estate-type
auction; provided, that the auctioneer
does not purchase the firearms, or take
possession of the firearms for sale on
consignment.
(b) Fact-specific inquiry. Whether a
person is engaged in the business as a
dealer under paragraph (a) of this
section is a fact-specific inquiry. Selling
large numbers of firearms or engaging or
offering to engage in frequent
transactions may be highly indicative of
business activity. However, there is no
minimum threshold number of firearms
purchased or sold 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. For example, even a single
firearm transaction or offer to engage in
a transaction, when combined with
other evidence (e.g., where a person
represents to others a willingness and
ability to purchase more firearms for
resale), may require a license; whereas,
a single isolated firearm transaction
without such evidence would not
require a license. At all times, the
determination of whether a person is
engaged in the business of dealing in
firearms is based on the totality of the
circumstances.
(c) Presumptions that a person is
engaged in the business as a dealer. In
civil and administrative proceedings, a
person shall be presumed to be engaged
in the business of dealing in firearms as
defined in paragraph (a) of this section,
absent reliable evidence to the contrary,
when it is shown that the person—
(1) Resells or offers for resale firearms,
and also represents to potential buyers
or otherwise demonstrates a willingness
and ability to purchase and resell
additional firearms (i.e., to be a source
of additional firearms for resale);
(2) Repetitively purchases for the
purpose of resale, or repetitively resells
or offers for resale, firearms—
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
(i) Through straw or sham businesses,
or individual straw purchasers or
sellers; or
(ii) That cannot lawfully be
purchased, received, or possessed under
Federal, State, local, or Tribal law,
including:
(A) Stolen firearms (e.g., 18 U.S.C.
922(j));
(B) Firearms with the licensee’s serial
number removed, obliterated, or altered,
or not identified as required by law (e.g.,
18 U.S.C. 922(k) or 26 U.S.C. 5861(i));
(C) Firearms imported in violation of
law (e.g., 18 U.S.C. 922(l), 22 U.S.C.
2778, or 26 U.S.C. 5844, 5861(k)); or
(D) Machineguns or other weapons
defined as firearms under 26 U.S.C.
5845(b) that cannot lawfully be
possessed (e.g., 18 U.S.C. 922(o); 26
U.S.C. 5861(d));
(3) Repetitively resells or offers for
resale firearms—
(i) Within 30 days after the person
purchased the firearms; or
(ii) Within one year after the person
purchased the firearms if they are—
(A) New, or like new in their original
packaging; or
(B) The same make and model, or
variants thereof;
(4) As a former licensee (or
responsible person acting on behalf of
the former licensee), resells or offers for
resale to a person (other than a licensee
in accordance with § 478.57 or § 478.78)
firearms that were in the business
inventory of the former licensee at the
time the license was terminated (i.e.,
license revocation, denial of license
renewal, license expiration, or surrender
of license), whether or not such firearms
were transferred to a responsible person
of the former licensee after the license
was terminated in accordance with
§ 478.57(b)(2) or § 478.78(b)(2); or
(5) As a former licensee (or
responsible person acting on behalf of
the former licensee), resells or offers for
resale firearms that were transferred to
the licensee’s personal collection or
otherwise as personal firearms in
accordance with 18 U.S.C. 923(c) and 27
CFR 478.125a(a) prior to the time the
license was terminated, unless:
(i) The firearms were received and
transferred without any intent to
willfully evade the restrictions placed
on licensees by 18 U.S.C. chapter 44;
and
(ii) One year has passed from the date
of transfer to the licensee’s personal
collection or otherwise as personal
firearms.
(d) Predominantly earn a profit—(1)
Definition. The intent underlying the
sale or disposition of firearms is
predominantly one of obtaining
pecuniary gain, as opposed to other
PO 00000
Frm 00125
Fmt 4701
Sfmt 4700
29091
intents, such as improving or
liquidating a personal firearms
collection: Provided, that proof of profit,
including the intent to 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. For purposes of
this section, a person may have the
intent to profit even if the person does
not actually obtain the intended
pecuniary gain from the sale or
disposition of firearms.
(2) Presumptions that a person has
intent to predominantly earn a profit. In
civil and administrative proceedings, a
person shall be presumed to have the
intent to predominantly earn a profit
through the repetitive purchase and
resale of firearms as defined in
paragraph (d)(1) of this section, absent
reliable evidence to the contrary, when
it is shown that the person—
(i) Repetitively or continuously
advertises, markets, or otherwise
promotes a firearms business (e.g.,
advertises or posts firearms for resale,
including through the internet or other
digital means, establishes a website to
offer their firearms for resale, makes
available business cards, or tags firearms
with sales prices), regardless of whether
the person incurs expenses or only
promotes the business informally;
(ii) Repetitively or continuously
purchases, rents, or otherwise
exchanges (directly or indirectly)
something of value to secure permanent
or temporary physical space to display
firearms they offer for resale, including
part or all of a business premises, a table
or space at a gun show, or a display
case;
(iii) Makes and maintains records to
document, track, or calculate profits and
losses from firearms repetitively
purchased for resale;
(iv) Purchases or otherwise secures
merchant services as a business (e.g.,
credit card transaction services, digital
wallet for business) through which the
person intends to repetitively accept
payments for firearms transactions;
(v) Formally or informally purchases,
hires, or otherwise secures business
security services (e.g., a central stationmonitored security system registered to
a business, or guards for security) to
protect firearms assets and repetitive
firearms transactions;
(vi) 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,
repetitive firearms transactions; or
(vii) Secures or applies for a State or
local business license to purchase for
E:\FR\FM\19APR3.SGM
19APR3
khammond on DSKJM1Z7X2PROD with RULES3
29092
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
resale or to resell merchandise that
includes firearms.
(e) Conduct that does not support a
presumption. A person shall not be
presumed to be engaged in the business
of dealing in firearms when reliable
evidence shows that the person is only
reselling or otherwise transferring
firearms—
(1) As bona fide gifts;
(2) Occasionally to obtain more
valuable, desirable, or useful firearms
for the person’s personal collection;
(3) Occasionally to a licensee or to a
family member for lawful purposes;
(4) To liquidate (without restocking)
all or part of the person’s personal
collection; or
(5) To liquidate firearms—
(i) That are inherited; or
(ii) Pursuant to a court order; or
(6) To assist in liquidating firearms as
an auctioneer when providing auction
services on commission at an estate-type
auction.
(f) Rebuttal evidence. Reliable
evidence of the conduct set forth in
paragraph (e) of this section may be
used to rebut any presumption in
paragraph (c) or (d)(2) of this section
that a person is engaged in the business
of dealing in firearms, or intends to
predominantly earn a profit through the
repetitive purchase and resale of
firearms.
(g) Presumptions, conduct, and
rebuttal evidence not exhaustive. The
activities set forth in the rebuttable
presumptions in paragraphs (c) and
(d)(2) of this section, and the activities
and rebuttal evidence set forth in
paragraphs (e) and (f) of this section, are
not exhaustive of the conduct or
evidence that may be considered in
determining whether a person is
engaged in the business of dealing in
firearms, or has the intent to
predominantly earn a profit through the
repetitive purchase and resale of
firearms.
(h) Criminal proceedings. The
rebuttable presumptions in paragraphs
(c) and (d)(2) of this section shall not
apply to any criminal case, although
they may be useful to courts in criminal
cases, for example, when instructing
juries regarding permissible inferences.
■ 4. Amend § 478.57 by designating the
undesignated paragraph as paragraph (a)
and adding paragraphs (b) through (d) to
read as follows:
§478.57
Discontinuance of business.
*
*
*
*
*
(b) Upon termination of a license (i.e.,
license revocation, denial of license
renewal, license expiration, or surrender
of license), the former licensee shall
within 30 days, or such additional
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
period approved by the Director for
good cause, either:
(1) Liquidate the former licensee
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
this part; or
(2) Transfer the former licensee
inventory to a responsible person of the
former licensee to whom the receipt,
possession, sale, or other disposition is
not prohibited by law. Any such
transfer, however, does not negate the
fact that the firearms were repetitively
purchased, and were purchased with
the predominant intent to earn a profit
by repetitive purchase and resale.
(c) Transfers of former licensee
inventory to a licensee or responsible
person in accordance with paragraph
(b)(1) or (2) of this section shall be
appropriately recorded as dispositions,
in accordance with § 478.122(b),
§ 478.123(b), or § 478.125(e), prior to
delivering the records after
discontinuing business consistent with
§ 478.127. Except for liquidation of
former licensee inventory to a licensee
within 30 days (or approved period) in
accordance with paragraph (b)(1) of this
section, or occasional sale of a firearm
from such inventory thereafter to a
licensee, a former licensee (or
responsible person of such licensee)
who resells any such inventory,
including former licensee inventory
transferred in accordance with
paragraph (b)(2) of this section, is
subject to the presumptions in § 478.13
(definition of ‘‘engaged in the business
as a dealer in firearms other than a
gunsmith or pawnbroker’’) that apply to
a person who repetitively purchased
those firearms for the purpose of resale.
(d) The former licensee shall not
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’’).
■ 5. Amend § 478.78 by designating the
undesignated paragraph as paragraph (a)
and adding paragraphs (b) through (d) to
read as follows:
§478.78
notice.
Operations by licensee after
*
*
*
*
*
(b) Upon final disposition of license
proceedings to disapprove or terminate
a license (i.e., by revocation or denial of
renewal), the former licensee shall
within 30 days, or such additional
period approved by the Director for
good cause, either:
PO 00000
Frm 00126
Fmt 4701
Sfmt 4700
(1) Liquidate the former licensee
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
this part; or
(2) Transfer the former licensee
inventory to a responsible person of the
former licensee to whom the receipt,
possession, sale, or other disposition is
not prohibited by law. Any such
transfer, however, does not negate the
fact that the firearms were repetitively
purchased, and were purchased with
the predominant intent to earn a profit
by repetitive purchase and resale.
(c) Transfers of former licensee
inventory to a licensee or responsible
person in accordance with paragraph
(b)(1) or (2) of this section shall be
appropriately recorded as dispositions,
in accordance with § 478.122(b),
§ 478.123(b), or § 478.125(e), prior to
delivering the records after
discontinuing business consistent with
§ 478.127. Except for the sale of former
licensee inventory to a licensee within
30 days (or approved period) in
accordance with paragraph (b)(1) of this
section, or occasional sale of a firearm
from such inventory thereafter to a
licensee, a former licensee (or
responsible person of such former
licensee) who resells any such
inventory, including former licensee
inventory transferred in accordance
with paragraph (b)(2) of this section, is
subject to the presumptions in § 478.13
(definition of ‘‘engaged in the business
as a dealer in firearms other than a
gunsmith or pawnbroker’’) that apply to
a person who repetitively purchased
those firearms for the purpose of resale.
(d) The former licensee shall not
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’’).
■ 6. Amend § 478.124 by revising
paragraph (a) to read as follows:
§478.124
Firearms transaction record.
(a) A licensed importer, licensed
manufacturer, or licensed dealer shall
not sell or otherwise dispose,
temporarily or permanently, of any
firearm to any person, other than
another licensee, unless the licensee
records the transaction on a firearm
transaction record, Form 4473:
Provided, that a firearms transaction
record, Form 4473, shall not be required
to record the disposition made of a
firearm delivered to a licensee for the
sole purpose of repair or customizing
when such firearm or a replacement
E:\FR\FM\19APR3.SGM
19APR3
Federal Register / Vol. 89, No. 77 / Friday, April 19, 2024 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES3
firearm is returned to the person from
whom received; provided further, that a
firearms transaction record, Form 4473,
shall not be used if the sale or other
disposition is being made to another
licensed importer, licensed
manufacturer, or licensed dealer, or a
curio or relic to a licensed collector,
including a sole proprietor who
transfers a firearm to their personal
collection or otherwise as a personal
VerDate Sep<11>2014
02:22 Apr 19, 2024
Jkt 262001
firearm in accordance with § 478.125a.
When a licensee transfers a firearm to
another licensee, the licensee shall
comply with the verification and
recordkeeping requirements in § 478.94
and this subpart.
*
*
*
*
*
29093
‘‘§ 478.125(e)’’ and adding in its place
‘‘§ 478.122(a), § 478.123(a), or
§ 478.125(e)’’.
Dated: April 8, 2024.
Merrick B. Garland,
Attorney General.
[FR Doc. 2024–07838 Filed 4–18–24; 8:45 am]
§ 478.125a
[Amended]
BILLING CODE 4410–FY–P
7. Amend § 478.125a in paragraphs
(a)(2) and (3) by removing the citation
■
PO 00000
Frm 00127
Fmt 4701
Sfmt 9990
E:\FR\FM\19APR3.SGM
19APR3
]]>Agencies
[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 [www.gpo.gov]
[FR Doc No: 2024-07838]
[[Page 28967]]
Vol. 89
Friday,
No. 77
April 19, 2024
Part III
Department of Justice
-----------------------------------------------------------------------
Bureau of Alcohol, Tobacco, Firearms, and Explosives
-----------------------------------------------------------------------
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
[[Page 28968]]
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\2\ See generally Public Law 90-618, 82 Stat. 1213 (1968).
\3\ 33 FR 18555 (Dec. 14, 1968).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\15\ 27 CFR 178.11 (1988).
\16\ Id.
---------------------------------------------------------------------------
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).
---------------------------------------------------------------------------
\17\ 27 CFR 478.125a(a); see also S. Rep. No. 98-583, at 13.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\18\ S. Rep. No. 98-583, at 13.
---------------------------------------------------------------------------
[[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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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))).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\22\ See Press Release, The White House FACT SHEET: New
Executive Actions to Reduce Gun Violence and Make Our Communities
Safer (Jan. 4, 2016), https://obamawhitehouse.archives.gov/the-press-office/2016/01/04/fact-sheet-new-executive-actions-reduce-gun-violence-and-make-our.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\23\ See generally ATF, Do I Need a License to Buy and Sell
Firearms? (Jan. 2016), https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf; ATF, Do I Need
a License to Buy and Sell Firearms? (Aug. 2023), https://www.atf.gov/file/100871/download.
\24\ ATF, Do I Need a License to Buy and Sell Firearms? 5 (Jan.
2016), https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf.
---------------------------------------------------------------------------
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), https://www.nytimes.com/live/2022/05/14/nyregion/buffalo-shooting; Mark
Osborne et al., At Least 19 Children, 2 Teachers Dead After Shooting
at Texas Elementary School, ABC News (May 25, 2022), https://abcnews.go.com/US/texas-elementary-school-reports-active-shooter-campus/story?id=84940951; Acacia Coronado & Alex Samuels, Death Toll
in Midland-Odessa Mass Shooting Climbs to Eight, Including the
Shooter, Texas Tribune (Aug. 31, 2019), https://www.texastribune.org/2019/08/31/odessa-and-midland-shooting-30-victims-reports-say/.
\27\ Press Release, DOJ, Man Who Sold Midland/Odessa Shooter AR-
15 Used in Massacre Sentenced for Unlicensed Firearms Dealing (Jan.
7, 2021), https://www.justice.gov/usao-ndtx/pr/man-who-sold-midlandodessa-shooter-ar-15-used-massacre-sentenced-unlicensed-firearms; Prison for Man Who Sold Texas Shooter Seth Ator AR-15 Used
in Midland-Odessa Massacre, CBS News (Jan. 7, 2021), https://www.cbsnews.com/texas/news/prison-for-man-sold-texas-shooter-seth-ator-ar-15-midland-odessa-massacre/.
\28\ Press Release, DOJ, Man Who Sold Midland/Odessa Shooter AR-
15 Used in Massacre Sentenced for Unlicensed Firearms Dealing (Jan.
7, 2021), https://www.justice.gov/usao-ndtx/pr/man-who-sold-midlandodessa-shooter-ar-15-used-massacre-sentenced-unlicensed-firearms.
\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), https://crsreports.congress.gov/product/pdf/IF/IF12197.
\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), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-newsletter-july-2017/download (gun
show guidelines); ATF, Important Notice to Dealers and Other
Participants at This Gun Show, ATF Information 5300.23A 1 (Sept.
2021) https://www.atf.gov/firearms/docs/guide/important-notice-dealers-and-other-participants-gun-shows-atf-i-530023a/download
(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?, https://www.atf.gov/firearms/qa/how-may-licensee-participate-raffling-firearms-unlicensed-organization (last reviewed May 22, 2020); ATF,
FFL Newsletter: Federal Firearms Licensee Information Service 8-9
(June 2021), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensee-ffl-newsletter-june-2021/download (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), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-february-1999/download (addressing dinner banquets).
\37\ See ATF, FFL Newsletter: Federal Firearms Licensee
Information Service 5-6 (June 2010), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-june-2010
(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), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensee-ffl-newsletter-june-2021/download (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), https://www.nyc.gov/html/om/pdf/2013/felon_seeks_firearm.pdf; 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),
https://www.atf.gov/firearms/docs/newsletter/ffl-newsletter-september-2016/download; ATF, 2 FFL Newsletter: Federal Firearms
Licensee Information Service 6-7 (Mar. 2013), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-march-2013-volume-2/download; 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), https://www.justice.gov/opa/pr/minnesota-man-indicted-dealing-firearms-without-license (defendant dealt in firearms through websites such
as GunBroker.com, 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), https://www.justice.gov/usao-md/pr/odenton-maryland-man-exiled-8-years-prison-firearms-trafficking-conspiracy (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), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensee-ffl-newsletter-june-2021/download (``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), https://www.justice.gov/usao-edca/pr/snapchat-gun-dealer-convicted-unlawfully-manufacturing-and-selling-firearms; Press
Release, DOJ, Sebring Resident Sentenced to Prison for Unlawfully
Dealing Firearms on Facebook (Nov. 7, 2016), https://www.justice.gov/usao-sdfl/pr/sebring-resident-sentenced-prison-unlawfully-dealing-firearms-facebook.
\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)).
---------------------------------------------------------------------------
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).
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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).
---------------------------------------------------------------------------
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?, https://www.atf.gov/firearms/qa/does-auctioneer-who-involved-firearms-sales-need-dealer-license
(last reviewed July 10, 2020); ATF, ATF Federal Firearms Regulations
Reference Guide, ATF Publication 5300.4, Q&A L1, at 207-08 (2014),
https://www.atf.gov/firearms/docs/guide/federal-firearms-regulations-reference-guide-2014-edition-atf-p-53004/download; ATF,
FFL Newsletter 3 (May 2001), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-may-2001/download;
ATF Ruling 96-2, Engaging in the Business of Dealing in Firearms
(Auctioneers) (Sept. 1996), https://www.atf.gov/file/55456/download;
ATF, FFL Newsletter 7 (1990), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-1990-volume-1/download; 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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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), https://www.atf.gov/resource-center/fact-sheet/fact-sheet-facts-and-figures-fiscal-year-2022.
\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'').
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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?, https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf (Jan. 2016),
https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf; 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)).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensee-ffl-newsletter-june-2021/download (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, https://www.collinsdictionary.com/us/dictionary/english/occasional (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.
---------------------------------------------------------------------------
\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), https://www.justice.gov/usao-ndtx/pr/man-who-sold-midlandodessa-shooter-ar-15-used-massacre-sentenced-unlicensed-firearms (defendant convicted
of filing a false tax return that concealed his income from firearms
sales).
---------------------------------------------------------------------------
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), https://www.justice.gov/opa/pr/utah-business-owner-convicted-dealing-firearms-without-license-and-filing-false-tax-returns
(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), https://www.justice.gov/opa/pr/minnesota-man-indicted-dealing-firearms-without-license (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), https://www.justice.gov/usao-cdca/pr/ex-pasadena-police-lieutenant-sentenced-one-year-federal-prison-unlicensed-selling
(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, https://waltherarms.com/connect/guarantee# (last visited Apr. 4, 2024);
Retail Policies, Center Target Sports, https://centertargetsports.com/retail-range/ (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), https://www.centuryarms.com/media/wysiwyg/Warranty_and_Return_v02162021.pdf
(``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, https://alphadogfirearms.com/i-love-you-pew/ (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, https://www.big5sportinggoods.com/static/big5/pdfs/Customer-Service-RETURN-EXCEPTIONS-POLICY-d.pdf (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, https://www.dfwgun.com/memberships/store-policies.html (last visited Feb.
29, 2024) (30-day return policy); Return Policy, RifleGear, https://www.riflegear.com/t-returns.aspx (last visited Feb. 29, 2024) (30-
day return policy); Gun-Buyer Remorse Is a Thing of the Past,
Stoddard's Range and Guns, https://stoddardsguns.com/stoddards-commitment/ (last visited Feb. 29, 2024) (30-day return policy);
Palmetto State Armory's Hassle-Free Return Policy, AskHandle,
https://www.askhandle.com/blog/palmetto-state-armory-return-policy
(last visited Feb, 29, 2024) (30-day return policy); Instructions
for Returns/Repairs, Rock River Arms, https://www.rockriverarms.com/index.cfm?fuseaction=page.display&page_id=34 (last visited Feb. 29,
2024) (30-day return policy); ``No Regrets'' Policy, Granite State
Indoor Range, https://www.granitestaterange.com/our-pro-shop/ (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), https://www.justice.gov/usao-ndtx/pr/ffl-sentenced-selling-guns-unlicensed-dealers
(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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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).
---------------------------------------------------------------------------
\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, https://www.merriam-webster.com/dictionary/personal (last visited Mar. 1, 2024)
(defining the term ``personal'' to include ``of, relating to, or
affecting a particular person''); Collection, Merriam-Webster,
https://www.merriam-webster.com/dictionary/collection (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, https://www.merriam-webster.com/dictionary/hobby (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.'').
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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?, https://www.atf.gov/firearms/qa/may-licensee-create-personal-collection-avoid-recordkeeping-and-nics-background-check
(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?, https://www.atf.gov/firearms/qa/does-licensee-have-record-firearms-acquired-prior-obtaining-license-their-acquisition (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), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-february-2011/download (``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), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-march-2006/download (``[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?, https://www.atf.gov/firearms/qa/may-licensee-store-personal-firearms-business-premises (last reviewed July 15,
2020); ATF, FFL Newsletter: Federal Firearms Licensee Information
Service 7 (Feb. 2011), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-february-2011/download; 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?, https://www.atf.gov/firearms/qa/may-licensee-maintain-personal-collection-firearms-how-can-they-do-so
(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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-september-2011/download.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
\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), https://www.justice.gov/usao-wdnc/pr/asheville-man-sentenced-dealing-firearms-without-license-0 (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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\105\ See, e.g., Annie Linskey, Closed Store Is a Source of
Guns, Baltimore Sun (Apr. 15, 2008), https://www.baltimoresun.com/news/bs-xpm-2008-04-15-0804150118-story.html (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), https://www.thewellnews.com/guns/booker-bill-takes-aim-at-gun-fire-sale-loophole/; Shira Toeplitz, Ackerman Proposes Gun-Control Bill to
Close `Firesale Loophole', Politico: On Congress Blog (Jan. 12,
2011), https://www.politico.com/blogs/on-congress/2011/01/ackerman-proposes-gun-control-bill-to-close-firesale-loophole-032289.
\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), https://www.justice.gov/opa/pr/gunsmoke-gun-shop-owner-and-former-discovery-channel-star-indicted-and-arrested-conspiracy (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).
---------------------------------------------------------------------------
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,
https://www.merriam-webster.com/dictionary/liquidate (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), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-march-2006/download (``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), https://www.atf.gov/firearms/docs/ruling/2010-1-temporary-assignment-firearm-ffl-unlicensed-employee/download (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?, https://www.atf.gov/firearms/qa/does-officer-or-employee-entity-holds-federal-firearms-license-such-corporation-have
(last reviewed May 22, 2020); ATF, 2 FFL Newsletter: Federal
Firearms Licensee Information Service 4 (Sept. 2013), https://www.atf.gov/firearms/docs/newsletter/federal-firearms-licensees-newsletter-september-2013-volume-2/download.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
\118\ Michael Martinez, `Universal Background Check:' What Does
It Mean?, CNN (Jan. 28, 2013), https://www.cnn.com/2013/01/14/us/universal-background-checks/.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\119\ See Definition of ``Frame or Receiver'' and Identification
of Firearms, 87 FR 24652, 24659 (Apr. 26, 2022).
---------------------------------------------------------------------------
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 the ``proposal laid out does not appear overly
cumbersome for currently licensed dealers or citizens looking to
liquidate guns from their personal collection'' and that ``[c]losing
the `gun show loophole' and requiring a record of firearms sold limits
the possibility of nefarious characters obtaining weapons while
increasing and promoting responsible gun ownership.'' Another commenter
agreed, describing the rule as a modest, common-sense measure to close
some of the huge loopholes that buyers and sellers use to get around
our necessary and otherwise effective system of background checks.
Another commenter, while supporting this aspect of the rule, also
recommended that ATF provide popular online marketplaces, such as
Armslist and GunBroker, with materials and guidance once the rule is
finalized to ensure their users understand their obligations to obtain
Federal firearms licenses and conduct background checks before dealing
in firearms.
Department Response
The Department acknowledges the commenters' support for the
proposed rule and agrees that, as a result of this rule, there will be
greater compliance with the law and more individuals who engage in the
business of dealing in firearms at gun shows and online will become
licensed under the GCA and therefore run background checks. ATF has
updated its guidance in light of the BSCA and intends to further update
the guidance to ensure that persons who operate at gun shows and online
understand the relevant licensing obligations. See Section II.C of this
preamble. The Department also notes that the term ``gun show loophole''
is a misnomer in that there is no statutory exemption under the GCA for
unlicensed persons to engage in the business of dealing in firearms at
a gun show, or at any other venue. As this rule clarifies, all persons
who engage in the business of dealing in firearms must be licensed
(and, once licensed, conduct background checks), regardless of
location.
9. Reduces Firearms Trafficking
Comments Received
Some commenters thought the proposed rule could have a positive
impact on reducing illegal firearms trafficking. One commenter said
that firearm transfers must be regulated to prevent criminals from
obtaining weapons and unscrupulous arms dealers from trafficking
weapons that fuel violence here and in Mexico. Another commenter
thought the rule would cause a reduction in trafficking because gun
traffickers are ``masquerading as hobbyists or collectors.'' Other
commenters stated that firearm rules or legislation may be very
different between neighboring States, thus enabling trafficking. For
example, one commenter, relying on a news story, stated that,
``[b]ecause Massachusetts has universal background checks and Maine
does not, Maine is a top `source state' for crime guns in
Massachusetts'' and that ``[c]riminals come to Maine to get the guns in
private sales that they cannot get in Massachusetts or in other states
with universal background checks.'' Another commenter stated that
creating additional regulations on how firearms are sold will reduce
the number of firearms that are trafficked and that the rule will
decrease the number of guns trafficked between State lines. Commenters
who participated in one of the form letter campaigns stated that guns
purchased in unlicensed sales often end up trafficked across State
lines, recovered at crime scenes in major cities, and used against
police officers, which contributes to the gun violence epidemic
plaguing our country. Such commenters also added that guns sold without
background checks--both online and at gun shows--are a huge source for
gun traffickers and people trying to avoid such checks.
Department Response
The Department acknowledges the commenters' support for the
proposed rule and agrees that the rule will help reduce firearms
trafficking. Many ATF criminal gun trafficking investigations reveal
that guns used in crimes involve close-to-retail diversions of guns
from legal firearms commerce into the hands of criminals, including
straw purchases from FFLs, trafficking by FFLs, and illegal transfers
by unlicensed sellers.\120\ As more persons become licensed as a result
of the BSCA's amendments to the meaning of ``engaged in the business,''
the multiple sales forms, out-of-business records, demand letter
records, theft and loss reports, and trace responses provided to ATF by
those dealers during criminal investigations will provide law
enforcement with additional crucial crime gun intelligence. Law
enforcement can use this information to better target limited resources
to pursue illicit firearms traffickers nationally and
internationally.\121\
---------------------------------------------------------------------------
\120\ ATF, National Firearms Commerce and Trafficking Assessment
(NFCTA): Crime Gun Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the United States and Its
Territories 41 (Mar. 27, 2024), https://www.atf.gov/firearms/docs/report/nfcta-volume-ii-part-iii-crime-guns-recovered-and-traced-us/download.
\121\ See 18 U.S.C. 923(g)(3)-(7); ATF Form 3310.4 (Dec. 2021)
(multiple handgun sales); ATF Form 3310.11 (Oct. 2020) (theft-loss
report); ATF Form 3310.12 (Feb. 2024) (multiple sales of certain
rifles).
---------------------------------------------------------------------------
10. Closes Liquidation Loophole for Former Licensees
Comments Received
Some commenters supported the proposed rule's clarification as to
how the GCA applies to firearm sales and former dealers. For example,
one commenter stated that dealers who have lost their licenses should
never be allowed to sell guns again. Similarly, another commenter said
that they support the rule because it ``goes a step beyond [previous
liquidation provisions] and does not allow any dealers who had their
licenses revoked to sell, trade, or distribute firearms to the
public.''
[[Page 28990]]
Department Response
The Department acknowledges the commenters' support for the
proposed rule and agrees that the rule will reduce the number of
firearms in the business inventory of a former licensee that are sold
improperly, i.e., without background checks and associated
recordkeeping. However, the Department is not adopting the suggestion
to bar former dealers from ever selling guns again. Rather, former
dealers are prohibited from engaging in the business of dealing in
firearms, unless they once again become licensed.
11. Establishes Better Standards for Who Should Become Licensed
Comments Received
Several commenters appreciated the transparency established by the
proposed rule. For example, one commenter stated, ``I strongly support
this proposed regulation because it sets a clear, common-sense standard
for when gun sellers must become licensed dealers and run background
checks'' and builds on the BSCA passed by Congress. Multiple commenters
and those associated with certain form letters said that they believe
that anyone offering guns for sale online or at a gun show is trying to
make a profit and should therefore be licensed, adding that they
supported the rule's clarifying provisions. One group of parents whose
children were victims of a mass shooting stated that they recognized
that ``the intent of the proposed rule is not to be punitive.'' They
added, ``[w]e support ATF maintaining an evaluation of the totality of
the circumstances when determining if one is `engaged in the business'
rather than establishing a minimum standard of how many firearms bought
or sold constitutes a licensure.'' Other commenters supported the
clarifying provisions because they do more to ensure that sellers
engaged in the business are treated alike. For example, one commenter
stated that it ``simply makes no sense for some gun dealers/sellers to
be exempt from the same standards that apply to licensed dealers.''
Department Response
The Department acknowledges commenters' support for the proposed
rule and agrees that the rule will provide needed clarity to persons
who are unsure whether they must become licensed under the GCA based on
their firearms purchase and resale activities. Although this rule does
not set forth a presumption that any person offering guns for sale
online or at a gun show is engaged in the business, it does set forth
several actions that give rise to a presumption that persons engaging
in those activities, including online or at gun shows, are engaged in
the business.
12. Consistent With Second Amendment Rights
Comments Received
Many supporters recognized that the proposal did not conflict with
an individual's Second Amendment rights. One commenter stated that the
rule is an important clarification in how gun laws are enforced in the
United States, and it does not infringe upon the rights of citizens to
``keep and bear arms'' because ``[a]nyone wanting to transfer a firearm
can still do so under this rule by using an existing federally-licensed
firearms dealer.'' In another commenter's opinion, the ``right to bear
arms is still alive and well even with reasonable rules set in place.''
Another commenter stated that gun advocates will argue that taking away
these loopholes endangers their Second Amendment rights and that this
is a false argument. This commenter added that, ``[a]ny American
citizen who wants to purchase a firearm online for self-protection or
hunting and who has a clean mental health and criminal record has
nothing to fear from common sense restrictions to online gun sales.''
Other commenters stated that this rule will make all citizens of the
United States safer without disrupting or infringing upon Second
Amendment rights.
Many commenters thought that firearm ownership comes with certain
responsibilities and that this rule helps ensure that those who are not
able to be responsible are less able to get firearms. Several
commenters stated that the rule would not limit Second Amendment rights
but would increase safety. For example, one commenter stated that the
proposed rule ``in no way infringes on our rights for gun ownership but
instead makes it safer for all of us to own and purchase guns
responsibly.'' Another commenter stated, ``[g]un ownership is a
protected right but it is also a privilege reserved for those who can
handle the responsibility.'' Other firearm owners commented that they
are firm believers in their Second Amendment rights and feel strongly
that those rights were conferred on individuals with responsible gun
ownership in mind, and that they grew up being taught respect for guns.
Department Response
The Department agrees that this rule is fully consistent with the
Second Amendment. This rule implements the provisions of the GCA, as
amended by the BSCA, that require persons who are engaged in the
business of dealing in firearms to be licensed. The Supreme Court has
emphasized that its recent Second Amendment opinions ``should not be
taken to cast doubt on laws imposing conditions and qualifications on
the commercial sale of arms.'' District of Columbia v. Heller, 554 U.S.
570, 626-27 & n.26 (2008); see also Bruen v. N.Y. State Rifle & Pistol
Ass'n, 597 U.S. 1, 80-81 (2022) (Kavanaugh, J., concurring, joined by
Roberts, C.J.) (same). See Section IV.B.8.c of this preamble for more
discussion on this topic.
B. Issues Raised in Opposition to the Rule
As noted, nearly 99,000 commenters expressed opposition to the
NPRM, including through form letters submitted as part of mass mail
campaigns. ATF received comments from a variety of interested parties,
including FFL retailers and manufacturers; legal organizations that
represent licensees; firearm sporting organizations; gun owner and gun
collector organizations; more than half of States' attorneys general;
Members of Congress; \122\ firearm owners; active-duty military members
and veterans; various firearm advocacy organizations; gun enthusiasts;
and people with law enforcement backgrounds. As discussed below,
numerous commenters raised various concerns about the Department's
proposed amendments to ATF regulations. The topics included
constitutional and statutory authority concerns, issues with the
clarity and effect of the proposed definitions, presumptions, changes
to procedures upon discontinuation of business, and concerns about the
public safety goals of the Department in promulgating this rule.
---------------------------------------------------------------------------
\122\ ATF received two letters from Members of the United States
House of Representatives in opposition to the rule, one dated
October 12, 2023, with four signatories, and another received on
December 7, 2023, with nine signatories. ATF received three letters
in opposition from Members of the United States Senate, one dated
September 21, 2023, with seven signatories, and two received
December 7, 2023, one with two signatories and one with one
signatory.
---------------------------------------------------------------------------
1. Lack of Clarity
Comments Received
Many commenters opposed the rule on the grounds that it was vague
or lacked clarity. Most of these commenters made statements to that
effect without providing an explanation or examples. Some explained
that they found the entire rule to be confusing, stating, ``[t]he
language and grammar of
[[Page 28991]]
the entire preamble is intentionally misleading and confusing unless
the reader is an attorney,'' ``the regulations are exceedingly
confusing to me, and I consider myself to be a learned man,'' and
``this rule is so vague that people trying to be right will never know
exactly what would make them need to be a dealer.''
Some commenters, however, were more specific. Some of these
commenters gave examples of particular parts of the rule they found
vague, for example: ``the proposed definitions are replete with the use
of the term `may' with respect to being engaged in the business as a
dealer in firearms''; the rule ``leaves the interpretation of
`occasional' subjective in nature''; the word ``repetitively'' used in
the fourth EIB presumption is ambiguous and could be interpreted as
``selling any number of firearms that is more than one''; ``it states
`even a single firearm transaction, or offer to engage in a
transaction, when combined with other evidence, may be sufficient to
require a license.' No examples are provided''; the rule ``creates
confusion by attempting to clarify the term `dealer' and how it applies
to auctioneers''; and the presumption that a person is a dealer when
that person ```sells or offers for sale firearms, and also represents
to potential buyers or otherwise demonstrate a willingness and ability
to purchase and sell additional firearms' is vague and would likely
include even harmless banter between buyer and seller of a single
firearm regarding additional purchases these individuals with to make
some time in the future.'' One commenter argued that, ``[t]he apparent
fines and jail time are draconian relative to the vagueness of the
application of the proposed rule.'' At least one commenter asked that
the Department qualify ``repetitively'' with a time limit so that a
firearms owner who is likely to sell a firearm more than once in their
lifetime or even over a five-year period would not be inadvertently
captured under the presumptions. And, at least one commenter took the
position that ``of course, repetition means more than once.''
Some other commenters focused on the impacts of the provisions they
stated were vague. One commenter said it appears that the ``intent of
this law is to force all sales through an FFL as you otherwise are
never sure the sale is lawful.'' A couple of commenters mentioned that
``four times in the proposed rule the ATF provide[d] a list of
`rebuttable presumption[s]' or other factors and then conclude[d] by
noting that the list is `not exhaustive' '' and that the proposed rule
is ``unlikely'' to cover selling one's gun to an immediate family
member--but leaves open the possibility that ATF could change its mind.
``This makes compliance both difficult and inconsistent,'' one of these
commenters added. ``When definitions are vague in this manner, it
leaves far too much opportunity for unlawful or unjust `interpretation'
or inconsistent implementation and enforcement,'' they concluded. The
commenter further explained that the proposed rule's lack of clarity
``places citizens who wish to abide by laws . . . in the unreasonable
position of having their lawfulness in a gray area. In this way, an
unelected official of ATF seems to have discretion to arrest persons,
seize property, or take other `enforcement actions' somewhat
arbitrarily. Additionally, even if courts later overturn that ATF
officer's decision, the hardship faced by the law[-]abiding citizens
due to those circumstances (lost wages, attorney fees, reputational
damage, emotional stress and trauma, etc.) are unreasonable.''
Other commenters were concerned about what they described as the
ambiguity of the statutory definitions, which ATF proposed to include
verbatim in the regulation. One commenter stated, ``[t]he new
definitions, such as `predominantly earn a profit' and `terrorism,' may
lead to differing interpretations and legal challenges.'' Another
stated, ``[t]he proposed rule is riddled with ambiguous and imprecise
terms such as `predominantly earn a profit' and `principal objective of
livelihood and profit.' This lack of clarity is unacceptable and can
lead to arbitrary enforcement and interpretation, jeopardizing the
rights of law-abiding citizens.''
One commenter suggested that additional education will be necessary
because the rule is hard to understand. ``While I appreciate the
intention to assist individuals in understanding when they are required
to have a license to deal in firearms, the proposed changes, as they
currently stand, create more questions than answers. The need for
comprehensive education and outreach efforts to inform the public about
these changes is evident.''
Department Response
The Department disagrees that the rule is vague or lacks clarity.
The rule implements the BSCA by setting forth specific conduct that is
presumed to be ``engag[ing] in the business'' of dealing in firearms or
acting with a predominant intent to earn a profit under the GCA. This
rule provides persons who may be unclear how the statute applies to
them with greater clarity as to what conduct implicates the statute,
even though the rule does not purport to include every possible
scenario. Many thousands of commenters stated that they believe this
rulemaking provides much needed clarity to help ensure that persons who
are prohibited from receiving or possessing firearms do not receive
them.
The Department acknowledges commenters' concerns that the
presumptions are not exhaustive of all of the conduct that may show
that, or be considered in determining whether, a person is engaged in
the business of dealing in firearms or has a predominant intent to earn
a profit. However, there are numerous and various fact patterns that
could fall within the statutory definition of being ``engaged in the
business'' of dealing in firearms under 18 U.S.C. 921(a)(21)(C). This
rule cannot possibly describe every potential scenario. It is important
to note the presumptions are designed to improve clarity and
consistency, though, as presumptions, they are not conclusive findings
and may be rebutted. The conduct that presumptively falls within the
definition of ``engaged in the business'' represents common fact
patterns that the Department has seen during numerous criminal
investigations, regulatory enforcement actions, and criminal
prosecutions, and which the Federal courts have recognized as strong
indicators of engaging in the business of dealing in firearms even
prior to the BSCA's expanded definition. In other words, these
presumptions represent situations that have been observed and tested
repeatedly over decades as conduct that is indicative of whether a
person is engaged in the business or has a predominant intent to earn
pecuniary gain from the sale or disposition of firearms. The Department
therefore disagrees that the rule, which provides additional
clarification about what the statute requires, is vague or will result
in inconsistent or unfair implementation and enforcement.
The Department also disagrees that the rule is confusing or overly
complex. The Department acknowledges that the preamble to the proposed
rule was long and included significant discussions and legal case
citations in support of the Department's proposed regulatory changes.
However, the rule changes the regulatory definition of what it means to
be ``engaged in the business'' as a dealer in firearms to match the
statutory definition as amended by the BSCA and provides additional
detail to aid persons in understanding what conduct is likely to meet
that definition. This includes addressing particular contexts, such as
[[Page 28992]]
auctioneers, and licensees who cease to be licensed. The rule does this
by defining certain terms and describing specific, identifiable conduct
in specific rebuttable presumptions. These definitions are based on
statutory language, standard dictionary definitions, and Federal court
opinions.
Based on concerns identified in the public comments, this final
rule has further refined some definitions and presumptions to help
collectors and hobbyists better understand when they are enhancing or
liquidating a personal collection without the need for a license. For
example, in response to one of the specific comments on the first EIB
presumption, the Department has added a parenthetical after
``represents to potential buyers or otherwise demonstrates a
willingness and ability to purchase and resell additional firearms'' to
explain that it means ``(i.e., to be a source of additional firearms
for resale).'' This presumption, like the others, is based on ATF's
criminal and regulatory enforcement experience and the case law cited
in both the proposed rule and this final rule.
The Department does not agree with commenters that the rule's use
of the term ``may'' in the regulatory definition of ``engaged in the
business'' does not provide firearms sellers with sufficient clarity as
to who is required to be licensed. While the presumptions in the rule
are intended to provide clarity to persons who resell firearms, the
Department cannot establish bright-line rules that address every
conceivable scenario. For example, while the regulatory text states
that ``[s]elling large numbers of firearms . . . may be highly
indicative of business activity,'' that will not always be the case,
depending on the circumstances. This is why the regulatory text uses
the word ``may'' at times and expressly states that activities set
forth in the rebuttable presumptions are not exhaustive of the evidence
or conduct that may be considered in determining whether a person is
engaged in the business of dealing in firearms or in determining the
more limited question of whether a person has the intent to
predominantly earn a profit through the repetitive purchase and resale
of firearms.
The Department does not agree with commenters that the undefined
terms in the rule are vague. In the absence of specific definitions,
readers should use the ordinary meaning of these statutory terms and
other words in the regulatory text. This includes the definition of the
term ``occasional,'' which means ``infrequent,'' or ``of irregular
occurrence,'' \123\ and the term ``repetitively'' as it applies to a
person engaged in the business as a dealer, which means that a person
intends to or actually does purchase and resell firearms again. With
regard to the comment that the term ``repetitive'' should be limited to
a period of time, again, this term, like the term ``occasional,''
should be read consistently with its ordinary meaning.\124\ Consistent
with that ordinary meaning, a person is less likely to be understood as
``repetitively'' selling firearms if they do so twice over five years
than if they do so several times over a short period. With regard to
statutory terms, such as ``to predominantly earn a profit'' and
``terrorism,'' those definitions were added to the GCA by the BSCA. The
Department is now adding them into ATF regulations so that the
regulatory text conforms to the statute.
---------------------------------------------------------------------------
\123\ See Occasional, Collins English Dictionary, https://www.collinsdictionary.com/us/dictionary/english/occasional (last
visited Feb. 29, 2024) (defining ``occasional'' in ``American
English'').
\124\ See, e.g., Repetitive, Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/repetitive (last visited Apr. 1,
2024) (``containing repetition''); Repetition, Merriam-Webster
Dictionary, https://www.merriam-webster.com/dictionary/repetition
(last visited Apr. 1, 2024) (``the act or instance of repeating or
being repeated'').
---------------------------------------------------------------------------
The Department disagrees that no examples were provided in the
proposed rule to explain the statement, ``even a single firearm
transaction or offer to engage in a transaction, when combined with
other evidence, (e.g., where a person represents to others a
willingness to acquire more firearms for resale or offers more firearms
for sale) may require a license.'' 88 FR 62021. That regulatory text
itself included an example: ``(e.g., where a person represents to
others a willingness to acquire more firearms for resale or offers more
firearms for sale).'' Id. This distinguishes a person engaged in the
business of dealing in firearms from a person who makes only a single
isolated firearm transaction without such other evidence, and who would
not ordinarily require a license, as the case law demonstrates.\125\ To
further clarify this example, the Department has added the following
clause to the regulatory text, ``whereas, a single isolated firearm
transaction without such evidence would not require a license.'' Sec.
478.13(b).
---------------------------------------------------------------------------
\125\ See footnote 72; cf. S. Rep. No. 98-583, at 8 (1984) (The
statute does ``not require that the sale or disposition of firearms
be or be intended as, a principal source of income or a principal
business activity. Nor does it apply to isolated sales, unless of
course, such sales are part of a regular course of business with the
principal objective of livelihood and profit.'').
---------------------------------------------------------------------------
The Department disagrees that ATF's enforcement of the rule would
be arbitrary. The rule clarifies the meaning of statutory terms and
identifies common scenarios under which persons are presumptively
engaged in the business, allowing for uniform application and
understanding.
The Department also disagrees that the rule creates confusion as to
how the term ``dealer'' applies to auctioneers. As described in Section
III.C of this preamble, the proposed and final regulatory text explains
that firearms dealing may occur anywhere, including by online auction,
and establishes by regulation ATF's longstanding interpretations that
distinguish between estate-type and consignment-type auctions.
The Department agrees with commenters that undertaking additional
outreach efforts would be beneficial to further explain the amendments
made to the GCA by the BSCA and how this rule implements those changes.
The Department plans to do so. As one example, in response to the BSCA,
ATF already updated its guidance entitled Do I Need a License to Buy
and Sell Firearms? \126\ and intends to further update the guidance to
include additional details that conform with this final rule.
---------------------------------------------------------------------------
\126\ ATF Publication 5310.2, Do I Need a License to Buy and
Sell Firearms? (Aug. 2023), https://www.atf.gov/file/100871/download.
---------------------------------------------------------------------------
2. Does Not Enhance Public Safety
Comments Received
Other commenters opposed the rule on the grounds that it will not
enhance public safety. The majority of comments on this topic argued
that criminals are the people putting public safety at risk, and that
they are not going to abide by the BSCA and the proposed regulation or
purchase firearms through FFLs. As a result, they stated, the proposed
rule will do nothing to affect public safety, while imposing a burden
on law-abiding citizens. One commenter stated, ``[p]rivate firearm
sales and transfers happen among law-abiding people and are not in any
way part of the unreasonable public safety risk that gun prohibition
advocates claim. Therefore, this rule does nothing to address the
unlawful acts of the criminals that pose a true and actual threat to
public safety.'' Another stated, ``there is very little public safety
i[f] this rule is enacted. The criminal element in society simply will
ignore it, and the lawful gun owners will be greatly affected with the
burden of complying
[[Page 28993]]
with the rule. Time and effort[ ] and money will have to be expended by
gun owners for no appreciable benefit.'' A third commenter stated there
is no evidence to support a correlation with public safety, asserting,
``[t]he proposed rule change lacks empirical evidence to substantiate
its assumed benefit of improved public safety. Numerous studies,
including those published in peer-reviewed journals [citing a journal
article], have found that the correlation between gun control measures
and reduction in gun violence is negligible. This suggests that the
rule change is a reactive measure rather than a well-considered
evidence-based policy.'' Another commenter said that, if ATF wants to
do something to promote gun safety, it should be actively involved with
industry experts to develop standards in education and safe ownership
instead of issuing the rule.
Other commenters suggested that issuing the regulation will ``only
serve to create a black market in firearms sales, while doing nothing
to actually stop crime,'' asked ``how this helps with cartels and
organized crime, when most of those people are already under a class
that shouldn't have guns anyway (i.e. illegal),'' and argued that the
rule ``will create criminals out of lawful gun owners, while dangerous
criminals like drug dealers and gang members could not care less.''
They added that the rule will make the public less safe because law-
abiding gun owners will face more hurdles while criminals will keep
doing what they are doing. Another commenter stated that, ``[o]n the
whole[,] gun owners are more law abiding[,] not less. We purposely
avoid breaking any law that may affect our ability to own firearms,
even laws we may not agree with. So this affects a population that is
less likely to be a problem and does nothing to discourage the criminal
population.''
Several commenters stated that criminals receive their firearms
from sources other than FFLs. For example, one commenter said:
``Federal studies have repeatedly found that persons imprisoned for
firearm crimes get their firearms mostly through theft, the black
market, or family members or friends.'' They stated, ``less than one
percent get guns at gun shows [citing a report].'' Another commenter
said that a study conducted by ATF, which reportedly concludes that
less than 1 percent of guns used in crimes were acquired by other means
(i.e., through private sales), indicates that this rule would not be
effective in preventing criminals from obtaining firearms. And a couple
of commenters stated that the source of danger comes from outside the
country, asserting, for example, ``This rule will not make anyone
safer. America has enemies across the globe. Who will do everything
they can to attack us. When [our] border is wide open, America is
significantly less safe because our border is open. Guns that will come
from across the border will not be known to the ATF. Close the border
to truly secure our nation.'' Another commenter said the rule will only
encourage more back-alley deals and the proliferation of unsafe, hand-
made, and 3D-printed firearms to evade the regulatory provisions.
Department Response
The Department disagrees that this rule will not enhance public
safety or lacks empirical evidence to support it. In enacting the BSCA,
Congress determined that there were persons who were engaged in the
business of dealing in firearms at wholesale or retail who should have
been licensed under existing law.\127\ Congress therefore amended the
GCA to clarify that those persons must be licensed. This rule
implements that amendment to the GCA. The result will be that more
persons who are engaged in the business of dealing in firearms will
become licensed, run NICS background checks, and maintain transaction
records through which firearms involved in crime can be traced. See
Section VI.A.2 of this preamble. One empirical indication of support
for this anticipated increase is that after the original publication of
the guidance Do I Need a License to Buy and Sell Firearms?, ATF
Publication 5310.2, in January 2016, there was a modest increase of
approximately 567 license applications (based on Federal Firearms
Licensing Center (``FFLC'') records). In addition, around 242,000
commenters stated that they believe this rulemaking will increase
public safety and provided data on that point. Additional empirical
evidence that public safety will be enhanced includes the following:
---------------------------------------------------------------------------
\127\ See footnotes 30 and 31, supra.
---------------------------------------------------------------------------
More Background Checks: As explained previously, the amended
regulations will increase the number of background checks performed
because more dealers will become licensed and run background checks on
their customers. With additional background checks being run by
licensed dealers, more prohibited persons will be denied firearms,
consistent with the plain language and intent of the GCA, as amended by
the Brady Act and the BSCA. Since the inception of NICS in 1998, the
FBI has denied at least 2,172,372 transfers due to background checks,
and in 2022 alone, it denied 131,865.\128\ From among the transfers
denied in 2022, 60,470 potential transferees were convicted of a crime
punishable by imprisonment for a term exceeding one year; \129\ 12,867
were under indictment or information for such a crime; 8,851 were
fugitives from justice; and 10,756 had been convicted of a misdemeanor
crime of domestic violence.\130\
---------------------------------------------------------------------------
\128\ FBI, Crim. Just. Info. Servs. Div., National Instant
Criminal Background Check System 2022 Operational Report 14, https://www.fbi.gov/file-repository/nics-2022-operations-report.pdf/view.
\129\ See 18 U.S.C. 921(a)(20) (defining ``crime punishable by
imprisonment for a term exceeding one year'').
\130\ FBI, Crim. Just. Info. Servs. Div., National Instant
Criminal Background Check System 2022 Operational Report 32, https://www.fbi.gov/file-repository/nics-2022-operations-report.pdf/view.
---------------------------------------------------------------------------
These NICS denials prevented the receipt and possible misuse of a
firearm by a prohibited person. Additionally, since the passage of the
BSCA's provision on enhanced background checks for juveniles, 18 U.S.C.
922(t)(1)(C)(iii), the FBI has conducted more than 200,000 enhanced
checks, resulting in at least 527 potentially dangerous juveniles being
denied firearms as of the first week of January 2024.\131\ And, as a
result of the NICS Denial Notification Act, codified at 18 U.S.C. 925B,
these denials will be reported within 24 hours directly to State,
local, and Tribal law enforcement authorities, which can then take
appropriate action. Because more persons will become licensed under the
BSCA and this rule, more enhanced juvenile checks will be conducted and
more denials will be reported to State, local, and Tribal law
enforcement, resulting in fewer firearms being transferred to
prohibited persons and faster investigation of denials and recovery of
transferred firearms as appropriate.
---------------------------------------------------------------------------
\131\ Press Release, DOJ, Justice Department Marks More Than 500
Illegal Firearm Purchases Stopped by New Enhanced Background Checks
(Jan. 5, 2024), https://www.justice.gov/opa/pr/justice-department-marks-more-500-illegal-firearm-purchases-stopped-new-enhanced-background.
---------------------------------------------------------------------------
More Crime Gun Traces: With more licensed dealers, law enforcement
will have increased ability to trace firearms involved in crime through
required records, including out-of-business records. Between 2017 and
2021, law enforcement agencies nationally and internationally submitted
a total of 1,922,577 crime guns to ATF for tracing, with 460,024
submitted in 2021. During that period, the number of traces increased
each year, resulting in a 36 percent rise over the five years from
[[Page 28994]]
2017 to 2021.\132\ ATF was able to determine the first retail purchaser
in 77 percent of those requests, providing law enforcement with crucial
leads and an increasing capability to solve gun crimes in their
respective jurisdictions throughout the United States and abroad.\133\
---------------------------------------------------------------------------
\132\ ATF, National Firearms Commerce and Trafficking Assessment
(NFCTA): Crime Gun Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the United States and Its
Territories 1 (Mar. 27, 2024), https://www.atf.gov/firearms/docs/report/nfcta-volume-ii-part-iii-crime-guns-recovered-and-traced-us/download.
\133\ Id. at 2.
---------------------------------------------------------------------------
In response to the comment alleging that few criminals (1 percent)
acquire firearms at gun shows, the most recent ATF report on firearms
commerce--the National Firearms Commerce and Trafficking Assessment,
Volume Two, Part III--reveals that, between 2017 and 2021, 41,810 crime
guns were traced to licensees at gun shows, reflecting a 19 percent
increase during that time.\134\ While the figure from 2021 represents
only 3 percent of the total number of crime guns traced, ``this figure
does not represent the total percentage of recovered crime guns that
were sold at a gun show during the study period as private citizens and
unlicensed dealers sell firearms at gun show venues.'' ATF has no
ability to trace crime guns to the numerous unlicensed dealers at gun
shows, and therefore, ``[n]ational data . . . [is] not available on
unregulated firearms transfers at gun shows.'' \135\ The low figure,
therefore, does not suggest that few crime guns are sold at gun shows--
to the contrary, it demonstrates law enforcement agencies' limited
ability to trace crime guns that are purchased at those venues. As more
unlicensed gun show dealers become licensed, law enforcement will be
able to trace more firearms subsequently involved in crime that were
sold at gun shows to help solve those crimes.
---------------------------------------------------------------------------
\134\ Id. at 14.
\135\ Id.
---------------------------------------------------------------------------
Better Crime Gun Intelligence: All licensed dealers are required to
report multiple sales of handguns occurring within five consecutive
business days, report thefts or losses of firearms from their inventory
or collection, and respond to trace requests.\136\ Certain dealers are
required to report multiple sales of certain rifles to ATF occurring
within five consecutive business days, and respond to demand letters
with records that report transactions where there is a short ``time-to-
crime.'' \137\ From this information, ATF is able to provide law
enforcement agencies throughout the United States with key crime gun
intelligence showing firearm trafficking patterns.\138\ In addition to
crucial intelligence provided directly to law enforcement in their
respective jurisdictions, comprehensive data gathered from licensee
sources was used to compile the National Firearms Commerce and
Trafficking Assessment, Volume II, regarding the criminal use of
firearms that have been diverted from lawful commerce. This assessment
allows law enforcement to better focus their limited resources on
dangerous criminals and enhances policymakers' ability to create
strategies to better stem the flow of crime guns to their
jurisdictions.\139\ For example, stolen firearms play an indirect role
in trafficking and diversion to the underground firearm markets used by
prohibited persons, juveniles, and other individuals seeking to buy
firearms without going through a background check. From 2017 to 2021,
licensees reported being the victims of 3,103 larcenies, 2,154
burglaries, and 138 robberies.\140\ This data was further broken down
over time by license type, business premises type, State, quantity of
firearms stolen, weapon type, caliber, time-to-crime, time-to-recovery,
recovery location, and age and gender of ultimate possessor.\141\ This
information will help reduce thefts from licensees and, therefore,
reduce firearms trafficking.\142\ ATF does not receive the same
detailed information about thefts from non-licensee dealers who do not
submit FFL Theft/Loss Reports (ATF Form 3310.11) to ATF, but ATF is
aware that thefts from non-licensees constitute a significantly higher
number of thefts and thus are a larger contributor to firearms
trafficking.\143\ Increasing the number of dealers who are licensed
will help reduce firearms trafficking by providing more of this kind of
detailed information as well.
---------------------------------------------------------------------------
\136\ 18 U.S.C. 923(g)(3), (6), (7).
\137\ 18 U.S.C. 923(g)(3)(a); ATF, National Tracing Center:
Demand Letter Program, https://www.atf.gov/firearms/national-tracing-center (last reviewed Feb. 26, 2024) (``Demand Letter 2 is
issued to FFLs who had 25 or more firearms traced to them the
previous calendar year with a `time-to-crime' of three years or
less.''); Report of Multiple Sale or Other Disposition of Certain
Rifles, ATF Form 3310.12 (Feb. 2024), https://www.atf.gov/firearms/docs/form/report-multiple-sale-or-other-disposition-certain-rifles-atf-form-331012/download; Demand Letter 2 Program: Report of
Firearms Transactions, ATF Form 5300.5 (Dec. 2021), https://www.atf.gov/firearms/docs/form/report-firearms-transactions-atf-form-53005/download.
\138\ ATF, National Firearms Commerce and Trafficking Assessment
(NFCTA): Crime Gun Intelligence and Analysis, Volume Two, Part II:
National Tracing Center Overview 8-10 (Jan. 11, 2023), https://www.atf.gov/firearms/docs/report/nfcta-volume-ii-part-ii-ntc-overview/download.
\139\ Press Release, DOJ, Justice Department Announces
Publication of Second Volume of National Firearms Commerce and
Trafficking Assessment: Report Presents Unprecedented Data on Crime
Gun Intelligence and Analysis (Feb. 1, 2023), https://www.atf.gov/news/pr/justice-department-announces-publication-second-volume-national-firearms-commerce-and (``The comprehensive--and
unprecedented--compilation of data in this report is intended to
provide strategic insight to law enforcement, policymakers, and
researchers as they work to reduce and prevent gun violence.'').
\140\ ATF, National Firearms Commerce and Trafficking Assessment
(NFCTA): Crime Gun Intelligence and Analysis, Volume Two, Part V:
Firearm Thefts 2 (Jan. 11, 2023), https://www.atf.gov/firearms/docs/report/nfcta-volume-ii-part-v-firearm-thefts/download.
\141\ Id. at 5-12.
\142\ Press Release, DOJ, Justice Department Announces
Publication of Second Volume of National Firearms Commerce and
Trafficking Assessment: Report Presents Unprecedented Data on Crime
Gun Intelligence and Analysis (Feb. 1, 2023), https://www.atf.gov/news/pr/justice-department-announces-publication-second-volume-national-firearms-commerce-and (``The Department of Justice is
committed to using cutting-edge crime gun intelligence to reduce
violent crime, and this first of its kind data set on emerging
threats, specifically the epidemic of stolen firearms and the
proliferation of machinegun conversion devices, will have real-world
impact in safeguarding our communities.'').
\143\ ATF, National Firearms Commerce and Trafficking Assessment
(NFCTA): Crime Gun Intelligence and Analysis, Volume Two, Part V:
Firearm Thefts 2 (Jan. 11, 2023), https://www.atf.gov/firearms/docs/report/nfcta-volume-ii-part-v-firearm-thefts/download (``[F]irearm
thefts from private citizens greatly outnumber firearms stolen from
FFLs. As reflected in Figure BRL-01, firearms stolen from private
citizens accounted for most stolen crime guns known to LEAs. From
2017 to 2021, there were 1,074,022 firearms reported stolen. About
3% (34,339) were stolen in FFL thefts, 1% (13,145) were stolen in
interstate shipments, and almost 96% (1,026,538) were stolen in
thefts from private citizens.'').
---------------------------------------------------------------------------
The Department acknowledges that there are criminals who are
currently engaged in the business of trafficking in firearms for profit
who will not become licensed, notwithstanding the requirements in the
GCA (as amended by the BSCA) and this rule. But the fact that some
persons purposely violate Federal law is appropriately addressed
through enforcement, and it is not a reason to refrain from providing
further clarity to increase compliance among those dealing in firearms.
The penalties for engaging in the business of dealing in firearms
without a license have long been set forth in the GCA, and this
rulemaking does not purport to change them. The illicit market in
firearms already exists, and nothing in this rule furthers that market.
By providing further clarity about who is required to become licensed,
this rule will help law-abiding persons comply with the law and will
also help ATF in its ability to enforce the law. It will reduce the
number of persons who are currently engaged in certain purchases and
sales of firearms without a license so that their activities do not
perpetuate firearms trafficking.
[[Page 28995]]
Moreover, as noted previously, prohibited persons continue to seek
to purchase firearms through licensed dealers--there were over 130,000
attempts in 2022 alone. By helping sellers better understand when they
must be licensed pursuant to the BSCA, and thus increasing the number
of licensees, this rule will result in more prohibited persons being
denied firearms at the point of sale before they can be used in a
violent crime. And, to the extent criminals purchase firearms through
licensed dealers, the firearms they use will be able to be traced
through the dealers' transaction records when they are later found at a
crime scene or otherwise linked to a violent crime. Unlicensed sellers
are not required to run background checks or maintain transaction
records through which crime guns can be traced. As to the proliferation
of more hand-made and 3D-printed firearms, other rules address the
licensing requirements for persons engaged in the business of
manufacturing firearms.\144\ Nonetheless, when dealers who become
licensed under this rule accept hand-made, 3D-printed, and privately
made firearms into inventory, they are already required to serialize
and record such firearms for crime gun tracing purposes and run
background checks on subsequent purchasers.\145\
---------------------------------------------------------------------------
\144\ For more information on who must be licensed as a
manufacturer, see Definition of ``Frame or Receiver'' and
Identification of Firearms, 87 FR 24652 (Apr. 26, 2022).
\145\ See 27 CFR 478.92(a)(2); 478.125(i).
---------------------------------------------------------------------------
3. Punishes Law-Abiding Citizens
Comments Received
Thousands of commenters stated that the proposed rule is an attack
on the entire population of law-abiding firearm owners through unlawful
infringement of their rights. To that end, many commenters claimed they
will lose the ability to protect themselves and their families because
they believe the proposed rule was designed to make it difficult for
law-abiding Americans to acquire firearms.
Many commenters opined that they would be prevented--potentially
criminally--from passing firearms to family, friends, or others when
trading up, retiring from their gun collecting hobby, or otherwise
wishing to purge firearms from their collections. Many commenters
believed that a certain number of firearms sold, such as more than
three per year, would make them a felon. One commenter was concerned
with how the rule affects him as a WWII re-enactor when members seek to
sell firearms to new members and stated that it would be difficult for
this group to continue their hobby under the proposed rule without
going through an FFL.
In that vein, many commenters stated that the proposed rule is
threatening, puts law-abiding citizens in a burdensome defensive
position of proving to an ``over-zealous'' Government that they are not
required to be licensed as a firearms dealer, and could entrap them.
Some opined that the goal of the proposed rule is to use complex and
confusing language to criminalize the activities of countless average
individuals who wish to sell or otherwise liquidate their firearms as
they naturally gain in value over time, especially during periods of
inflation. One commenter stated that ``[t]his proposal is a transparent
attempt to strong-arm internet service providers, gun shows, technology
platforms, and other facilitators to abandon any involvement in private
gun sales with vague threats of `administrative action' for non-
compliance.'' Another commenter suggested that the proposed rule was
intended to ``make every American gun owner live in fear of buying or
selling a gun at any point in their lives.''
A few commenters raised concerns that, if they inadvertently deal
in firearms without a license, and are therefore determined to be in
violation of the rule by ATF, they would not be able to then become a
legal dealer. ``One footnote in this proposed rule suggests the ATF
might prevent a person from obtaining a license to even engage in
future firearm transactions because they were presumed to have
`willfully engaged in the business of dealing in firearms without a
license,' '' a commenter said. ``Therefore, the agency might warn that
individual of their purportedly unlawful behavior,'' the commenter
continued, and ``[s]uch an individual, wishing to complete a future
firearm transaction without ATF harassment, might submit an application
to obtain a license to deal in firearms. But ATF's footnote suggests
the law-abiding individual might be denied the license simply because
their previous conduct was presumptively unlawful,'' they concluded.
Department Response
The Department disagrees with the assertions that this rule is
intended to or will make felons of law-abiding citizens when they wish
to pass firearms to family or friends, or to sell all or a part of a
personal collection of firearms. This rule effectuates the BSCA and
helps protect innocent and law-abiding citizens from violent crime.
This rule does not place additional restrictions on law-abiding
citizens who occasionally acquire or sell personal firearms to enhance
a personal collection or for a hobby. Instead, the rule provides
clarity to persons on when they are engaged in the business as a dealer
in firearms with the predominant intent to profit. It articulates what
it means to be engaged in the business, as well as other relevant
statutory terms, to identify those persons whose conduct requires that
they obtain a license--as distinguished from persons who make
occasional purchases and sales in private transactions not motivated
predominantly by profit.
This rule does not prevent law-abiding persons from purchasing or
possessing firearms, from selling inherited firearms, or from using
their personal firearms for lawful purposes such as self-defense,
historical re-enactments, or hunting. The rule includes a non-
exhaustive list of conduct that does not support a presumption that a
person is engaging in the business and that may also be used to rebut
the presumptions. Additionally, this rule does not impose any new
restrictions in the application process to become an FFL. Further,
nothing in this rule imposes licensing requirements on internet service
providers, gun show promotors, or technology platforms that are
operating in conformity with applicable legal requirements. And
finally, this rule does not inhibit law-abiding citizens from acquiring
firearms. In fact, this rule will likely increase the number of
licensed dealers available to sell firearms to consumers. Nonetheless,
a small percentage of unlicensed persons who are engaged in the
business under the BSCA amendments, and therefore must become licensed
to continue dealing in firearms, might choose to leave the firearm
sales market rather than become licensed, for a variety of reasons. See
Sections IV.D.5 and VI.A of this preamble for further discussion of
this potential outcome.
In this rule, despite several commenters advocating for a strict
numerical threshold, the Department did not establish a numerical
threshold for what would constitute being ``engaged in the business.''
Any number would be both overinclusive and underinclusive. It would be
overinclusive in that a collector who does not sell firearms to
predominantly earn a profit might sell a significant number of firearms
to liquidate a personal collection (and thus cross the numerical
threshold), even though the GCA provides that sales to liquidate a
personal collection are not made to
[[Page 28996]]
predominantly earn a profit. See 18 U.S.C. 921(a)(22). And it would be
underinclusive in that someone might devote time, attention, and labor
to dealing in firearms with the intent to profit (and would thus
qualify as being engaged in the business under the statute), but might
not meet some hypothetical number of sales and thus elect not to get,
or purposefully evade getting, a license. As stated above, the courts
have indicated that a license may be required even when there is a
single firearms transaction or offer to engage in a transaction where
persons also hold themselves out as sources of additional weapons. See
Section III.D of this preamble. At the same time, however, Congress
specifically exempted from the definition of ``engaged in the
business'' as a dealer in firearms ``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), so a person
who makes multiple sales will not always be engaged in the business.
The Department disagrees with the commenters who said that persons
who inadvertently deal without a license in violation of the rule would
be ``caught in a trap'' of not being able to become a licensed dealer.
Even if a person is presumed to be engaged in the business of dealing
in firearms under one of the EIB presumptions in the rule, ATF would
need to have evidence that the person ``willfully'' engaged in that
business without a license to deny the application for license. See 18
U.S.C. 923(d)(1)(C). Consistent with the way the courts have long
interpreted this term in this administrative firearms licensing
context, the term ``willfully'' means that the license applicant ``knew
of his legal obligation [to become licensed] and purposefully
disregarded or was plainly indifferent to'' that requirement. Article
II Gun Shop, Inc. v. Gonzales, 441 F.3d 492, 497 (7th Cir. 2006)
(quoting Stein's, Inc. v. Blumenthal, 649 F.2d 463, 467 (7th Cir.
1980)).\146\ So, only an applicant who purposefully disregarded or was
plainly indifferent to the licensing requirement would be denied a
license on those grounds.
---------------------------------------------------------------------------
\146\ See also CEW Properties, Inc. v. ATF, 979 F.3d 1271, 1273
(10th Cir. 2020); Shawano Gun & Loan, LLC v. Hughes, 650 F.3d 1070,
1077-78 (7th Cir. 2011) (quoting Gonzales, 441 F.3d at 497);
Armalite, Inc. v. Lambert, 544 F.3d 644, 647-49 (6th Cir. 2008); On
Target Sporting Goods, Inc. v. Attorney General of U.S., 472 F.3d
572, 575 (8th Cir. 2007); RSM, Inc. v. Herbert, 466 F.3d 316, 321-22
(4th Cir. 2006); Willingham Sports, Inc. v. ATF, 415 F.3d 1274, 1277
(11th Cir. 2005); Perri v. ATF, 637 F.2d 1332, 1336 (9th Cir. 1981).
---------------------------------------------------------------------------
The Department disagrees that WWII re-enactors will be unable to
sell firearms to fellow hobbyists under this rule without going through
a licensed dealer. While Federal law already generally prevents persons
from selling firearms to a person in another State without going
through a licensed dealer,\147\ neither existing law nor this rule
prevents persons residing in the same State from occasionally
purchasing and reselling firearms to enhance their personal collections
or for a hobby without going through a licensee. Nonetheless, to
further address these concerns, the Department has amended the
definition of ``personal collection'' in this rule to include, as an
example, personal firearms that a person accumulates for ``historical
re-enactment.''
---------------------------------------------------------------------------
\147\ See 18 U.S.C. 922(a)(5).
---------------------------------------------------------------------------
4. Adverse Impact on Underserved and Minority Communities
Comments Received
Certain commenters opined that the proposed rule could somehow have
an adverse effect on persons with limited economic means who would be
forced to ``choose between living expenses and protecting themselves
and love[d] ones.'' Comments included scenarios such as economically
disadvantaged persons being unable to sell a personally owned firearm
to make ends meet because of, for example, prohibitive costs and
hurdles to becoming licensed; families needing to liquidate assets,
including personally owned firearms, to care for loved ones, pay for
food, rent, or other obligations; disadvantaged persons having to
choose between selling a firearm at a loss or being prosecuted as an
``illegal gun dealer''; and low-income individuals being financially
unable to acquire a firearm to provide protection for themselves or
families as a result of the rule. One commenter stated that the
requirement for individuals to rebut presumptions in administrative or
civil proceedings poses a considerable financial burden, particularly
for those with lower incomes, and specifically persons of color.
Several commenters expressed concern that the proposed rule would
unfairly target minority communities. Some commenters opined that the
proposed rule is classist and racist: ``only rich [White] people'' can
afford to legally obtain guns because licensed firearms dealers are
disproportionately distributed in white neighborhoods; minority
populations experience disproportionately higher rates of arrest versus
non-minority populations; and minority communities will have the
greatest struggle to obtain a firearm for protection where self-defense
needs may be most acute. Another commenter opined that Black and brown
communities, LGBTQI+ people, and transgender people will be
disproportionately affected by the final rule. Others suggested that
the FFL licensing costs should be reduced by this rule, suggesting a
$10 limited FFL license for a personal collector.
Department Response
The Department disagrees that this rule will prevent persons with
limited income from lawfully acquiring or liquidating firearms.
Specifically, under this rule, a person will not be presumed to be
engaged in the business of dealing in firearms when reliable evidence
shows that the person is only reselling or otherwise transferring
firearms occasionally as bona fide gifts, to obtain more valuable,
desirable, or useful firearms for the person's personal collection;
occasionally to a licensee or to a family member for lawful purposes;
to liquidate all or part of a personal collection; to liquidate
firearms they have inherited; or to liquidate firearms pursuant to a
court order. See 27 CFR 478.13(e). With respect to the cost of a dealer
license and the comment suggesting that ATF reduce the FFL licensing
cost, this rule must effectuate the laws of Congress and that amount is
set by 18 U.S.C. 923(a)(3)(B) ($200 for three years, and $90 renewal
for three years). With respect to commenters' asserted limited access
to licensed dealers in minority communities, neither the GCA nor this
rule distinguishes between communities. All persons who engage in the
business of dealing in firearms must be licensed at fixed business
premises within a State, see 18 U.S.C. 923(d)(1)(E), and this rule
implements the licensing requirements wherever that dealing may occur.
The Department further disagrees that this rule will
disproportionately affect lower-income individuals or certain minority
groups. This final rule implements the GCA, as amended by the BSCA,
which regulates commerce in firearms. The GCA requires that all persons
who meet the definition of engaged in the business of dealing in
firearms must become licensed without regard to their socioeconomic
status, where they live, or to which identity groups they belong. The
GCA does not distinguish between minority groups and other groups, and
its licensing provisions are not targeted at reducing
[[Page 28997]]
the number of locations where lower income residents can lawfully
purchase firearms. And, according to several commenters, including a
civil rights organization, minority communities are disproportionately
hurt by gun violence, including hate crimes (often by prohibited
persons who would not pass a background check), and this rule will help
minority communities by reducing gun violence.
Under the GCA and this rule, 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 the person's
personal collection of firearms'' is not ``engaged in the business'' of
dealing firearms. Sec. 478.13(a). In addition, nothing in the GCA or
this rule precludes a person from lawfully purchasing firearms for
self-protection or other lawful personal use, or making isolated sales
of such firearms without devoting time, attention, and labor to dealing
in firearms as a regular course of trade or business. A single or
isolated sale of a firearm that generates pecuniary gain to help make
ends meet, care for loved ones, or pay for food, rent or other
obligations would not alone be sufficient to qualify as being engaged
in the business; instead, there would need to be additional conduct
indicative of firearms dealing within the meaning of the GCA.
Similarly, persons who liquidate (without restocking) all or part of
their personal collection are not considered to be engaged in the
business and may use the proceeds for lawful purposes, including those
mentioned above. However, a person could still be engaged in the
business even when they are using proceeds to make ends meet, care for
loved ones, or pay for food, rent, or other obligations if they were to
engage in additional conduct that is indicative of firearms dealing
within the meaning of the GCA.
5. More Important Priorities and Efficiencies
Comments Received
Many of the commenters opined that there are more important ways
that ATF should address firearm violence and crime instead of
promulgating the rule. Thousands of commenters suggested considering
alternative solutions that address the root causes of gun violence,
such as community-based violence prevention programs, mental health
reform, or improved access to mental health services, including
allocating money for such services. Others suggested implementing
weapon safety courses in schools. Specifically, a commenter said,
``[a]ccording to the government's own statistics [citing to the CDC
website], the majority of gun deaths are due to suicides. And the next
highest category of deaths by firearms is inner city peer on peer
murders of young men[.]'' If the Government wants to try to fix these
sources of firearm-related deaths, the commenter added, it should look
at the evidence and address the root causes.
Many commenters suggested increasing support for law enforcement
agencies, such as funding and equipment, while many more suggested
enforcing current laws, such as targeting stolen firearms or felons
possessing firearms, instead of creating new laws and regulations.
Others suggested targeting straw purchases, criminals who sell firearms
to minors, unlawful internet sales such as Glock switches, and
individuals who lie on the ATF Form 4473.
Some suggested focusing enforcement efforts based on geography,
such as focusing on the southern border to address firearm, drug, and
human trafficking whereas others suggested focusing on gangs or
criminals known to operate in certain cities or other areas and
creating gang task forces. Along those lines, some suggested enforcing
existing Federal law against prohibited persons possessing firearms in
communities where local officials downplay Federal prohibitions for
political reasons. In addition to enforcing current laws, some
suggested other measures, such as harsher prison sentences for violent
criminals, eliminating ``no bail'' policies, constructing more prisons,
and ending a ``revolving door'' justice system that they said fails to
hold violent felons accountable.
Other commenters expressed concern about the firearm background
check system. Some commenters suggested improving firearm background
check response times for currently licensed FFLs before implementing a
rule that would increase the number of licensees. Some suggested
focusing on comprehensive background checks and closing legal loopholes
that allow firearms to fall into the wrong hands.
Department Response
The Department acknowledges comments about treating mental health
and drug addiction, securing schools and workplaces, improving records
available to the NICS, properly funding law enforcement, and various
other national policy issues, such as the root causes of gun violence,
border control, gangs, drug and human trafficking, penal facilities and
laws, and how State and local officials implement laws. The Department
agrees that these are important issues; however, they are not addressed
in the GCA or the BSCA's provisions relating to persons engaged in the
business of dealing in firearms, and therefore are outside the scope of
this rule.
To the extent that commenters raised issues within ATF's
jurisdiction--such as by suggesting that ATF focus on firearms
trafficking, felons possessing firearms, stolen firearms, targeting
straw purchases, criminals who sell firearms to minors, unlawful
internet sales of weapons such as Glock switches, and individuals who
lie on ATF Form 4473--the Department agrees that these are, and should
be, among the Department's most important concerns. At their core, they
are all related to keeping firearms out of the hands of prohibited
persons and others who may commit crimes with firearms. In addition to
ATF's other enforcement efforts, the Department considers this
rulemaking necessary to implement the GCA and address those
concerns.\148\ Clarifying who qualifies as a dealer in firearms and
must be licensed will not only increase the number of FFLs, but also
provide ATF with a better ability to: (1) curb prohibited sales to
minors, felons, and others; (2) better identify and target those
engaging in straw purchases and firearms trafficking (which can
indirectly aid in capturing people who engage in drug and human
trafficking); and (3) identify unlawful internet sales and false
statements on ATF Forms 4473, among other benefits. These issues are
precisely what this rule targets.
---------------------------------------------------------------------------
\148\ Although these other matters may fall within the scope of
ATF's authority, ``an agency has broad discretion to choose how best
to marshal its limited resources and personnel to carry out its
delegated responsibilities.'' Massachusetts v. E.P.A., 549 U.S. 497,
527 (2007).
---------------------------------------------------------------------------
6. Concerns With Effect on ATF
Comments Received
A number of commenters expressed views that the proposed rule would
cause such an increase in the number of dealer applicants and licensees
that ATF would not have the resources to handle the corresponding
increased workload. One commenter stated, ``Legal sales of firearms by
individuals take place every day over trading websites and gun shows,
creating thousands of transactions; estimates in the proposed rule
indicate as many as 300,000 individuals would need to obtain an FFL
which would overburden the ATF and result in long delays and high
expense for the government, likely
[[Page 28998]]
much greater than the estimates.'' Another stated, ``[t]he true cost is
likely to be far greater when factoring in the ATF's expanded
responsibilities, increased workload, and the potential need for
additional personnel and resources to manage the influx of license
applications and compliance checks. This could result in unforeseen
financial and logistical challenges for both the ATF and the
individuals seeking licenses.'' Another commenter stated that the NPRM
would increase the number of inspections ATF would have to conduct,
including just for one or two firearms sold.
In addition to costs to ATF and potential licensees, another
commenter suggested that the proposed rule raises concerns relating to
the NICS. By exponentially increasing the number of transactions
requiring background checks, the proposal risks overburdening the NICS,
leading to delays or even erroneous outcomes, they said, adding, ``This
rule would exacerbate existing problems, thereby undermining its
effectiveness as a tool for ensuring public safety.''
Other commenters suggested that all this extra cost and work would
provide little benefit because nearly all of these current exchange
activities are innocent and legal, having no criminal intent, the
``mountains of applications [would be] for what will be temporary FFL
licenses,'' and the increase would, ironically, ``hinder'' ATF's
ability to solve crime. As one commenter stated, ``After all, licensed
dealers can directly order firearms from distributors or manufacturers,
and the more licensed dealers, the harder it is to ensure all those
dealers are complying with all applicable laws and regulations (fixed
number of agents available for compliance inspections, more license
holders, lower rate of inspections per license holder).'' Although
acknowledging that the licensing fee is set by statute, several of
these commenters nonetheless suggested an increase in the fees to help
ATF. The application fee for dealers in firearms is currently set by
the GCA at $200 for the first three-year period, stated one of these
commenters. They continued by comparing this to the amount people spend
in State fees for hunting licenses, as well as the scope of ATF's work:
``In the area of firearms alone ATF not only assists thousands of law
enforcement agencies nationally and internationally in firearm tracing
but also further contributes to public safety through permitting and
monitoring with follow up compliance checks of 11 different types of
[FFLs]. Your agency needs additional staff and funding support. I
recommend increasing the FFL application fee to $600 to help facilitate
carrying out your public safety mission. If an out of state person went
on an elk hunting trip to Oregon, Wyoming, Montana, or Colorado they
would be paying over $700 just for the license/tags!'' (emphasis
removed)
Department Response
In response to comments saying that ATF does not have resources
necessary to process additional licenses and increasing workload, the
Department acknowledges that the BSCA amended the GCA to broaden the
scope of persons who are required to be licensed as dealers under the
GCA. The Department anticipates that, soon after this final rule is
published, there will be an initial influx of applicants, which will
then level off as licenses are processed and issued. The Department
will reallocate resources as necessary to handle the estimated initial
increase in the number of license applicants and anticipates being able
to do so without taking away from other enforcement priorities.
The Department acknowledges commenters' desire to increase dealer
license fees; however, those fees are set by statute, not by
regulation. See 18 U.S.C. 923(a)(3). As such, those comments are beyond
the scope of this rule.
7. Concerns With the Comment Process
Comments Received
One commenter stated that ATF required all commenters to include
their name and address to comment and added that this requirement
violates the First Amendment, adding that courts have consistently held
that restrictions on anonymous speech are subject to ``exacting
scrutiny.'' They also stated that asking for commenter identity
``severely limit[s] both the degree and amount of public
participation.'' The commenter further stated that this ``is
predictably likely to chill the gun owning public from weighing in and
exercising their right to participate.'' Finally, the commenter pointed
out that many government agencies accept anonymous comments in
identical circumstances and that the Administrative Procedure Act
(``APA'') does not require agencies to authenticate comments. As a
result, the commenter requested that ATF re-open the comment period. At
least one commenter who submitted a comment later in the comment period
expressed skepticism about the large number of comments already posted
in favor of the rule and thought they could have been produced by
automated bots. Further, at least two commenters were under the
impression that ATF refused to accept boxes of petitions submitted by a
firearms advocacy organization.
Department Response
The Department disagrees that ATF's request for self-identification
in its instructions ``severely limit[ed] the degree and amount of
public participation,'' or discouraged the public from commenting, as
evidenced by the thousands of electronic comments that ATF received
that were either submitted anonymously or under an obvious pseudonym.
Moreover, among the tens of thousands of submitted comments opposing
the rule were many comments in which commenters expressly declared that
they would not comply with any regulation or simply made disparaging or
profane statements about the proposed rule, DOJ, or ATF, which
undermines the comment's suggestion that commenters who have a negative
view of ATF were deterred from submitting comments. ATF accepted,
posted, and considered the anonymous and pseudonymous comments and
those with negative views.
The commenter's statement that restrictions on anonymous speech are
subject to ``exacting scrutiny'' under the First Amendment is
irrelevant here because ATF did not restrict anonymous speech. Rather,
ATF required commenters to include their first and last name and
contact information when submitting comments, and noted that ``ATF may
not consider, or respond to, comments that do not meet these
requirements.'' 88 FR 62019. Thus, individuals could submit anonymous
comments at will, but ATF indicated that it might not respond. ATF is
not constitutionally required to respond to all comments, as
``[n]othing in the First Amendment or in [the Supreme Court's] case law
interpreting it suggests that the rights to speak, associate, and
petition require government policymakers to listen or respond to
individuals' communications on public issues.'' Minn. State Bd. for
Cmty. Colleges v. Knight, 465 U.S. 271, 285 (1984). Nonetheless, ATF
did consider the submitted comments, anonymous or not, and is
responding in this preamble to the issues raised, even though not to
every individual comment.
The NPRM instructions under ``Public Participation,'' requiring
that commenters include their first and last name and contact
information (88 FR 62019), were for mail-in comments. ATF generally
requires that persons provide such information on mailed comments in
case of illegible handwriting in the
[[Page 28999]]
comment or in case the agency would like to follow up on a comment to
gain further information or perspective from the commenter. In
addition, ATF also generally requests such information on any comment
submitted by electronic means or mail for the latter reason. Commenters
are encouraged to include such information when submitting an
electronic comment; however, the NPRM made clear that if commenters
were submitting via the Federal eRulemaking portal, they should follow
instructions on the portal. 88 FR 61993, 62019. On the Federal
eRulemaking portal, the Department permits individuals to submit
comments anonymously or even use aliases to mask their identity.
The significant majority of comments were submitted through the
eRulemaking portal and were not required to include identifying
information. As discussed above, thousands of commenters submitted
electronic form letters opposing the rule, and those commenters, though
they could have submitted anonymously, typically provided a name as
part of those mass-mail campaigns. Accordingly, the Department
disagrees that commenters opposing the rule were discouraged from
participating and also disagrees with the suggestion that ATF should
re-open the comment period.
Additionally, the developers of the Federal eRulemaking portal have
in place measures to prevent comments from automated bots \149\ and did
not inform ATF that there were any system irregularities during the
comment period.
---------------------------------------------------------------------------
\149\ According to regulations.gov, the system employs reCAPTCHA
``to support the integrity of the rulemaking process and manage the
role of software-generated comments.'' See Frequently Asked
Questions, Regulations.gov, https://www.regulations.gov/faq (last
visited Mar. 7, 2024).
---------------------------------------------------------------------------
And finally, the commenters who believed that ATF denied acceptance
of boxes of petitions were mistaken. ATF received, accepted, scanned,
posted, and considered the petitions from the firearms advocacy
organization on behalf of their constituency, which were timely mailed
before the close of the comment period in accordance with the NPRM
instructions. Those petitions, which expressed objections to the
proposed rule, totaled over 17,000 comments and were processed and
considered.
8. Constitutional Concerns
a. Violates the Ex Post Facto Clause
Comments Received
A few commenters stated that the NPRM directly violates clause 3 of
Article I, Section 9, of the United States Constitution, which
prohibits ex post facto laws. These commenters' opposition comes from
their belief that, once the final rule goes into effect, sales of
firearms that are currently lawful will no longer be legal, and that
the new prohibition would constitute an ex post facto law. The
commenters who provided reasons for their assertion that this rule
constitutes an ex post facto law primarily focused on their belief that
the rule would be an ``infringement on firearms ownership and property
rights'' and would create a backdoor firearms registry, that the rule
is ``criminalizing and restricting transactions and expanding the scope
of scrutiny'' of the ``engaged in the business'' as a dealer definition
to ``those who the original law had not intended,'' and that the rule
is an attempt to tax and punish Americans that have not committed a
crime. One commenter stated that the EIB presumption that applies when
a person repetitively sells firearms of the same or similar kind or
type ``reads like a trap ready to spring on an unsuspecting collector
who[se conduct] would previously be perfectly legal'' if, for example,
they had exchanged a bolt-action Mosin-Nagant rifle in 7.62x54r for a
Star Model B pistol in 0x18. According to the commenter, ``the concern
here is taking an activity which was entirely acceptable prior to this
rule, then moving the goalposts to make it illegal. It is concerning
that this would appear to be an ex-post facto change.'' Another
commenter asked whether it was legal ``to pass a law in 2022, then
redefine what that law says?''
Department Response
The Department disagrees that the proposed rule violates the Ex
Post Facto Clause. As an initial matter, the rule does not itself
impose any new liability. Rather, the rule implements the BSCA, which
amended the GCA, a statute passed by Congress. A law ``violates the Ex
Post Facto Clause if it applies to events occurring before its
enactment and alters the definition of criminal conduct or increases
the punishment for a crime.'' United States v. Pfeifer, 371 F.3d 430,
436 (8th Cir. 2004) (citing Lynce v. Mathis, 519 U.S. 433, 441 (1997)).
But a law does not violate the Ex Post Facto Clause just because it
applies to conduct that ``began prior to, but continued after'' its
effective date. United States v. Brady, 26 F.3d 282, 291 (2d Cir. 1994)
(internal quotation marks omitted). For example, in the context of
firearm possession, courts have consistently recognized that regulating
the continued or future possession of a firearm that was acquired
before the regulation took effect does not implicate the Ex Post Facto
Clause because such a regulation does not criminalize past conduct.
See, e.g., United States v. Pfeifer, 371 F.3d 430, 436-37 (8th Cir.
2004); United States v. Mitchell, 209 F.3d 319, 322-23 (4th Cir. 2000);
United States v. Brady, 26 F.3d 282, 290-91 (2d Cir. 1994); United
States v. Gillies, 851 F.2d 492, 495-96 (1st Cir. 1988); United States
v. D'Angelo, 819 F.2d 1062, 1065-66 (11th Cir. 1987); cf. Samuels v.
McCurdy, 267 U.S. 188, 193 (1925) (rejecting Ex Post Facto Clause
challenge to statute that prohibited the post-enactment possession of
intoxicating liquor, even when the liquor was lawfully acquired before
the statute's enactment).
Here, the rule does not impose any civil or criminal penalties and
nothing in this rule requires that the statute be applied in a manner
that violates the Ex Post Facto Clause. Nor does this rule regulate
``firearm ownership'' in a vacuum--it addresses dealing in firearms.
This rule describes the proper application of the terms Congress used
in various provisions of the GCA, as modified by the BSCA, to define
what constitutes being engaged in the business as a dealer--and, thus,
when persons must obtain a dealer's license before selling firearms. As
stated above, this rule does not impose liability independent of the
pre-existing requirements of those statutes.
The Department disagrees that this rule ``redefine[s] what that law
says.'' It simply explains and further clarifies the terms of the BSCA.
The Department further disagrees that substantive rules that interpret
an earlier statute--such as the 2022 changes the BSCA made to the GCA--
through a congressional grant of legislative rulemaking authority are
ex post facto laws merely because they interpret or clarify those laws.
The proposed rule is exclusively prospective and does not penalize
prior conduct; it is not an ex post facto law. See Lynce, 519 U.S. at
441. For these reasons, the Department disagrees with commenters'
assertions that the rule violates the Ex Post Facto Clause.
b. Violates the First Amendment
Comments Received
A few commenters raised concerns that the proposed definitions
violate the First Amendment. These commenters
[[Page 29000]]
stated that, ``One is not required by the Constitution to be vetted and
permitted in order to claim protection under the First Amendment Right
to Free Speech,'' which the commenters stated includes the right to
``procure and sell firearms as a citizen.'' In addition, at least one
commenter stated that the ``promotion'' presumption under the
definition of ``predominantly earn a profit'' violates the First
Amendment by infringing on a private citizen's ability to promote their
brand by conflating intent to sell with promotion of a brand. Another
commenter stated that, when an agency can charge a crime against a
person solely because they utter an offer to sell a firearm, ATF is
enforcing thought crimes. The commenter added that this goes beyond
existing law structures and does not meet the standard of calling
``Fire!'' in a theater.
Some commenters expressed First Amendment concerns specifically
regarding the definition of terrorism included in the regulation. While
some commenters voiced approval of including the definition of
terrorism because they believe it allows the Government address
potential threats effectively, other commenters objected, with some
stating it is unnecessary and possibly infringes on freedom of speech
and expression because the Government might inadvertently stifle
protected political activism or dissent. They urged that the definition
needs to be more precise to avoid unintended consequences and to ensure
that legitimate firearms activities are not penalized.
Department Response
The Department disagrees with the commenters' First Amendment
objections. As an initial matter, this rule does not regulate speech at
all, nor is the right to ``procure and sell firearms as a citizen''
protected speech under the First Amendment. Although the Supreme Court
has held that the First Amendment protects ``expressive conduct,'' it
is not implicated by the enforcement of a regulation of general
application not targeted at expressive activity. Arcara v. Cloud Books,
Inc., 478 U.S. 697, 702, 706-07 (1986). (First Amendment scrutiny ``has
no relevance to a statute directed at . . . non-expressive activity,''
but applies ``where it was conduct with a significant expressive
element that drew the legal remedy in the first place.''); see also
Wright v. City of St. Petersburg, 833 F.3d 1291, 1298 (11th Cir. 2016)
(``First Amendment scrutiny `ha[d] no relevance to [a trespass
ordinance] directed at imposing sanctions on nonexpressive activity'
''); cf. Talk of the Town v. Dep't of Fin. & Bus. Servs. ex rel. Las
Vegas, 343 F.3d 1063, 1069 (9th Cir. 2003) (section of Las Vegas Code
barring consumption of alcohol in places that lack valid liquor
licenses ``in no way can be said to regulate conduct containing an
element of protected expression''). Conduct may be expressive where
``[a]n intent to convey a particularized message [is] present, and . .
. the likelihood [is] great that the message would be understood by
those who viewed it.'' Texas v. Johnson, 491 U.S. 397, 404 (1989)
(quoting Spence v. Washington, 418 U.S. 405, 410-11 (1974)). This final
rule does not regulate expressive conduct of any kind, and the
commenters have not offered any valid reason to believe that selling
firearms constitutes expressive conduct. As such, the First Amendment
is not implicated by this rule.
Even if certain aspects of procuring and selling a firearm could be
considered expressive conduct, ``a sufficiently important governmental
interest in regulating the nonspeech element'' of conduct that also
includes an expressive element ``can justify incidental limitations on
First Amendment freedoms.'' United States v. O'Brien, 391 U.S. 367, 376
(1968). Under an O'Brien analysis--
a government regulation is sufficiently justified [1] if it is
within the constitutional power of the Government; [2] if it
furthers an important or substantial governmental interest; [3] if
the governmental interest is unrelated to the suppression of free
expression; and [4] if the incidental restriction on alleged First
Amendment freedoms is no greater than is essential to the
furtherance of that interest.
Id. at 377.
Addressing these elements, first, ``the Government may
constitutionally regulate the sale and possession of firearms.'' Wilson
v. Lynch, 835 F.3d 1083, 1096 (9th Cir. 2016). Second, courts have
repeatedly held that public safety and preventing crime are not only
substantial, but compelling, governmental interests. See, e.g., United
States v. Salerno, 481 U.S. 739, 750 (1987); Mai v. United States, 952
F.3d 1106, 1116 (9th Cir. 2020); Worman v. Healey, 922 F.3d 26, 39 (1st
Cir. 2019); Kolbe v. Hogan, 849 F.3d 114, 139 (4th Cir. 2017); N.Y.
State Rifle & Pistol Ass'n v. Cuomo, 804 F.3d 242, 261 (2d Cir. 2015);
Horsley v. Trame, 808 F.3d 1126, 1132 (7th Cir. 2015). Third, ``the
Government's efforts to reduce gun violence'' are not directed at any
hypothetical expressive conduct and cannot be construed to be related
to the suppression of free expression in any way. Wilson, 835 F.3d at
1096-97. Fourth, the regulation's definitions and rebuttable
presumptions do not ban ownership, purchase, or sale of firearms, nor
do they restrict purchases and sales for enhancement of personal
firearms collections. The regulation merely clarifies that recurring
sales or purchases for resale, with the predominant intent to earn a
profit, constitute being engaged in the business as a dealer. It does
not ban these sales; it just requires that dealers comply with existing
statutory licensing requirements. Therefore, any burden is
``incidental'' and ``minimal.'' Id. Because the regulation ``satisfies
each of the O'Brien conditions,'' it would ``survive[ ] intermediate
scrutiny.'' Id. at 1097 (finding ATF's Open Letter to Federal Firearms
Licensees, informing them that they would have cause to deny a firearm
sale as violating 18 U.S.C. 922(d)(3) if a purported purchaser
presented their medical marijuana registry card, did not violate the
First Amendment even if having the card was considered expression).
Thus, even if the O'Brien standard applies, the regulation does not
violate the First Amendment.
Moreover, this rule does not establish that an individual will be
charged with a crime ``solely'' because they ``utter'' an offer to sell
a firearm. As noted above, the presumptions set forth in this rule do
not apply to criminal proceedings. Further, the application of a
rebuttable presumption based on a seller's speech does not restrict
speech in any way--it means only that, in a proceeding to determine
whether a seller of firearms is ``engaged in the business'' of dealing
in firearms, the Department may be able to make an initial evidentiary
showing based on the seller's speech, and the evidentiary burden then
shifts to the seller. The Supreme Court has held that the First
Amendment ``does not prohibit the evidentiary use of speech to
establish'' a claim ``or to prove motive or intent.'' Wisconsin v.
Mitchell, 508 U.S. 476, 489 (1993). Consistent with this principle,
courts have rejected First Amendment challenges to rebuttable
presumptions that are triggered by speech evidence. See Cook v. Gates,
528 F.3d 42, 63-64 (1st Cir. 2008); cf. Village of Hoffman Estates v.
Flipside, Hoffman Estates, Inc., 455 U.S. 489, 495-96 (1982) (rejecting
claim that a village had unlawfully restricted speech through a drug
paraphernalia licensing ordinance just because guidelines for enforcing
the ordinance ``treat[ed] the proximity of drug-related literature as
indicium that paraphernalia are `marketed for use with illegal cannabis
or drugs'''). Ultimately, the subject of this final rule is a seller's
conduct and not his speech, and the
[[Page 29001]]
rule does not impose any burdens on speech.
To the extent commenters are alleging this rule impermissibly
inhibits commercial speech, it does no such thing. Repetitively or
continuously advertising the sale of firearms can result in a person
being presumed to be engaging in the business, but a presumption may be
rebutted. At any rate, even if unrebutted, the implication of the
presumption is simply that the person must have a license to deal in
firearms--that person is not precluded from advertising the sale of
firearms. Assuming the presumption does burden commercial speech,
courts have routinely recognized that ``[t]he Constitution accords a
lesser protection to commercial speech than to other constitutionally
guaranteed expression.'' Cent. Hudson Gas & Elec. Corp. v. Pub. Serv.
Comm'n of New York, 447 U.S. 557, 562-63 (1980) (internal quotation
marks omitted). If the content of the commercial speech is not illegal
or misleading, the Government must first ``assert a substantial
interest in support of its regulation; second, the government must
demonstrate that the restriction on commercial speech directly and
materially advances that interest; and third, the regulation must be
`narrowly drawn.''' Fla. Bar v. Went For It, Inc., 515 U.S. 618, 624
(1995). As stated above, ``the Government may constitutionally regulate
the sale and possession of firearms,'' Wilson, 835 F.3d at 1096, and
public safety is a compelling governmental interest. Requiring those
who are engaged in the business of dealing in firearms to be licensed--
and thus to keep records and conduct background checks on potential
purchasers to deny transfers to those who are prohibited from
possessing firearms--materially advances public safety. Moreover, this
requirement is narrowly drawn because it pertains to only those ``who
devote[ ] 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.'' It does not
apply to every sale.
The Department also disagrees that the rule's definition of
``terrorism'' is unnecessary or infringes upon protected speech. The
definition mirrors the statutory definition of ``terrorism'' that
Congress enacted and codified in 18 U.S.C. 921(a)(22) and (a)(23), with
only a minor addition at the beginning to state the definitions to
which it applies. It is also necessary to explain the congressionally
enacted proviso that proof of profit shall not be required when a
person engages in the regular and repetitive purchase and disposition
of firearms in support of terrorism. The definition does not constitute
a governmental restriction on speech or expressive conduct, and so it
does not violate the First Amendment.
Again, it bears emphasizing that this statutory definition of
``terrorism'' existed in the definition of ``principal objective of
livelihood and profit'' before the BSCA was passed, and still remains
there verbatim. The BSCA added that same definition to the new
``predominantly earn a profit'' definition. This rule merely moves that
definition within the regulations to be a standalone definition so that
it applies to both the term ``predominantly earn a profit'' and
``principal objective of livelihood and profit'' (in the sections
governing importers, manufacturers, and gunsmiths)--consistent with the
statute--without repeating it in two places, and makes a slight edit at
the beginning to state that it applies to both definitions. This rule
does not further interpret or define that term, and comments in that
regard are beyond the scope of the rule.
c. Violates the Second Amendment
Comments Received
Of those who objected to the NPRM, a majority argued that any
changes to the definitions, or creating new requirements and rebuttable
presumptions, are inconsistent with the Second Amendment and are
therefore unconstitutional. Commenters stated that the right to have--
and thus purchase and sell--firearms dates back to the Founding and
that requiring licenses for any aspect of firearm sales is an
unconstitutional infringement of Second Amendment rights. Many
commenters stated that the rule is ``reclassifying all sales (even
private) to require a `licensed dealer' (FFL) . . . thusly preventing
law abiding United States citizens from obtaining firearms. If a
citizen cannot obtain a firearm, a citizen cannot keep or bear a
firearm violating the Second Amendment,'' and similar statements. Some
of these commenters stated that the rule violates the Second Amendment
by creating universal background checks, making it difficult and costly
for citizens to sell personal firearms, and that it deprives people of
the inherent right to dispose of, trade, or do what they wish with
their own property.
Some stated they understand the importance of balancing public
safety and regulation of illegal firearms activity with firearm
ownership, but expressed concerns that the correct balance point has
not been determined yet or that the proposed regulation might
``inadvertently classify individuals who engage in the lawful and
occasional transfer of personal firearms to friends or family members
as arms dealers,'' raising concerns about overreach and undue burden.
Several commenters tied these concerns to District of Columbia v.
Heller, 554 U.S. 570 (2008), stating that expanding the definition of
who is engaged in the business of dealing in firearms may criminalize
law-abiding citizens engaging in their Second Amendment rights, which
the commenters stated were ``unequivocally affirm[ed]'' by Heller. One
commenter stated that the Heller decision ``emphasized that any
restrictions placed on the Second Amendment must be closely tailored to
avoid unnecessary infringement on individual rights. The proposed rule,
by including casual sellers under the umbrella of those `engaged in the
business,' stretches this definition beyond its historical and legal
boundaries. This is not a close tailoring of restrictions but an undue
burden on average citizens who may occasionally sell firearms without
falling under any standard commercial definition of a firearms
dealer.''
Many other commenters stated that the regulation violates New York
State Rifle & Pistol Ass'n, v. Bruen, 597 U.S. 1 (2022), because, the
commenters argued, there is no analogous historical law from either the
Founding era--when the Second Amendment was ratified--or the
Reconstruction period--when the Fourteenth Amendment's Due Process
Clause incorporated the Second Amendment's protections and rendered
them applicable to the States--that defined a ``dealer'' in firearms or
required background checks, dealer licensing, recordkeeping, or gun
registration. Others stated that the regulation violates Bruen because,
they stated, Bruen precludes the Government from using means-end
scrutiny to justify its firearms laws. Accordingly, the commenters
argued, the proposed rule's use of public safety as a basis for
purportedly banning firearms from average citizens renders it
unconstitutional under Bruen. These commenters further argued the
proposed rule is unconstitutional under Bruen because it serves no
public interest.
A few other commenters directly stated that the BSCA, GCA, and NFA
all violate the Second Amendment. Some added that the ATF regulation is
misinterpreting the BSCA, which did not intend to change the definition
of ``engaged in the business'' or any other definition, and the
proposed rule is thus
[[Page 29002]]
an effort to work around the Second Amendment.
Department Response
The Department disagrees with commenters that the GCA, the BSCA
amendments, or this rule implementing these statutes violate the Second
Amendment. Those statutes and this final rule are consistent with the
Supreme Court's Second Amendment decisions. In Heller, the Court
emphasized that ``the right secured by the Second Amendment is not
unlimited'' and ``nothing in our opinion should be taken to cast
doubt'' on certain laws, including those ``imposing conditions and
qualifications on the commercial sale of arms.'' 554 U.S. at 626-27.
The Court repeated the same statement in McDonald v. City of Chicago,
561 U.S. 742, 786 (2010), and Justice Kavanaugh, joined by the Chief
Justice, reiterated the point in his concurring opinion in Bruen, 597
U.S. at 81 (Kavanaugh, J.).
Those precedents confirm that this rule raises no constitutional
concern under the Second Amendment. The rule addresses the commercial
sale of firearms. This rule does not prevent individuals who are
permitted to possess firearms under Federal law from possessing or
acquiring firearms; individuals remain free to purchase firearms from
an FFL or in a private sale from a non-licensee who is not engaged in
the business of dealing in firearms. Nor does this rule require a
dealer's license for all sales. By its terms, this rule applies only to
those who ``devote[ ] 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.'' 18 U.S.C.
921(a)(21)(C). And because this rule does not mandate a license for all
sales, it does not mandate a background check for all sales. Likewise,
this rule does not prevent those who own firearms from lawfully
selling, acquiring, or keeping this property. This rule does not
prevent law-abiding citizens from making occasional sales or purchases
of firearms for the enhancement of a personal collection or for a
hobby--it concerns only those ``engaged in the business'' of firearms
dealing. Firearm owners would only need a license in the event that
they are devoting 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.
At least one circuit court has rejected a facial Second Amendment
challenge to the licensing requirement in 18 U.S.C. 923(a) on the
ground that it ``imposes a mere condition or qualification. Though
framed as a prohibition against unlicensed firearm dealing, the law is
in fact a requirement that those who engage in the [business of
selling] firearms obtain a license.'' United States v. Hosford, 843
F.3d 161, 166 (4th Cir. 2016). The licensing requirement, which is
implemented by this rule, is ``a crucial part of the federal firearm
regulatory scheme.'' Id. at 168; see also Focia, 869 F.3d at 1286
(prohibiting transfers between unlicensed individuals in different
states ``does not operate to completely prohibit [the defendant] or
anyone else, for that matter, from selling or buying firearms'';
instead, it ``merely'' imposes ``conditions and qualifications on the
commercial sale of arms'' (internal quotation marks omitted)); United
States v. Nowka, No. 11-CR-00474, 2012 WL 2862061, at *6 (N.D. Ala. May
10, 2012) (``[Plaintiff's] right to buy or sell a firearm is not
abridged. It is regulated.''). This rule implements a definitional
change that Congress made in the BSCA, which will expand the number of
firearms sellers affected by the licensing requirement in 18 U.S.C.
923(a).
Additionally, the final rule is consistent with the Supreme Court's
more recent decision in Bruen. That case clarified the standard for
resolving Second Amendment claims ``[i]n keeping with Heller,'' 597
U.S. at 17, and the Court did not draw into question Heller's
explanation that regulations of commercial sales of firearms are
presumptively lawful. See id. at 81 (Kavanaugh, J., concurring); see
also id. at 79 (noting that the Second Amendment does not prohibit the
imposition of objective ``licensing requirements'' commonly associated
with firearms ownership); id. at 72 (Alito, J., concurring) (noting
that nothing in that opinion decided anything about ``the requirements
that must be met to buy a gun''). Under Bruen, to establish a Second
Amendment violation, a challenger must first show that the final rule
implicates ``the Second Amendment's plain text.'' Id. at 17 (majority
opinion). Only if that threshold requirement is met is the Government
then required to ``demonstrate that the [final rule] is consistent with
this Nation's historical tradition of firearm regulation.'' Id. Here,
the final rule does not implicate the Second Amendment's ``plain
text,'' which addresses the right to ``keep and bear Arms'' and is
silent as to the commercial sale of firearms. U.S. Const. amend. II.
Both before and after Bruen, courts have agreed that the Second
Amendment does not ``protect a proprietor's right to sell firearms.''
Teixeira v. County of Alameda, 873 F.3d 670, 690 (9th Cir. 2017); see
also United States v. Kazmende, No. 22-CR-236, 2023 WL 3872209, at *5
(N.D. Ga. May 17, 2023) (rejecting a Second Amendment challenge to 18
U.S.C. 922(a)(1)'s prohibition on willfully engaging in the business of
dealing in firearms without a license on the ground that the ``Second
Amendment . . . simply does not cover the commercial dealing in
firearms.''), report and recommendation adopted, 2023 WL 3867792 (N.D.
Ga. June 7, 2023); United States v. Flores, 652 F. Supp. 3d. 796, 799-
802 (S.D. Tex. 2023) (holding that ``commercial firearm dealing is not
covered by the Second Amendment's plain text''); United States v. King,
646 F. Supp. 3d. 603, 607 (E.D. Pa. 2022) (holding that ``the Second
Amendment does not protect the commercial dealing of firearms'');
United States v. Tilotta, 2022 WL 3924282, at *5 (S.D. Cal. Aug. 30,
2022) (concluding that the plain text of the Second Amendment does not
cover the commercial sale and transfer of firearms).
Even if, contrary to law, the scope of the Second Amendment's
protection extended to commercial dealing in firearms, there is a
robust historical tradition supporting the Government's authority to
require licenses and inspection of firearms sellers. Where a regulation
implicates the Second Amendment, the Government may justify it ``by
demonstrating that it is consistent with the Nation's historical
tradition of firearm regulation,'' including, for example, by pointing
to ``a well-established and representative historical analogue.'' Id.
at 24, 30. To be analogous, historical and modern firearms regulations
need only be ``relevantly similar''; a ``historical twin'' is not
required. Id. at 29-30. In fact, from colonial times, State and local
governments have routinely exercised their authority to regulate the
sale of firearms, through licensing, inspection, and similar
requirements.
For instance, the third U.S. Congress made it unlawful for a
limited period ``to export from the United States any cannon, muskets,
pistols, bayonets, swords, cutlasses, musket balls, lead, bombs,
grenades, gunpowder, sulpher, or saltpetre,'' Act of May 22, 1794, 1
Stat. 369, ch. 33, sec. 1 (``An Act prohibiting for a limited time the
Exportation of Arms and Ammunition, and encouraging the Importation of
the same''), demonstrating a clear understanding that the Constitution
permitted regulation of firearms sellers.
[[Page 29003]]
Further, as the en banc Ninth Circuit recounted in detail, as early as
the 1600s, ``colonial governments substantially controlled the firearms
trade,'' including through ``restrictions on the commercial sale of
firearms.'' Teixeira, 873 F.3d at 685 (further explaining, as examples,
that ``Connecticut banned the sale of firearms by its residents outside
the colony,'' and Virginia law made it unlawful for any individual to
travel more than three miles from a plantation with ``arms or
ammunition above and beyond what he would need for personal use'').
Measures regulating firearms sellers, similar to the inspection and
licensing regime of today, have been commonplace throughout history. To
take one example, in 1805, Massachusetts required that all musket and
pistol barrels manufactured in the State and offered for sale be
``proved'' (inspected and marked by designated individuals) upon
payment of a fee, to ensure their safe condition, and Maine enacted
similar requirements in 1821.\150\ Further, multiple States, such as
Massachusetts (1651, 1809), Connecticut (1775), New Jersey (1776), and
New Hampshire (1820), required licenses or inspection to export or sell
gunpowder (akin to modern ammunition).\151\ See also United States v.
El Libertad,--F. Supp. 3d--,No. 22-CR-644, 2023 WL 4378863, at *7
(S.D.N.Y. July 7, 2023) (finding that historical laws showed
``expansive authority exercised by colonial and early state
legislatures as well as early congresses over the transfer of firearms
between individuals and across borders,'' including through ``licensing
requirements [and] registration requirements''). Similar licensing and
taxation requirements for the sale of gunpowder and certain arms were
enacted through the antebellum and Reconstruction eras.\152\
---------------------------------------------------------------------------
\150\ See 3 Laws of the Commonwealth of Massachusetts, from
November 28, 1780, to February 28, 1807, at 259-61 (1807); 1 Laws of
the State of Maine 546 (1830).
\151\ See Colonial Laws of Massachusetts Reprinted from the
Edition of 1672, at 126, Powder (1890) (1651 statute requiring
license to export gunpowder); 2 General Laws of Massachusetts from
the Adoption of the Constitution to February, 1822, at 198-200, ch.
52, An Act Providing for the Appointment of Inspectors, and
Regulating the Manufactory of Gun-Powder, secs. 1, 8 (1823) (1809
statute providing for the appointment of an ``inspector of gunpowder
for every public powder magazine, and at every manufactory of
gunpowder,'' and imposing penalties for any sale or export of
gunpowder ``before the same has been inspected and marked''); 15 The
Public Records of the Colony of Connecticut, from May, 1775, to
June, 1776, Inclusive 191, An Act for Encouraging the Manufactures
of Salt Petre and Gun Powder (1890) (1775 Connecticut law
establishing, among other things, that no gunpowder manufactured in
the colony ``shall be exported out'' of the colony ``without [an
applicable] licence''); Acts of the General Assembly of the State of
New-Jersey, at a Session Begun at Princeton on the 27th Day of
August 1776, and Continued by Adjournments 6, ch. 6, An Act for the
Inspection of Gun-Powder, sec. 1 (1877) (No person shall offer any
gunpowder for sale ``without being previously inspected and marked
as is herein after directed.''); Laws of the State of New Hampshire;
With the Constitutions of the United States and of the State
Prefixed 276-78, An Act to Provide for the Appointment of Inspectors
and Regulating the Manufactory of Gunpowder, secs. 1, 8 (1830)
(authorizing ``inspector of gunpowder for every public powder
magazine, and at every manufactory of gunpowder in this state'' and
imposing penalties for any sale or disposition of gunpowder ``before
the same has been inspected and marked'').
\152\ The Revised Charter and Ordinances of the City of Chicago:
To Which are Added the Constitutions of the United States and State
of Illinois 123-24, ch. 16, Regulating the Keeping and Conveying Gun
Powder and Gun Cotton, secs. 1, 6 (1851) (1851 city law barring the
sale of gunpowder ``in any quantity'' without government permission,
and barring ``retailer[s] of intoxicating liquors'' and
``intemperate person[s]'' from such permits); The Charter and
Ordinances of the City of Saint Paul, to August 1st, 1863, Inclusive
166, Gunpowder, ch. 21, sec. 1 (1863) (similar 1858 city law
requiring permission to sell gunpowder,); Acts of the General
Assembly of Alabama: Passed at the Session of 1874-75, at 41, An Act
to Establish Revenue Laws for the State of Alabama, Act No. 1, sec.
102(27) (1875) (imposed $25 license fee on dealers of pistols and
certain knives); Acts of the General Assembly of Alabama, Passed at
the Session of 1878-9, at 436-37, Act of Feb. 13, 1879, Act No. 314,
sec. 14 (authorized town to ``license dealers in pistols, bowie-
knives and dirk-knives'').
---------------------------------------------------------------------------
That modern laws regarding the commercial sale of firearms may not
be identical to laws from the Founding era is not dispositive. There
are many reasons other than constitutional limitations that historical
regulations are not a ``dead ringer'' for modern regulations. Bruen,
597 U.S. at 30. For example, during the Founding era, guns in America
were ``produced laboriously, one at a time,'' Pamela Haag, The Gunning
of America 9 (2016), and communities were ``close-knit,'' where
``[e]veryone knew everyone else,'' Range v. Att'y Gen., 69 F.4th 96,
117 (3d Cir. 2023) (en banc) (Krause, J., dissenting) (quoting
Stephanos Bibas, The Machinery of Criminal Justice 2 (2012)). That is
substantially different from today, where guns may be mass-produced
quickly and are widely available for purchase at ubiquitous retailers
through modern technology and more plentiful and far-reaching channels
of national and international commerce, where sellers are unlikely to
know their customers. But from the Founding and before, the principle
remains the same. The Government has been allowed to--and has enacted
measures to--regulate the commercial sale of firearms to prevent their
sale to persons the Government deemed dangerous. Thus, assuming for the
sake of argument that the regulation implicates Second Amendment
rights, it would pass muster under Bruen.
In response to commenters stating that the Department should not
use the Heller two-step process, the Department acknowledges that Bruen
abrogated the ``two-step'' framework of Heller, as ``one step too
many,'' and rejected the application of means-end scrutiny at the
second step. Bruen, 597 U.S. at 19. Although the Department believes
this rule does promote public safety, the Department is not relying on
this benefit in conducting the historical analysis required by Bruen
(assuming again for the sake of argument that it applies).
Therefore, to the extent that commenters argued the rule or the
underlying statute violates the Second Amendment, the Department
disagrees for all of the reasons stated above.
d. Violates the Fourth or Fifth Amendment Right to Privacy
Comments Received
Several commenters claimed the proposed rule violates their right
to privacy under the Fourth Amendment and the Fifth Amendment's Due
Process Clause. These commenters believe that the proposed rule creates
a de facto firearms registry by requiring that people who engage in
recurring purchases and sales with the predominant intent to earn a
profit must obtain a dealer's license. Other commenters stated that
enforcement of the proposed rule would lead to a violation of their
constitutional right to privacy by requiring them to be registered
dealers subject to privacy-invading and warrantless inspections without
breaking a law--even for a single firearms transaction. They raised
particular concerns in this regard for those who operate from home. And
other commenters asserted a Fourth Amendment violation in regard to
their property if the Government knows what firearms or how many
weapons each individual owns. One commenter focused on the rule's
inclusion of electronic marketplaces as a violation of privacy, stating
that including online brokers, auctions, text messaging services, and
similar electronic means of transacting purchases and sales would cause
people to ``forfeit their privacy to the ATF in these matters.''
Department Response
The Department disagrees that the rule violates the Fourth
Amendment or any constitutional right to privacy. Under both the
statute and the proposed and final rules, there are no recordkeeping or
background check requirements for personal firearms that
[[Page 29004]]
are occasionally bought and sold as part of enhancing a personal
collection, such as for sporting purposes. As to the recordkeeping and
background check requirements for the licensees engaged in the business
of dealing in firearms, those records are not maintained in the custody
of the government but are retained by the licensee until they
discontinue their business. See 18 U.S.C. 923(g)(4); 27 CFR 478.129.
Moreover, even when these records are in ATF's possession after the
licensee discontinues their business, due to statutory and permanent
appropriations restrictions, they are not searchable by a transferee's
name or any personal identification code. See 18 U.S.C. 926(a); \153\
Consolidated and Further Continuing Appropriations Act, 2012, Public
Law 112-55, 125 Stat. 552, 609-10 (2011) (``That, hereafter, no funds
made available by this or any other Act may be used to electronically
retrieve information gathered pursuant to 18 U.S.C. 923(g)(4) by name
or any personal identification code . . .''). This rule does not create
or modify requirements with respect to retaining and searching records.
---------------------------------------------------------------------------
\153\ ``No such rule or regulation prescribed after the date of
the enactment of the Firearm Owners' Protection Act may require that
records required to be maintained under this chapter or any portion
of the contents of such records, be recorded at or transferred to a
facility owned, managed, or controlled by the United States or any
State or any political subdivision thereof, nor that any system of
registration of firearms, firearms owners, or firearms transactions
or dispositions be established. Nothing in this section expands or
restricts the [Attorney General's] authority to inquire into the
disposition of any firearm in the course of a criminal
investigation.''
---------------------------------------------------------------------------
The Department also does not agree that this rule will violate a
constitutional right to privacy with regard to commenters' property.
This rule does not require individuals to provide any information with
regard to their possession of firearms. It applies only to those
engaged in the business of dealing in firearms. ``Property used for
commercial purposes is treated differently for Fourth Amendment
purposes from residential property. `An expectation of privacy in
commercial premises . . . is different from, and indeed less than, a
similar expectation in an individual's home.''' Minnesota v. Carter,
525 U.S. 83, 90 (1998) (quoting New York v. Burger, 482 U.S. 691, 700
(1987)). Moreover, every applicant for a license is made aware of ATF's
right of entry into their premises and examination of their records,
see 27 CFR 478.23; thus there can be no reasonable expectation of
privacy in the information contained in those records. Cf. United
States v. Marchant, 55 F.3d 509, 516 (10th Cir. 1995) (finding no
reasonable expectation of privacy in the information contained in ATF
Form 4473 and further noting that ``Form 4473 did not advise Defendant
that the information elicited was private, or that it would remain
confidential''). Additionally, while the proposed rule in no way
establishes a registry of firearms, and Congress has specifically
prohibited such a registry, it is worth noting that the nearly century-
old requirement for the actual registration of privately held firearms
has never once been found to violate a Fourth Amendment right to
privacy.
Some courts have recognized a privacy interest in avoiding
disclosure of certain personal matters under the Due Process Clauses of
the Fifth and Fourteenth Amendments. See Doe No. 1 v. Putnam County,
344 F. Supp. 3d 518, 540 (S.D.N.Y. 2018). Even under these court
decisions, however, ``not all disclosures of private information will
trigger constitutional protection.'' Id. (internal quotation marks
omitted). In at least one circuit, the right to privacy in one's
personal information under the Due Process Clauses is ``limited [to a]
set of factual circumstances involving one's personal financial or
medical information.'' Id. ``[T]he question is not whether individuals
regard [particular] information about themselves as private, for they
surely do, but whether the Constitution protects such information.'' DM
v. Louisa County Dep't of Human Services, 194 F. Supp. 3d 504, 508-09
(W.D. Va. 2016) (internal quotation marks omitted) (finding no right to
privacy with respect to the nature and location of an individual's
counseling sessions). Basic information regarding firearms ownership or
possession is of neither the medical nor financial variety, and no
court has found this information to be constitutionally protected. See
Doe 1, 344 F. Supp. 3d at 541 (``Disclosure of one's name, address, and
status as a firearms license [holder] is not one of the `very limited
circumstances' in which'' a right to privacy exists).
e. Violates the Fifth Amendment--Unconstitutionally Vague
Comments Received
Some commenters objected to the rule on the ground that it is so
vague that it violates the Due Process Clause of the Fifth Amendment.
Most commenters merely stated that the rule violates the Fifth
Amendment because it is unconstitutionally vague, without providing
further details. Of those few commenters that elaborated their
vagueness concern, the primary concern was that the rule does not
define a threshold number of firearms that must be sold to qualify a
person as a dealer in firearms, and that they felt this is
unconstitutionally vague. A couple of other commenters stated that the
rule was unconstitutionally vague and arbitrary in setting some of the
rebuttable presumptions, and focused particularly on the presumption
that a resale within 30 days after purchase could qualify a person as a
dealer in firearms. These commenters believed that the time period
included in this provision was arbitrary and so vague that routine
actions that commonly arise in personal firearms contexts could trigger
the presumption without people realizing it, thus entrapping people or
exposing law-abiding citizens to a criminal prosecution. One commenter
stated that ``[p]hrases like `time, attention, and labor' or
`predominantly earn a profit' are nebulous and subject to
interpretation,'' and stated that this vagueness conflicts with the
principles established in Grayned v. City of Rockford, 408 U.S. 104
(1972).
One commenter argued that the proposed rule is unconstitutional,
relying on Johnson v. United States, 576 U.S. 591 (2015), for the
proposition that a criminal statute is unconstitutionally vague in
violation of due process for either of two reasons: first, if ``it
fails to give ordinary people fair notice'' of what is proscribed; and,
second, if it is ``so standardless that it invites arbitrary
enforcement.'' Johnson, 576 U.S. at 595. The commenter added that
``[o]ther case law expounding the `void for vagueness' doctrine''
includes Grayned. According to the commenter, ``[u]nder Grayned, due
process required that a law provide fair warning and provide `persons
of reasonable intelligence a reasonable opportunity to know what is
prohibited so he may act accordingly.''' Another commenter cited to
Cargill v. Garland, 57 F.4th 447, 469 (5th Cir.) (en banc), cert.
granted 144 S. Ct. 374 (2023) (mem.), and stated, ```ambiguity
concerning the ambit of criminal statutes should be resolved in favor
of lenity.''' Relying on Cargill, the commenter said, ``[a] statute is
ambiguous if, after a court has `availed [itself] of all traditional
tools of statutory construction,' the court is left to `guess at its
definitive meaning' among several options. Id. (cleaned up).'' This
commenter continued, ``In those circumstances involving ambiguous
criminal statutes, the court is `bound to apply the rule of lenity.'
Id. at 471. So even if a court were to find that the statutory
definition of `engaged in the business' is ambiguous enough to allow
[[Page 29005]]
for presumptions of guilt based on a single transaction, that is far
from the most obvious reading of the statute, which interpretation
would thus be resolved in favor of lenity.'' Some congressional
commenters stated, ``The proposed rule raises serious vagueness
concerns in light of the severe penalties. Will someone face a civil
investigation for handing out business cards to sell his personal
collection? What about if someone decides to sell a firearm in its
original packaging?''
Department Response
The Department disagrees with commenters that this regulation,
terms within it, or the rebuttable presumptions established by it are
unconstitutionally vague. To begin, many of the comments are critical
of the specific language Congress included in the statute (which is
being added to the regulation). The Department cannot change the terms
in the statute or their effect on sellers' legal rights and
obligations. However, these comments illustrate the benefits of a rule
that provides additional clarification to the public. The rule explains
the Department's understanding of the statutory terms at issue and
describes how those terms apply to particular circumstances, thus
providing greater clarity to the public.
In any event, however, the terms employed in the statute and rule
are not unconstitutionally vague. ``It is a basic principle of due
process that an enactment is void for vagueness if its prohibitions are
not clearly defined.'' Grayned, 408 U.S. at 108. A law is impermissibly
vague if it ``fails to provide a person of ordinary intelligence fair
notice of what is prohibited, or is so standardless that it authorizes
or encourages discriminatory enforcement.'' FCC v. Fox Television
Stations, Inc., 567 U.S. 239, 253 (2012) (internal quotation marks
omitted). However, ``[c]ondemned to the use of words, we can never
expect mathematical certainty from our language.'' Grayned, 408 U.S. at
110. The definitions in this rule use the terms with their ordinary
meanings and in context, see United States v. TRW Rifle, 447 F.3d 686,
689, 690 (9th Cir. 2006), and are sufficiently clear to ```give the
person of ordinary intelligence a reasonable opportunity to know what
is prohibited,''' Village of Hoffman Estates, 455 U.S. at 498 (quoting
Grayned, 408 U.S. at 108). Absolute certainty is not required. See
Hosford, 843 F.3d at 171 (explaining that laws ``necessarily have some
ambiguity, as no standard can be distilled to a purely objective,
completely predictable standard''); Draper v. Healey, 827 F.3d 1, 4
(1st Cir. 2016) ([I]f due process demanded [a] how-to guide, swaths of
the United States Code, to say nothing of state statute books, would be
vulnerable.''); United States v. Lachman, 387 F.3d 42, 56 (1st Cir.
2004) (``The mere fact that a statute or regulation requires
interpretation does not render it unconstitutionally vague.''); Kolbe
v. O'Malley, 42 F. Supp. 3d 768, 800 (D. Md. 2014) (A ``statute is not
impermissibly vague simply because it does not spell out every possible
factual scenario with celestial precision.'' (internal quotation marks
omitted)). The many objective examples and detailed explanations in the
rule, all supported by a thorough administrative record, provide
clarification and assist people in complying with the statute. This
rule is therefore not unconstitutionally vague.
The Department further disagrees that this rule violates the rule
of lenity. The rule of lenity does not apply whenever a law or rule may
contain some ambiguity. ``The simple existence of some statutory
ambiguity . . . is not sufficient to warrant application of that rule,
for most statutes are ambiguous to some degree.'' Muscarello v. United
States, 524 U.S. 125, 138 (1998). To invoke the rule of lenity, a court
``must conclude that there is a `grievous ambiguity or uncertainty' in
the statute.'' Id. at 138-39 (quoting Staples v. United States, 511
U.S. 600, 619 n.17 (1994)). A grievous ambiguity or uncertainty is
present ```only if, after seizing everything from which aid can be
derived, [a] [c]ourt `can make no more than a guess as to what Congress
intended.''' Ocasio v. United States, 578 U.S. 282, 297 n.8 (2016)
(quoting Muscarello, 524 U.S. at 138-39). This rule does not require
``a guess'' as to what conduct satisfies being ``engaged in the
business''; it adopts the plain, statutory or dictionary meaning of
terms and provides rebuttable presumptions and examples for additional
clarity.
The rule's rebuttable presumptions are also not unconstitutionally
vague; indeed, such presumptions are common in the law. Courts
frequently rely on them because they provide an approach that is
particularized to certain circumstances. The presumptions in this rule
are specific and tailored to particular situations. The fact that they
may be overcome by rebuttal evidence does not render them vague.
Although the presumptions do not address all circumstances in which a
person might be engaged in the business, they do take into account
common fact patterns that have been found to be appropriate indicators.
While a bright line numerical approach might provide greater
clarity, the Department has rejected such an approach for the reasons
identified in Section IV.B.3 of this preamble, as well as in the NPRM.
The Department has also chosen to use presumptions in this rule rather
than another approach,\154\ because these presumptions are consistent
with the 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 even
under the pre-BSCA definition.
---------------------------------------------------------------------------
\154\ For the reasons why the Department did not adopt a factor-
based approach, see Section IV.C.3.
---------------------------------------------------------------------------
f. Violates the Fifth Amendment--Unconstitutional Taking
Comments Received
A few commenters opposed the rule as an unconstitutional taking
under the Fifth Amendment. The primary concerns raised by these
commenters were that, by requiring people who currently sell firearms
without a license to acquire a license, the rule creates a backdoor
registry, enabling the Government to identify what weapons, and how
many, each person has, so that the Government can then enter private
property without a warrant and seize them. One commenter spelled out
the concern more fully, stating, ``Moreover, the rights to self-defense
and to keep and bear arms are, in no small measure, property rights.
The Fifth Amendment's Takings Clause provides additional protection to
these rights. This clause ensures that private property cannot be taken
for public use without just compensation. Arms, as personal property
acquired lawfully, fall under this protection. Therefore, any
regulation that effectively deprives an individual of their arms, or
the utility thereof, intersects with property rights and demands
rigorous scrutiny under the Takings Clause.''
Department Response
The Department disagrees that the proposed regulation constitutes a
taking, and further disagrees that it results in a compensable taking.
As an initial matter, no property is being taken. This rule does not
require individuals who currently own firearms that they might sell or
who might buy firearms in the future to surrender or destroy any
personal property in order to engage in those activities. Further, even
if they predominantly intend to earn a profit through repetitive
purchases or resales, and thus must obtain a dealer license, they still
do not have to surrender or
[[Page 29006]]
destroy any personal property to comply with this rule.
Furthermore, even where the application of Federal firearms laws
results in the forfeiture of firearms, that is not a compensable
taking. The Federal Circuit has recognized that, under Supreme Court
precedent, there are certain exercises ``of the police power that
ha[ve] repeatedly been treated as legitimate even in the absence of
compensation to the owners of the . . . property.'' Acadia Tech. Inc.
v. United States, 458 F.3d 1327, 1332-33 (Fed. Cir. 2006). As the
Supreme Court articulated the doctrine, ``[a] prohibition simply upon
the use of property for purposes that are declared, by valid
legislation, to be injurious to the health, morals, or safety of the
community, cannot, in any just sense, be deemed a taking or an
appropriation of property for the public benefit.'' Mugler v. Kansas,
123 U.S. 623, 668-69 (1887); see Acadia Tech., Inc., 458 F.3d at 1333.
The Federal Circuit and the Court of Federal Claims have also made
clear that these principles apply with full force in analyzing the
impact of firearms regulations. See Mitchell Arms, Inc. v. United
States, 7 F.3d 212 (Fed. Cir. 1993); Akins v. United States, 82 Fed.
Cl. 619 (2008).
Even if a takings analysis would be appropriate, a takings claim
would likely be analyzed under Penn Central Transportation Co. v. City
of New York, 438 U.S. 104, 124 (1978), and the result would be the
same. Under Penn Central, a court considers: (1) the character of the
Government's actions, (2) the property holder's investment-backed
expectations, and (3) the economic impact on the property holder. Id.
No taking exists under the Penn Central test. A restriction
``directed at the protection of public health and safety . . . is the
type of regulation in which the private interest has traditionally been
most confined and governments are given the greatest leeway to act
without the need to compensate those affected by their actions.'' Rose
Acre Farms, Inc. v. United States, 559 F.3d 1260, 1281 (Fed. Cir.
2009). A plaintiff's ``reasonable investment-backed expectations are
greatly reduced in a highly regulated field,'' Branch v. United States,
69 F.3d 1571, 1581 (Fed. Cir. 1995), such as the firearms industry. And
as the Supreme Court has made clear, an owner of personal property
``ought to be aware of the possibility that new regulation might even
render his property economically worthless.'' See Lucas v. South
Carolina Coastal Council, 505 U.S. 1003, 1027-28 (1992). At the same
time, with respect to economic impact, the Court has observed that even
when a regulation ``prevent[s] the most profitable use of [a person's]
property,'' a ``reduction in the value of property is not necessarily
equated with a taking.'' Andrus v. Allard, 444 U.S. 51, 67 (1979); see
also Jacob Ruppert, Inc. v. Caffey, 251 U.S. 264, 303 (1920) (upholding
a Federal law banning nonintoxicating alcoholic beverages on the ground
that ``there was no appropriation of private property, but merely a
lessening of value due to a permissible restriction imposed upon its
use''). Therefore, even under a takings analysis, this rule does not
constitute a taking under the Fifth Amendment.
The Department disagrees that the proposed rule will enable ATF to
create a national firearms registry that can be used to seize firearms.
Since Fiscal Year 1979, Congress has prohibited ATF from using any
Federal funds to create a national gun registry. Treasury, Postal
Service, and General Government Appropriations Act, 1979, Public Law
95-429, 92 Stat. 1001, 1002 (1978). ATF complies with that statutory
prohibition, and this proposed rule does not change either the
prohibition or ATF's compliance. Nor does the rule permit ATF to create
a backdoor national firearms registry, and it is not doing so. Any
records that licensed dealers are legally required to keep remain with
the dealer as long as the business continues, and information from
those records is requested only if a particular firearm becomes part of
a criminal investigation by a law enforcement entity. See 18 U.S.C.
923(g). ATF does not keep or receive records until the licensee ceases
operations. And, although ATF may receive some records from
discontinued businesses, they are not searchable by name or other
personally identifiable information. This rule does not change that.
g. Violates the Fifth Amendment--Equal Protection Clause
Comments Received
A few commenters claimed that the proposed rule violates what they
characterize as the Fifth Amendment's Equal Protection Clause by
enabling uneven application of the law; uneven enforcement; seizing
personal property; and creating a chilling effect on owners, buyers,
and sellers of firearms.
Department Response
The Department disagrees that the proposed rule violates the equal
protection component of the Fifth Amendment's Due Process Clause. Under
certain circumstances, the equal protection component prohibits the
Federal Government from treating similarly situated persons
differently. See Bolling v. Sharpe, 347 U.S. 497, 498 (1954). However,
like the Fourteenth Amendment Equal Protection Clause, the equal
protection component of the Fifth Amendment ``must coexist with the
practical necessity that most legislation classifies for one purpose or
another, with resulting disadvantage to various groups or persons.''
Romer v. Evans, 517 U.S. 620, 631 (1996). If a ``classification
`impermissibly interferes with the exercise of a fundamental right or
operates to the peculiar advantage of a suspect class,' [a court will]
subject the classification to strict scrutiny. Otherwise, [courts] will
uphold the classification if it is `rationally related to a legitimate
state interest.''' Mance v. Sessions, 896 F.3d 699, 711 (5th Cir. 2018)
(footnote omitted) (quoting Nat'l Rifle Ass'n v. ATF, 700 F.3d 185,
211-12 (5th Cir. 2012)). There is no fundamental right to be engaged in
the business of dealing in firearms or in selling firearms without a
license. See Kazmende, 2023 WL 3872209, at *5. Nor are firearms dealers
a ``suspect class,'' meaning a class that is ``saddled with such
disabilities, or subjected to such a history of purposeful unequal
treatment, or relegated to such a position of political powerlessness
as to command extraordinary protection from the majoritarian political
process.'' Massachusetts Bd. of Retirement v. Murgia, 427 U.S. 307, 313
(1976) (internal quotation marks omitted).
Rational basis review thus applies here. Rational basis review
requires a ``rational relationship'' between the classification and
``some legitimate governmental purpose.'' See Heller v. Doe, 509 U.S.
312, 320 (1993). Under rational basis review, a classification ``is
accorded a strong presumption of validity,'' id. at 319, and will be
upheld if ``there is some rational basis for the statutory distinctions
made . . . or [those distinctions] have some relevance to the purpose
for which the classification is made.'' Lewis v. United States, 445
U.S. 55, 65 (1980) (internal quotation marks omitted) (rejecting an
equal protection challenge to a ``firearm regulatory scheme'' that
prohibits a felon from possessing a firearm).
There is clearly a rational basis for requiring those engaged in
the business of dealing in firearms to be licensed according to the
classifications and other requirements set forth in this rule. The
``principal purpose'' of the GCA is ``to curb crime by keeping firearms
out of the hands of those not legally entitled to possess them.''
Huddleston v. United States, 415 U.S. 814, 824 (1974)
[[Page 29007]]
(internal quotation marks omitted). As a result, ``[c]ommerce in
firearms is channeled through federally licensed importers,
manufacturers, and dealers in an attempt to halt mail-order and
interstate consumer traffic in these weapons.'' Id.; see also United
States v. Biswell, 406 U.S. 311, 315 (1972) (``[C]lose scrutiny'' of
``interstate traffic in firearms'' is ``undeniably of central
importance to federal efforts to prevent violent crime and to assist
the States in regulating the firearms traffic within their borders'');
id. at 315-16 (``Federal regulation'' of the traffic in firearms
``assures that weapons are distributed through regular channels and in
a traceable manner''); United States v. Hosford, 82 F. Supp. 3d 660,
667 (D. Md. 2015) (prohibiting engaging in the business of firearms
without a license ``ensures that significant commercial traffic in
firearms will be conducted only by parties licensed by the federal
government'' (internal quotation marks omitted)); id. (``Nor is the
licensing requirement onerous.''). As discussed throughout this
preamble, the regulatory changes in this final rule are essential to
implementing Congress's changes to the GCA and furthering the
Government's interest in having people who are engaged in the business
of selling firearms be licensed as FFLs.
h. Violates the Fifth Amendment--Due Process Clause
Comments Received
A few commenters claimed that the proposed rule violates the Fifth
Amendment's Due Process Clause and the concept of ``innocent until
proven guilty'' by creating rebuttable presumptions. The Due Process
Clause states, ``No person shall be . . . deprived of life, liberty, or
property, without due process of law . . . .'' U.S. Const. amend. V.
Some of these commenters asserted that the presumptions reduce the
scrutiny that would be required under the Due Process Clause before
charging a person with a crime or removing their property, or cause a
person to inadvertently commit a crime without knowing it would be seen
that way under a presumption.
Others interpreted the presumptions as causing people to be
presumed guilty, and then having to prove their innocence, thereby
undermining the concept of ``innocent until proven guilty.'' Two U.S.
senators stated, ``If the proposed rule goes into effect, innocent
people will have to prove to the ATF that they are not firearms dealers
when they, for example, try to resell firearms that are in the original
packaging or represent that they can sell additional firearms to their
friends. These types of activities do not make someone a licensed
firearms dealer. Nothing in current law, including as amended by the
BSCA, empowers the ATF to shift the burden to an innocent person to
prove that keeping a firearm in its original packaging or discussing
the sale of firearms to friends or family makes him a licensed firearms
dealer.''
Other commenters asserted that the statutory provision saying that
it is not necessary for the Government to prove intent to profit if the
person was dealing in firearms for criminal purposes or terrorism runs
contrary to the axiom that one is innocent until proven guilty and
raises due process concerns under the Fifth Amendment. Others were
concerned that the process of defending oneself during administrative
processes to rebut a presumption would require people to set themselves
up for self-incrimination during a subsequent criminal process. One
commenter explained that using rebuttable presumptions shifts the
burden of proof from the Government to the subject of the
investigation, and runs counter to the Fifth Amendment, which they
explained precludes using ``forced testimony'' against a person in a
criminal trial unless waived. The commenter argued that if an
accusation that a person is engaged in the business of dealing in
firearms without a license is based upon a rebuttable presumption, then
the person is unfairly and unconstitutionally placed in legal jeopardy.
The person will lose the civil or administrative action against them,
the commenter said, if they do not present facts to rebut the
presumption, but then the information shared with the Government will
be available for use against them in a criminal case. (The commenter
cited Allen v. Illinois, 478 U.S. 364 (1986), Minnesota v. Murphy, 465
U.S. 420, 435 & n.7 (1984), and other cases.) In other words, the
commenter added, the person is penalized for not responding to the
inquiry or allegation based upon a presumption. (The commenter cited
Marchetti v. United States, 390 U.S. 39 (1968).)
Department Response
The Department disagrees that the rebuttable presumptions in this
rule violate the Due Process Clause of the Fifth Amendment. First, the
rebuttable presumptions apply only to shift the burden of production,
not the burden of persuasion. Although the presumptions expressly do
not apply in criminal proceedings, even in that context, presumptions
that shift only the burden of production do not violate due process.
See Ruan v. United States, 597 U.S. 450, 463-64 (2022). Second, ``[t]he
law is well established'' that presumptions shifting the burden of
production ``may be established by administrative agencies, as long as
there is a rational nexus between the proven facts and the presumed
facts.'' Cablevision Sys. Corp. v. F.C.C., 649 F.3d 695, 716 (D.C. Cir.
2011); see also Cole v. U.S. Dep't of Agric., 33 F.3d 1263, 1267 (11th
Cir. 1994); Atchison, Topeka & Santa Fe R.R. v. Interstate Com. Comm'n,
580 F.2d 623, 629 (D.C. Cir. 1978). The BSCA broadened the scope of
persons who are required to be licensed under the GCA, and the
implementing presumptions in this rule are necessary to provide persons
with a greater understanding as to who is likely to be ``engaged in the
business'' as a ``dealer'' under that new standard. The presumptions
are narrowly tailored and based on specific firearms purchase and sale
activities to effectuate that purpose. As a result, there is a rational
connection between the facts to be proven--for example, frequent and
multiple purchases and resales, accepting credit cards as a method of
payment, advertising, etc.--and the presumed facts--being engaged in
the business or having the requisite intent to profit. See USX Corp. v.
Barnhart, 395 F.3d 161, 172 (3d Cir. 2004) (finding agency's
``rebuttable presumption [was] entirely reasonable'' and noting that
the ``presumption is rebuttable and therefore avoids problematic
mechanical operation'').
Contrary to commenters' assertions, the rebuttable presumptions in
this rule, even when applied in a civil or administrative proceeding,
do not alleviate the burden of persuasion on the Government to prove
that a person is willfully engaged in the business without a license
under the applicable evidentiary standard. They neither limit nor
prescribe the manner in which a party can rebut such a presumption.
Agencies may adopt evidentiary presumptions provided that the
presumptions shift the burden of production, not the burden of
persuasion (also sometimes referred to as the burden of proof).
Cablevision, 649 F.3d at 716.\155\ That is the case here. Because the
rebuttable presumptions are merely evidentiary tools to assist the
trier of fact in determining whether the Government has met its burden
of production in a given proceeding and
[[Page 29008]]
do not shift the burden of persuasion, this rule does not violate due
process.\156\ In the NPRM, the Department stated that a person ``shall
not be presumed to be engaged in the business of dealing in firearms''
when the person engaged in certain types of conduct (e.g., clearly a
person is not presumed to be engaged in the business when that person's
conduct is limited to activity the statute specifically excludes).
However, to alleviate commenter concerns, the regulatory text of this
final rule now makes clear that evidence of such conduct may also be
presented as rebuttal evidence (e.g., gifts, certain occasional sales,
etc.), and further makes clear that additional types of reliable
rebuttal evidence could be offered beyond those examples.
---------------------------------------------------------------------------
\155\ See also Chem. Mfrs. Ass'n. v. Dep't of Transp., 105 F.3d
702, 706 (D.C. Cir. 2007); U.S. Steel Corp. v. Astrue, 495 F.3d
1272, 1284 (11th Cir. 2007) (internal quotation marks omitted)).
\156\ See Ruan v. United States, 597 U.S. 450, 463-64 (2022)
(Statute providing ``a presumptive device, akin to others we have
recognized in a criminal context, which merely shift[s] the burden
of production to the defendant, following the satisfaction of which
the ultimate burden of persuasion returns to the prosecution'' did
not violate due process); Alabama By-Products Corp. v.
Killingsworth, 733 F.2d 1511, 1517 (11th Cir. 1984) (regulatory
presumption under 20 CFR 727.203(a)(1) that miner is presumed to be
disabled with an X-ray showing of pneumoconiosis did not violate due
process).
---------------------------------------------------------------------------
The Department acknowledges the commenters' concerns about the
possibility of self-incrimination if they provide rebuttal evidence in
an administrative or civil proceeding that could be used against them
in a criminal proceeding. The Fifth Amendment privilege against
compulsory self-incrimination, however, can be asserted ``in any
proceeding, civil or criminal, administrative or judicial,
investigatory or adjudicatory,'' and it ``protects against disclosures
which the witness reasonably believes could be used in a criminal
prosecution or could lead to other evidence that might be so used.''
Kastigar v. United States, 406 U.S. 441, 444-45 (1972). The Fifth
Amendment's protection against self-incrimination not only protects the
individual against being involuntarily called as a witness against
himself in a criminal prosecution, but it also affords protection
against having compelled responses provided in civil or administrative
proceedings used against him in a later criminal prosecution. Lefkowitz
v. Turley, 414 U.S. 70, 77 (1973). Moreover, it is not uncommon for
individuals to have to balance the implications of providing testimony
in a civil or administrative case against the potential that such
testimony may be used in a future criminal proceeding. For instance,
this circumstance can occur whenever a statute has criminal, civil, and
administrative implications. See, e.g., 15 U.S.C. 1825(a), (b) (civil
and criminal penalties for violations relating to sales or exhibitions
of horses that are sore); 18 U.S.C. 670(c), (d) (civil and criminal
penalties for theft of medical products); 22 U.S.C. 2778(c), (e) (civil
and criminal penalties for unlawful exportation of defense articles);
30 U.S.C. 820(a), (b), (d) (civil and criminal penalties for violations
of mine health and safety standards); and 33 U.S.C. 533(a), (b) (civil
and criminal penalties for failing to comply with lawful orders of the
Coast Guard).
The statutory definition of ``terrorism'' existed in the GCA's
definition of ``principal objective of livelihood and profit'' before
the BSCA was passed, see 18 U.S.C. 921(a)(22) (2020), and remains there
verbatim. The BSCA added that same definition to the new definition of
``to predominantly earn a profit'' in the GCA, as well. This rule
merely: (1) moves that definition within the regulations to be a
standalone definition so that it applies to both the term
``predominantly earn a profit'' and ``principal objective of livelihood
and profit'' without repeating it in two places; and (2) makes a minor
revision to identify the provisions to which the definition applies.
This rule does not further interpret or define that term, and comments
in that regard are beyond the scope of the rule.
i. Violates the Tenth Amendment
Comments Received
Some commenters opposed the proposed rule on the grounds that it
violates the Tenth Amendment, which provides: ``The powers not
delegated to the United States by the Constitution, nor prohibited by
it to the States, are reserved to the States respectively, or to the
people.'' U.S. Const. amend. X. Some of these commenters referred to
the rule as a violation of the separation of powers or federalism. The
majority of these commenters stated that the rule ``will override the
authority of the states with overburdensome federal regulations and
strip state's rights.'' One commenter suggested that this rule will
``intrud[e] [upon] states' responsibilities.'' Several commenters
stated that the power to regulate commerce in firearms is not a power
delegated to the Federal Government. Others stated that, although the
Federal Government has the power to regulate interstate commerce in
firearms, it has not been delegated authority to regulate commerce
between people within a given state, or in intrastate commerce. One
commenter stated that, ``as long as the transaction doesn't cross state
lines, it cannot be regulated by the Federal government.'' A couple of
commenters cited McDonald v. City of Chicago, 561 U.S. 742 (2010), for
the proposition that each state has its own body of laws that reflect
its unique needs, culture, and opinions of its residents, and has the
autonomy to tailor public safety measures to these unique situations.
These commenters stated that the proposed rule disregards this
principle.
Department Response
The Department disagrees that the rule violates the Tenth
Amendment. Commenters seemingly argued that the powers exercised by the
Department in issuing the rule were ``powers not delegated to the
United States by the Constitution, nor prohibited by it to the
States.'' U.S. Const. amend. X. However, if Congress has acted within
its power under the Commerce Clause, ``the Tenth Amendment expressly
disclaims any reservation of that power to the States.'' See New York
v. United States, 505 U.S. 144, 156 (1992). Simply put, a valid
exercise of Congress' power is not a violation of the Tenth Amendment.
Multiple courts have repeatedly and consistently upheld the GCA as a
valid exercise of Congress' Commerce Clause power, see, e.g., United
States v. Hosford, 843 F.3d 161, 163 (4th Cir. 2016); United States v.
Rose, 522 F.3d 710, 716-19 (6th Cir. 2008); Navegar, Inc. v. United
States, 192 F.3d 1050, 1054-1065 (D.C. Cir. 1999), and rejected
challenges to the statute on Tenth Amendment grounds, see, e.g., Bezet
v. United States, 714 F. App'x 336, 342-43 (5th Cir. 2017) (``[E]ach
provision [of the GCA] that Bezet has standing to challenge was validly
enacted under the commerce power or the taxing power. Therefore, the
district court was correct to reject Bezet's claims under the Tenth
Amendment.'').
As for commenters who argued Congress does not have authority to
regulate any intrastate firearms transactions, regardless of its
connection to interstate commerce, Congress may ``regulate purely local
activities that are part of an economic `class of activities' that have
a substantial effect on interstate commerce.'' Gonzales v. Raich, 545
U.S. 1, 17 (2005). Raich held that one situation in which ``Congress
can regulate purely intrastate activity'' even if that activity is not
itself commercial, is ``if it concludes that failure to regulate that
class of activity would undercut the regulation of the interstate
market in that commodity.'' Id. at 18. When there is a ``comprehensive
framework for regulating the production, distribution, and possession''
of a commodity, the fact that the regulatory scheme
[[Page 29009]]
``ensnares some purely intrastate activity is of no moment.'' Id. at
22, 24. This analysis has been specifically applied to firearms. See
Montana Shooting Sports Ass'n v. Holder, No. CV-09-147, 2010 WL
3926029, at *17 (D. Mont. Aug. 31, 2010) (``As Raich instructs, the
fact that Federal firearms laws `ensnare some purely intrastate
activity,' such as . . . manufacturing and sales activity . . . , `is
of no moment.' Under Raich, the National Firearms Act and Gun Control
Act constitute a valid exercise of federal commerce power, even as
applied to the purely intrastate manufacture and sale of firearms . . .
.'') (quoting Raich, 545 U.S. at 22), aff'd, 727 F.3d 975 (9th Cir.
2013); see also United States v. Stewart, 451 F.3d 1071, 1078 (9th Cir.
2006); Hollis v. Lynch, 121 F. Supp. 3d 617, 640 (N.D. Tex. 2015)
(citing Raich, 545 U.S. at 22), aff'd, 827 F.3d 436 (5th Cir. 2016);
Rose, 522 F.3d at 717-18.
j. Violates Other Constitutional Provisions
Comments Received
A small number of commenters stated that the NPRM violates the
Eighth Amendment's prohibition against excessive fines and cruel and
unusual punishments; the Ninth Amendment (which states, ``[t]he
enumeration in the Constitution, of certain rights, shall not be
construed to deny or disparage others retained by the people,'' U.S.
Const. amend. IX); and the Equal Protection and Due Process Clauses of
the Fourteenth Amendment. These commenters did not explain how they
thought the proposed rule violated these constitutional provisions. One
commenter stated that the proposed rule constitutes restricted zoning
that will deprive people of their rights and is therefore
unconstitutional. Numerous other commenters stated that the NPRM is
unconstitutional and deprives people of their rights, but did not
provide detailed arguments, although some of these commenters based
their statement on a belief that the rule requires anyone who sells a
firearm to be licensed as a dealer or that it creates a universal
background check. Several commenters stated that the Constitution does
not grant the Federal Government, including Congress, the authority to
regulate firearms or the trade in firearms, and any law or regulation
that does so is unconstitutional. Some of these commenters specifically
stated that the BSCA, and even the NFA and GCA, are unconstitutional
laws.
Department Response
The Department disagrees that the proposed rule violates the Eighth
Amendment's protection against excessive fines and cruel and unusual
punishments. Criminal and civil penalties, including forfeiture, can be
considered fines under the Eighth Amendment if they are punishments for
an offense and, thus, must not be excessive. Austin v. United States,
509 U.S. 602, 619 (1993); Disc. Inn, Inc. v. City of Chicago, 72 F.
Supp. 3d 930, 934 (N.D. Ill. 2014), aff'd, 803 F.3d 317 (7th Cir.
2015). Under the Eighth Amendment, a ``fine'' is ``excessive'' if it is
``grossly disproportional to the gravity of [the] offense.'' United
States v. Bajakajian, 524 U.S. 321, 334 (1998). Here, the penalties for
dealing firearms without a license are up to five years' imprisonment,
a $250,000 fine, or both. See 18 U.S.C. 922(a)(1)(A), 923(a),
924(a)(1)(D), 3571(b)(3). The GCA does not require a minimum penalty,
and the penalty in any particular case will vary according to
circumstances, so the Department disagrees that the penalties
associated with unlawfully dealing in firearms (which could be very low
or none) are facially ``excessive.'' The Department may also seek
forfeiture of the property involved in criminal activity. Courts have
repeatedly found on a case-by-case basis that these are not excessive
penalties, see, e.g., United States v. Approximately 627 Firearms, More
or Less, 589 F. Supp. 2d 1129, 1135-37 (S.D. Iowa 2008), and the
proposed rule does not increase the penalties for noncompliance with
the GCA, which are set by statute.\157\
---------------------------------------------------------------------------
\157\ To the extent commenters argue that the fees required to
be a Federal firearms licensee violate the Eighth Amendment, they
are (1) not a fine, and (2) not excessive.
---------------------------------------------------------------------------
The Department also disagrees that the rule violates the
commenters' rights under the Ninth Amendment. The BSCA amendments to
the statutory definition of ``engaged in the business'' and this rule
implementing those amendments constitute only a modest congressional
expansion of the previous FFL licensing requirements, and do not
infringe upon any constitutional rights. The commenters discussed an
implied right to self-defense and a right to ``transfer nonliving
personal property without government hindrance or supervision.'' This
rule does not prevent any individuals from exercising self-defense, and
no court has ever recognized a categorical right to transfer personal
property free of government regulation. The Ninth Amendment ``does not
confer substantive rights in addition to those conferred by other
portions of our governing law.'' Gibson v. Matthews, 926 F.2d 532, 537
(6th Cir. 1991).
It is unclear how the commenters believe that the rule would
violate the Equal Protection or Due Process Clauses of the Fourteenth
Amendment. First, the Fourteenth Amendment applies to the States and
State actors, not Federal agencies. See Shell v. United States Dep't of
Housing & Urban Dev., 355 Fed. App'x 300, 307 (11th Cir. 2009). Second,
the rule, like the statute, applies to all persons and does not burden
one suspect class or group of people more than others. Instead, the
rule helps to identify persons who are engaged in the business of
dealing in firearms or have the predominant intent to earn a profit
through certain firearms purchase and resale activities. Nor is the
Government engaging in intentional disparate treatment of a suspect
class or group of people regarding a fundamental right. This final rule
has also complied with the requirements of the APA, including public
notice and comment, of which the commenters availed themselves during
the proposed rule stage. See 5 U.S.C. 553. With respect to a rulemaking
of general and prospective applicability, the Due Process Clause does
not require additional procedural safeguards. See Bi-Metallic Inv. Co.
v. State Bd. of Equalization, 239 U.S. 441, 445 (1915); see also
General Category Scallop Fishermen v. Sec'y of U.S. Dept. of Commerce,
720 F. Supp. 2d 564, 576 (D.N.J. 2010) (explaining that publication in
the Federal Register satisfies notice requirements under the Due
Process Clause).
The Department disagrees that this rule amounts to restricted
zoning and is therefore unconstitutional. The commenter seems to
suggest that because the BSCA and this rule will result in more
firearms sellers being deemed to be ``engaged in the business'' within
the meaning of 18 U.S.C. 921, those sellers will no longer be permitted
to make firearms sales from their homes and will instead have to comply
with State and local commercial zoning laws. However, State and local
governments determine zoning classes and requirements pursuant to their
police powers. Carter v. City of Salina, 773 F.2d 251, 254 (10th Cir.
1985) (``It is the general rule that zoning ordinances are in
derogation of common-law property rights and find their authority
through the state police power.''). Nothing in this rule purports to
alter State and local zoning laws or dictate how those laws should
treat firearms sellers who are ``engaged in the business'' of dealing
in firearms under Federal law. Nor does the commenter point to any
particular
[[Page 29010]]
zoning restrictions that might apply to an individual firearms seller
who would be ``engaged in the business'' of dealing in firearms under
this rule. At bottom, this rule does not create additional zoning
restrictions. Such restrictions, if they exist at all, are created and
managed on the State, local, and Tribal levels.
9. Statutory Authority Concerns
a. Lack of Delegated Authority To Promulgate the Rule
Comments Received
A majority of the commenters opposed to the rule argued that ATF is
exceeding its authority by promulgating the rule, and that it is the
job of Congress to change the laws and the job of Federal agencies to
enforce them. A majority of these commenters stated that they
considered the proposed regulation to be a method of changing the law
without passing new legislation and stated that Congress has given ATF
no additional authority to ``re-define'' ``details'' in the law. One
commenter stated that ``No federal agency has the right to interpret
laws, amendments, or constitutions. That's what [C]ongress is for.'' A
few others made similar statements. Other commenters stated that the
NPRM is an executive order or a law itself, and ATF has no authority to
change law via an executive order or by issuing new laws.
One commenter, instead of saying that ATF has no authority to
promulgate regulations, stated that ATF has no authority to ``devise
its own definitions.'' They further argued that the only exception to
this is the term ``collector,'' because the statute specifically
delegates authority to the Attorney General to further define that
term. The commenter concluded that when Congress includes explicit
authorization to define one term, it negates any implied regulatory
power to expand definitions for other terms, quoting the expressio
unius est exclusio alterius principle described in Bittmer v. United
States, 598 U.S. 85, 94 (2023). A second commenter, in a similar but
narrower vein, pointed to the ``specific definitions provided by
Congress for both `engaged in the business' and `predominantly earn a
profit.' '' These definitions, the commenter argued, ``should entirely
foreclose any attempt by ATF to redefine those terms.'' The commenter
quoted Royce v. Hahn, 151 F.3d 116, 123 (3d Cir. 1998), for the
proposition that ``[s]uch an explicit reference to a statutory
definition demonstrates a Congressional intent to forestall
interpretation of the term by an administrative agency and acts as a
limitation on the agency's authority.''
Some commenters stated that the proposed definition of ``engaged in
the business'' is contrary to or an overreach of the BSCA or the FOPA.
One commenter asked ``[w]here in the text of the FOPA does the ATF
believe Congress expressly grants it the authority to redefine `engaged
in the business' as Congress has clearly defined it through several
amendments made to the FOPA by Congressional legislative action?''
Another commenter, citing 18 U.S.C. 926(a) and section 106 of FOPA, 100
Stat. at 459, stated that the FOPA reduced ATF's regulatory authority
under the GCA by changing the original phrase `` `such rules and
regulations as he deems reasonably necessary' '' to `` `only such rules
and regulations as are necessary.' '' The commenter asserted that this
change means that ATF has the authority to enact only regulations that
are ``necessary [for enforcement of the Act] as a matter of fact, not
merely reasonably necessary as a matter of judgment.'' Another
commenter, characterizing the BSCA, stated that ``[t]he essence of the
change was simply that illegal firearm sales need not amount to a
person's `livelihood' for that activity to be criminally actionable. It
was never intended to give the administration a blank check to
comprehensively rewrite settled law or understandings about private
firearms sales for lawful purposes or for the enhancement or
liquidation of personal firearm collections.'' One commenter cited the
legislative record for the GCA, contending that Congress declined to
adopt a provision that would have made it a crime to violate any
regulation promulgated pursuant to the GCA due to asserted concerns
that the provision would delegate to ATF the authority to determine
what constitutes a crime. The commenter concluded that the proposed
rule ``would do exactly what Congress rejected when it enacted the GCA
in 1968. It would redefine and expand GCA definitions, with the
consequence that unlawful acts would be expanded by regulation. ATF has
no such authority.''
A few commenters argued that the regulation exceeds ATF's authority
because it criminalizes behavior or deprives people of something. As a
result, these commenters assert that the alleged penal provisions must
be clearly stated in the statute itself. One commenter stated that the
regulation, ``with a stroke of a pen creates violations that may lead
to fines, confiscation of assets and possibly jail time.'' Another
added that, because the proposed rule involves criminal penalties, it
must ``not criminalize any action that is either not clearly prohibited
by the law or that is specifically prohibited by the law.'' ``Removing
rights,'' added another commenter, ``should be a matter take[n] up
before the full body of Congress and U.S. Citizens, not an un-elected
group of individuals.'' An additional commenter couched the issue in
terms of deference, citing cases like United States v. Apel, 571 U.S.
359, 369 (2014), for the proposition that because the GCA is a criminal
statute, ATF's reading is not entitled to any deference.
Department Response
As an initial matter, the Department disagrees that this rule
``comprehensively rewrite[s]'' or otherwise alters ``settled law'' in a
manner inconsistent with Congress's enactments. Most recently, Congress
passed the BSCA in 2022, and this rule implements the GCA, as amended
by the BSCA. The Department and ATF have the legal authority to
promulgate regulations and rules that are necessary to implement,
administer, and enforce the GCA, as amended by the FOPA and the BSCA,
including its definition of ``engaged in the business'' as a dealer.
See 18 U.S.C. 926(a); 28 U.S.C. 599A(b)(1), (c)(1); 28 CFR 0.130(a)(1)-
(2); Treas. Order No. 221(1), (2)(d), 37 FR 11696-97 (June 10, 1972).
This rule--which updates ATF's regulations in accordance with the
BSCA's new statutory definition of when a person is considered to be
``engaged in the business'' and makes other related changes--is a valid
exercise of that statutory authority. See Nat'l Rifle Ass'n v. Brady,
914 F.2d 475, 479 (4th Cir. 1990) (``Because Sec. 926 authorizes the
[Attorney General] to promulgate those regulations which are
`necessary,' it almost inevitably confers some measure of discretion to
determine what regulations are in fact `necessary.' '')
The rule is also consistent with ATF's historical experience
implementing the GCA. In the original GCA implementing regulations in
1968, ATF's predecessor agency provided regulatory definitions of terms
that Congress did not define in the statute. 33 FR 18555 (Dec. 14,
1968). Since that time, ATF has promulgated additional regulatory
definitions to implement amendments to the GCA, including FOPA and the
Brady Act. See, e.g., Commerce in Firearms and Ammunition, 53 FR 10480
(Mar. 31, 1988) (providing definitions for, among other terms,
``dealer'' and ``engaged in the business''); Definitions for the
Categories of Persons Prohibited from Receiving Firearms, 62 FR 34634
(June
[[Page 29011]]
27, 1997). Now that Congress has passed further legislation to amend
the statutory definition of certain terms, it is logical and
appropriate for ATF--consistent with its statutory authority and
experience in administering the relevant statutory provisions--to
review existing rules and promulgate new ones if necessary to properly
implement that statutory change.
This rule is necessary to assist people, such as unlicensed persons
seeking to comply with the law and fact finders in certain proceedings,
to determine when firearms sellers are required to be licensed as
wholesale or retail dealers under the expanded statutory definition of
``engaged in the business,'' and for ATF to effectively regulate the
firearms industry. Indeed, numerous commenters stated that because the
BSCA redefined ``engaged in the business'' to focus on a person's
intent ``to predominantly earn a profit,'' regulatory updates were
necessary to clarify when a license was needed and how ATF would
consider and enforce certain aspects of firearms and sales that are
relevant to the intent-to-profit analysis in the current
marketplace.\158\
---------------------------------------------------------------------------
\158\ See, e.g., ATF-2023-0002-319816 (Dec. 7, 2023); ATF-2023-
0002-362368 (Dec. 6, 2023); ATF-2023-0002-317174 (Dec. 5, 2023);
ATF-2023-0002-281792 (Nov. 29, 2023); ATF-2023-0002-333284 (Nov. 26,
2023); ATF-2023-0002-262638 (Nov. 2, 2023); ATF-2023-0002-246750
(Oct. 25, 2023); ATF-2023-0002-171793 (Oct. 18, 2023); ATF-2023-
0002-218598 (Oct. 17, 2023); ATF-2023-0002-84981 (Oct. 5, 2023);
ATF-2023-0002-65889 (Sep. 19, 2023); ATF-2023-0002-43184 (Sep. 14,
2023); ATF-2023-0002-0538 (Sep. 10, 2023).
---------------------------------------------------------------------------
The Department also disagrees with commenters that the rule or its
presumptions are inconsistent with the text or legislative history of
FOPA,\159\ or with the structure of the GCA. The GCA includes
delegations of rulemaking authority that are both general and
specific,\160\ and its express grants of statutory authority to define
particular terms do not negate the broader authority that Congress has
granted to the Department to issue regulations that define additional
statutory terms as necessary to carry out the GCA. Indeed, as
congressional commenters have noted, the GCA as amended by FOPA and the
BSCA authorizes the Department to utilize its expertise gained from
decades of enforcement experience to further define terms or to issue
other rules that are necessary to implement the GCA. In light of that
delegation, the fact that Congress generally defined the term ``engaged
in the business'' does not mean that the Department lacks the authority
to further define that term.\161\ In enacting the BSCA, Congress found
it necessary to broaden the term ``engaged in the business,'' but did
not provide guidance on how to apply that new definition to specific
firearms transaction activities. This rule provides that necessary
clarification in accordance with the Department's delegated authority.
---------------------------------------------------------------------------
\159\ The Fourth Circuit has explained that the FOPA amendments
did not change ATF's authority to promulgate regulations necessary
to implement the GCA. See Nat'l Rifle Ass'n, 914 F.2d at 478-79
(rejecting argument that FOPA requires courts to ``strike down [ATF]
regulations if we do not find them strictly necessary and the least
restrictive means of accomplishing the purposes of the [GCA]'').
\160\ Compare, e.g., 18 U.S.C. 926(a) (``The Attorney General
may prescribe only such rules and regulations as are necessary to
carry out the provisions of this chapter . . . .''); H.R. Rep. No.
90-1577, at 18 (1968) (``Section 926. Rules and regulations. This
section grants rulemaking authority to the Secretary . . . .''); S.
Rep. No. 90-1501, at 39 (1968) (similar), with, e.g., 18 U.S.C.
921(a)(13) (``The term `collector' means any person who acquires,
holds, or disposes of firearms as curios or relics, as the Attorney
General shall by regulation define . . . .''); id. 923(g)(1)(A)
(``Each licensed importer, licensed manufacturer, and licensed
dealer shall maintain such records of importation, production,
shipment, receipt, sale, or other disposition of firearms at his
place of business for such period, and in such form, as the Attorney
General may by regulations prescribe.''); id. 923(g)(2) (``Each
licensed collector shall maintain in a bound volume the nature of
which the Attorney General may by regulations prescribe, records of
the receipt, sale, or other disposition of firearms.''); id. 923(i)
(``Licensed importers and licensed manufacturers shall identify by
means of a serial number engraved or cast on the receiver or frame
of the weapon, in such manner as the Attorney General shall by
regulations prescribe, each firearm imported or manufactured by such
importer or manufacturer.'').
\161\ See, e.g., Guedes v. ATF, 45 F.4th 306, 314-19 (D.C. Cir.
2022) (upholding ATF regulation interpreting the statutory term
``machine gun''); cf. Nat'l Rifle Ass'n, 914 F.2d at 480-81 (ATF had
the legal authority to define the statutory terms ``business
premises'' and ``gun show or event'').
---------------------------------------------------------------------------
The Department disagrees that the rule criminalizes behavior or
imposes criminal penalties. Congress long ago both enacted the
statutory requirement that persons who engage in the business of
dealing in firearms must obtain a license and imposed criminal
penalties for noncompliance with that statutory requirement. This rule,
on the other hand, merely implements Congress's latest amendment to the
definition of ``engaged in the business.'' Nothing in the rule
criminalizes behavior or prohibits persons from engaging in the
business of dealing in firearms; it merely implements the statutory
requirement, as amended by the BSCA, that requires persons to become
licensed if they wish to engage in that business.
b. Lack of Authority To Promulgate Presumptions
Comments Received
In addition to the concerns raised under Section IV.B.8.g of this
preamble about the efficacy of the rule given that the presumptions
will not be required in any criminal proceeding, several commenters
argued that creating such presumptions is unlawful and problematic.
Some commenters argued that nowhere in the rule did the Department cite
any authority authorizing it to adopt or create presumptions applicable
to statutory terms. Another commenter stated that ``ATF's recently
proposed rule now aims to create several presumptions when a person is
`engaged in the business,' despite the [BSCA] definition that contains
no such presumptions. It is clearly not the intent of Congress to
include those presumptions in this proposed rule.'' A third commenter
objected on the grounds that ``many of [the presumptions] concern
common and entirely innocent conduct related to firearms
transactions.''
Additionally, at least one commenter stated that the legislative
history of the GCA clearly demonstrates that ATF cannot make the
violation of a regulation a crime. As originally proposed, the
commenter stated, the bill that became the GCA provided, ``[w]hoever
violates any provision of this chapter or any rule or regulation
promulgated thereunder . . . shall be fined not more than $5,000 or
imprisoned not more than five years, or both.'' Prior to passage,
however, Congress deleted the provision making it an offense to violate
``any rule or regulation promulgated thereunder.'' 114 Cong. Rec.
14,792, 14,793 (1968). The commenter concluded that, with the redefined
and expanded GCA definitions in the proposed rule, unlawful acts would
be expanded by regulation, which is contrary to the fact that all GCA
offenses are defined in terms of violations of ``this chapter'' of the
statute.
Moreover, commenters asserted, as a practical matter, that even
with the disclaimer that the presumptions are only required in
administrative and civil proceedings, it does not change the fact that
18 U.S.C. 924(a)(1)(D), which makes it a criminal act to engage in the
business of dealing in firearms without a license, exists and carries
prison time and high fines. One commenter questioned how ATF could say
it would not use the presumptions in a criminal case if the agency
intends for courts to be in a position to rely on the presumptions to
create permissive inferences in jury instructions. Another commenter
stated that the Department did not adequately explain how any
presumption would be ``useful'' or in any way appropriate to a criminal
proceeding, whether considered by the judge or jury, and that there is
no
[[Page 29012]]
explanation as to how these presumptions become permissive inferences.
At least one commenter pointed out that jury instructions are
written based on statutory language and applicable judicial decisions
that interpret the law. As the GCA is a criminal statute, the commenter
stated, ATF cannot expand it, and because the GCA definitions are the
same in criminal and civil contexts, ATF cannot have rebuttable
presumptions regarding the definitions that are different in a civil or
administrative context. According to another commenter, this would
violate the ``chameleon cannon'' in which courts have said statutory
terms ``are not chameleons, acquiring different meanings when presented
in different contexts.'' Maryland v. EPA, 958 F.3d 1185, 1202 (D.C.
Cir. 2020); see also Clark v. Martinez, 543 U.S. 371, 382 (2005)
(similar). Other commenters similarly cited Leocal v. Ashcroft, 543
U.S. 1 (2004), for the proposition that ATF is legally prohibited from
employing a rebuttable presumption of liability in noncriminal
proceedings that does not apply in the criminal context. Commenters
pointed out that in Leocal, the Supreme Court stated that a statute
with ``both criminal and noncriminal applications'' must be interpreted
``consistently, whether [courts] encounter its application in a
criminal or noncriminal context.'' Id. at 11-12 n.8. Commenters also
argued that an agency involved in the prosecution of a case does not
get to tell the judge how to draft the jury instructions.
Additionally, commenters argued that the Department's use of
presumptions in the civil and administrative context, but not the
criminal context, runs afoul of the rule of lenity and is contrary to
existing case law, specifically the Supreme Court's holding in United
States v. Thompson/Center Arms Co., 504 U.S. 505 (1992). In Thompson/
Center Arms, commenters stated that the Court rejected ATF's
interpretation of the application of a certain definition in the NFA.
The Court concluded that ``although it is a tax statute that we
construe now in a civil setting, the NFA has criminal applications that
carry no additional requirement of willfulness . . . . It is proper,
therefore, to apply the rule of lenity and resolve the ambiguity in
Thompson/Center's favor.'' Id. at 517-18. Commenters therefore argued
that the Department's claim that the rebuttable presumptions are
applicable to civil and administrative proceedings, but not criminal
ones, is also impermissible.
Commenters also disagreed with the Department's characterization of
case law in which the Department described that courts have relied on
ATF's regulatory definition to decide whether the defendant was an
``unlawful user of or addicted to any controlled substance'' under the
GCA. Specifically, commenters stated that in the cases cited in
footnote 60 of the NPRM, 88 FR 62000, the courts relied on ATF's
regulation because there was no applicable statutory definition, unlike
the terms that are the subject of this rulemaking. Another commenter
argued that none of the cases cited by the Department support the use
of presumptions in an ``engaged in the business'' analysis in which a
single data point would suffice to satisfy what is inherently a
multifactor test. The commenter argued that an appropriate and relevant
jury instruction would be for the jury to consider all the facts. In
this sense, the commenter added, at most the NPRM could have: ``(i)
provided a list (as numerous courts have provided in their opinions) of
various types of factors that can legitimately play into an `engaged in
the business' determination; (ii) noted that such conduct involves a
tremendous amount of gray area that cannot be resolved by unyielding
regulation; and (iii) concluded that each case is to be decided on its
own unique facts and circumstances.'' Lastly, at least one opposing
commenter noted that the Department was also incorrect in referring to
forfeitures as a civil or administrative proceeding for which the
presumptions could be used because, the commenter said, forfeitures
require a showing of intent by ``clear and convincing evidence'' under
18 U.S.C. 924(d)(1), not a presumed violation. Focusing on forfeiture,
another commenter stated that ``[f]orfeitures may occur in civil,
administrative, or criminal proceedings. ATF's proposed `rebuttable
presumptions,' in addition to being unauthorized by law, are
particularly negated by the . . . requirement of clear and convincing
evidence in Sec. 922(a)(1) cases involving forfeiture.''
In contrast to the commenters opposed to the presumptions as a
matter of law, one commenter in support of the rule suggested including
the ``predominantly earn a profit'' presumptions under the EIB
presumptions, rather than having them as separate sets of presumptions.
The reason for this suggestion is that each of the proposed
presumptions under ``predominantly earn a profit'' also demonstrates
other elements of the statutory definition. For example, a person who
purchases or secures physical space to display firearms not only
demonstrates profit motive but also establishes that the seller
``devotes time, attention, and labor to dealing with firearms,''
therefore satisfying all elements of BSCA's revised statutory
definition of ``engaged in the business'' as a dealer in firearms.
Another commenter in support stated that in the final rule, ``ATF
should consider clarifying that the conduct described in the list of
rebuttable presumptions, while not creating presumptions in criminal
prosecutions, may nonetheless be relevant and important when ATF
prioritizes what conduct it focuses on when conducting criminal
investigations.''
Department Response
The Department disagrees that it lacks the legal authority to
promulgate rebuttable presumptions in ATF regulations. As discussed
above, the Attorney General and ATF have the authority and
responsibility to promulgate regulations necessary to enforce the
provisions of the GCA, and a regulation that clarifies when a license
is required is such a regulation. See 18 U.S.C. 926(a); see also H.R.
Rep. No. 90-1577, at 18 (1968); S. Rep. No. 90-1501, at 39 (1968).
Because the BSCA broadened the scope of persons who are required to be
licensed under the GCA, this rule, including its presumptions, are
necessary to implement the BSCA and provide persons with a greater
understanding of who is likely to be ``engaged in the business'' as a
``dealer'' under that new standard. See Nat'l Rifle Ass'n, 914 F.2d at
479 (``Because Sec. 926 authorizes the [Attorney General] to
promulgate those regulations which are `necessary,' it almost
inevitably confers some measure of discretion to determine what
regulations are in fact `necessary.' '').
Further, ``[t]he law is well established that presumptions may be
established by administrative agencies, as long as there is a rational
nexus between the proven facts and the presumed facts.'' Cole, 33 F.3d
at 1267.\162\ The
[[Page 29013]]
presumptions that the Department has chosen to promulgate are derived
from ATF's extensive regulatory, enforcement, and investigative
experience, and they are based on common firearms purchase and sales
activities by dealers engaged in the business. As the Department has
explained, each of the presumptions describes conduct that, in its
experience, indicates that an individual is likely to be engaged in the
business of firearms dealing (or, as applicable, acting with a
predominant intent to profit). For example, persons who engage in
frequent and multiple purchases and resales, accept credit cards as a
method of payment, advertise, etc. are likely to be engaged in the
business or have the requisite intent to profit. See also, e.g., 88 FR
61999-62003 (NPRM setting forth the rationale underlying each
presumption). Accordingly, there is a rational connection between the
facts to be proven and the presumed facts. See Cablevision Systems
Corp. v. FCC, 649 F.3d 695, 716 (D.C. Cir. 2011) (noting that a court
must ``defer to the agency's judgment'' and uphold an evidentiary
presumption so long as ``there is a sound and rational connection
between the proved and inferred facts, and when proof of one fact
renders the existence of another fact so probable that it is sensible
and timesaving to assume the truth of [the inferred] fact . . . until
the adversary disproves it'' (citation omitted)). The Department's
determination that presumptions are necessary to carry out the GCA here
is also informed by its experience in other regulatory contexts where
the agency has incorporated presumptions and found them to promote a
common understanding of, and consistent compliance with, the laws it
implements.\163\
---------------------------------------------------------------------------
\162\ See, e.g., 88 FR 31314, 31450 (May 16, 2023) (Department
of Homeland Security (``DHS'') rule establishing rebuttable
presumption that certain noncitizens are ineligible for asylum); 87
FR 65904, 66069 (Nov. 1, 2022) (Department of Education rule
establishing rebuttable presumption that when a higher education
institution closes and causes detriment to student loan borrowers,
student loan borrowers who suffered that detriment are entitled to
relief from loan repayment); 81 FR 34243, 34258 (May 31, 2016)
(Small Business Administration (``SBA'') rule establishing
rebuttable presumption of affiliation based on an identity of
interest); 8 CFR 208.13(b) (DHS regulations creating rebuttable
presumption that past persecution of refugee establishes well-
founded fear of future persecution); 12 CFR 225.32 (Federal Reserve
Board regulations creating rebuttable presumptions that determine
when a company controls another company); 13 CFR 124.103(b) (SBA
regulations creating rebuttable presumption that individuals who are
members of certain groups are socially disadvantaged); 38 CFR 3.307
(Department of Veterans Affairs regulations creating rebuttable
presumptions relating to exposure by veterans to certain chemicals
or diseases).
\163\ See, e.g., 27 CFR 478.12(d) (``The modular subpart(s)
identified in accordance with Sec. 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.''); id. Sec. 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.''); id. Sec.
478.92(a)(1)(vi) (``[F]irearms awaiting materials, parts, or
equipment repair to be completed are presumed, absent reliable
evidence to the contrary, to be in the manufacturing process'').
---------------------------------------------------------------------------
The Department acknowledges, as commenters noted, that failure to
comply with the licensing requirement can have criminal implications.
It is unlawful under 18 U.S.C. 922(a)(1)(A), 923(a), and 924(a)(1)(D)
for any person to willfully engage in the business of dealing in
firearms without a license. However, the Department disagrees with
commenters' assertions about how the rule would apply in a criminal
context. First, the presumptions in the regulatory text do not apply to
criminal proceedings. Instead, persons seeking to comply with the
licensing requirement should take them into account in determining
whether they must obtain a license, and they apply in civil and
administrative proceedings. This includes license denial or revocation
proceedings for willful violations ``of this chapter or regulations
issued thereunder,'' see 18 U.S.C. 923(d)(1)(C), 923(e), and civil/
administrative asset forfeiture proceedings based on ``willful
violation of any other provision of this chapter or any rule or
regulation promulgated thereunder,'' see id. 924(d)(1).
The Department also disagrees with the commenters' assertion that
the rebuttable presumptions are contrary to the clear and convincing
evidence standard for forfeiture in ``intended to be used'' violations
of 18 U.S.C. 922(a)(1). Section 924(d)(1) provides for seizure and
forfeiture of firearms and ammunition involved in the commission of
several specified crimes. The statute also authorizes the forfeiture of
any firearm and ammunition intended to be used in the commission of
offenses set forth in 18 U.S.C. 924(d)(3)--which includes the
prohibition against unlicensed dealing in 18 U.S.C. 922(a)(1). When a
civil forfeiture action is based on the offenses in 18 U.S.C.
924(d)(3)(C), the Government is required to establish by a
preponderance of the evidence (as required by 18 U.S.C. 983(c)(1)) the
underlying violation that supports forfeiture (including inchoate
offenses) and also, by clear and convincing evidence (as required by 18
U.S.C. 924(d)(1) and (d)(3)(C)) that the firearms and ammunition for
which forfeiture is sought were intended to be used in that crime. When
a criminal forfeiture action is based on the offenses in 18 U.S.C.
924(d)(3)(C), the Government, having already proven the underlying
violation beyond a reasonable doubt, is required to establish by clear
and convincing evidence (as required by 18 U.S.C. 924(d)(1) and
(d)(3)(C)) that the firearms for which forfeiture is sought were
intended to be used in that crime. Thus, the presumptions (or
permissive inferences) would apply only to the Government's evidence to
prove an individual is ``engaged in the business'' for purposes of the
underlying section 922(a)(1) violation, not to the Government's burden
of proving that a particular firearm was intended to be used in the
section 922(a)(1) violation.
Moreover, the presumptions do not change the burden of proof
applicable to forfeitures; they simply shift the burden of producing
evidence in the underlying determination of whether a section 922(a)(1)
violation occurred. If the Government seeks to seize a firearm on the
basis that it was intended to be used in an unlicensed dealing offense
by a person presumed to be ``engaged in the business'' under this rule,
the Government would still have the burden of proving that intent by
clear and convincing evidence (and the underlying offense by a
preponderance of the evidence). And in civil forfeiture cases where the
firearms to be forfeited were actually offered for sale by a person
presumed to be engaged in the business under this rule, rather than
simply intended to be used in such violation, the ``preponderance of
the evidence'' burden of proof applicable to all civil forfeitures
under 18 U.S.C. 983(c)(1) would apply to that forfeiture proceeding.
See 18 U.S.C. 924(d)(1) (providing for the forfeiture of ``[a]ny
firearm or ammunition involved in or used in any . . . willful
violation of any other provision of this chapter [including section
922(a)(1)(A)]'').\164\
---------------------------------------------------------------------------
\164\ See, e.g., United States v. 133 Firearms With 36 Rounds of
Ammunition, No. 08-cv-1084, 2012 WL 511287, at *3 (S.D. Ohio 2012)
(``Where it is alleged that the firearm was `involved or used in'
any of the offenses listed in 18 U.S.C. 924(d)(3), the government's
burden of proof is by a preponderance of the evidence.''); United
States v. Four Hundred Seventy Seven Firearms, 698 F. Supp. 2d 890,
893 (E.D. Mich. 2010) (``[T]he statute's requirement of a heightened
burden of clear and convincing evidence to prove intent does not
apply to a forfeiture action premised on a firearm being actually
involved in or used in a willful violation of 922(a)(1)(A).'').
---------------------------------------------------------------------------
The rule recognizes the unique constitutional context in which
criminal proceedings take place, where defendants are entitled to
heightened procedural protections and the Government bears the burden
of persuasion beyond a reasonable doubt, and makes clear that its
presumptions do not apply in criminal cases. But that does not mean, as
some commenters have suggested, that the Department has given the
statute a different meaning in the civil and criminal contexts. In any
proceeding that requires proof that an
[[Page 29014]]
individual was ``engaged in the business''--whether criminal, civil, or
administrative--the Government has the burden to prove conduct that
meets the definition in 18 U.S.C. 921(a)(21)(C), i.e., that the person
devoted 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. This rule further defines
that term and sets forth certain activities that are indicative of
being engaged in the business to provide clarification and guidance to
persons who are potentially subject to the licensing requirement. These
activities are indicative of being engaged in the business regardless
of the type of proceeding in which the activities may ultimately be
offered as proof. But the rule's delineation of evidentiary
presumptions for use only in civil and administrative proceedings does
not require courts to ``giv[e] the same [statutory] provision a
different meaning.'' Clark v. Martinez, 543 U.S. 371, 380 (2005). As
the proposed rule explained, in criminal cases, courts may decide to
use the presumptions as permissive inferences, such as when drafting
jury instructions, and nothing prevents the Department from requesting
that criminal courts consider, or prevents such courts on their own
from considering, the conduct underlying the rule's presumptions to
determine whether an individual was ``engaged in the business'' (such
as when instructing juries regarding permissive inferences).\165\
---------------------------------------------------------------------------
\165\ See, e.g., United States v. Zareck, Criminal No. 09-168,
2021 WL 4391393, at *68-69 (W.D. Pa. Sept. 24, 2021) (rejecting
challenge to jury instructions that included an inference of current
drug use based on the regulatory definition of ``unlawful user of a
controlled substance'' in 27 CFR 478.11); United States v. South,
No. 19cr43, 2020 WL 3489341 (N.D.W.V. June 26, 2020) (similar);
Eighth Circuit Committee on Model Jury Instructions, Manual of Model
Criminal Jury Instructions for the District Courts of the Eighth
Circuit, 266-68 (incorporating inference of current drug use in 27
CFR 478.11); United States v. Perez, 5 F.4th 390, 400 (3d Cir. 2021)
(finding that application note to Federal sentencing guidelines
allowed courts to draw a rebuttable presumption that a firearm is
used in connection with a drug-trafficking offense where it is found
in close proximity to drugs or drug paraphernalia); United States v.
Freeman, 402 F. Supp. 1080, 1082 (E.D. Wis. 1975) (interpreting
Selective Service regulations to create a rebuttable presumption
that shifted to the defendant the burden of putting forward evidence
showing he did not receive the order requiring him to report for
service).
---------------------------------------------------------------------------
For example, the Department has concluded that a person who
repetitively resells firearms within 30 days from purchase is likely to
be ``engaged in the business'' requiring a license. A person
potentially subject to the licensing requirement should take that
interpretation into account in assessing their need for a license and,
in a civil or administrative proceeding, the Government and court will
apply that interpretation through rebuttable presumptions. Those
presumptions do not apply in criminal proceedings, but that does not
change the Department's interpretation that a person who repetitively
resells firearms within 30 days from purchase is likely to be ``engaged
in the business'' requiring a license, nor does it prevent a court
presiding over a criminal proceeding from adopting the Department's
interpretation and applying it in a manner consistent with the
Constitution and criminal law. In a criminal proceeding, a court may,
at its discretion, elect to instruct the jury that it may draw an
inference that a person is ``engaged in the business,'' or has the
``predominant intent to earn a profit,'' based on evidence that the
person repetitively resold firearms within 30 days from purchase, or
engaged in any of the other activities set forth in the rule's
presumptions. If the court decided to instruct the jury regarding such
a permissive inference, that instruction would be consistent with the
Department's interpretation of the statute contained in this rule.
The Department disagrees with commenters who imply that it is
improper or unusual for a party, including the Government, to submit or
advocate for proposed jury instructions in a case. Under the Federal
Rules of Criminal Procedure, any party may request in writing that the
court instruct the jury on the law as specified in the request, and any
party may object to any portion of the instructions. See Fed. R. Crim.
P. 30(a), (d). Independent bodies, including those that are private,
quasi-judicial, and academic, also prepare form or pattern
instructions. While criminal courts are under no obligation to adopt
the Department's interpretation of ``engaged in the business,'' and a
court's ultimate treatment of the Department's evidence might differ
across criminal and civil proceedings, the Department's interpretation
of the statutory term is the same across ``both criminal and
noncriminal applications.'' Leocal, 543 U.S. at 11 n.8.
For similar reasons, the commenters' reference to the Supreme
Court's decision in Thompson/Center Arms is inapposite. There, the
Supreme Court applied the rule of lenity to resolve an ambiguous
statutory term, even though it was construing that term in a ``civil
setting,'' due to the statute's potential criminal applications. See
Thompson/Center Arms Co., 504 U.S. at 517-18. As discussed above, the
Department's rule offers one definition of the statutory term ``engaged
in the business,'' and its use of presumptions does not require that
courts apply the term differently in criminal and noncriminal settings.
Further, Thompson/Center Arms does not speak to the burden of proof or
attendant evidentiary presumptions, and its invocation of the rule of
lenity to resolve an ambiguous statutory term imposes no barrier to the
Department establishing prospectively by regulation presumptions for
persons potentially subject to the licensing requirement to consider
and for use in civil and administrative proceedings.
As noted above, it is well established that administrative agencies
can create rebuttable presumptions. This is the case even when the
statute at issue has both civil and criminal components.\166\ In
Chemical Manufacturers Association v. Department of Transportation, for
example, the D.C. Circuit did not invoke the rule of lenity or suggest
that the Department of Transportation's presumptions would result in
inconsistent interpretations, but rather upheld the presumption at
issue because the agency ``adequately articulated a reasonable
evidentiary basis for [it].'' 105 F.3d 702, 707 (D.C. Cir. 1997). As
addressed in Section IV.B.8.g of this preamble, the presumptions in
this rule are rationally based on ATF's regulatory, investigative, and
law enforcement experience, supported by subject matter expertise and
decades of applicable case law applying various presumptions in civil
and administrative proceedings.\167\
---------------------------------------------------------------------------
\166\ See footnotes 162 and 163, supra; see also, e.g., 17 CFR
255.1, 255.3(b)(4) (Securities and Exchange Commission (``SEC'')
regulations implementing the Bank Holding Company Act of 1956, which
provides for both criminal and civil penalties, see 12 U.S.C. 1847,
and creating a presumption that the purchase or sale of a financial
instrument by a banking entity is not for the trading account of the
entity if it is held for 60 days or longer); id. Sec. 255.20(g)
(SEC regulation from same part establishing rebuttable presumption
that a banking entity with limited assets and liabilities is in
compliance with regulatory obligations).
\167\ See, e.g., Big Branch Res. v. Ogle, 737 F.3d 1063, 1069
(6th Cir. 2013) (in disability benefits proceeding, claimant's proof
of disability shifted the burden to employer's insurer to
demonstrate otherwise); Medina v. Cram, 252 F.3d 1124, 1129 (10th
Cir. 2001) (rebuttable presumption of qualified immunity in civil
proceeding ``necessarily shifts the burden from the party favored by
the presumption to the party rebutting it.''); Scales v. I.N.S., 232
F.3d 1159, 1163 (9th Cir. 2000) (in deportation proceedings,
evidence of foreign birth shifts burden to the petitioner to prove
citizenship); Garvey v. National Transp. Safety Bd., 190 F.3d 571,
580 (D.C. Cir. 1999) (``[O]nce the FAA shows that a pilot failed to
follow a clear ATC instruction, the burden of production shifts to
the pilot to offer an exculpatory explanation.); Spilman v. Mosby-
Yearbook, Inc., 115 F. Supp. 2d 148, 154 (D. Mass. 2000) (in
copyright dispute proceeding, registration of the copyright created
a rebuttable presumption of validity and shifted the burden to the
respondent to prove invalidity of the copyright); Idaho Mining Ass'n
v. Browner, 90 F. Supp. 2d 1078, 1087-98 (D. Idaho 2000) (upholding
environmental regulations adopting a rebuttable presumption in favor
of fishable/swimmable use designations); In re The Medicine Shoppe,
210 B.R. 310, 312 (N.D. Ill. 1997) (in bankruptcy proceeding, a
properly filed claim creates a rebuttable presumption of validity
and shifts the burden to the objector to produce evidence to
overcome the presumption); Sinatra v. Heckler, 566 F. Supp. 1354,
1358-59 (E.D.N.Y. 1983) (in Social Security benefits proceeding,
regulatory presumption served to shift the burden of going forward
with evidence of receipt of notice of adverse determination).
---------------------------------------------------------------------------
[[Page 29015]]
The Department disagrees with the commenters' recommendation to
include the set of PEP presumptions under the EIB presumptions. While
the Department agrees that the conduct underlying the PEP presumptions
may often be found and proven in cases that depend on establishing that
an individual ``engaged in the business,'' the EIB presumptions stand
on their own because, once proven, they demonstrate a likelihood of
devoting time, attention, and labor to dealing in firearms as a regular
course of business in addition to the person's intent to predominantly
earn a profit through the repetitive purchase and resale of firearms.
In contrast, the PEP presumptions, once proven, demonstrate only a
likelihood of a predominant intent to earn a profit through the
repetitive purchase and resale of firearms, not that the person is
presumed to be engaged in the business as a result of their actual
repetitive purchasing or reselling of firearms. That the Government is
able to produce evidence of intent sufficient to satisfy a PEP
presumption does not necessarily mean that the evidence put forward is
always sufficient to prove the other EIB statutory elements in a civil
or administrative proceeding.
For example, if a person repetitively rents tables at gun shows
over the course of several months to display firearms for resale, that
conduct would demonstrate a predominant intent to profit from
repetitive resales and, therefore, the second PEP presumption
(repetitively renting physical space to display firearms for resale).
Indeed, a person would not likely continue to rent or continuously
purchase space at a cost if the person did not intend to profit from
selling at gun shows, even if no firearms were actually sold. The
seller is presumed to have a predominant intent to earn a profit
through repetitive firearms purchases and resales even though there may
not have been any actual purchases or resales that would rise to an EIB
presumption. Repetitively renting tables at gun shows over the course
of several months is certainly indicative of being engaged in the
business; however, by itself, it does not yet demonstrate the other
elements of being engaged in the business--devoting time, attention,
and labor to dealing in firearms as a regular course of trade or
business. Those elements would still have to be proven even if there
was evidence sufficient to demonstrate the seller's predominant intent
to support a PEP presumption. In contrast, if the seller repetitively
rents tables at gun shows over the course of several months to display
firearms for sale, and repetitively resells firearms within 30 days
after purchasing them, the person's conduct meets both the PEP and EIB
presumptions. In addition to the second PEP presumption, the first EIB
presumption (offering to sell firearms and demonstrating a willingness
and ability to purchase and resell additional firearms) would be met
because this conduct demonstrates not only a predominant intent to
profit, but also the devotion of time, attention, and labor to dealing
in firearms as a regular course of trade or business by actually
transacting firearms.
c. Arbitrary or Capricious
Comments Received
Some commenters objected to the NPRM on grounds that it is
arbitrary and capricious because, they said, it is nothing more than a
politically motivated rulemaking designed to stop all private sales,
create universal background checks, or establish a national firearms
registry in furtherance of political agendas, rather than developing
clear standards that apply over time. Others more specifically argued
that the entire rule is arbitrary and capricious under 5 U.S.C.
706(2)(A) of the APA. Some of these commenters argued that the agency
relied on factors that Congress did not intend for it to consider when
enacting the BSCA. A few contended that the changes being made to the
definition of ``engaged in the business'' were unnecessary because the
definition as it was pre-BSCA has been in effect and working fine for a
long time. Others said that changing the definition oversteps the
authority allowed by the BSCA, which did not grant ``additional
authority'' to ``re-define'' dealer, or asserted that the Department's
definition does not simply clarify the law, which cannot be expanded
without a solid basis.
Other commenters stated that the rule is arbitrary because it
causes the proposed definition of a dealer ``engaged in the business''
to be less clear and makes it almost impossible to determine when one
is in compliance. One of these commenters elaborated that ``[t]he
proposed rule outlines a set of extremely complex, subjective, and
arbitrary guidelines on how [ATF] will determine if an individual is
engaged in the business of 2nd Amendment protected sales.'' Another
commenter asserted that the rule was unfair because it changed the
definition overnight without notice that most people would be aware of.
A third stated the rule ``fails to provide any bright-line rules for
individuals to ascertain whether they are actually `engaged in the
business' and instead claims that ATF will conduct a `fact-specific
inquiry' under which `even a single firearm transaction' may suffice. .
. . This is not a rule, nor is it knowable to the average, reasonable
person. And yet, this Proposed Rule suggests alterations to Federal
regulation that will bear the full force of criminal law. More, the
Proposed Rule leaves complete and total discretion in the hands of
ATF.''
Several commenters focused on the lack of a threshold number of
firearms as an indicator of the arbitrary nature of the rule. One of
these commenters explained that ``[t]he rule does not provide any
rationale for why selling more than one firearm per calendar year
should be considered engaging in the business of dealing in firearms.
There is no evidence that this is a meaningful threshold, and there is
no reason to believe that it will be effective in preventing straw
purchases.'' Related to frequency, another commenter stated that ``the
proposed rule negatively affects the public by providing the ATF
exceptionally capricious leeway in its definition of `repetitive';
since no clear definition is given, it is reasonable to assume that the
ATF considers offering any of the listed firearms for sale more than
once in the citizen's lifetime as repetitive.''
Other commenters stated that the rebuttable presumptions as a whole
are ``a compilation of totally arbitrary criteria that just makes it
hard for normal citizens to sell weapons to each other under non-
business transactions.'' Others focused on specific presumptions as
arbitrary or capricious. For example, a couple of commenters asserted
that the firearm's condition is an unsupported and arbitrary basis for
a rebuttable presumption that one is engaged in the business. One of
these commenters elaborated that new buyers may need the manufacturer
instructions on care and handling of the firearms, among other
information contained on original packaging, as well as special tools,
locks, and cases that come with the original packaging. As a result,
selling a firearm with original packaging
[[Page 29016]]
may indicate nothing more than passing it on to a new owner. As another
example, a commenter raised concerns about the resale of a firearm
within 30 days after purchase, stating that ``an arbitrary 30 day rule
to define those individuals engaged in firearms sales cannot possibly
be based on any data and facts . . . . If it were based on actual data,
the days would be 28, or 34, or 67, for example. My point is that 30
days is an arbitrary amount based on nothing other than making it an
easy number to remember for policy and enforcement purposes.''
Some other commenters found the concept of ``profit'' to be
arbitrary. One commenter stated that ``[s]elling at a profit does not
equate to engaging in the business. That is totally absurd. Prices of
firearms appreciate, as do any other valuable object.'' Another stated
that ```the statutory definition further provides that proof of profit
is not required . . .', which in other words means `here at the ATF
will charge you whether or not we have evidence of wrongdoing.' ''
Another commenter, an organization that runs gun shows, stated that the
application of the concept of profit in the rule not only exceeds the
statutory scope, but also does not appropriately account for what
constitutes a profit.
And finally, some commenters stated that the rule lends itself to
arbitrary and capricious interpretation and enforcement, placing
citizens at risk. For example, one commenter stated that
``[u]ltimately, this rule will only impair the rights of the law[-
]abiding citizens and potentially create additional felons through what
is merely an arbitrary and capricious rule.'' Another stated that
``[t]he rule would give the Attorney General broad discretion to
determine who is a gun dealer and who is not, and it would subject gun
owners to arbitrary and capricious enforcement actions.''
Department Response
The Department disagrees that the rule is arbitrary or capricious,
or otherwise violates the APA. The BSCA amended the GCA, and the
Department has invoked its rulemaking authority, see 18 U.S.C. 926(a),
to promulgate regulations necessary to implement the GCA, as amended.
As stated previously, ATF has been delegated the authority to further
define statutory terms, such as ``engaged in the business,'' when
necessary to administer and enforce the GCA.
While the BSCA broadened the definition of ``engaged in the
business'' as it applies to dealers, it did not set forth or explain
what specific firearms purchase and sale activities are sufficient for
a person to be ``engaged in the business'' of dealing in firearms under
the GCA. Many commenters stated that they believe this rulemaking
provides much needed clarity about the persons who must obtain a
license, thereby increasing the firearms transactions conducted through
licensed dealers, helping to ensure that persons who are prohibited
from receiving or possessing firearms do not receive them, and creating
more licensed dealers who maintain records through which crime guns can
be traced.
The Department disagrees that the rule is unclear or overly
complex. The rule sets forth definitions of terms that are based on
standard dictionary definitions and decades of case law interpreting
``engaged in the business.'' The rebuttable presumptions are based on
specific, identifiable conduct and clearly defined in the regulatory
text.
The Department explained its reasoning, both in the proposed rule
and elsewhere in this final rule, for not adopting a specific numerical
threshold of firearms that an individual must sell to be considered
``engaged in the business.'' See Department Response in Section IV.B.3
of this preamble. The Department disagrees with commenters who argued
that a single sale, standing alone, would presumptively classify the
seller as ``engaged in the business'' under this rule. The regulatory
text explains that a single sale must be coupled with additional
evidence to support a determination that the seller required a license.
It is important to note that, in any event, all presumptions in this
rule are rebuttable.
The Department disagrees with the comments that the presumptions
are arbitrary. As explained previously, and in response to particular
comments about specific presumptions, the presumptions are all based on
the Department's investigative and regulatory enforcement
experience,\168\ as well as numerous post-FOPA court and administrative
decisions cited in this rule.\169\ Indeed, some of the regulatory text
that commenters asserted is new or represents a significant change was
adopted from ATF's published guidance issued almost eight years ago in
2016.\170\ That guidance explained that ``there is no `magic number'
related to the frequency of transactions that indicates whether a
person is `engaged in the business' of dealing in firearms.'' \171\
---------------------------------------------------------------------------
\168\ See Nat'l Mining Ass'n v. United Steel Workers, 985 F.3d
1309, 1322 (11th Cir. 2021) (``Agencies are permitted to rely on
their experience in the regulated field, so long as they explain
what their experience is and how that experience informs the
agency's conclusion.'').
\169\ See footnotes 71-83, supra.
\170\ See ATF Publication 5310.2, Do I Need a License to Buy and
Sell Firearms? 5 (Jan. 2016), https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf.
\171\ Id. at 5.
---------------------------------------------------------------------------
The Department disagrees with the comments arguing that a firearm's
condition--or the fact that a firearm is in, or sold with, original
packaging that contains manufacturer instructions and other useful
items--is an arbitrary basis for a rebuttable presumption. Persons who
are engaged in the business of dealing in firearms often desire
firearms that are in either a new condition, or a nearly new condition,
accompanied by original packaging so they can command the highest price
while quickly attracting buyers in the shortest amount of time.
Moreover, purchasers of deadly, explosive-based weapons are more likely
to trust the safety and reliability of new, factory-tested firearms,
rather than used firearms in a lesser condition. Nonetheless, in
response to comments regarding the presumptions that a person is
engaged in the business if they repetitively resell or offer for resale
new or like-new firearms, or firearms that are of the same or similar
kind and type, the Department has revised those presumptions to apply
only where the resales or offers for resale occurs within one year from
the date of purchase (also referred to in this rule as a ``turnover''
limitation) to reduce the chance that personal collection firearms
might fall within either of these presumptions. See 27 CFR
478.13(c)(3)(ii). In this regard, the Department agrees with some
commenters that collectible firearms could be maintained in a like-new
condition months or years after they were originally sold. However,
based on the Department's extensive experience investigating and
enforcing civil, administrative, and criminal cases against persons who
were willfully engaged in the business without a license, it is
unlikely that a collector or hobbyist would repetitively resell such
firearms within one year after purchase if not to engage in the
business of dealing in firearms. Of course, as the rule text states,
the determination of whether a person is engaged in the business is a
fact-specific inquiry. Thus, a person who intentionally stockpiles and
sells new or like-new firearms, or the same make and model or variants
thereof, with an intent to evade the one-year turnover limitation may
still be considered to be engaged in the business if circumstances
warrant that determination.
[[Page 29017]]
The Department's views have been further confirmed and supported by
a survey ATF conducted of special agents who work on ``engaged-in-the-
business'' criminal cases. The survey was conducted to better
understand the appropriate turnover limitation, as these special agents
have encountered bona fide collectors during the course of their work.
In that survey, ATF asked how soon after purchase bona fide collectors
typically resell a firearm in new or like-new condition with original
packaging or firearms of the same make and model. Of the 116 agents who
responded, 65 percent reported that, based on their observations, bona
fide collectors typically resell a firearm that they purchased for
their collection sometime after one year. Of that 65 percent, 13
percent added that many bona fide collectors do not resell for as long
as five years after purchase, if ever. Another 15 percent of agents
responded that they had observed some collectors resell a firearm
sometime after six months. Only 6 percent of agents reported seeing a
collector resell a firearm after 90 days, and only 1 percent of agents
reported observing a resale within 60 days. The remaining 15 percent of
agents did not provide a response because they had not closely observed
the behavior of collectors. None of the agents reported collectors
reselling firearms within 30 days after purchase. In addition, these
results were about single sales of firearms; they did not report on
frequency of repetitive sales, or sales involving multiple firearms.
Given that 65 percent of agents reported that collectors do not
typically resell even one firearm in new or like-new condition with
original packaging or firearms of the same make and model within a year
after purchase, the likelihood that collectors or hobbyists would
engage in repetitive resales of such firearms within one year is low.
It is Congress, not the Department, that identified the predominant
intent to profit as a key element of being engaged in the business of
dealing in firearms, so commenters' concerns with the concept of
profit's role in making EIB determinations are not addressed in this
rulemaking. However, the Department agrees with the commenter who
stated that actually ``[s]elling at a profit does not equate to
engaging in [the] business'' because a showing of actual profit,
whether or not expenses or inflation are considered, is not required to
be engaged in the business. Rather, it is the predominant intent of
obtaining pecuniary gain from sale or disposition of firearms that
matters. See 18 U.S.C. 921(a)(22). Moreover, because the person's
predominant intent to profit is the relevant fact, it does not matter
how actual profit is calculated.
Finally, the Department disagrees that the rule lends itself to
arbitrary or capricious enforcement of the dealer licensing requirement
because the rule sets forth specific, identifiable evidence that is
presumed to demonstrate that a person is engaging in the business, or
predominantly intends to earn a profit. In any proceedings where such
evidence is presented, it may be rebutted by the party alleged to be
engaged in the business of firearms dealing to the extent such rebuttal
evidence is available. The presumptions are based on purchase and
resale activities that, in ATF's experience, are indicators of dealing
in firearms, as well as court cases, which greatly reduces the
possibility of inconsistent interpretation and enforcement.
d. Violates the Prohibitions Against Creating a Gun Registry
Comments Received
Numerous commenters objected to the regulation as a ploy by the
Government to subject law-abiding gun owners who have the right to buy
and sell firearms to a rigorous registration requirement. They claimed
that the new definition of ``dealer'' would require any person who
sells a firearm to obtain a license, and that being licensed requires a
person to register all of their firearms, thereby creating a universal
backdoor gun registry. A few commenters also stated that ATF already
has and maintains ``nearly a billion entries of gun owner's information
in a searchable database.''
Department Response
The Department disagrees that this rule creates a registry of
firearms. First, the definition of ``engaged in the business'' as a
dealer in firearms as implemented in this rule does not result in a
requirement, directly or indirectly, that all persons who sell a
firearm must be licensed. Under this rule, persons who sell firearms
but who are not engaged in the business of dealing in firearms do not
need to become licensed. This includes persons who make occasional
sales to family members or FFLs, to enhance their personal collection,
and to liquidate inherited firearms, among others. Section 478.13(e) of
the regulatory text in this rule provides more information on conduct
that does not support a presumption of being engaged in the business as
a dealer in firearms.
Second, and more fundamentally, the rule does not create a firearms
registry. Licensees are required by the GCA, see 18 U.S.C.
923(g)(1)(A), (g)(2), to complete and maintain records of production,
acquisition, and disposition of all firearms at their licensed business
premises for such period, and in such form, as the Attorney General may
prescribe by regulations. But licensees are not required to register
their firearms with ATF or to otherwise submit a listing of the
firearms they own or sell. Although ATF has the authority to inspect a
licensee's records under certain conditions, see 18 U.S.C.
923(g)(1)(B)-(C), the records belong to and are maintained by the
licensees, not the government. Only after a licensee discontinues
business do the GCA and implementing regulations require licensees to
provide their records to ATF, which allows ATF tracing of crime guns to
continue.\172\ See 18 U.S.C. 923(g)(4); 27 CFR 478.127. In fact, 18
U.S.C. 926(a)(3) expressly provides that ``[n]othing in this section
expands or restricts the [Attorney General's] authority to inquire into
the disposition of any firearm in the course of a criminal
investigation.'' \173\ This rule does not in any way alter the
longstanding legal requirements preventing ATF from creating a national
firearms registry.
---------------------------------------------------------------------------
\172\ The out-of-business firearms transaction records are
indexed by abbreviated FFL number so that they may be accessed when
needed to complete a firearm trace request involving a licensee that
is no longer in business. Out-of-business firearms transaction
records are not searchable by an individual's name or other personal
identifiers. In 2006, ATF transitioned from using microfilm images
of records to scanning records into a digital storage system with
images that are not searchable through character recognition,
consistent with ATF's design and use of its prior Microfilm
Retrieval System.
\173\ Federal law has long prohibited ATF from consolidating or
centralizing licensee records. Since 1979, congressional
appropriations have prohibited ATF from using any funds or salaries
to consolidate or centralize records of acquisition and disposition
of firearms maintained by FFLs. See Treasury, Postal Service, and
General Government Appropriations Act, 1980, Public Law 96-74, 93
Stat. 559, 560 (1979). This annual restriction became permanent in
2011. See Public Law 112-55, sec. 511, 125 Stat. at 632.
---------------------------------------------------------------------------
e. Violates 18 U.S.C. 242
Comments Received
Out of concern regarding their rights under the Second Amendment to
the Constitution, several commenters claimed that by working on this
rule, ATF officials are violating 18 U.S.C. 242, which makes it a crime
for a person acting under color of any law to willfully deprive a
person of a right or privilege protected by the Constitution or laws of
the United States. Commenters also claimed that ATF officials and
employees are likewise violating their oath of office to support
[[Page 29018]]
and defend the Constitution (particularly the Second Amendment) under
the same provision.
Department Response
The Department disagrees that any official involved in promulgating
or implementing this rule is violating 18 U.S.C. 242 or any other
criminal law. The regulations proposed and finalized herein do not
raise constitutional concerns for the reasons given above. See Section
IV.B.8 of this preamble.
C. Concerns With Specific Proposed Provisions
The Department received thousands of comments from the public
concerned about specific provisions in the proposed rule. A majority of
those concerns were in opposition to the rule, but ATF also received
comments from individuals who generally supported the proposals. These
specific comments originated from a variety of interested parties,
including advocacy, sporting, and gun owners' organizations; gun safety
organizations; lawmakers; gun enthusiasts; members of the general
public; and persons with legal backgrounds. The topics included
concerns regarding the proposed definitions, issues regarding the
presumptions as a general matter, comments on some of the individual
EIB and PEP presumptions, and questions about the transfer of firearms
between licensees.
1. Definition of ``Dealer''
Comments Received
In commenting on whether the rule's definition of dealer is clear,
a number of commenters mentioned that the rule does not include a
numerical threshold of firearms or a specified time frame establishing
when a person's activities become engaged in the business. As a result,
for example, one commenter stated that an average person could not
reasonably be expected to understand what activities would require them
to get a license, which, the commenter said, essentially means that a
single sale of a firearm by a private owner would require a dealer's
license unless the seller is either selling to improve their collection
or is liquidating their collection.
Other commenters were concerned about the places in which the
proposed rule defined firearms purchase and sales activities as
dealing. For example, one commenter stated that the reference to an
international marketplace in the definition of ``dealer'' could be read
to include activities that occur wholly outside the United States,
which goes against the legal presumption that Congress ordinarily
intends its statutes to have domestic, not extraterritorial,
application. The commenter did not think the Department intended to
exercise extraterritorial jurisdiction and suggested the definition of
``dealer'' should be revised to make this clear. As another example,
one commenter expressed concerns about the rule's clarification that
dealing may occur wherever, or through whatever medium, qualifying
activities may be conducted, suggesting that instead of clarifying,
this is likely to create more confusion because having a license would
then prohibit the person from selling in some locations. The commenter
said that 27 CFR 478.100 is clear that a dealer can transact sales only
at its licensed premises or a ``qualifying'' gun show or event. To be a
qualifying gun show or event, the commenter said, it must be sponsored
by an organization devoted to collecting, competitive use, or other
sporting use of firearms. As an example, the commenter stated, ``it
would be difficult to imagine a circumstance where a licensed dealer
would be allowed to sell at a flea market, though private sales there
might be legal.''
Finally, other commenters expressed concern about whether the rule
would include certain persons as dealers. For example, one commenter, a
large FFL, stated that it is unclear whether its individual employees
must be separately licensed as dealers when working in the employ of an
FFL. They stated that a plain reading of the proposed regulatory text
suggests its employees would be required to be separately licensed. For
example, they noted, an associate working in the commenter's customer
service department is responsible for the physical repair of firearms
returned for service. The associate is a ``person,'' performs the
repair work, and obtains monetary compensation for the repairs via
paycheck. The commenter asked if, in this scenario, the associate is a
``dealer'' requiring license as a gunsmith, even if the repairs they
perform are made at the direction of the commenter, who itself is a
licensee. Similarly, another commenter inquired whether the definition
of being engaged in the business as a dealer now includes those who
sell only component parts of a weapon, but not the whole weapon itself.
Another commenter was also concerned about those who fabricate certain
parts, but for a different reason. The commenter, who supported the
overall definition of ``dealer'' because they believe it to be
consistent with the BSCA and to enhance public safety, said, ``I have
concerns about the broad reach concerning persons engaged in the
fabrication fitment of barrels, stocks, [and] trigger mechanisms due to
these parts being unregulated and not considered firearms under the
current frame or receiver rule, as well as the GCA. See [Docket No.]
2021R-05F, AG Order No. 5374-2022. Despite this portion of the
definition being in the previous definition, I . . . would recommend
that this portion be dropped from the definition.''
Department Response
The Department disagrees that the rule does not explain who must be
licensed as a ``dealer.'' The definition of ``dealer'' is, in relevant
part, ``any person engaged in the business of selling firearms at
wholesale or retail'' and was already established in the GCA and ATF
regulations prior to the BSCA amendments. See 18 U.S.C. 921(a)(11)(A).
The rule clarifies within this definition that a person can be
considered a dealer regardless of the location or medium through which
a person engages in the business. In the definition of ``engaged in the
business'' as a wholesale or retail dealer, the rule then sets forth
specific and defined conduct that will be presumed to be ``engaged in
the business'' requiring a license as a ``dealer,'' as well as conduct
that does not support a presumption and may be used as evidence to
rebut any such presumption. See Sec. 478.13(c), (e), (f).
The Department disagrees that a single sale of a firearm by a
private owner, without more, would necessarily require a dealer's
license under this rule. To the contrary, a dealer who is engaged in
the business ``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.'' 18
U.S.C. 921(a)(21)(C). To that end, one presumption established by this
rule states that a person who sells or offers firearms for sale (even
if a firearm is not actually sold) and then also represents to
potential buyers or otherwise demonstrates a willingness and ability to
purchase and resell additional firearms (i.e., to be a source of
additional firearms for resale) is presumptively engaged in the
business. Thus, it is clear from the rule's plain language that, to
trigger this presumption, additional evidence is required beyond merely
a single sale of a firearm.
The Department disagrees that the rule seeks to assert
extraterritorial jurisdiction in excess of statutory authority by
referencing ``international
[[Page 29019]]
marketplaces'' in the definition of ``dealer.'' The statutory
prohibition at 18 U.S.C. 922(a)(1)(A) makes it unlawful for unlicensed
persons ``to ship, transport, or receive any firearm in interstate or
foreign commerce.'' Including ``international'' marketplaces in the
definition of ``dealer'' is consistent with Congress's intent to
regulate unlicensed sales in ``foreign'' commerce.\174\ Additionally,
the GCA, as recently amended by the BSCA, 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. See 18 U.S.C.
924(k)(2)(B). Willfully engaging in the business of dealing in firearms
without a license is an offense punishable by more than one year in
prison, see id. 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 sale in another country would be violating 18 U.S.C.
924(k)(2)(B), among other provisions of U.S. law. This is not conduct
``wholly outside the United States,'' as the commenter suggests.
Accordingly, this rule now clarifies in the definition of ``dealer''
that purchases or sales of firearms as a wholesale or retail dealer may
occur ``at any other domestic or international public or private
marketplace or premises.''
---------------------------------------------------------------------------
\174\ See footnote 48, supra.
---------------------------------------------------------------------------
The Department disagrees with the commenter who said that the
definition of ``dealer'' will cause more confusion because it includes
dealing that ``may be conducted'' at a gun show or event, due to, as
the commenter stated, some gun shows or events not being qualified
under 27 CFR 478.100. Persons who want to engage in the business of
dealing in firearms at a gun show or event must first apply for and
receive a license at a business premises in the same State as the gun
show or event, regardless of whether the gun show or event is
qualified. During the application process, ATF advises the applicant
during an application inspection concerning their responsibilities as a
dealer, to include dealing only at qualified gun shows or events within
the same State as their licensed business premises. To the extent that
the definition's use of the phrase ``may be conducted'' causes some
persons to incorrectly believe they may lawfully deal in firearms at
gun shows or events that are not qualified, the phrase ``may be
conducted'' has been replaced with ``are conducted'' in the final
definition of ``dealer.''
With regard to the commenter's question whether an employee of a
gunsmith who performs repair work, or fitment of barrels, stocks, and
trigger mechanisms to firearms, is a ``dealer'' who must be licensed,
the rule does not address who is ``engaged in the business'' as a
dealer-gunsmith under 18 U.S.C. 921(a)(21)(D), and therefore must be
licensed under 18 U.S.C. 921(a)(11)(B).\175\ This rule addresses only
who is engaged in the business as a dealer under 18 U.S.C.
921(a)(11)(A). Also, this rule does not require employees of dealers to
be licensed separately. Firearms businesses carry out their operations
through their employees.\176\ Employees of dealers therefore do not
require a separate license, provided the employees are acting within
the scope of their duties on behalf of the licensee.\177\
---------------------------------------------------------------------------
\175\ For more information on who must be licensed as a
gunsmith, see Definition of ``Frame or Receiver'' and Identification
of Firearms, 87 FR 24652 (Apr. 26, 2022).
\176\ See ATF Ruling 2010-1, Temporary Assignment of a Firearm
by an FFL to an Unlicensed Employee, at 2-3 (May 20, 2010), https://www.atf.gov/firearms/docs/ruling/2010-1-temporary-assignment-firearm-ffl-unlicensed-employee/download.
\177\ See United States v. Webber, No. 2:14-cr-00443, 2017 WL
149963, at *8 (D. Utah Jan. 13, 2017) (``[A]n employee of Cabela's
is not engaged in the business of dealing in firearms because
Cabela's has the profit motive and Cabela's is the party engaged in
the repetitive purchase and resale of firearms. However, let us
assume that the employee, who did not have his own FFL, began buying
hundreds of guns from Cabela's and reselling them out of his home
for personal profit. Cabela's maintains the A&D book, but the
employee is not paid for his extracurricular activities. Under those
facts, the Gun Control Act would prohibit the employee's conduct.
The employee would not be permitted to circumvent the Gun Control
Act's licensing requirement by engaging in the business of dealing
in firearms with Cabela's FFL.'').
---------------------------------------------------------------------------
Lastly, in response to the question whether the rule applies to
persons who deal in component parts of a complete weapon, this rule
applies to persons who engage in the business of dealing in
``firearms,'' as that term is defined by 18 U.S.C. 921(a)(3). This
includes weapons that will, are designed to, or may readily be
converted to expel a projectile under 18 U.S.C. 921(a)(3)(A), and the
frames or receivers of any such weapons under 18 U.S.C. 921(a)(3)(B).
Persons who engage in the business of dealing in any such firearms
under the GCA must be licensed.
2. Definitions of ``Purchase'' and ``Sale''
Comments Received
In the NPRM, the Department proposed to define the terms
``purchase'' and ``sale'' as they pertain to the term ``engaged in the
business'' of dealing in firearms. While some commenters agreed with
including definitions for ``purchase'' and ``sale'' so persons cannot
evade licensing through the barter or exchange of non-monetary items,
other commenters believed the proposed definitions went too far. One
commenter opined that the definition is so focused on barter, profit,
and trade that it will allow ATF to find any nexus such that the agency
would be able to detain, investigate, and refer for prosecution an
honest series of sales, trades, or bartering that are not in any way
executed as part of a business scheme. Other commenters opined that the
definitions offered for these terms ``deviate from historical practices
that allowed for the transfer and trade of firearms among private
citizens with minimal government interference.'' Another considered the
definitions to be generally consistent with the plain meaning of those
terms.
Several commenters also offered suggestions to the regulatory text.
One commenter stated that the definition of ``sale'' is too broad and
includes ``Christmas gifts, because [the proposed definition does] not
require[ ] for the firearm's delivery to be `bargained-for in
exchange,' [which is] the core of contract that distinguishes contract
from gift.'' The commenter stated that ATF's definition of ``sale''
runs counter to the dictionary definition that is quoted in footnote 45
of the NPRM, 88 FR 61999. The commenter quoted this definition of
``sale,'' emphasizing that it references ``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).'' (Emphasis added by commenter) The commenter noted
that ATF's regulatory definition does not include the term ``contract''
and therefore ignores that there must be consideration for a sale to
have occurred. In a similar vein, a couple of other commenters
emphasized that sales, trades, or exchanges of firearms occur on the
basis of agreements or agreed exchanges between the parties and should
therefore be permitted.
Another commenter raised a concern that ``the [proposed] definition
of `sale' could potentially include non-dispositional transfers. . . .
Rather than use the term `providing,' which could include many
temporary transfers, the more statutorily consistent term would be
`disposing of.' The GCA uses the terms `disposition' or `dispose' in
connection with the words `sale' or `sell' seven times in section 922.
18 U.S.C. 922(a)(6), 922(b)(2), 922(d), 922(d)(10),
[[Page 29020]]
922(d)(11), 922(j).'' Therefore, the commenter suggested it would be
more statutorily consistent to define the term as ``disposing of a
firearm in exchange for something of value'' instead of ``providing a
firearm in exchange for something of value.''
Department Response
The Department disagrees that the definitions of ``purchase'' and
``sale'' are overbroad and should not include bartering or trading
firearms. As the rule points out, even before the BSCA, courts upheld
criminal convictions where payment was made in exchange for firearms in
the form of goods or services, rather than cash. Non-cash methods of
payment may include contraband, such as drugs. A non-cash method of
payment may also be used to conceal illicit firearms dealing, to
include avoiding reporting requirements associated with transfers of
cash.\178\ Moreover, while the Department agrees with the commenters
that one definition of ``purchase'' can include acquiring something of
value by contract (i.e., a ``bargained for'' exchange), the common
definition of ``purchase'' is more generally defined to mean ``to
obtain by paying money or its equivalent.'' \179\ Nonetheless, to
ensure that acquiring the firearm is understood to be intentional, the
Department has added the words ``an agreed'' before ``exchange,'' as
used in other comments that view an exchange more broadly than by
contract. This includes an agreement to exchange something of value
indirectly, such as payment of the seller's debt owed to a third party
in exchange for a firearm.
---------------------------------------------------------------------------
\178\ See 31 U.S.C. 5313(a); 31 CFR 1010.330 (reports relating
to currency in excess of $10,000 received by a trade or business).
\179\ Purchase, Webster's Online Dictionary, https://www.merriam-webster.com/dictionary/purchase (last visited Mar. 4,
2024); Purchase, Collins English Dictionary, https://www.collinsdictionary.com/us/dictionary/english/purchase (last
visited Mar. 4, 2024) (``to obtain for money or by paying a
price'').
---------------------------------------------------------------------------
Regarding the definition of ``sale,'' the Department disagrees that
the proposed definition of that term is inconsistent with common
dictionary definitions.\180\ Moreover, giving bona fide gifts \181\
continues to be excluded from conduct presumed to be engaged in the
business, and evidence of such gifts can be used to rebut the
presumptions that a person is engaged in the business. See Sec.
478.13(e)(1), (f). Furthermore, the Department agrees that it is more
consistent with the GCA to use the phrase ``disposing of a firearm''
rather than ``providing a firearm,'' in the definition of ``sale,'' and
that change has accordingly been made.\182\
---------------------------------------------------------------------------
\180\ See Sale, Collins English Dictionary, https://www.collinsdictionary.com/us/dictionary/english/sale (last visited
Mar. 4, 2024) (``exchange of property of any kind, or of services,
for an agreed sum of money or other valuable consideration''); Sale,
Oxford English Dictionary, https://www.oed.com/search/dictionary/?scope=Entries&q=sale (last visited Mar. 4, 2024) (``The action or
an act of selling or making over to another for a price; the
exchange of a commodity for money or other valuable
consideration.'').
\181\ For the definition of ``bona fide gift,'' see footnote 69,
supra.
\182\ See 18 U.S.C. 922(a)(6) (prohibiting false statements in
connection with the ``sale or other disposition'' of a firearm); id.
922(b)(2) (prohibiting the sale or delivery of any firearm in
violation of any State law or published ordinance at the place of
``sale, delivery or other disposition''); id. 923(g)(1)(A),(g)(2)
(requiring licensees to maintain records of ``sale, or other
disposition of firearms''); id. 923(g)(3)(A) (requiring licensees to
prepare reports of multiple ``sales or other dispositions''); id.
923(j) (requiring that the gun show or event location of the ``sale
or other disposition'' of firearms be entered in licensee records).
---------------------------------------------------------------------------
3. Definition of Engaged in the Business Generally
Comments Received
Numerous commenters did not agree with the Department's assertion
in the proposed rule that a single firearms transaction or no sale at
all may require a license. They believed that this runs counter to
statutory language that emphasizes ``regular'' and ``repetitive''
manufacture and sale or purchase and resale of firearms. Commenters
stated that ``repetitive'' cannot be proven by ``a single firearm
transaction''; that the statute clearly requires a course of conduct of
purchasing and reselling firearms repetitively. One commenter stated
that the required repetitive purchase and resale of firearms means that
``[the] firearms must be purchased `and' resold. If firearms are not
purchased with the intention of resale at time of purchase, [they]
fall[ ] under the exception.'' Otherwise, the commenter argued, simple
purchases and sales are something any gun owner might do; that is why
Congress carefully chose the word ``resale''--meaning ``the act of
selling something again.'' Along this vein, at least one commenter
suggested that the Department amend all the presumptions for engaged in
the business to use the word ``resale'' or ``reselling'' rather than
``sale'' or ``selling'' to be consistent with the phrase ``repetitive
purchase and resale of firearms'' in the GCA definition of dealer.
Another commenter also rejected the Department's position that
``there is no minimum number of transactions that determines whether a
person is `engaged in the business' of dealing in firearms,'' and that
``even a single firearm transaction, or offer to engage in a
transaction [without any actual transaction], when combined with other
evidence, may be sufficient to require a license.'' The organization
identified six indicators in the GCA that they argued demonstrate that
more is required, including: (1) use of ``firearms'' in the plural; (2)
``regular course,'' contemplating a series of events; (3)
``repetitive,'' meaning more than once; (4) requiring actual ``purchase
and resale,'' which (5) provides a contemporaneous conjunctive
requirement; and (6) exempting ``sales, exchanges, or purchases,'' in
the plural. The commenter concluded that these indicators require ATF
to reverse its position.
Another organization emphasized that a person who makes occasional
sales, exchanges, or purchases for enhancement of a personal collection
or for a hobby, or to sell all or part of their personal firearms
collection, is not engaged in the business as a dealer even if the
person sells the firearms to ``predominantly earn a profit.'' ``Profit
motive,'' they stated, ``is not relevant to activities that fit within
the carve-out because it is an exception to the general `engaged in the
business' rule. This construction of the statute is extremely important
because it covers common behavior for law-abiding gun owners.''
Some congressional commenters focused specifically on the
presumptions in this light and stated that ``the civil and
administrative presumptions ignore the occasional seller and hobbyist
protections under the law. . . . Occasional sellers may keep firearms
in their original packaging or discuss the purchase and resale of
firearms with friends. Occasional sellers--because they are occasional
sellers--may represent that they are able to get firearms. And
occasional sellers may collect or even sell firearms of the same make
and model. The proposed rule paints a broad brush to attempt to
regulate conduct that is protected under the law for occasional sellers
of firearms.'' An additional commenter stated that the statute's use of
the plural form of ``occasional sales, exchanges, or purchases''
clearly indicates that multiple sales, exchanges, or purchases can be
made by gun owners without rising to the level of dealing.
Indeed, at least one commenter in support of the presumptions
suggested that the rule could be clearer about what constitutes an
occasional sale. ``[W]hile it is not necessary for the final rule to
establish a numerical ceiling for what constitutes `occasional' sales
or exchanges under 18 U.S.C. 921(a)(21)(C) (given the NPRM's general
preference for a fact-specific inquiry),'' they said, it
[[Page 29021]]
``should at minimum clarify that `occasional' sales conduct should not
be construed to include sales conduct that is consistently ongoing or
that is regularly scheduled in a consistent or periodic fashion.''
One commenter stated that ATF has created a nebulous moving target
without including a numerical threshold to determine when one is a
dealer in firearms. Indeed, two commenters otherwise in support of the
rule proposed adding a rebuttable presumption that the sale or transfer
of five or fewer firearms is presumed to be selling or transferring
firearms occasionally, whereas another commenter suggested 8-10 firearm
sales as the appropriate number. One of the commenters cited to similar
provisions in California (which the commenter stated has five firearms
per year as its threshold) and other States to support the proposition
that it is possible to set a number, while not necessarily agreeing
that five is the reasonable threshold. These commenters stated that by
adding this threshold, the public and law enforcement would have a
clearer idea of when one is subject to, or exempt from, becoming
licensed. Similarly, another commenter suggested a threshold number of
five firearms per month would be reasonable because the vast majority
of individual hobbyists and collectors would not even approach half of
the limit. This commenter specifically stated, ``[t]his would leave no
room for guessing and would send a strong message from the ATF that
persons who may touch the limit would need to go ahead and obtain their
FFL.'' Another commenter suggested that, rather than trying to define
what ``engaged in the business'' means, it would be better to explain
how a citizen may sell a firearm so as not to be considered a firearms
dealer needing a license. Defining it from that direction, they added,
would make any conduct outside that ``non-dealer'' definition
presumptively conduct that requires a license.
An additional commenter suggested that, to alleviate the
``occasional seller exemption'' issue, ATF should treat the
presumptions as permissive inferences in civil/administrative contexts
as well as in criminal ones. ``This is a much more lenient standard for
those who have not even repetitively sold or purchased a firearm,''
they stated, because permissive inferences are not mandatory, do not
shift the burden of proof, and do not require a specific outcome.
Similarly, a final commenter suggested that the first EIB presumption
should instead be a permissive inference (dealing in firearms 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). The commenter stated that, as a
mandatory presumption, this presumption is too inflexible to be fairly
applied, even on a case-by-case basis, but also that it does not allow
for the case-by-case analysis the commenter said ATF purports to want.
There is a tension between the presumptions that indicate a person is
``engaged in the business,'' the commenter added, and the exclusion
from being engaged in the business for those who make only occasional
sales. By its plain language, the commenter continued, the presumption
includes anyone who intends to purchase or sell any number of firearms,
regardless of whether they intend to do so for pecuniary gain or to
enhance or liquidate a personal collection. ``This linguistic
imprecision undercuts ATF's stated exemption of persons who only make
occasional purchases, sales, or trades for the enhancement or
liquidation of a personal collection,'' they concluded.
Department Response
The Department agrees with commenters that the GCA's definition of
``engaged in the business'' contemplates a person's devotion of time,
attention, and labor to a regular trade or business of buying and
selling more than one firearm, but disagrees that the statute requires
any minimum number of firearms to actually be sold to be ``engaged in
the business'' under the GCA, or that the EIB presumptions are contrary
to the statutory language. While some commenters reference particular
words or phrases in the statute, the statutory language must be
considered as a whole. To be ``engaged in the business'' as a wholesale
or retail dealer under 18 U.S.C. 921(a)(11)(A), a person must ``devote[
] 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.'' 18 U.S.C. 921(a)(21)(C).
A person may ``devote[ ] time, attention, and labor to dealing in
firearms as a regular course of trade or business,'' for example, by
spending time, effort, and money each day purchasing, storing, and
securing firearms inventory, and advertising or displaying those
firearms for sale. The specific resale activities identified in each
presumption reflect this devotion of time, attention, and labor to
dealing in firearms as well as the element of intent. But it is only
the intent element of the statute--to predominantly earn a profit--that
mentions ``repetitive purchase and resale of firearms.'' There is no
statutory requirement that firearms actually be sold; indeed, a dealer
may routinely (i.e., ``regularly'') devote time and resources working
toward that goal as a course of trade or business, but never find a
buyer or consummate any sales due to insufficient demand or poor sales
practices. This is because the phrase ``repetitive purchase and resale
of firearms'' refers to the method, or modus operandi, by which a
person intends to engage in the firearms business.\183\ Thus, under the
statutory text and judicial interpretations of it, no actual sales are
required if the intent element is met and the person's conduct
demonstrates their devotion of time, attention, and labor to dealing in
firearms as a regular course of trade or business.\184\
---------------------------------------------------------------------------
\183\ See Palmieri, 21 F.3d at 1268 (``Although the definition
[of engaged in the business] 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.'' (footnote omitted)); Focia, 869 F.3d at 1281-82
(``[N]othing in the [FOPA] amendments or the rest of the statutory
language indicates that a person violates Sec. 922(a)(1)(A) only by
selling firearms as his primary means of income. And the word
`hobby'--which [defendant] suggests includes the regular sale of
guns for profit and financial gain, so long as it is not the
seller's primary source of income--simply cannot bear the weight
that [defendant] seeks to put on it. The exact percentage of income
obtained through the sales is not the test; rather, we have
recognized that the statute focuses on the defendant's motivation in
engaging in the sales.'').
\184\ See, e.g., King, 735 F.3d at 1107 n.8 (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''); Nadirashvili, 655 F.3d at 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 Carter, 801 F.2d at 81-82)).
---------------------------------------------------------------------------
Intent may be inferred from a person's words or conduct.\185\
Unlike a
[[Page 29022]]
numerical threshold number of sales, the rule's EIB presumptions are
all activities, based on case law and ATF's experience, that are
indicative of the intent to earn a profit through the repetitive
purchase and resale of firearms. With respect to the suggestion that
there should be a five-firearm sale or transfer threshold for
determining whether a person is engaged in the business, the
Department's approach will allow it to more effectively enforce the
licensing requirement for individuals who are engaged in the business.
For example, even before the BSCA broadened the engaged in the business
definition, the Department successfully prosecuted, and courts
routinely upheld, multiple criminal cases in which the evidence
presented would not have met a five-sale threshold, but other evidence
made clear the individual was engaged in the business without a
license.\186\
---------------------------------------------------------------------------
\185\ See Agnew v. United States, 165 U.S. 36, 50 (1897)
(referring to a ``presumption that a person intends the natural and
probable consequences of acts intentionally done, and that an
unlawful act implies an unlawful intent''); cf. United States v.
Scrivner, 680 F.2d 1099, 1100 (5th Cir. 1982) (``[I]ntent may be
inferred from words, acts, and other objective facts.''); United
States v. Arnold, 543 F.2d 1224, 1225 (8th Cir. 1976) (``The
requisite intent may be inferred from the acts of the defendant.'');
United States v. Spinelli, 443 F.2d 2, 3 (9th Cir. 1971) (``It is
clear that the Government need not adduce direct proof of intent. It
may be inferred from the defendant's acts.''); United States v.
Ledbetter, 432 F.2d 1223, 1225 (10th Cir. 1970) (``Intent may be
inferred from the conduct of the defendant and from circumstantial
evidence which furnishes a basis for a reasonable inference.'').
\186\ See, e.g., Orum, 106 F. App'x 972 (sold three guns on two
occasions and testimony that defendant frequented flea markets and
gun shows where he displayed and sold firearms); United States v.
Shah, 80 F. App'x 31, 32 (9th Cir. 2003) (evidence of one sale and
defendant's ``disposition as a person `ready and able to procure'
additional weapons''); see also Hosford, 82 F. Supp. 3d 660 (five
transactions).
---------------------------------------------------------------------------
The terms ``sale'' and ``resale'' were used interchangeably in the
NPRM because any sale after the firearm was produced and previously
sold is a ``resale.'' When speaking of a firearm resale in the context
of dealing, it is generally understood that it includes any sale of a
firearm, including a stolen firearm, any time after any prior sale has
occurred. Nonetheless, the Department agrees with the commenters that
this was not explicitly stated in the NPRM, that using the term
``resale'' more consistently would be clearer, and that the intent
element of the statute contemplates potential repetitive ``resales'' of
firearms to be engaged in the business. For these reasons, the
Department has revised the regulatory text to change ``sale'' to
``resale'' in various presumptions where that prefix (``re'') was not
already used, and defined ``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 any wholesale or retail
sale of a firearm any time after it was previously sold by anyone.
In response to comments, the Department has also incorporated, as
examples of rebuttal evidence: bona fide gifts, occasional sales to
enhance a personal collection, occasional sales to a licensee or to a
family member for lawful purposes, liquidation of all or part of a
personal collection, and liquidation of firearms that are inherited, or
liquidation conducted pursuant to a court order. See Sec. 478.13(e),
(f). The Department has also added language explicitly stating that,
similar to the way the presumptions operate, these are not the only
types of evidence that could be presented to rebut a claim of being
engaged in the business. See Sec. 478.13(g). Additionally, while the
term ``occasional'' is not defined in the regulatory text, the
Department agrees that the plain and ordinary meaning of that term
means ``of irregular occurrence; happening now and then; infrequent.''
\187\ The Department also agrees that regular or routine sales,
exchanges, or purchases of firearms (even on a part-time basis) for the
enhancement of a personal collection or for a hobby would not fall
within the definition of ``occasional.''
---------------------------------------------------------------------------
\187\ See footnotes 70, 123, supra.
---------------------------------------------------------------------------
The Department disagrees with the suggestion to instead define how
a citizen may not be considered to be engaged in the business. Because
of the myriad circumstances under which a person may sell a firearm, it
would be difficult, if not impossible, for the Department to outline
all the circumstances in which firearms might lawfully be sold without
a license. However, the Department has set forth in the final rule a
non-exhaustive list of conduct that does not support a presumption and
can be used as evidence to rebut any of the narrowly tailored
presumptions indicating that a person is engaged in the business of
dealing in firearms. See Sec. 478.13(e), (f).
Finally, the Department disagrees with the recommendation to change
the rebuttable presumptions to permissive inferences in civil and
administrative proceedings to alleviate concerns by occasional sellers
of personal collection firearms. The Department believes that the use
of rebuttable presumptions in civil or administrative proceedings will
be much more effective at achieving compliance with the GCA, as amended
by the BSCA, than voluntary permissive inferences or the existing
factor-based approach to determining whether a person is engaged in the
business. ATF's 2016 guidance, for example, outlined the general
factors and some examples of being engaged in the business, but
compliance with that guidance document was voluntary and it was not
published in the Federal Register for broader distribution and
attention by the public.\188\ As such, it resulted in only a brief
increase in the number of persons engaged in the business becoming
licensed dealers (around 567).\189\ The rule's approach is consistent
with Congress's purposes in enacting the BSCA, which included, among
other things, addressing significant non-compliance in the firearms
market with the engaged in the business licensing requirements. See
Section II.D of this preamble. Using rebuttable presumptions in this
context is also consistent with the use of rebuttable presumptions in
the GCA and other ATF regulations. Indeed, the GCA and implementing
regulations already incorporate rebuttable presumptions in various
other firearms-related contexts.\190\
---------------------------------------------------------------------------
\188\ See ATF, Do I Need a License to Buy and Sell Firearms?
(Jan. 2016), https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf.
\189\ Source: ATF, Federal Firearms Licensing Center.
\190\ See footnote 65, supra.
---------------------------------------------------------------------------
4. Definition of Engaged in the Business as Applied to Auctioneers
Comments Received
Some commenters asserted that the Department should reconsider or
make clearer the definition of ``engaged in the business'' as a dealer
in firearms as applied to auctioneers. At least one commenter disagreed
with conditioning an auctioneer's need for a license on whether that
auctioneer takes possession of the firearm prior to the auction. The
commenter stated that an auctioneer may take a deceased person's
firearms into possession prior to the auction for purposes of safety
and security and indicated that this kind of action does not make one a
dealer. Another commenter stated the Department's attempt to
distinguish between estate-type versus consignment-type auctions
generates confusion because it seems that, under the rule, whether an
auctioneer must be licensed depends on who owns the firearm (i.e., an
individual other than the auctioneer, versus an estate). In particular,
the commenter stated that ATF's statement that an auctioneer would not
need a license if acting as an agent of ``the owner or executor of an
estate who is liquidating a personal collection,'' is inconsistent with
other statements in the NPRM, which suggest that the exemption would
apply only to estate sales (e.g., ``[t]he firearms are within the
estate's control and the sales made on the estate's behalf''). The
commenter stated that it is the method or sale (consignment versus true
[[Page 29023]]
auction) that determines if the auctioneer exemption applies, not the
origin of the firearm (estate versus personal collection). Separately,
at least one commenter believed that, because auctioneers are exempt
from the requirement to have a license under the rule, a family estate,
or the heirs, would have difficulty selling their collection through an
auction house in the future.
One organization, though not in support of the rule overall,
recognized this portion as the Department's attempt to establish by
regulation ATF's longstanding guidance for auctioneers. The commenter
suggested that the Department further clarify how ``engaged in the
business'' applies in various auction contexts. For instance, the
commenter said it is not clear whether auction companies, which are
commonly engaged by nonprofit organizations, would need to be licensed
when assisting nonprofit organizations with their auctions. The
commenter questioned whether an auction company that does not take
possession of the firearms prior to the auction, or consign the
firearms for sale, would be exempt from licensing requirements even
though the firearms are not part of the nonprofit organization's
``personal collection'' as defined by the proposed rule. Separately,
the same commenter asked whether nonprofit organizations that conduct
auctions of donated firearms would need to obtain a license or whether
their use of an FFL to facilitate the auction is sufficient. If the
nonprofit itself must be an FFL, the commenter asked if it could
coordinate with other FFLs out of State to facilitate auctions outside
of the State where the nonprofit organization's business premises is
located.
At least one commenter that supported the proposed rule overall
urged the Department to provide further guidance to auctioneers that,
to the extent an auctioneer operates in States that require background
checks on private transactions, estate-type auctioneers risk aiding and
abetting illegal transactions if they knowingly facilitate sales of
guns without background checks. Further, the commenter, while
recognizing the Department did not set any numerical thresholds to
determine when a person is a dealer in firearms, suggested that it
would be appropriate in this context to provide numerical thresholds
because estate-type auctions represent a source of guns that can be
purchased without background checks. They recommended that the
Department clarify that if an estate-type auctioneer facilitates an
individual auction involving more than five guns or facilitates
auctions involving more than 25 guns in a one-year period, then they
must be a licensed as an FFL or risk aiding and abetting liability
under Federal law.
Department Response
This rule merely establishes by regulation ATF's longstanding
understanding of the GCA's requirements with respect to auctioneers and
does not affect the ability of persons to sell firearms through auction
houses. Estate-type auctioneers are not required to be licensed because
they are not devoting 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. They are
instead providing services as an agent of the owner on commission.
These auctioneers are not in the business of dealing in firearms and do
not themselves purchase the firearms. The auctioned firearms are within
the estate's control and the sales are made on the estate's behalf. The
rule uses the term ``estate-type'' auction to indicate that the
firearms need not be part of a decedent's estate, but may instead have
been acquired through certain other non-commercial means, such as a
non-profit organization receiving a donation of firearms that the non-
profit then auctions through an estate-type auctioneer who does not
take ownership of the firearms or accept the firearms for resale on
consignment. See Sec. 478.13(a).
The Department agrees with the comment that there may be personal
firearms that may be auctioned at an estate-type auction that do not
fall within the rule's definition of ``personal collection,'' such as
firearms that were acquired by an individual for self-defense. For this
reason, the regulatory text in 27 CFR 478.13(a) has been revised to
delete the reference to a ``personal collection'' when discussing how
the regulation applies to auctioneers. The Department also agrees with
commenters' concerns about limiting the auctioneer exception where the
estate-type auctioneer takes possession of firearms prior to the
auction for reasons other than consignment (e.g., temporary safe
storage and return to the estate). The main reason consignment-type
auctions require a dealer's license is because the auctioneer has been
paid to take firearms into a business inventory for resale at auction
in lots, or over a period of time, i.e., consigned for sale. In a
``consignment-type'' auction, the auctioneer generally inventories,
evaluates, and tags the firearms for identification, and has the legal
authority to determine how and when they are to be sold. Consequently,
the auctioneer dealer exception has been revised in Sec. 478.13(a) so
that it does not apply where the firearms for sale have been taken into
possession on consignment prior to the auction.
The Department agrees that auctioneers must comply with Federal,
State, and local laws. The Department therefore agrees with the comment
that estate-type auctioneers must abide by State and local laws that
require background checks when the auctioneer is assisting private
parties in liquidating inventories of firearms on their behalf.
However, no changes are being made as a result of that comment because
the requirements imposed by State and local jurisdictions to run
background checks do not determine whether a person is ``engaged in the
business'' as a dealer under Federal law. Further, with regard to those
auctioneers who obtain a license, the regulations already provide that
a license ``confers no right or privilege to conduct business or
activity contrary to State or other law.'' See 27 CFR 478.58.
Finally, as stated previously, the Department disagrees that there
should be a minimum threshold number of firearms to be considered a
dealer, whether through an estate-type auction or otherwise. Bona fide
estate-type auctioneers are assisting persons in liquidating firearms
inventories, not firearms that were acquired for the purpose of resale,
and thus would not incur aiding and abetting liability.
5. General Concerns on Presumptions That a Person is Engaged in the
Business
a. Overbreadth and Lack of Foundation
Comments Received
A general sentiment from commenters opposed to the proposed
presumptions is that they are overbroad, would capture too many
permissible sales by collectors, and are not valid indicators of
unlawful activity or activity showing the person is an unlicensed gun
dealer. The commenters opined that the presumptions include common,
innocent behavior with firearms that firearm owners engage in every
day, including the presumption, for example, that arises from evidence
of selling firearms within 30 days after a purchase or selling firearms
that are new or like-new, have original packaging, or are of the same
or similar type of firearms. For example, one commenter stated that the
presumptions would apply in a typical situation where a person has
improved their financial situation and upgrades
[[Page 29024]]
multiple of their firearms from entry-level, inexpensive items to more
expensive items that have more features or better reputation for
reliability. This commenter argued that such a person's conduct in
upgrading their collection would likely touch upon every single
presumption. Similarly, another commenter explained how a person's
conduct could fall within multiple presumptions without that person
necessarily being engaged in the business. For example, the commenter
said, a person purchases a 9mm firearm to carry concealed, but then
does not like the recoil impulse and subsequently sells it in like-new
condition within 30 days and with the original box. Subsequently, the
commenter continued, the person purchases a second firearm and also
does not like how it operates for concealed carry. If the person sells
that second firearm in like-new condition within 30 days with the
original box and it is a similar kind to the previously purchased
firearm, then, the commenter concluded, that person would have multiple
criteria factored against them as engaging in the business even though
the person is not in fact engaging in the business of dealing in
firearms.
Further, commenters stated the rule contradicts the scheme
established by Congress and the new presumptions would apply to
collectors in every instance despite the statutory language to
specifically exempt from the licensing requirement ``occasional'' gun
sales and gun sales from a ``personal collection.'' The presumptions,
they stated, fail to recognize this exception. Some congressional
commenters opposed to the rule stated: ``We merely struck the
`livelihood' language from the statute. This was done to prevent
someone who should register as a firearms dealer from evading licensing
requirements because he or she had another job that supported his
livelihood. In other words, we wanted to clarify that if a person has a
job and also operates a firearms business, he or she must still
register as a firearms dealer. This was the law in many different
jurisdictions across the country and consistent with the ATF's
guidance. . . . In making this incremental clarification, we left in
place all of the other language in the statute that needs to be
considered by the ATF before deeming someone a firearms dealer. . . .
Nothing in the presumptions take into account whether the individual
devotes time, attention, and labor to dealing firearms. Similarly, the
presumptions do not factor in whether the person repeatedly buys and
sells firearms as a regular course of trade or business'' (footnote
omitted).
Additionally, some commenters stated the proposed rule did not
provide sufficient foundation or actual evidence for how any of the
presumptions are linked to or give rise to criminal activity. Even
though the Department cited observations and criminal and civil
actions, one commenter stated these conclusions are ``based on a
censored sample'' and are unreliable because the rule overstates the
probative value of the behavior. The commenter argued that ATF would
need to survey the likelihood that the circumstances giving rise to the
presumption are present within the full class of persons who purchase
firearms.
Department Response
The Department disagrees that the presumptions in the rule are
overbroad and would capture innocent persons who only occasionally sell
firearms from their personal collection without a license. The
rebuttable presumptions are narrowly tailored to specific conduct that
the Department has found through its investigative and regulatory
enforcement experience, as well as numerous post-FOPA court and
administrative decisions, to require a license. And crucially, the
presumptions are rebuttable, so in the event a civil or administrative
proceeding is brought, and a presumption is raised, it can be rebutted
with reliable evidence to the contrary. Rebuttable presumptions are
just that; they are not established fact, as some of the commenters
suggest. And as stated previously, the presumptions shift only the
burden of production; they do not change the burden of persuasion.
Moreover, consistent with the statutory exclusions, the final rule
expressly provides that a person will not be presumed to be engaged in
the business of dealing in firearms when reliable evidence shows that
the person is only reselling or otherwise transferring firearms: (a) as
bona fide gifts; (b) occasionally to obtain more valuable, desirable,
or useful firearms for the person's personal collection; (c)
occasionally to a licensee or to a family member for lawful purposes;
(d) to liquidate (without restocking) all or part of the person's
personal collection; or (e) to liquidate firearms that are inherited,
or pursuant to a court order. See Sec. 478.13(e). Evidence of these
situations may be used to rebut any presumption in the rule, and the
Department has clarified that this is not an exhaustive list. See Sec.
478.13(f), (g). The Department is therefore providing objectively
reasonable standards for when a person is presumed to be ``engaged in
the business'' to strike an appropriate balance that captures persons
who should be licensed because they are engaged in the business of
dealing in firearms, without limiting or regulating occasional sales by
personal collectors and hobbyists.
The Department disagrees that the proposed rule did not provide
sufficient foundation or evidence for how the presumptions are linked
to or give rise to criminal activity. First, the presumptions in the
rule are based on decades of pre-BSCA criminal case law that continues
to be applicable, and the proposed rule cites numerous ATF criminal
cases brought against persons who engaged in the business without a
license based on evidence cited in each presumption. The presumptions
are also based on ATF's significant regulatory enforcement
experience,\191\ including tens of thousands of compliance inspections
of licensed FFLs in the last decade. ATF also reviewed summary
information on criminal cases from Fiscal Year 2018 to Fiscal Year 2023
that it investigated, or is currently investigating, involving
violations of 18 U.S.C. 922(a)(1)(A) and 923(a), to assess the extent
to which the presumptions were consistent with conduct engaged in by
persons who are unlawfully dealing in firearms without a license.
Hundreds of cases described conduct that would fall under one or more
of the EIB or PEP presumptions. Each of the presumptions was supported
by the conduct described in these cases, except one. ATF did not find a
case that included conduct that would fall under the PEP presumption on
business insurance. The Department has therefore removed that
presumption in this final rule. See Sec. 478.13(d).
---------------------------------------------------------------------------
\191\ To further confirm that the proposed PEP presumptions were
grounded in the behaviors of licensees who are engaged in the
business or applicants seeking to become licensed, ATF surveyed
Industry Operations Investigators (``IOIs'') on their observations
of active licensees and applicants during compliance and
qualification inspections, respectively, regarding conduct that is
described under the PEP presumptions. All PEP conduct had been
observed by IOIs based on their experience inspecting various sizes
and types of firearms businesses or applicants seeking to become
licensed, except for the eighth PEP presumption (business
insurance). For the eighth PEP presumption, IOIs indicated that,
based on their experience of interacting with existing FFLs and FFL
applicants who operate out of a residence, these types of businesses
did not have or plan to have a business insurance policy that
covered firearms inventory.
---------------------------------------------------------------------------
The Department disagrees with some commenters that the EIB
presumptions do not indicate that a person devotes time, attention, and
labor to dealing firearms. Each presumption requires conduct that
demonstrates the devotion
[[Page 29025]]
of time, attention, and labor to dealing in firearms through specific
purchase and sale activities. For example, a person who purchases and
resells firearms, and then offers to purchase more firearms for resale
to the same person, has devoted time, attention, and labor to dealing
in firearms as a regular course of business. The seller has expended
time, effort, and money to locate and purchase firearms and locate
interested customers, then offered to buy and sell more firearms to
customers. The statutory definition of ``engaged in the business'' does
not require a seller to have repeatedly purchased and resold firearms;
rather, it is the person's intent to predominantly earn a profit
through repetitive purchases and resales that must be proven. Each EIB
presumption involves activities that tend to show this predominant
profitmaking intent.
b. Enforcement of Presumptions
Comments Received
Several commenters stated that the proposed rule did not make clear
to whom it would apply or how ATF or other law enforcement entities
should consider the presumptions or criteria in an enforcement context.
Commenters stated the rule needs to make clear what sales relating to
personal collections or hobby are allowed without a license, so the
public knows ahead of time if what they are doing requires a license.
One commenter stated that there are no safe harbors in the rule that
could encourage lawful and responsible behavior. The commenter
suggested that it would be simpler to include a presumption that
``[a]ny seller of a firearm who first transfers that firearm to a
licensee should be presumed not to be a dealer in firearms regardless
of all other indicia.'' According to the commenter, transferring a
firearm to a licensee first shows that the seller cares about creating
a record of the sale more than simply maximizing profit, and so such
sellers should not be considered dealers. Further, this suggested
presumption would encourage the conduct of private transactions through
FFLs and accomplish the statutory objectives and the Department's and
ATF's policy goals. However, the commenter added that this suggested
presumption should not be used to imply that a sale that does not occur
through an FFL is automatically an unlawful transaction. Another
commenter similarly suggested that ATF's chief concern with creating
these presumptions is to keep people from avoiding background checks.
As a result, they said, ATF should exclude from the presumptions all
sales in which background checks are conducted, including sales to a
current FFL, private sales facilitated through a current FFL, and sales
of NFA firearms.\192\
---------------------------------------------------------------------------
\192\ See footnote 78.
---------------------------------------------------------------------------
Another commenter, who supported the rule, suggested that absent
guidance from the Department about how the ``criteria'' would be
weighted, an atmosphere of ambiguity and uncertainty exists for persons
who sell or transfer firearms at gun shows, online, or through other
means without an FFL, as well as for law enforcement and regulatory
agencies enforcing the rule. The commenter suggested adding language to
state that while no single factor is determinative, the Department will
assign different weights to each factor depending on the context and
circumstances of each case. For example, the commenter suggested that
if a person rented a table at a gun show, the Department would consider
the person to be engaged in the business if the person has displayed
signs or banners with a business name or logo, offered warranties or
guarantees for the firearms sold, or transferred firearms to residents
of another State. Likewise, if the transaction occurs online, the
commenter suggested the Department make clear in the rule that it will
consider if the person created a website with a domain name that
indicates a business activity, posted advertisements on online
platforms that cater to firearm buyers and sellers, accepted payments
through online services that charge fees for transactions, and whether
the person has shipped firearms to persons who are residents of another
State through online sales or transfers.
Another suggestion was that ``ATF should consider clarifying that
the initial burden of producing evidence to establish an `engaged in
the business' presumption in a civil or administrative proceeding falls
on the government.'' They further suggested the rule should also state
that, after a determination that the initial evidentiary burden for a
presumption has been met, the burden of producing reliable rebuttal
evidence shifts to the other party, and if the other party fails to
produce sufficient reliable rebuttal evidence, the presumption will
stand. They also suggested that the final rule should clarify whether
the examples of conduct in paragraph (c)(4) (now Sec. 478.13(e) and
(f)) of the NPRM's definition of ``engaged in the business''--that is
not presumed to be ``engaged in the business''--are intended to serve
as rebuttable presumptions or as rebuttal evidence. ``It appears,'' the
commenter said, ``from their placement outside of (c)(3) that the
(c)(4) examples are not designed to be rebuttable presumptions, but the
final rule would benefit from clarifying how those examples are to be
raised and applied in proceedings.''
Department Response
The Department disagrees that the rule does not make clear to whom
it would apply. The rule implements the provisions of the BSCA that
amended the definition of ``engaged in the business'' in the GCA as it
applies to wholesale and retail dealers of firearms. Thus, the rule is
applicable to any person who intends to ``engage in the business'' of
dealing in firearms at wholesale or retail, as the rule further defines
that term. Such persons must become licensed and abide by the
applicable requirements imposed on licensees under the GCA and 27 CFR
part 478. And the rule further explains that the rebuttable
presumptions are applicable in civil and administrative proceedings
(e.g., license issuance and asset forfeiture), not in criminal
proceedings, though courts in criminal cases may choose to use them as
permissive inferences. See Sec. 478.13(c), (h). The Department will
exercise its discretion to utilize the presumptions set forth in the
rule in civil and administrative cases and may recommend their use as
permissive inferences in criminal proceedings, when appropriate.
The Department disagrees that the rule does not make clear what
sales relating to personal collections or hobbies are allowed without a
license. The proposed rule explicitly recognized the GCA's ``safe
harbor'' provision that a person is not engaged in the business if the
person makes occasional sales, exchanges, or purchases of firearms for
the enhancement of a personal collection or for a hobby. 88 FR 61994,
62001-02. It also stated that a person would not be presumed to be
engaged in the business if the person transfers firearms only as bona
fide gifts. Id. Transfers of firearms for these reasons do not support
a presumption that a person is ``engag[ing] in the business,'' and
reliable evidence of these purposes may also be used to rebut any
presumption and show that a person is not engaged in the business under
the statute. See Sec. 478.13(e), (f). The final rule also specifies
that a person shall not be presumed to be engaging in the business when
reliable evidence shows that the person is transferring firearms only
to liquidate all or part of a personal collection of firearms. See id.
In addition, the term ``personal collection'' is defined consistently
with dictionary definitions to include firearms acquired
[[Page 29026]]
``for a hobby,'' and explains the circumstances under which firearms
transferred to a personal collection by a former licensee prior to
license termination may be sold or otherwise disposed.
Nonetheless, to further allay the concerns of commenters who sought
further clarification of the ``safe harbors,'' the Department is adding
to this rule a list of conduct that does not support a presumption, as
previously stated. See Sec. 478.13(e). Reliable evidence of such
conduct may also be used to rebut the presumptions. See Sec.
478.13(f). The Department has also stated in the rule that the list of
rebuttal evidence is not exhaustive. See Sec. 478.13(g). Additionally,
while the Department disagrees with the commenter that the regulatory
text in the final rule needs to explain how the rebuttable presumptions
shift the burden of production, the Department agrees with the
commenter as to how they are to be applied. As an initial matter, a
person will not be presumed to be engaged in the business of dealing in
firearms when reliable evidence shows that the person only sells or
transfers firearms for one of the reasons listed in Sec. 478.13(e).
Determining whether a presumption applies is a fact-specific
assessment, as is determining whether a person is engaging in conduct
that does not support a presumption, such as buying or selling firearms
to enhance or liquidate a personal collection. For example, unlicensed
individuals selling firearms at a gun show or using an online platform
cannot merely display a sign or assert in their advertisement that the
firearms offered for sale are from a ``personal collection'' and
preclude application of a presumption. Instead, whether a presumption
would apply requires an assessment of the totality of the
circumstances, including an evaluation of the reliability of any such
assertion regarding a ``personal collection.''
Once a proceeding is initiated, the burden of persuasion never
shifts from the Government or plaintiff. If evidence sufficient to
support a presumption is produced in a civil or administrative
proceeding, the responding person has the opportunity to produce
reliable rebuttal evidence to refute that presumption. If the
responding person produces such reliable evidence, additional evidence
may be offered by the Government or plaintiff to further establish that
the person has engaged in the business of dealing in firearms, or had
the intent to predominantly earn a profit through the repetitive
purchase and resale of firearms, depending on which set of presumptions
is applied. If the responding person fails to produce evidence to rebut
a presumption, however, the finder of fact would presume that the
person was ``engaged in the business'' of dealing in firearms, or had a
predominant intent to earn a profit from the repetitive sale or
disposition of firearms, as the case may be.
The Department agrees that a person should be able to rebut a
presumption that they are engaged in the business of dealing in
firearms requiring a license if the sales are occasionally only to an
FFL or to a family member for lawful purposes. A person who only
occasionally sells a firearm to a licensee is not likely to have a
predominant intent to earn a profit because a licensee typically will
offer less than a non-licensee for the firearm given the licensee's
intent to earn a profit through resale.\193\ The same reasoning applies
to family members because the seller is less likely to have a
predominant intent to earn a profit due to their pre-existing close
personal relationship (i.e., a less than arms-length transaction). For
this reason, the occasional sale of firearms to a licensee or to a
family member for lawful purposes has been added to the non-exhaustive
list of examples of evidence that may rebut any presumption. Sec.
478.13(e)(3), (f). However, the Department is not excluding from the
presumptions a person who engages in private sales that are facilitated
by a licensee. Even though such sales are certainly allowed,\194\ a
private seller likely intends to predominantly earn a profit from those
arms-length sales even if the licensee requires a fee for the service
of running a background check.
---------------------------------------------------------------------------
\193\ See Enlisted Auctions, How Do I Sell My Firearms?, https://www.enlistedauctions.com/resources/how-do-i-sell-my-firearms (last
visited Mar. 6, 2024) (``You can take your firearm to a local gun
shop. Typically gun shops will buy your firearm from you at a lower
price and then try to resell the firearm at a profit. Pros to this
method are that you can take the firearm to the store, drop it off,
receive your payment and you are done. Downside is that you do not
typically receive market value for your firearm. Think of it as
trading in a vehicle. When you trade in your car at a dealership,
the dealer never pays you what the car is worth on the open
market.''); Dunlap Gun Buyers, How to Sell a Gun in Maryland: A
Comprehensive Guide (Sept. 8, 2023), https://www.cashmyguns.com/blog/how-to-sell-a-gun-in-maryland (``Gun owners can sell their
firearm to a local dealer. This is a good way to help ensure gun
owners are complying with gun laws in Maryland for firearm sales.
However, sellers may be leaving money on the table by selling for
much less than the gun's actual market value.'').
\194\ See ATF, Facilitating Private Sales: A Federal Firearms
Licensee Guide, https://www.atf.gov/firearms/docs/guide/facilitating-private-sales-federal-firearms-licensee-guide/download
(last visited Mar. 6, 2024); ATF Proc. 2020-2, Recordkeeping and
Background Check Procedure for Facilitation of Private Party
Firearms Transfers (Sept. 2, 2020), https://www.atf.gov/rules-and-regulations/docs/ruling/atf-proc-2020-2-%E2%80%93-recordkeeping-and-background-check-procedure/download.
---------------------------------------------------------------------------
The Department disagrees with the comment that the rebuttable
presumptions in the rule should be considered only as criteria that
should be weighted and not as rebuttable presumptions. Of course, in
the final determination of whether someone is ``engaged in the
business,'' all the evidence, for and against, will be weighed by the
fact finder. But that does not preclude the use of reasonable and
supported rebuttable presumptions as part of that process. In that
vein, to best clarify who is presumptively required to be licensed as a
dealer, the rule identifies specific conduct that will be presumed to
be ``engaging in the business'' with the intent to ``predominantly earn
a profit.'' The presumptions are not factors; nor are they weighted
according to the various circumstances described in each presumption
because any one of them is sufficient to raise the presumption, and any
may be rebutted by reliable evidence to the contrary.
c. Exemption From Presumptions
Comments Received
At least one commenter in support of the proposed rule raised
concerns about the exception from the presumptions where a person
``would not be presumed to be engaged in the business requiring a
license as a dealer when the person transfers firearms only as bona
fide gifts or occasionally 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.'' \195\ The commenter stated that, although a bona fide gift
should suffice to rebut a presumption, the exclusion of these types of
situations ``risks creating a significant loophole whereby firearms
traffickers could shift the burden of proof simply by claiming that any
suspicious transaction was a gift.'' The commenters cited United States
v. Gearheart, No. 23-cr-00013, 2023 WL 5925541, at *2 n.3 (W.D. Va.
Sept. 12, 2023) as an example of when a straw purchaser initially told
investigators that she bought the gun as a gift.
---------------------------------------------------------------------------
\195\ 88 FR 62001-02.
---------------------------------------------------------------------------
By contrast, another commenter not in support of the rule stated
that ``Congress affirmatively exempted from licensure all sales to
expand or liquidate a private collection and occasional transactions--
even with some profit motive--to
[[Page 29027]]
enhance a collection or for a hobby. But ATF now seeks to presume the
opposite for a wide array of transactions.''
Department Response
The Department disagrees that the bona fide gift exception is a
``loophole'' for multiple reasons. First, transferring a firearm as a
bona fide gift to another person is not a ``sale'' because there is no
``exchange'' or payment of money, goods, or services for the firearm.
Second, a person who is not otherwise engaged in the business as a
dealer and truly intends to give a firearm as a gift does not
ordinarily devote time, attention, and labor to firearms dealing as a
trade or business or show the predominant intent to earn a profit
through the repetitive purchase and resale of firearms. The Gearhart
case cited by one of the commenters is not a case of dealing in
firearms without a license; rather, it is a case where a person aided
and abetted a straw purchaser to buy a firearm for himself--the actual
buyer--not for resale to others. Third, as in all fact-based
proceedings, a party must establish through evidence that a claim of
fact is reliable in order to use that fact in their favor. That
determination is made by the finder of fact, not the proponent of the
argument. Fourth, to the extent that gifts are mutually exchanged
between both parties, as the commenter recognizes, the transfer of bona
fide gifts is evidence that can be used to rebut any presumption. Once
the Government proves an exchange, or offer to exchange, firearms for
something of value, the responding party may submit evidence to show
that the firearms were transferred only as bona fide gifts.
The Department disagrees with the commenter that this rule causes
all firearms transactions to be deemed engaged in the business of
dealing in firearms, but agrees that the rule should make clear that an
occasional sale only to obtain more valuable, desirable, or useful
firearms for a personal collection or hobby, or liquidation of all or
part of a personal collection, should not be presumed to be engaging in
the business. Based on the Department's agreement with this comment,
the final rule adds this activity to the list of conduct that does not
support a presumption and as evidence that can rebut any presumption
should a proceeding be initiated. See Sec. 478.13(e)(2) and (4), (f).
However, as explained previously, the term ``liquidation'' is
inconsistent with a person acquiring additional firearms for their
inventory (i.e., ``restocking''), and that has been made clear in a
parenthetical in the regulatory text. See Sec. 478.13(e)(4).
d. Use of Presumptions in Particular Proceedings
Comments Received
Several commenters expressed concerns about the application of the
presumptions in criminal contexts or in administrative or civil
contexts. More than one commenter expressed that there was confusion as
to whether ATF will use the presumptions (either the engaged in the
business presumptions or the intent to predominantly earn a profit
presumptions) in criminal proceedings. One of the commenters raised
concerns about when and how ATF will use the presumptions in
administrative or civil proceedings. The commenter stated that much of
ATF's administrative jurisdiction is over existing FFLs, which are
already engaged in the business and thus not affected by the rule. The
commenter then asked whether ATF intends to apply the presumptions to
``FFLs who transfer firearms for unlicensed individuals that ATF
believes are `engaged in the business?' '' They expressed concerns that
this would mean holding FFLs responsible for whether their customers
are unlawfully engaging in the business ``under the nebulous standards
of the proposed rule,'' which would make it too risky for any FFL to
ever facilitate a third-party transfer. The commenter suggested that
the only other possibility was to use the presumptions in forfeiture
actions, but these were substantially restricted as part of FOPA and
were not amended as part of the BSCA.
Department Response
The Department acknowledges commenters' confusion about the
application of the presumptions to criminal, civil, and administrative
proceedings. This final rule makes clear that the rebuttable
presumptions are to be used by persons potentially subject to the
licensing requirement to consider whether they must obtain a license,
as well as in civil and administrative proceedings, but they do not
apply to criminal proceedings. Civil and administrative proceedings
include, for example, civil asset forfeiture and administrative
licensing proceedings.\196\ However, as discussed in Section IV.B.9.b
of this preamble, this final rule indicates that a court in a criminal
case, in its discretion may, for example, elect to use the presumptions
as permissive inferences in jury instructions.\197\ Criminal
investigations, prior to formal charging, are covered by separate
policies, rules, and legal limitations, and are not within the scope of
this rule. The final rule does not suggest the presumptions be used in
criminal proceedings to shift the Government's burden of proof to the
defendant. In criminal proceedings, the Due Process Clause prohibits
the prosecution from using evidentiary presumptions in a jury charge
that have the effect of relieving the prosecution of its burden of
proving every element of an offense beyond a reasonable doubt.\198\
This rule does no such thing.
---------------------------------------------------------------------------
\196\ See footnote 85, supra.
\197\ See footnote 66, supra.
\198\ See Francis, 471 U.S. at 313.
---------------------------------------------------------------------------
Regarding civil or administrative proceedings involving existing
licensees, the Department disagrees that the standards in the rule are
``nebulous.'' The presumptions identify specific conduct that is
presumed to be engaging in the business, and the presumptions are to be
applied in all civil and administrative proceedings where there is
evidence of such specific conduct. Indeed, licensees have long been
prohibited by the GCA from willfully assisting persons they know are
engaged in the business of dealing in firearms without a license. See
18 U.S.C. 2; 922(a)(1)(A). Moreover, the BSCA's amendment at 18 U.S.C.
922(d)(10) now prohibits licensees or any other person from selling or
otherwise disposing of a firearm to a person knowing or having
reasonable cause to believe that such person intends to sell or
otherwise dispose of the firearm in furtherance of a Federal or State
felony, including 18 U.S.C. 922(a)(1). These violations of the GCA may
be brought against a licensee, or the licensee's firearms, in a civil
forfeiture or administrative licensing proceeding. For example, if a
licensed dealer sold firearms to a known member of a violent gang who
the dealer knew was repetitively selling the firearms within 30 days
from purchase to other gang members, the dealer's license could be
revoked under 18 U.S.C. 923(d)(1)(C) for willfully aiding and abetting
a violation of section 922(a)(1)(A), and potentially for willfully
violating section 922(d)(10). Under these circumstances, the gang
member would be presumed to be engaged in the business, and evidence of
the gang member's repetitive sales could be put forward in the
administrative action to revoke the dealer's license.
However, for the Government to take administrative action on that
basis against an existing licensee, or a license applicant, it would
still need to prove the person committed the conduct
[[Page 29028]]
willfully. See 18 U.S.C. 922(a)(1)(A), 923(d)(1)(C), 923(e). Even if a
presumption applied in a given case against a licensee, the Government
would still have to prove that a licensee facilitating a private sale
knew of an unlicensed dealer's purchase and resale activities without a
license, and either purposefully disregarded the unlicensed dealer's
lack of a license or was plainly indifferent to it. Thus, a licensed
dealer who inadvertently facilitates occasional private sales for an
unlicensed person whom the licensee does not know is engaged in the
business, and who is not plainly indifferent to the seller's need for a
license, would not be liable for the private seller's misconduct.
6. EIB Presumption--Willingness and Ability To Purchase and Sell More
Firearms
Comments Received
Generally, commenters opposing this EIB presumption stated it was
too broad and provided several examples of typical conduct that would
be captured under the presumption requiring a person to obtain an FFL.
Gun collectors' associations stated that most people who collect
firearms or engage in the sale of firearms for a hobby are willing to
buy or willing to sell. A commenter provided additional examples in
which the commenter stated that ATF could presume a person is
unlawfully engaged in the business, such as a person downsizing a
personal collection by a single firearm while expressing a desire to
continue downsizing, selling one firearm while offering to buy another,
or trading one firearm for another in someone else's collection.
Likewise, some commenters believed that any gun owner who discusses
sales of firearms with friends or relatives or who makes repetitive
offers to sell a firearm in order to secure a reasonable price will
need to be licensed because of the first presumption.
Specifically, some commenters argued that this presumption would
capture and penalize sellers who make statements as a part of normal
interactions, such as ``I need money to settle my divorce. That's why
I'm selling this Colt 1911. If you like this one, I also have another
with a consecutive serial number. Yeah, I'm losing money on them, but I
need the cash.'' This type of statement or innocuous statements such
as, ``[M]y wife makes me sell a gun to buy a new one, so I'm always
buying and selling guns'' are being wrongfully equated to criminal
actors who may say to an undercover officer, ``I can get you whatever
you want'' or that he can ``get plenty more of these guns'' and ``in a
hurry'' for the right amount of money. Commenters indicated that a huge
difference between these two scenarios is the totality of the
circumstances. The rule, they argued, is incorrectly crafted to avoid
the need for any totality of the circumstances analysis, so that only
one firearm, one presumptive circumstance, or ``possibly one overriding
circumstance'' is necessary, coupled with the subjective assessment of
an agent.
Another commenter suggested that ATF could amend the presumption to
correct the issue. ``Presently,'' the commenter said, ``the language is
too broad to function as a rebuttable presumption because its plain
language meaning places it in conflict with the presumption that an
occasional seller is not `engaged in the business.' If ATF amended this
presumption to include a frequency element, it would rectify this
issue.'' (emphasis added by commenter). The commenter suggested one
option could be, ``[a] person will be presumed to be engaged in the
business of dealing in firearms when the person, on a recurring basis,
sells or offers for sale firearms, and also represents to potential
buyers a willingness and ability to purchase and sell additional
firearms, or otherwise demonstrates the person's willingness and
ability to act as a dealer in firearms on a recurring basis,'' and
added that this alternative would add the necessary frequency element
and also correct a disjunctive ``or'' included in the original to make
the presumption clearer.
Department Response
The Department disagrees with the comments that the first EIB
presumption is too broad, or that collectors or hobbyists will be
unable to maintain or downsize their personal collections without a
license under the first EIB presumption in the rule. A person who makes
repetitive offers to sell firearms to downsize or liquidate a personal
collection does not fall within the presumption, which requires not
only that the person sell or offer for sale firearms, but also
demonstrate a willingness and ability to purchase and resell additional
firearms that were not already part of their personal collection. This
conduct is sometimes referred to as ``restocking.'' \199\ Nonetheless,
to make this point clear, the following parenthetical has been added in
the first EIB presumption: ``(i.e., to be a source of additional
firearms for resale).'' Sec. 478.13(c)(1). This presumption, like the
others, may be rebutted with reliable evidence to the contrary in any
proceeding.
---------------------------------------------------------------------------
\199\ See Restock, Cambridge Online Dictionary, https://dictionary.cambridge.org/us/dictionary/english/restock (last visited
Mar. 7, 2024) (``to replace goods that have been sold or used with a
new supply of them''); Restock, The Britannica Online Dictionary,
https://www.britannica.com/dictionary/restock (last visited Mar. 7,
2024) (``to provide a new supply of something to replace what has
been used, sold, taken, etc.'').
---------------------------------------------------------------------------
The Department disagrees that the first presumption is too broad to
function as a presumption without a time limitation because it
conflicts with the statutory exception for occasional sales to enhance
a personal collection. Persons who resell (or offer for resale)
firearms and hold themselves out to potential buyers or otherwise
demonstrate a willingness and ability to purchase and resell additional
firearms for resale are engaged in the business, according to well-
established case law. For example, in Carter, 801 F.2d at 82, the
Second Circuit found there was sufficient evidence that the defendant
engaged in the business in violation of 18 U.S.C. 922(a)(1) even though
he made only two sales four months apart. The Court explained that,
``[a]lthough the terms `engage in the business of' and `dealing in'
imply that ordinarily there must be proof of more than an isolated
transaction in order to establish a violation of this section . . .
[the] defendant's conduct was within the intended scope of the
statute'' because ``the statute reaches those who hold themselves out
as a source of firearms.'' \200\ There is no need for a time limitation
because such persons are holding themselves out as a source of
additional firearms for resale, thereby demonstrating a present intent
to engage in repetitive purchases and resales for profit. This
presumption merely shifts the burden of production to the responding
person to show that those resales occurred only occasionally to enhance
a personal collection, liquidate inherited firearms, or were otherwise
not sold to engage in the business as a dealer.
---------------------------------------------------------------------------
\200\ 801 F.2d at 81, 82 (internal quotation marks omitted); see
also footnote 68, supra.
---------------------------------------------------------------------------
7. EIB Presumption--Spending More Money on Firearms Than Reported
Income
Comments Received
Numerous commenters stated that this presumption is broad and
unclear. A couple of commenters questioned the meaning of ``applicable
period of time'' in this presumption, with one commenter claiming that
the presumption would ``assume the majority of purchasers of high end
collectible firearms [are] `engaged in the business' off of merely the
fact [that]
[[Page 29029]]
they purchased a gun more expensive than their income for some
period.'' Other commenters also stated there are many ways people might
not have reportable gross income. For example, adult children may not
have any gross taxable income, so buying and selling even two firearms
in a year could trigger the presumption. Similarly, commenters noted
that retired collectors with little or no reportable gross income
compared to their assets could be at significant risk of being
considered dealers without even offering a gun for sale or for spending
as little as $200 to advertise the sale of a firearm on GunBroker.com
or in a similar publication.
Another commenter provided specific examples of how law-abiding gun
owners who should not be considered dealers could easily be dealers
under this presumption. For instance, a California peace officer, who
suffers career-ending injuries and goes through the appropriate
process, would be eligible for ongoing disability payments of 50
percent of base pay, none of which is taxable. Under this pattern of
facts, the commenter argued, a law-abiding gun owner with such a
disability award and no other income could be presumed to be a dealer
if they sold only one firearm of any value. The commenter asserted that
many military members are in a similar situation where they may receive
disability pay that is not taxable. In all these cases, these people
might need post-separation income or to buy and sell firearms without
ever desiring to be dealers or making a profit on the sales, but they
run the risk of being presumed to be dealers based on this second
presumption. An additional commenter similarly stated the ``provision
that a person who spends more money than their reported gross taxable
income on purchasing firearms for resale, has no basis what-so-ever in
`profit.' Profit is based on a sum in excess of all costs. Not gross
income. Further, many retired people have a small gross taxable income
compared to their assets.''
One commenter claimed that assorted welfare benefits are excluded
from gross income and that, to the extent that those benefits ``benefit
disproportionately persons based on race or other classification,'' the
second presumption is constitutionally suspect. The commenter said that
ATF needs to justify the use of gross income in this presumption, which
could have a disproportionate impact on persons on the basis of race.
Similarly, at least one commenter in support of the proposed rule also
suggested that this presumption could potentially create an
``unreliable'' standard, whereby high-income dealers could sell large
amounts of firearms without ever being subject to the presumption,
while a single sale could be enough to subject a person with low or
fixed income to the presumption of unlawful dealing. The commenter
advised that for this specific presumption, the Department adopt a
numerical threshold of ten gun sales per year, which would make
applying this presumption easier for courts and law enforcement while
avoiding the inequities of ATF's income-based approach.
Department Response
In proposing this presumption, the Department noted that the likely
intention of a person who expends more funds on the purchase of
firearms in an ``applicable period of time'' than the total amount of
their reported gross income for that period would be to resell the
firearms for a profit. As noted by several commenters, however, there
are several situations in which individuals with income that is not
reportable as gross taxable income--such as those receiving disability
or welfare benefits, retired firearm collectors, retirees drawing on
Roth IRAs, and young adult children--could expend that non-reportable
income at levels in excess of their gross reported income to purchase
firearms, yet not intend to resell those firearms for a profit.
Application of a gross income presumption to such individuals,
commentors argued, would unfairly require them to disprove that they
were engaged in the business when they purchased a firearm or firearms.
While such circumstances would seem to be unlikely, the Department
acknowledges they could occur. The Department similarly acknowledges
that commenters' observations regarding the potential disparate effect
of a gross income-based presumption on low-income individuals, while
also unlikely, may occur. In light of these considerations, the
Department has decided not to include a gross income-based presumption
in this final rule and has removed it from the final rule.
Although the Department has determined not to include a gross
income-based presumption in this final rule, the Department notes that
evidence of expenditures for the purchase of firearms in excess of an
individual's reported gross income may nevertheless be relevant to the
factual assessment as to whether an individual is engaged in the
business. As amended by BSCA, the relevant assessment under the GCA is
whether a person's intent in engaging in firearms sales is
predominantly one of obtaining pecuniary gain; the financial
circumstances of an individual engaged in the repetitive acquisition
and sale of firearms is therefore relevant to this assessment.
8. EIB Presumption--Certain Types of Repetitive Transactions
a. Repetitively Transacting Firearms Through Straw Persons/Sham
Businesses
Comments Received
With regard to this presumption, at least one commenter questioned
why it was needed if straw purchasing is already a felony, while
another commenter raised no objection to a presumption that relied on
other crimes to establish the presumption. A couple of commenters did
not agree with the straw purchaser presumption because it could
unfairly capture unlicensed persons, as demonstrated in the following
scenarios. For example, they said, collectors purchase firearms on the
used firearms market, which is the only place to find vintage firearms,
but they could trigger this presumption without being aware they had
purchased the firearm through a straw seller. Similarly, an unlicensed
person who innocently sells two firearms that he no longer finds
suitable for self-defense would be presumed to be engaged in the
business if the buyers of the firearms turn out to be straw purchasers.
One commenter suggested that ``[t]he final rule should clarify that
while firearm sales involving illicit straw middlemen and contraband
firearms are indicative of the seller's criminal purposes, these sales
are also indicative of an individual's predominant intent to profit
when undertaking the sales. The conduct can indicate both at the same
time, and, as the NPRM notes, it is the illicit nature of the middleman
activity and firearm types that increases the profitability of the
sale. While the criminal purposes involved in such sales obviate ATF's
need to prove profit under BSCA's definition of `to predominantly earn
a profit,' it does not obviate the fact that such sales are in fact
predominantly motivated by profit.''
The same commenter, who generally supported the rule, had a
suggestion for improving this presumption. They stated that, ``[w]hile
sensible as currently drafted and deserving of inclusion in the final
rule, this presumption would benefit by clarifying whether the word
`repetitively' in the Proposed Rule is intended to apply to the phrase
`sells or offers for sale' in the same way that it clearly applies to
`purchases for the purpose of resale.' ''
[[Page 29030]]
Department Response
The Department disagrees that the presumption addressing straw
purchasers is not needed because straw purchasing is already a felony.
While it is true that straw purchasing is a felony,\201\ all persons
who engage in the business of dealing in firearms are required to be
licensed, even if the means by which those firearms are purchased and
sold is unlawful. Moreover, the Department agrees with the comment that
firearms purchases and sales through straw individuals and sham
businesses are indicative of an individual's predominant intent to
profit from those repeated illicit sales. In any event, Federal law
provides that the Government is not required to prove profit, including
an intent to profit, where a person is engaged in regular and
repetitive sales for criminal purposes, pursuant to 18 U.S.C.
921(a)(22). Making repetitive resales through straw individuals or sham
businesses for the purpose of engaging in the business without a
license is a criminal purpose.\202\ The statute itself thereby provides
notice to such persons that they may be unlawfully engaging in the
business of dealing in firearms.
---------------------------------------------------------------------------
\201\ See 18 U.S.C. 932 (prohibiting straw purchasing of
firearms); 922(a)(6) (prohibiting false statements about the
identity of the actual purchaser when acquiring firearms);
924(a)(1)(A) (prohibiting false statements made in licensee's
required records).
\202\ See 18 U.S.C. 922(d)(10) (making it unlawful for any
person to sell or otherwise dispose of a firearm to any person
knowing or having reasonable cause to believe that such person,
including as a juvenile, intends to sell or otherwise dispose of the
firearm or ammunition in furtherance of a felony, including sec.
922(a)(1)).
---------------------------------------------------------------------------
At the same time, collectors who innocently purchase and sell
firearms from or through a straw purchaser without knowing the person
was acting for someone else, or purposefully disregarding or being
plainly indifferent to that fact, would not incur liability for
engaging in the business without a license. The Government must prove
willful intent in all relevant licensing and forfeiture proceedings.
For example, if the Government were to deny an application for a
license because of previous unlawful unlicensed dealing, it must show
that the applicant ``willfully violated'' the unlicensed dealing
prohibition at 18 U.S.C. 922(a)(1). See 18 U.S.C. 923(d)(1)(C).
The Department agrees that the term ``repetitively'' applies to
purchases of firearms in the same way as it applies to sales of
firearms. Consequently, the Department has added the word
``repetitively'' before ``resells or offers for resale'' with respect
to the straw/sham business and unlawfully possessed firearms
presumptions. See Sec. 478.13(c)(2).
b. Repetitively Purchasing Unlawfully Possessed Firearms
Comments Received
As with the presumption related to straw purchasing or sham
businesses, at least one commenter said that the presumption is
unnecessary because unlawful possession of certain firearms can already
be prosecuted as a stand-alone felony. The commenter also questioned
the need for this presumption because no legitimate business would deal
in illegal firearms, and so buying and selling such firearms would show
that a person is not engaged in the business. The commenter further
noted that there is no way for a person to know if the firearm they
acquire is stolen because ``[t]here is no database where a would-be
purchaser, or seller for that matter, may check if a gun is stolen.''
The commenter similarly questioned how an average person would know if
a particular firearm was imported illegally, providing the example of a
vintage World War I Luger that could have been brought to the United
States legally in 1919 as a souvenir, or smuggled into the country
illegally in 1970. Another commenter noted that the NPRM did not
explain how possession of certain unlawful firearms (stolen guns, those
with serial numbers removed, or those imported in violation of law), in
addition to its own separate crime, also constitutes unlawful dealing.
The commenter added that the GCA draws no connection between being
engaged in the business as a dealer in firearms and the unlawful
possession of certain types of firearms.
By contrast, at least one commenter in support of the rule
suggested that the Department add ``weapons, the possession of which is
prohibited under [S]tate or local laws'' to the list of examples in the
presumption of firearms that cannot be lawfully purchased or possessed.
Department Response
The Department disagrees that the presumption addressing buying and
selling of prohibited firearms is not needed because possession of such
firearms is already a crime. As with dealers who transact through straw
individuals, which is also a Federal crime, all persons who engage in
the business of dealing in firearms are required to be licensed even if
the firearms purchased and sold by the business are also unlawful to
possess. Contraband firearms are actively sought by criminals and earn
higher profits for the illicit dealer because of the additional labor
and risk to acquire them. Illicit dealers will often buy and sell
stolen firearms and firearms with obliterated serial numbers because
those firearms are preferred by both sellers and buyers to avoid
background checks and crime gun tracing. However, bona fide collectors
who occasionally purchase and resell firearms from their personal
collections without knowing the characteristics of the firearms that
make them unlawful to possess would not incur liability for engaging in
the business without a license. There is always a requirement for the
Government to prove a willful intent to violate the law in any
proceeding arising under 18 U.S.C. 922(a)(1), 923(a), 923(d)(1)(C), or
923(e). In addition, each presumption may be refuted with reliable
evidence that shows the person was not engaging in the business, such
as evidence that they were occasionally reselling to obtain more
valuable firearms for their personal collection. See Sec. 478.13(f).
Moreover, under the BSCA, 28 U.S.C. 534(a)(5), once licensed, dealers
who may have innocently purchased unlawful firearms will now have
access to the FBI's National Crime Information Center database to
verify whether firearms offered for sale have been stolen.
The Department agrees with the comment that it should revise this
presumption on repetitive purchases and resales to clarify that it
includes firearms unlawfully possessed under State and local law. The
fact that profit motive is buttressed by the illicit nature of the
product applies equally to firearms that are illegal under State law.
One of the primary purposes of the GCA was to enable the States
effectively to regulate firearms traffic within their borders. See
Omnibus Crime Control and Safe Streets Act of 1968, Public Law 90-351,
sec. 901(a), 82 Stat. 197, 225-26.\203\ And, according to the comment
from Attorneys General representing 20 States and the District of
Columbia, ``many guns are trafficked across [S]tate lines, exploiting
the differences in [S]tate regulations.'' Accordingly, the Department
has revised the presumption to make it clear that it includes all
firearms that cannot lawfully be purchased, received, or possessed
``under Federal, State, local, or Tribal law,'' and cites the Federal
prohibitions only as examples. Sec. 478.13(c)(2)(ii).
---------------------------------------------------------------------------
\203\ See also S. Rep. No. 90-1097, at 28 (1968); H.R. Rep. No.
90-1577, at 6 (1968); S. Rep. No. 90-1501, at 1 (1968).
---------------------------------------------------------------------------
[[Page 29031]]
9. EIB Presumption--Repetitively Selling Firearms in a Short Period of
Time
a. Repetitively Selling Firearms Within 30 Days After Purchase
Comments Received
Numerous commenters disagreed with the presumption that a person is
a dealer if they repetitively sell or offer for sale a firearm within
30 days after originally purchasing the firearm. Commenters noted that
this presumption shows ATF's lack of understanding of the firearms
community. Commenters stated it is common for people, including
collectors and firearm enthusiasts, to find themselves in a situation
where they buy a firearm and quickly regret the purchase. They
disagreed with the Department basing the presumption on the assertion
that stores have a 30-day return period. Some commenters stated that
stores frequently have strict no-return policies, and other commenters
stated that stores frequently offer a ``non-firing inspection period''
within which a customer can return the firearm. This means that if the
customer fires the gun after purchase and does not like it, the person
has no choice but to sell the firearm as used. Another commenter
provided common scenarios where they claimed a person would be presumed
to be a dealer under this presumption. In one example, a non-licensee
who buys two firearms that do not work or fulfill their intended role
and subsequently sells them within 30 days would be presumed to be
engaged in the business because of the ``repetitive'' sales of the
firearms within 30 days of purchase. The commenter also suggested that
a person who inherits a firearm collection from a parent and chooses to
sell those firearms by auction or by other private sale within 30 days
would be subject to prosecution under this presumption.
At least one commenter in support of the rule recommended that the
period for this presumption be extended from 30 days to 90 days to make
it more difficult for people to structure transactions in a way that
would evade licensing and background check obligations.
Department Response
The Department disagrees with commenters that it is common for
persons to repetitively purchase and resell firearms within 30 days
without a predominant intent to profit, such as by selling unsuitable
or defective firearms. Common sense and typical business practices
dictate that it is more consistent with profit-based business activity
than collecting to buy and resell inventory in a short period, and as
stated previously, that is true especially when the firearm could be
returned yet is resold instead. For one thing, multiple firearms would
have to be purchased and resold within that 30-day period of time to
trigger the presumption. Thus, even assuming a person could not return
a firearm, which is not always the case, it is unlikely that there
would be more than one unsuitable or defective firearm that would need
to be resold during the 30-day period unless the person is engaged in
the business.\204\ And, as with the other presumptions, this
presumption may be refuted by reliable evidence to the contrary to
account for less common circumstances raised by the commenters.
---------------------------------------------------------------------------
\204\ Further support for a 30-day resale presumption comes from
ATF's experience observing persons who sell firearms at gun shows.
Because of the frequency of gun shows, unlicensed dealers have a
readily available marketplace in which to buy, display, and sell
numerous firearms for a substantial profit within one month.
According to one study, there were 20,691 guns shows in the United
States that were promoted and advertised between 2011 and 2019, with
2,299 gun shows per year. See David P[eacute]rez Esparza et al.,
Examining a Dataset on Gun Shows in the US, 2011-2019, 4 Journal of
Illicit Economies and Development 86, 87 (2022), https://storage.googleapis.com/jnl-lse-j-jied-files/journals/1/articles/146/submission/proof/146-1-1646-1-10-20220928.pdf; see also Crossroads
of the West, 2024 Gun Show Calendar 1, https://www.crossroadsgunshows.com/wp-content/uploads/2024/03/Calendar-2024.pdf (last updated Mar. 20, 2024) (48 gun shows in Arizona,
California, Nevada, and Utah in 2024); Gun Show Trader, Missouri Gun
Shows, https://gunshowtrader.com/gunshows/missouri-gun-shows/ (last
visited Mar. 26, 2024) (57 gun shows in Missouri and Arkansas in
2024); Gun Show Trader, Central Indiana Gun Show Calendar, https://gunshowtrader.com/gunshows/central-indiana/ (last visited Mar. 8,
2024) (54 gun shows in Indiana in 2024).
---------------------------------------------------------------------------
With regard to the suggestion to extend the 30-day period to 90
days, the Department disagrees. The Department believes that the
turnover presumption for persons actively engaged in the business of
dealing in firearms of varying conditions, kinds, and types is more
likely to occur within a relatively short period of time from the date
of purchase. While the Department understands that some licensees will
not accept returns, 30 days is a reasonable time frame within which ATF
can distinguish those who are engaged in the business from those who
are not because many licensees, including licensed manufacturers, will
accept returns of unsuitable or defective firearms within that period
of time. See footnote 81, supra.
Finally, the Department disagrees that a person who inherits a
personal collection and liquidates it within 30 days after inheritance
falls within the 30-day turnover presumption. The presumption applies
only to persons who repetitively resell firearms within 30 days ``after
the person purchased the firearms.'' Sec. 478.13(c)(3)(i). A person
who inherits a personal collection does not, in the absence of other
factors, ``purchase'' or exchange something of value in order to
receive the firearms. To further clarify, the final rule also lists, as
rebuttal evidence, the specific example of a person who liquidates
inherited firearms. See Sec. 478.13(e)(5)(i), (f).
b. Repetitively Selling New or Like-New Firearms
Comments Received
Of the several presumptions, some commenters believed that this
presumption hurts collectors, who are not licensees, the most because
they value the original condition of firearms and, as such, frequently
keep firearms in like-new condition and with their original packaging.
Again, commenters stated that including this presumption demonstrates
the Department's and ATF's lack of understanding of how the community
values firearms. One commenter pointed out, as an example, that ``[t]he
National Rifle Association has three collector grades for new or like
new modern firearms--`New,' `Perfect,' and `Excellent'--which represent
the three most coveted and sought-after grades,'' and included a link
to an article on how to evaluate firearms. Another commenter noted that
it is fairly standard for a person to buy a firearm, shoot it a few
times, and then sell it in the original box in a private sale because
selling the firearm in its original box contributes to the value of the
firearm. This, the commenter noted, should not be considered to be
engaging in the business. Numerous commenters noted that owners keep
firearms in the original boxes not out of criminality, but for
collectability. At times, the packaging may be more valuable than the
firearm. Therefore, a gun might appear to be ``like new'' possibly
months or years after a transaction and one may be presumed to be
engaged in the business under this presumption if the person later
sells their like-new firearm with the original packaging. Further,
``like new in original packing firearms are . . . the most sought after
of collectible firearms,'' said one commenter. At least one commenter
stated that this rule will make firearms less safe if individuals
discard the original packaging, which often includes warnings and
safety information about the firearm, in order
[[Page 29032]]
to avoid being considered a dealer under the presumption when they
later want to sell the firearm.
Department Response
The Department does not agree that most persons who repetitively
purchase and resell firearms that are in a new condition, or like-new
condition in their original packaging, lack a predominant intent to
earn a profit. That is too broad an assessment. On the contrary, the
Department has found--based on its experience as described above--that
this type of behavior is an indicator of being engaged in the business
with a predominant intent to earn a profit from dealing in firearms in
pristine condition.\205\ This is even more likely to be the case when
the new or like-new firearms are repetitively purchased and resold
within a one-year period of time. However, the Department acknowledges
commenters' concerns and agrees that true collectors may hold
collectible firearms for a long period of time, and that some
collectible firearms may appear to be like-new months or years after
purchase. Therefore, to reduce the possibility that these ``new'' or
``like-new'' firearms \206\ are part of a personal collection, and to
account for the higher likelihood that repetitive resales of such
firearms in a relatively short time period are made with an intent
predominantly to earn a profit, the Department has incorporated a one-
year turnover limitation into the presumption. See Sec.
478.13(c)(3)(ii)(A). The Department believes that persons acting with a
predominant intent to earn a profit are likely to repetitively turn
over firearms they purchase for resale within this period. In addition,
ATF's experience \207\ is that collectors and hobbyists routinely
retain their personal collection firearms for at least one year before
resale, so the Department believes this is also a reasonable period
that would not pose a burden on collectors and hobbyists.\208\ As with
the other presumptions, this one may be refuted with reliable evidence
to the contrary.
---------------------------------------------------------------------------
\205\ See footnote 82, supra.
\206\ For purposes of this rule, the Department interprets the
term ``new'' in accordance with its common definition to mean,
``having recently come into existence,'' and the term ``like new''
to mean ``like something that has recently been made.'' See, e.g.,
New, Merriam-Webster Online Dictionary, https://www.merriam-webster.com/dictionary/new (last visited Mar. 8, 2024); Like New,
Merriam-Webster Online Dictionary, https://www.merriam-webster.com/dictionary/like%20new (last visited Mar. 8, 2024). The Department
understands that collectors commonly grade or rate collectible
firearms as a means of determining their appreciated value over
time, insurance, collectability, etc. However, this presumption is
not aimed at collectible firearms and is not making a distinction
based on a firearm's grade or rating in relation to commonly
accepted firearms condition standards, such as those contained in
the NRA Modern Gun Condition Standards or the Standard Catalog of
Smith & Wesson. See Jim Supica, Evaluating Firearms Condition, NRA
Museums, https://www.nramuseum.org/gun-info-research/evaluating-firearms-condition.aspx (last visited Mar. 26, 2024).
\207\ See the discussion under the Department's response in
Section IV.B.9.c of this preamble.
\208\ In further support of a one-year time limit, 18 U.S.C.
923(c) provides that after one year, firearms transferred by a
licensee from the licensee's business inventory to the licensee's
personal collection are no longer deemed business inventory.
---------------------------------------------------------------------------
c. Repetitively Selling Same or Similar Kind/Type Firearms
Comments Received
Numerous commenters stated that this presumption targets collectors
who often focus on collecting a specific type or kind of firearm (e.g.,
Colt single action revolvers, over-under shotguns, or World War II-era
bolt-action rifles) and would thus be more likely to sell firearms by
the same manufacturer or of the same type to enhance their collection.
``Virtually every collector or hobbyist focuses their efforts on
specific manufactures and types of firearms. They are for the most part
devoted to something,'' said one commenter. The commenters claimed that
``a collector liquidating his collection will almost assuredly be
presumed to be engaged in the business, especially if he requires more
than one incident to sell his collection,'' but the collector ``is
doing exactly that which is explicitly allowed by statute.''
Some commenters strongly disagreed with ATF's description that
``[i]ndividuals who are bona fide collectors are less likely to amass
firearms of the same kind and type than amass older, unique, or less
common firearms'' because this disregards not only the fact that
collectors can purchase and sell common firearms that do not hold
antique value, but also what is known in the firearms community as
``pattern collecting.'' According to commenters, some people purchase
the same type of pistol or rifle over and over again, in every single
iteration imaginable, which can vary due to manufacturing date,
manufacturing location, minute changes in the firearms, or any number
of reasons. In pattern collecting, a person would have multiple
firearms for sale that look exactly the same to a lay person. For
instance, one commenter asked if a seller would be subject to this
presumption if they sold a small collection of highly valuable 19th
century Winchester lever action rifles, which would be of the same kind
and type. Similarly, another commenter said that large portions of the
modern firearms market can be considered ``of similar kind,'' pointing
out that a ``Gen 3 Glock in 9mm Luger is of similar kind to a polymer
Walther in 9mm or a Palmetto State Armory Dagger in 9mm. The 9mm
polymer pistol market has a lot of variety, but [those firearms] can
all be considered `of similar kind.' '' The commenter noted further
that individuals might have numerous 9mm polymer pistols in their
personal collection because it makes it easier to acquire ammunition,
and if magazines or accessories are interchangeable, it makes it easier
to have a variety of configurations at hand at a lower cost. The
commenter also noted that many modern sporting rifles would also be
considered of ``similar kind'' if they can all be chambered in the same
caliber. The commenter stated that it is overbroad for the Department
to assume that someone selling modern firearms of the same type is more
likely to be a dealer in firearms because collecting is not limited to
curio and relic firearms.
One commenter expressed concerns about how firearms of the same or
similar kind and type could be ascertained and quoted an example from
the proposed rule's discussion about the ``same kind and type''
presumption. As quoted by the commenter, the proposed rule stated that
this presumption may be rebutted based on ``evidence that a collector
occasionally sells one specific kind and type of curio or relic firearm
to buy another one of the same kind and type that is in better
condition to `trade-up' or enhance the seller's personal collection.''
The commenter added, ``using `same kind and type' is not correct. For
instance, a [Curio and Relic] (C&R) [license] holder sells a bolt-
action Mosin-Nagant rifle in 7.62x54r, then uses the funds to purchase
a Star Model B pistol in 9x18. Are these (Mosin-Nagant & Star Model B)
the `same kind and type' or not? Both are clearly collectable C&R
firearms, while one is a bolt-action rifle and the other a pistol.''
Department Response
As with the previous EIB presumption, the Department disagrees that
collectors are likely to repetitively purchase and resell firearms that
are of the same or similar kind and type without a predominant intent
to earn a profit, at least not within a relatively short period of
time. If a person is accumulating and repetitively reselling the same
or similar kinds and types of firearms as part of a personal collection
as defined in this rule, they can use evidence that they are doing so
to
[[Page 29033]]
enhance or liquidate their personal collection to refute the
presumption.
Nonetheless, to substantially reduce the possibility that these
``like-kind'' firearms are part of a personal collection, as stated
previously, a one-year turnover limitation has been incorporated into
the presumption and, as always, any presumption may be rebutted with
reliable evidence to the contrary.\209\ See Sec. 478.13(c)(3)(ii)(B).
It is unlikely that persons who collect the same or similar kinds and
types of firearms for study, comparison, exhibition, or for a hobby
will repetitively resell them within one year after they were
purchased.
---------------------------------------------------------------------------
\209\ Per footnote 208, this time period is also supported by 18
U.S.C. 923(c).
---------------------------------------------------------------------------
Finally, in response to commenters' concerns about determining
which firearms would be of the same kind and type, the Department has
made some changes. First, as to the comment on whether the Mosin and
Star firearms described would be the same kind and type, the Department
notes that the Mosin-Nagant rifle in 7.62x54r and the Star Model B
pistol in 9x18 are not the same or similar kind and type of firearms.
They are of a different manufacturer (Mosin-Nagant v. Star), model
(M1891 v. BM), type (rifle v. pistol), caliber (7.62x54R v. 9x18), and
action (bolt action v. semiautomatic). They share almost no design
features and would thus not be subject to the ``same kind and type''
presumption. Nonetheless, to avoid any confusion about the meaning of
``same kind and type'' of firearms, and to allow for collectors who
obtain multiple firearms of the same type, but from different makers
and of different models, the Department has substituted the more
precise term ``same make and model'' in the final rule. See Sec.
478.13(c)(3)(ii)(B).
Further, to clarify the meaning of ``similar'' in this context, the
final rule now instead refers to ``variants thereof'' (i.e., variants
of the same make and model). See id. The term ``variant'' is already
defined in 27 CFR 478.12(a)(3) to mean ``a weapon utilizing a similar
frame or receiver design, irrespective of new or different model
designations or configurations, characteristics, features, components,
accessories, or attachments.'' Thus, to identify a ``variant'' of a
particular make and model, the design of the frame or receiver of one
firearm is compared to the design of the frame or receiver of the other
firearm, regardless of newer model designations or configurations other
than the frame or receiver.\210\ For example, an AK-74M is a rifle
variant of the original AK-47 rifle. ``The notable changes in the AK-
74M include a 90-degree gas block, a lightened bolt and bolt carrier, a
folding polymer stock, a new dust cover designed to resist the recoil
of an attached grenade launcher, [and] a reinforced pistol grip.''
Alexander Reville, What are all the AK Variants?, guns.com (Jan. 5,
2024), https://www.guns.com/news/what-are-ak-variants. But none of the
changes found in the AK-74M involve a design modification to the
receiver--the housing for the bolt--so that firearm is a rifle variant
of the original make and model (AK-47 rifle). See 27 CFR
478.12(a)(4)(vii). Likewise, an AR-type firearm with a short stock
(i.e., pistol grip) is a pistol variant of an AR-15 rifle because they
share the same or a similar receiver design. See 27 CFR 478.12(a)(3),
(f)(1)(i). Repetitive resales of firearms that are the same make and
model, or variants of the same make and model, within a year of
purchase, demonstrate that the firearms were likely purchased and
resold as commodities (i.e., business inventory), as opposed to
collectibles. Thus, to identify a firearm subject to this presumption,
the rule now looks to the make and model of a firearm and its
``variants'' (as defined in 27 CFR 478.12(a)(3)) which are generally
easy to determine by comparing the design of the frame or receiver--the
key structural component of each firearm repetitively sold. As with the
other presumptions, this one may be rebutted with reliable evidence to
the contrary.
---------------------------------------------------------------------------
\210\ In addition to the fact that the term ``variant'' was
incorporated into ATF regulations in 2022, see 87 FR 24735, this
term is well understood by the firearms industry and owners. See,
e.g., Alexander Reville, What are all the AK Variants?, guns.com
(Jan. 5, 2024), https://www.guns.com/news/what-are-ak-variants
(``[T]he AK has gone through several revisions over the years,
creating more modern variants. In fact, what you find yourself
calling an AK-47 might just be something different.''); Aaron
Basiliere, The AR-15 Pistol: The Rise of America's Rifle Variant,
catoutdoors.com (Apr. 19, 2022), https://catoutdoors.com/ar-15-pistol/.
---------------------------------------------------------------------------
10. EIB Presumption--Selling Business Inventory After License
Termination
Comments Received
Commenters raised concern over the impact of this presumption on
certain former licensees. Commenters stated that they believe this EIB
presumption will hurt recently retired FFLs who might need to sell off
firearms due to financial hardship. Some commenters stated that the
rule would punish former FFLs, holding them to a different and more
onerous standard than persons who were never licensed, and disagreed
with ATF's statement in justification of the presumption that a
``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.' '' 88 FR 62003. They stated that
ATF offered no citation for this proposition and ignored that a firearm
might be acquired first for business inventory and later become a part
of a personal collection. They argued that the former FFL should be
entitled to sell part or all of that collection under the statute
without becoming a dealer. Further, they argued that, unlike the other
presumptions affecting former FFLs, there is no time limitation, which
in essence means this presumption bars a former FFL from ever selling
firearms that were in their business inventory for any purpose without
triggering the presumption of again being engaged in the business. This
puts former licensees in an untenable position never contemplated by
Congress. One commenter suggested that, at a minimum, the rule should
grandfather in former FFLs who went out of business prior to this rule
becoming effective and allow them to treat those former business-
inventory firearms as a personal collection even if all the proposed
criteria of that presumption (now Sec. 478.13(c)(4)), such as formal
transfer from the A&D book, were not followed.
An additional commenter suggested that ATF should consider
supplementing this presumption with an additional presumption that any
formerly licensed firearms dealer, or person acting on their behalf,
that sells or offers to sell multiple guns that were in the former
FFL's business inventory at the time the license was terminated will be
presumed to be ``engaged in the business'' unless the firearms are
disposed of through a sale to another FFL.
Department Response
The Department disagrees that this EIB presumption is contrary to
the GCA, or that firearms that were repetitively purchased for resale
by licensees can be considered part of a ``personal collection'' if
they were not transferred to a personal collection prior to license
termination. The GCA at 18 U.S.C. 923(c) clearly contemplates that any
business-inventory firearms transferred while the person is a licensee
must be held in a personal collection by the licensee for at least one
year before the firearms lose their status as business inventory.
However, when a licensee does not transfer business inventory firearms
to a personal collection prior to license termination, the firearms
remain
[[Page 29034]]
business inventory.\211\ Such firearms were not acquired for a personal
collection, and were not transferred to one, and cannot be said to have
lost their status as firearms purchased for resale with a predominant
intent to profit simply because the licensee is no longer licensed to
sell them. Moreover, allowing former licensees to continue to sell
business inventory after license termination without background checks
and records through which crime guns can be traced clearly undermines
the licensing requirements of the GCA. It also places such former
licensees at an unfair competitive advantage over current FFLs, who are
continuing to sell firearms while following the rules and procedures of
the GCA. Indeed, there would be little point revoking a license for
willful violations of the GCA by a non-compliant FFL if the former
licensee could simply continue to sell firearms without abiding by the
requirements under which they purchased the firearms with the
predominant intent to profit, and by which the compliant FFLs abide. As
to concerns that a former licensee might need to quickly sell its
inventory to stave off financial hardship, the former licensee is still
free to sell firearms from this inventory on occasion to a licensee.
See Sec. Sec. 478.57(b)(1), (c); 478.78(b)(1), (c).
---------------------------------------------------------------------------
\211\ See ATF, Important Notice: Selling Firearms AFTER
Revocation, Expiration, or Surrender of an FFL 1 (June 3, 2021)
(``If a former FFL is disposing of business inventory, the fact that
no [firearms] purchases are made after the date of license
revocation, expiration, or surrender does not immunize him/her from
potential violations of 18 U.S.C. 922(a)(l)(A). Instead, business
inventory acquired through repetitive purchases while licensed are
attributed to the former FFL when evaluating whether subsequent
[firearms] sales constitute engaging in the business of dealing in
firearms without a license.''); ATF, Important Notice: Selling
Firearms AFTER Revocation, Expiration, or Surrender of an FFL 1
(Dec. 1, 2014) (same).
---------------------------------------------------------------------------
Under the rule, this presumption operates in conjunction with the
new liquidation-of-business-inventory provisions in 27 CFR 478.57
(discontinuance of business) and 478.78 (operations by licensee after
notice), which allow former licensees to either liquidate remaining
business inventory to a licensee within 30 days after their license is
terminated (or occasionally to a licensee thereafter), or transfer what
is now defined as ``former licensee inventory'' (firearms that were in
the business inventory of a licensee at the time of license
termination, as distinguished from a ``personal collection'' or other
personal firearms) to a responsible person of the former licensee
within that period. Under these new provisions, when firearms in a
former licensee inventory are transferred to the responsible person,
they remain subject to the presumptions in this rule. Such firearms
were repetitively purchased for resale and cannot be considered part of
a ``personal collection'' as that term is defined in the rule. Firearms
in a former licensee inventory differ from those in a personal
collection or other personal firearms in that they were purchased
repetitively as part of a business inventory with the predominant
intent to earn a profit. Persons who continue to sell those business
inventory firearms, including those transferred to a responsible person
of the former licensee, other than occasionally to an FFL, will be
presumed to be engaged in the business without a license, though the
presumption may be refuted with reliable evidence to the contrary.
The Department disagrees with a commenter's suggestion to
grandfather in former FFLs who went out of business prior to the
effective date of the rule and allow them to treat former business
inventory as a personal collection. Prior to the rule, former licensees
and their responsible persons were not entitled to sell their business
inventories after license termination if their predominant intent was
to obtain livelihood and pecuniary gain from those sales. This rule
merely establishes by regulation the guidance ATF has provided for at
least ten years and of which the FFL community has been aware; that is,
ATF has long advised former licensees in written notices of revocation,
expiration, and surrender not to engage in the business after license
termination by selling the business inventory.\212\ Continuing to sell
business inventory would undermine the licensing requirements of the
GCA.
---------------------------------------------------------------------------
\212\ See footnote 211, supra.
---------------------------------------------------------------------------
The Department agrees with a commenter's suggestion to incorporate
a presumption that a formerly licensed dealer who sells firearms from
the former business inventory is engaging in the business unless the
firearms are sold to a licensee. An occasional sale to a licensee
generally does not show a predominant intent to profit because a
licensed dealer is likely to pay less than fair market value to buy a
firearm for resale from an unlicensed person given the licensed
dealer's intent to profit. Nor does it present the same public safety
concerns associated with unlicensed dealing because the purchasing
dealer would record the acquisitions and dispositions and run
background checks when they resell the firearms. For these reasons, in
addition to allowing liquidation of a business inventory to a licensee
within 30 days, this presumption has been amended by the final rule to
allow former licensees (or a responsible person acting on their behalf)
to occasionally sell ``former licensee inventory'' firearms to an
active licensee after the initial 30-day liquidation period in
accordance with the discontinuation of business provisions at
Sec. Sec. 478.57(b)(2) and 478.78(b)(2) without triggering the EIB
presumptions. However, if the former licensee (or responsible person)
sells former licensee inventory more frequently than occasionally to a
licensee after the initial 30-day liquidation period, they are subject
to the presumptions in this rule.
11. EIB Presumption--Selling Business Inventory Transferred to a
Personal Collection Prior to License Termination
Comments Received
Commenters disagreed with inclusion of this last presumption in
which a former licensee (or responsible person acting on behalf of the
former licensee) is presumed to be a dealer if they sell or offer to
sell firearms that were transferred to their personal collection prior
to license termination, unless those firearms were transferred to the
former licensee's personal collection without intent to willfully evade
firearms laws and one year has passed from the date of transfer to the
personal collection.
At least one commenter stated that prior unlawful transfers do not
necessarily taint a future transfer, nor do they demonstrate that a
former FFL continues to be engaged in the business. The commenter
stated that there would be no possible way for former FFLs, whose
licenses were revoked and who may be prohibited or facing practical
circumstances that preclude them from being re-licensed in the future,
to liquidate their former inventory that was not transferred to a
personal collection to ATF's satisfaction. The commenter also noted
that section 923(c) applies only to licensees and that none of the
provisions apply to an unlicensed person who happened to formerly have
held an FFL. In other words, the commenter seemed to question how the
Department could require former FFLs or even responsible persons, who
are non-FFLs, to abide by certain restrictions upon license revocation,
such as disposing of the former business inventory in a particular
manner; as former licensees, the commenter argued, they automatically
do not have ``business inventory.'' This is particularly true, the
commenter stated, as a former licensee
[[Page 29035]]
whose license was revoked--and who, by law, may never be able to be a
licensee again--may be precluded from ever transferring their firearms
under any circumstances (other than by giving them away as free gifts).
Furthermore, a commenter stated, section 923(c) adds that ``nothing
in this chapter shall be construed to prohibit a licensed manufacturer,
importer, or dealer from maintaining and disposing of a personal
collection of firearms, subject only to such restrictions as apply in
this chapter to dispositions by a person other than a licensed
manufacturer, importer, or dealer.'' The commenter concluded that this
means, under the statute, a dealer may acquire a personal collection
while they are a dealer or while going out of business and may later
dispose of that collection under the same rules as other non-dealers,
except as provided in 18 U.S.C. 923(c). The commenter also noted that
nothing in either 18 U.S.C. 921(a)(21)(C) or 923 discusses a required
intent at the time the firearm is acquired, and ATF provided no
citation to support the ``proposition that firearms acquired by an FFL
are not (or cannot be) for a `personal collection.' '' While all can
agree that the predominant purpose of the FFL is to earn a profit, the
commenter stated the proposed rule ignores the fact that many FFL
holders are also firearm collectors or enthusiasts, and that often many
of the firearms that are put into the business inventory are for the
personal collection of the FFL holder or its responsible persons.
One of the commenters stated that this presumption seems to apply
to all firearms transferred to any responsible person of an FFL, even
if those guns were transferred to that responsible person via an ATF
Form 4473 and a background check was conducted. They stated this
presumption overlooks the fact that an FFL may have dozens of
responsible persons who may change frequently, and that a former
responsible person may have no say in the business dealings once they
are gone; in fact, the person may not even know that the business has
given up or lost its license. Yet, they said, ATF's presumption now
seeks to hold that former responsible person to a burdensome
presumption based on their former employer's decision to cease its
firearms operations.
The commenter stated that this presumption seems contrary to ATF's
existing position that a transfer to a personal collection happens as a
matter of law once the license is given up because there is no more
business inventory as a result of the firearms business ceasing
operations. They cited ATF's National Firearms Act Handbook, ATF E-
Publication 5320.8 (Apr. 2009), https://www.atf.gov/firearms/docs/guide/atf-national-firearms-act-handbook-atf-p-53208/download (``NFA
Handbook''), as an example of the agency's position; they said that, in
section 14.2.2 of the NFA Handbook, ATF stated, ``FFLs licensed as
corporations, partnerships, or associations, who have been qualified to
deal in NFA firearms and who go out of the NFA business, may lawfully
retain their inventory of these firearms . . . as long as the entity
does not dissolve but continues to exist under State law.'' Further, as
a practical matter, the commenter stated that it is not clear how a
company going out of business would store the firearms ``separately
from, and not commingled with the business inventory'' to meet the
definition of ``personal collection'' when the company no longer has a
business inventory due to its going out of business. The rule, they
argued, provides no clarity for how former FFLs are to treat their
business inventory if the former FFL just allowed firearms to come into
their collection after their business ceased but did not meet all of
the requirements set out by ATF.
Department Response
The Department disagrees that this EIB presumption is contrary to
section 923(c) of the GCA. Contrary to the implicit views of the
commenters, an FFL that loses or surrenders its license is not thereby
immune from the provisions of the GCA. As provided by section 923(c),
for licensees to dispose of firearms from a personal collection, they
must be transferred from the business inventory to a personal
collection and maintained in that collection for at least one year
before they lose their status as business inventory. This rule
implements section 923(c) by establishing a presumption that resales or
offers for resale of such firearms show that the former licensee is
engaging in the business. Thus, licensees who know they will be going
out of business by reason of license revocation, denial of renewal,
surrender, or expiration cannot simply transfer their business
inventory to a ``personal collection'' the day before license
termination, and two days later, sell off the entire inventory as
liquidation of a ``personal collection'' without background checks or
transaction records. Such firearms were not personal firearms acquired
for ``study, comparison, exhibition . . . or for a hobby.'' However,
consistent with section 923(c) and this rule, once the one-year period
has passed, the former licensee will no longer be presumed to be
engaged in the business without a new license if they later liquidate
all or part of the personal collection, assuming the firearms were
received and transferred prior to license termination without any
intent to willfully evade the restrictions placed on licensees by the
GCA. This includes licensees whose licenses were revoked or denied
renewal due to willful violations if they transferred business-
inventory firearms to their personal collection or otherwise as
personal firearms prior to license termination in accordance with the
law.
The Department disagrees with the comment that, under the law,
prior unlawful transfers do not ``taint a future transfer.'' The GCA at
18 U.S.C. 923(d)(1)(C) authorizes approval of an application for
firearms license if the applicant ``has not willfully violated any of
the provisions of this chapter or regulations issued thereunder.'' If
ATF previously revoked or denied license renewal for willful violations
of the GCA or its implementing regulations, then under the law, that
former licensee may be denied a firearms license in the future. See id.
This provision shows that prior unlawful activity is relevant to future
dealing in firearms. Moreover, section 923(c) deems firearms to be part
of a business inventory if their transfer to a personal collection ``is
made for the purpose of willfully evading the restrictions placed upon
licensees.'' This demonstrates that Congress was specifically concerned
with licensees evading the requirements of the GCA through improper
transfers to a personal collection. Therefore, as to the comment that
ATF cannot require former licensees (or a responsible person acting on
their behalf) to abide by regulations addressing their former business
inventory, the Department believes that it has the authority under the
GCA to take enforcement action, such as to deny a license or seize
firearms for forfeiture, when a former licensee (or a responsible
person acting on their behalf) has willfully violated the rules
concerning winding down licensed business operations, 27 CFR 478.57 or
478.78 (as applicable). The former licensee (or a responsible person
acting on their behalf) is presumed to be engaged in the business
without a license if they thereafter sell off that business inventory
(unless they transfer it within 30 days after license termination to a
former licensee inventory, and thereafter only occasionally sell a
firearm from that inventory to a licensee)--inventory that they did not
transfer to a personal collection or
[[Page 29036]]
otherwise as a personal firearm prior to license termination and then
retain for a year, as required.
Regarding responsible persons while they are acting on behalf of
such licensees, the Department does not agree that such persons will be
unaware of the termination of the license. As set forth in 18 U.S.C.
923(d)(1)(B) and this rule, responsible persons are only those
responsible for the management and policies of the firearms business.
They are not sales associates, logistics personnel, engineers, or
representatives who might have little control over or understanding of
the firearms business operations or license status. Responsible persons
acting on behalf of a former licensee must therefore be careful not to
sell business inventory of the former licensee without a license.
Nonetheless, the final rule makes clear that responsible persons of
former licensees who (1) after one year from transfer, sell firearms
from their personal collection that were transferred from the former
licensee's business inventory before license termination, or (2)
occasionally sell firearms to a licensee that were properly transferred
to a former licensee inventory after license termination, are not
presumed to be engaged in the business due to those sales (assuming
they did not acquire or dispose of those firearms to willfully evade
the restrictions placed on licensees).
Regarding the comment that this presumption applies to all firearms
transferred to any responsible person of a licensee, even if those
firearms were transferred to that responsible person on an ATF Form
4473 and a background check was conducted, the Department disagrees
that the presumption applies. Responsible persons who properly received
a firearm from the then-licensee's business inventory on an ATF Form
4473 for their own personal use, in accordance with 27 CFR 478.124, are
not subject to the liquidation presumption because they now own the
firearm disposed to them by the business. Subsequent termination of the
license has no bearing on the responsible person's prior acquisition of
a personal firearm. The liquidation presumption does not apply to
former responsible persons who are selling what are now their own
personal firearms. Any subsequent sale of those personally owned
firearms is evaluated the same way as any other firearm transactions by
unlicensed persons.
12. Definition of ``Personal Collection (or Personal Collection of
Firearms, or Personal Firearms Collection)''
Comments Received
At least one commenter noted that the proposed definition of
personal collection, which excludes any firearm purchased for the
purpose of resale with the predominant intent to earn a profit, is
problematic because collectors buy guns with the purpose of eventual
resale when they locate and can afford guns of higher quality and
rarity. This sentiment was echoed by several commenters who asserted
that the proposed rule negatively affects collectors and hobbyists by
requiring them to become licensed dealers simply because they want to
sell or trade some firearms from their personal collection. For
instance, one commenter stated that a hobbyist may purchase a firearm
in degraded condition, or lacking components. This commenter indicated
that they should not be considered engaged in the business of dealing
even if they made a reasonable profit simply because they refurbished
or upgraded the lawfully acquired firearm and sold it for a personal
reason.
Another commenter stated the definition of ``personal collection''
was too vague, leaving room for misinterpretation. The commenter stated
that, without more clarity, licensees will have difficulty determining
whether their occasional sale for personal collection enhancement falls
within that scope, and the definition will create further confusion
among licensees and law enforcement officials.
Some commenters stated that the definition of ``personal
collection,'' and also the examples of what constitutes a hobby, are
too narrow. First, they explained that the hobbies mentioned in the
statute and the regulation as examples focus heavily on activities that
involve shooting firearms (e.g., hunting, skeet, or target shooting)
but do not mention non-shooting hobbies, such as curio collecting.
Further, they questioned why ``personal collection'' is limited to non-
commercial purposes and pointed out that commercial entities that are
not engaged in the business of dealing in firearms frequently use
firearms for commercial business purposes. They provided examples,
including a hunting outfitter that might have a collection of firearms
for use in the commercial hunting enterprise, yet the firearms would
still be considered part of a personal collection, or an armored car
company having firearms for protection that would be in the company's
personal collection and not in a business inventory. These businesses
are engaged in a business and have firearms, but they are not engaged
in the business of dealing in firearms even if they, for example, buy
firearms to upgrade ones used by the truck drivers or replace old ones
taken on hunting trips by clients. Similarly, at least one commenter
noted that firearms acquired as part of teaching and safety instruction
activities would not be covered under the proposed definition of
personal collection and therefore, according to the commenter, an owner
whose firearm ownership grew because of these activities and who then
sold some firearms would not be exempt from being engaged in the
business even though that person might not have acquired the firearms
for purposes of resale with the predominant intent to earn a profit.
Another commenter stated that the definition of personal collection
is so narrowly defined it would exclude transfers of firearms to law
enforcement and make ``the somewhat common `Gun Buy-Back' scheme
unlawful.'' The commenter suggested the following scenario: ``An estate
may include any number of firearms. The inheritor receives what
previously may have been considered a personal collection. Whatever the
size or value, the new owner has no association with any `study,
comparison, exhibition, or hobby' and would like to be rid of them.
Currently, some new owners transfer their firearms to municipal police
at a local `gun buy-back event.' '' But under the new definition, the
commenter added, ``[t]ransferring any number of firearms for even
limited pecuniary gain (even directly to law enforcement in exchange
for marginally valued gift cards) would be a [F]ederal crime. Byrne
grants could no longer fund these activities.''
Other commenters also noted that the proposed definition means that
firearms acquired by an individual for any other purpose, such as for
self-defense, would not be part of a personal collection. Commenters
stated that studies show that about two-thirds of Americans report
owning firearms primarily for ``defense'' or ``protection.'' Without
including firearms acquired for self-defense as part of a personal
collection, commenters believed that ATF is trying to create a third
classification of owned firearms, i.e., firearms that are owned by non-
licensees but are not acquired for ``study, comparison, exhibition, or
for a hobby.'' In essence, commenters argued that the definition is
incorrectly limited to firearms that are for noncommercial,
recreational enjoyment.
[[Page 29037]]
Some commenters, including some gun collectors' associations,
argued that the proposed definition erodes statutory protections for
nonbusiness conduct by conflating ``sales, exchanges, or purchases of
firearms for the enhancement of a personal collection'' and ``for a
hobby.'' In other words, the proposed definition includes ``hobby''
within ``personal collection'' rather than it being its own safe
harbor. Commenters stated that the ``for a hobby'' provision and the
``for a personal collection'' provision are two separate and distinct
items, meaning that a person who purchases or sells firearms
occasionally as a collector or for a hobby is not a firearms dealer and
not required to be licensed, and that ``personal collection'' and
``hobby'' must have distinct meanings.
Commenters provided suggestions on how the term ``hobby'' could be
defined. One commenter suggested the definition be broader to mean ``a
group [of] firearms that a person accumulates for any reason, other
than firearms currently in the business inventory of a current
licensee.'' One commenter, while supporting ATF in considering the
``totality of the circumstances when determining if one is `engaged in
the business,' '' suggested the rule ``could benefit from specific
examples that help collectors and hobbyists understand when they may
incite the need for licensure and to help confirm the intent of the
rule.''
In a similar vein, another commenter in support of the rule
provided a suggested clarification of when a gun sale would be part of
a hobby. They said the rule parenthetically describes ``hobby'' in the
definition of ``personal collection'' as follows: ``(e.g.,
noncommercial, recreational activities for personal enjoyment, such as
hunting, or skeet, target, or competition shooting).'' As a result, the
commenter suggested the rule ``could clarify that, to be covered by the
exception, a hobbyist may only engage in gun sales to serve an interest
in such `noncommercial, recreational activities for personal enjoyment,
such as hunting, or skeet, target, or competition shooting.' '' The
same commenter also suggested that the rule ``should clarify that the
hobby exception to the `engaged in the business' definition does not
cover an individual whose hobby is gun selling to generate profit.''
A different commenter in support of the rule proposed other
clarifying language to create a rebuttable presumption for when a sale
or transfer of a firearm is presumed to be part of a hobby. The
proposed addition would specify that a person who meets all of the
following criteria will be presumed to be selling or transferring
firearms as part of a hobby: when the collection (A) has been appraised
by an expert who is qualified to evaluate firearms; (B) has been
documented by photographs that show each firearm and its serial number;
(C) has been catalogued by serial numbers and other identifying
features; (D) has been insured by an insurance company that covers
firearms; (E) has been displayed in a secure location that is not
accessible to unauthorized persons; and (F) has not been used for
hunting, sporting, or self-defense purposes. The commenter proposed
that this presumption would help infrequent sellers or those who
transfer firearms for personal reasons distinguish between regular
commercial sales and ``occasional'' or ``hobby'' sales.
The same commenter also suggested adding a similar rebuttable
presumption providing that a person is presumed to be selling or
transferring firearms for hunting, sporting, or self-defense purposes
when the person sells or transfers a firearm that is suitable for
hunting certain game animals, participating in certain shooting
competitions, or providing protection against certain threats. The
commenter also suggested a presumption based on a threshold number of
sales per year as an additional way to help distinguish infrequent
sellers. This suggested presumption would read, ``a person who sells or
transfers five or fewer firearms per calendar year shall be presumed to
be selling or transferring firearms occasionally. This presumption may
be rebutted by evidence that shows that the person is engaged in the
business of dealing in firearms. A person who sells or transfers more
than five firearms per calendar year shall be presumed to be engaged in
the business of dealing in firearms. This presumption may be rebutted
by evidence that shows that the person is not engaged in the business
of dealing in firearms.''
Other commenters stated that the portion of the definition of
``personal collection'' stating that licensees can only consider
firearms as a part of their personal collection if they are stored
separately from and not comingled with business inventory and
appropriately tagged as ``not for sale'' would be difficult to
operationalize and would make things complicated not only for the
business but also for the employees of that business. These commenters
stated that the rule does not allow for licensed (or otherwise lawfully
permitted) concealed carry activities. For instance, a business could
be cited for a violation if an employee carries their personal firearm
to work on their person if the employee temporarily puts it in desk
drawer or work bench. Additionally, to avoid potential liability, they
opined that the employee would have to tag their personal firearm as
not for sale. These commenters argued that ATF should either remove the
requirement for FFLs to store personal collections separately from
business inventory or clearly exclude firearms owned by persons and
carried on or about the person for self-defense.
Another commenter stated that the rule inappropriately requires
FFLs going out of business to ``dispose'' of the firearms in their
business inventory to themselves in order for such firearms to be
considered part of their personal collection. They added that such a
transfer to a personal collection happens as a matter of law once the
license is given up, because there is no more business inventory,
because the firearms business has ceased.
Department Response
The Department agrees that collectors who purchase firearms for a
personal collection are permitted under the GCA, as amended, to
occasionally sell them to enhance their collection or liquidate them
without being required to obtain a license. However, firearms that are
purchased by collectors or hobbyists for the purpose of resale with the
intent to predominantly earn a profit cannot be said to primarily have
been accumulated for study, comparison, exhibition, or for a
hobby.\213\ They are considered commercial firearms or firearms
obtained for financial gain, not part of a personal collection. Many of
the criticisms of the definition of ``personal collection'' have one
misconception in common: that any person who amasses multiple firearms
without a license and without criminal purpose has, by definition, a
``personal collection,'' or is a ``collector'' under the statute.\214\
But that is not correct. This
[[Page 29038]]
assertion is akin to saying that any person who walks around with
change in their pockets for daily use has a coin collection or is a
coin collector.
---------------------------------------------------------------------------
\213\ See The Federal Firearms Owner Protection Act: Hearing on
S. 914 Before the S. Comm. on the Judiciary, 98th Cong. 50-51 (1983)
(response of Robert E. Powis, Deputy Assistant Secretary, Dep't of
the Treasury, to questions submitted by Sen. Hatch) (``The proposed
definition states that the term [``with the principal objective of
livelihood and profit''] means that the intent underlying the sale
or disposition of firearms is predominantly one of obtaining
livelihood and necessary gain, as opposed to other intentions such
as improving or liquidating a personal firearms collection. It does
not require that the sale or disposition of firearms is, or be
intended as, a principal source income or a principal business
activity. This provision would make it clear that the licensing
requirement does not exclude part-time firearms businesses as well
as those firearms collectors or hobbyists who also engage in a
firearms dealing business.'').
\214\ Under the GCA, 18 U.S.C. 921(a)(13), the term
``collector'' means ``any person who acquires, holds, or disposes of
firearms as curios or relics.'' A firearm is a ``curio'' or
``relic'' when it: (1) is ``of special interest to collectors by
reason of some quality other than is associated with firearms
intended for sporting use or as offensive or defensive weapons'';
and (2) either (a) was manufactured at least 50 years prior to the
current date, (b) was certified by a museum curator to be a curio or
relic of museum interest, or (c) derives a substantial part of its
monetary value from the fact that it is novel, rare, bizarre, or
because of its association with some historical figure, period, or
event. 27 CFR 478.11.
---------------------------------------------------------------------------
The Department has revised the definition of ``personal
collection'' in the final rule to make it clear that firearms a person
obtains predominantly for a commercial purpose or for financial gain
are not within that definition. This distinguishes such firearms from
personal firearms a person accumulates for study, comparison,
exhibition, or for a hobby, which are included in the definition of
``personal collection,'' but which the person may also intend to
increase in value. Nonetheless, the Department agrees that collecting
``curios or relics'' (as defined in 27 CFR 478.11), ``collecting unique
firearms to exhibit at gun club events,'' ``historical re-enactment,''
and ``noncommercial firearms safety instruction'' should be added to
the specific examples of firearms acquired for a ``personal
collection,'' and has added them to this final rule.
The Department disagrees that the definition of ``personal
collection'' is so narrowly defined that it would preclude personal
firearms that are inherited from being sold under a common government
``gun-buy-back'' program. First, the occasional sale of inherited
firearms to a government agency is not conduct that would likely fall
within any presumption or otherwise rise to the level of being engaged
in the business of dealing in firearms. Second, sales of inherited
firearms, whether or not they are part of a personal collection, are
generally not made by a person who is devoting time, attention, and
labor to dealing in firearms with a predominant intent to profit. To
make this clear, the Department has added liquidation transfers or
sales of inherited firearms as conduct that does not support a
presumption of being engaged in the business. The Department also
included reliable evidence that a person was liquidating inherited
firearms in the types of evidence that can be used to rebut any
presumption. See Sec. 478.13(e)(5)(i), (f). For these reasons, a
person would not be presumptively engaged in the business if they only
sold inherited firearms to a government agency as part of a ``gun-buy-
back'' program, regardless of whether the firearms fell within the
definition of ``personal collection.''
The Department disagrees with commenters who said that the
definition of ``personal collection'' is too vague and acknowledges
that the definition does not include firearms owned by commercial
entities and used for commercial business purposes. The definition is
from standard dictionary definitions, and firearms acquired by
commercial entities are not ``personal'' or a ``collection,'' and
cannot be said to be part of ``personal collection.'' \215\ That,
however, does not necessarily mean commercial entities that own
firearms are engaged in the business of dealing in firearms under the
statute or this rule. When a company, such as an armored car company or
hunting outfitter, purchases firearms for a business inventory, their
predominant intent is not likely to be earning a profit by repetitively
purchasing and reselling firearms. While the operations of each company
must be examined on a case-by-case basis to determine, for example, if
they are engaged in the business of dealing in firearms on a part-time
basis, such companies generally do not need to be licensed.
---------------------------------------------------------------------------
\215\ See footnote 88, supra.
---------------------------------------------------------------------------
The Department also disagrees with commenters who indicated that
``personal collection'' is too narrow because it does not include
firearms purchased for self-defense. The dictionary definition of
``collection'' means ``an accumulation of objects gathered for study,
comparison, or exhibition or as a hobby.'' \216\ This common definition
is consistent with how the GCA views a ``collection.'' The GCA, 18
U.S.C. 921(a)(13), defines the term ``collector'' as ``any person who
acquires, holds, or disposes of firearms as curios or relics, as the
Attorney General shall by regulation define.'' The regulations have
long further defined the term ``curios or relics'' as ``[f]irearms
which are of special interest to collectors by reason of some quality
other than is associated with firearms intended . . . as offensive or
defensive weapons.'' For this reason, the definition of ``personal
collection'' in this rule does not include firearms that have no
special interest to the collector or hobbyist other than as weapons for
self-defense or defense of others, as has been clarified in the final
rule.\217\ At the same time, the Department recognizes that 18 U.S.C.
921(a)(21)(C) allows persons to make occasional sales, exchanges, or
purchases of firearms ``for a hobby.'' For this reason, the Department
has defined the term ``personal collection'' more broadly than just a
collection of curios or relics, and has included firearms for
``noncommercial, recreational activities for personal enjoyment, such
as hunting, skeet, target, or competition shooting, historical re-
enactment, or noncommercial firearms safety instruction.''
---------------------------------------------------------------------------
\216\ Collection, Merriam-Webster Online Dictionary, https://www.merriam-webster.com/dictionary/collection (last visited Mar. 7,
2024); see also Collection, Brittanica Online Dictionary, https://www.britannica.com/dictionary/collection (last visited Mar. 7, 2024)
(``a group of interesting or beautiful objects brought together in
order to show or study them or as a hobby'').
\217\ See, e.g., Tyson, 653 F.3d at 202-03 (``Tyson called
himself a firearms `collector,' which, if true, would also have
shielded him from criminal trafficking liability. See 18 U.S.C.
921(a)(21)(C) (stating that one 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' is not a `dealer in firearms').
These were lies designed to game the system. After all, none of the
firearms purchased by Tyson were antiques and his behavior was
decidedly inconsistent with that of a collector.''); Idarecis, 164
F.3d 620, 1998 WL 716568, at *3 (unpublished table decision)
(``[Defendant] nevertheless argues that the definition of a gun
`collection' in Sec. 921(a)(21)(c) should be read more broadly than
the definition of a gun `collector' in order to encompass the guns
[Defendant] owned and sold. We cannot say that the district court's
failure to instruct the jury on the collection exemption pursuant to
Sec. 921(a)(21)(C) was plain error. There is no case authority to
suggest that there is a distinction between the definition of a
collector and of a collection in the statute.''); Palmieri, 21 F.3d
at 1269 (``[A] `collector' is defined as `any person who acquires,
holds, or disposes of firearms as curios or relics . . . . ' Id.
sec. 921(a)(13). Section 922(a) requires inquiry into both the
defendant's conduct and status. If the conduct constituted engaging
in the business of dealing in firearms, then it is illegal unless
the defendant is a licensed dealer. On the other hand, sales by a
licensed or unlicensed collector from a personal collection in
furtherance of a hobby are not illegal. Once the conduct is deemed
equivalent to the business of dealing, however, collector status
will not shield a defendant from liability under Sec. 922(a).'').
---------------------------------------------------------------------------
Moreover, by definition, all firearms are ``weapons'' that will,
are designed to, or may readily be converted to expel a projectile, and
are therefore instruments of offensive or defensive combat.\218\ 18
U.S.C. 921(a)(3)(A). Some firearms that can be used for personal
defense may also be collectibles or purchased for a hobby, while others
may not. Additionally, including all firearms usable for self-defense
in the definition of ``personal collection'' is inconsistent with the
statutory scheme
[[Page 29039]]
of the GCA. The GCA places restrictions on dealing in firearms, but
permits individuals to make ``occasional sales, exchanges, or purchases
of firearms for the enhancement of a personal collection or for a
hobby'' or sell all or part of a personal collection. 18 U.S.C.
921(a)(21)(C). Including all firearms usable for self-defense in the
definition of ``personal collection'' would allow the limited
definitional exclusions for enhancing and liquidating a personal
collection to swallow the rule that dealers in firearms must be
licensed, because one could nearly always claim that a firearm was
purchased or sold to improve or liquidate the firearms one keeps for
self-defense. That assertion is not consistent with the common
definitions of ``collection'' or ``hobby.'' In addition, it would
potentially create similar problems with the GCA provision that places
limitations on the disposition of firearms transferred by licensees to
their ``personal collection.'' 18 U.S.C. 923(c). It could also create a
conflict with the provision of the United States Sentencing Guidelines
that allows persons convicted of certain firearms violations in some
situations to receive a reduction in their sentencing offense level if
they possessed firearms ``solely for lawful sporting purposes or
collection.'' \219\ U.S.S.G. 2K2.1(b)(2).
---------------------------------------------------------------------------
\218\ See Lunde Arms Corp. v. Stanford, 107 F. Supp. 450, 452
(S.D. Cal. 1952), aff'd, 211 F.2d 464 (9th Cir. 1954) (``To be a
firearm an implement must be a weapon. . . . A weapon is defined in
Webster's New International Dictionary, 2nd edition, as: `An
instrument of offensive or defensive combat[.]' '').
\219\ See United States v. Miller, 547 F.3d 718, 721 (7th Cir.
2008) (``Miller concedes that he kept the shotgun for security
against intruders, rather than as part of a collection. It follows
that Sec. 2K2.1(b)(2) does not reduce Miller's offense level.'');
United States v. Bertling, 510 F.3d 804, 807, 811 (8th Cir. 2007)
(defendant was not entitled to sentencing guidelines calculation
reduction for sporting purposes or collection where he possessed a
handgun for personal protection); United States v. Halpin, 139 F.3d
310, 310-11 (2d Cir. 1996) (possession or use of a gun for purposes
of personal protection, or protection of others, does not qualify a
defendant for a sentence reduction for sporting purposes or
collection); United States v. Dudley, 62 F.3d 1275, 1277 (10th Cir.
1995) (same); United States v. Gresso, 24 F.3d 879, 881-82 (7th Cir.
1994) (``[T]he Sentencing Commission allows a reduction in penalty
for certain types of possession; these favored uses [of sporting
purposes or collection] do not include self-protection. It is easy
to understand why self-protection is not included. Attempting to
distinguish as a practical matter between defensive and potentially
offensive purposes might be next to impossible.''); United States v.
Cousens, 942 F.2d 800, 803-04 (1st Cir. 1991) (same).
---------------------------------------------------------------------------
Whether a firearm is part of a personal collection or for a hobby
depends on the kind and type of firearms,\220\ and courts have also
looked to the nature and purpose for which they are accumulated.\221\
This is not to say individuals or companies cannot buy or sell firearms
that are primarily for self-defense or protection of others under this
rule. It just means that those other personal firearms are not
necessarily part of a ``personal collection,'' and persons who buy or
sell such firearms cannot avail themselves of the statutory exception
for personal collections in 18 U.S.C. 921(a)(21)(C) unless the firearms
are of a type and purpose to qualify as personal collection firearms.
To make this point clear, the definition of ``personal collection'' has
been revised to state that ``[i]n addition, the term shall not include
firearms accumulated primarily for personal protection: Provided, that
nothing in this definition shall be construed as precluding a person
from lawfully acquiring firearms for self-protection or other lawful
personal use.'' Sec. 478.11.
---------------------------------------------------------------------------
\220\ Cf. United States v. Hanson, 534 F.3d 1315, 1319 (10th
Cir. 2008) (``[T]he type of gun here, which is most commonly used
for self-protection, weighs against Mr. Hanson's claim that he
purchased it entirely for a sporting purpose.''); United States v.
Wilder, 12 F. App'x 297, 299 (6th Cir. 2001) (some of the
defendant's firearms were not suited for hunting or target practice,
and so the U.S.S.G. 2K2.1(b)(2) sentence reduction did not apply);
United States v. Lewitzke, 176 F.3d 1022, 1028 (7th Cir. 1999)
(affirming the district court's finding that defendant's guns were
not of the type normally used for target shooting and therefore
weighed against granting the reduction); United States v. Hause, 26
F. App'x 153, 154 (4th Cir. 2001) (same with inexpensive handgun
that was not the sort of firearm that would be considered
collectible).
\221\ See United States v. Fifty-Two Firearms, 362 F. Supp. 2d
1308, 1314-15 (M.D. Fla. 2005) (``[Defendant] did not merely make
occasional sales or exchanges of firearms to enhance his personal
collection or for a hobby. Rather, he possessed a significant number
of inexpensive shotguns, rifles, and handguns for resale.'');
Hannah' 2005 WL 1532534, at *3 (rejecting a defendant's argument
that purchases and sales of firearms were made for the enhancement
of his personal collection or for a hobby where ``[n]one of the
firearms had any historical value''); cf. United States v. Baker,
501 F.3d 627, 629 (6th Cir. 2007) (affirming the district court's
decision not to apply sentencing guideline 2K2.1(b)(2) because ``the
gun was not `stored in a manner showing that it was valued or
treasured,' nor was it `polished and treated as one would treat
something that was part of a collection' ''); United States v.
Denis, 297 F.3d 25, 33-34 (1st Cir. 2002) (same where a rifle was
stored loaded and near cash to protect marijuana sales, rather than
kept for sporting purposes as alleged); United States v. Clingan,
254 F.3d 624, 626 (6th Cir. 2001) (upholding denial of the
collection sentence reduction, and noting that ``[n]one of the
weapons were antiques or of other special value''); United States v.
Miller, 224 F.3d 247, 251 (3d Cir. 2000) (affirming the district
court's denial of the 2K2.1(b)(2) sentence reduction to the
defendant's sentence for dealing in firearms without a license under
18 U.S.C. 922(a)(1)(A) because the firearms sold were not ``solely
for sporting purposes or collection'' where the defendant was
convicted for firearms trafficking); United States v. Zakaria, 110
F.3d 62, 1997 WL 139856, at *3 (4th Cir. 1997) (unpublished table
decision) (``In the present case, there was substantial evidence
showing that Zakaria purchased the firearms with the sole intent of
selling them to his cousin for illegal export to Pakistan; not for
placing them in his private collection.''); United States v.
Andrews, 45 F.3d 428, 1994 WL 717589, at *3 (4th Cir. 1994)
(unpublished table decision) (denying sentence reduction, saying
``[a]lthough Andrews possessed a large number of guns that were
unloaded and on display in his den, they generally were common
shotguns and rifles typically not `collected' in the narrow sense of
being `collectors' items'''); United States v. Gonzales, 12 F.3d
298, 301 (1st Cir. 1993) (same with respect to accumulation by a
felon of ``a small arsenal of handguns'' allegedly for sporting
purposes or collection).
---------------------------------------------------------------------------
The Department has made it explicit in this final rule that
firearms acquired for a hobby--including noncommercial, recreational
activities for personal enjoyment, such as hunting, or skeet, target,
or competition shooting, or historical re-enactments--may be part of a
``personal collection.'' Therefore, reliable evidence of occasional
sales of such firearms only to obtain more valuable, desirable, or
useful firearms for the person's personal collection would not support
a presumption and may be used to rebut any EIB presumption.\222\ See
Sec. 478.13(e)(2), (f). However, as stated previously, the Department
will not set a minimum threshold number of firearms to determine when a
person is engaged in the business or occasionally selling firearms to
enhance a personal collection. While not included in the regulatory
text, the plain and ordinary meaning of the term ``occasional'' should
be read to mean ``infrequent or irregular occurrence,'' \223\ and to
exclude firearm sales, exchanges, or purchases that are routinely or
regularly made (even on a part-time basis).
---------------------------------------------------------------------------
\222\ See, e.g., Approximately 627 Firearms, 589 F. Supp. 2d at
1135 (``[Claimant] offered credible testimony that he was an avid
hunter, and that `maybe 20 to 25' of the firearms at issue were his
personal guns. The firearms which [Claimant] held for personal use
are not subject to forfeiture simply because the vast majority of
seized firearms were `involved in' [dealing without a license].''
(citation omitted)).
\223\ See footnote 123, supra.
---------------------------------------------------------------------------
The Department agrees with the comment that the phrase ``or for a
hobby'' in 18 U.S.C. 921(a)(21)(C) has a meaning independent of the
term ``collection.'' The rule therefore incorporates that phrase into
the definition of ``personal collection,'' and expressly recognizes
that firearms that may not be considered ``collectibles'' are also
included in the definition of ``personal collection.'' Under this
combined definition, firearms acquired ``for a hobby'' are, for
example, those acquired for ``noncommercial, recreational activities
for personal enjoyment, such as hunting, skeet, target, or competition
shooting, historical re-enactment, or noncommercial firearms safety
instruction.''
The Department agrees with commenters that the requirement, in the
definition of ``personal collection of a licensee,'' that licensees
must segregate business inventory from personal firearms in the
proposed rule was not
[[Page 29040]]
meant to apply to personal firearms ordinarily carried by the licensee.
It was meant to apply only to personal firearms that are stored or
displayed on the licensee's business premises, which should not be
commingled with business inventory. For this reason, the applicable
language in this final rule's definition of ``personal collection of
licensee'' has been revised to clarify that it applies only to personal
firearms ``when stored or displayed'' on the business premises.
The Department disagrees that transfer of firearms in a business
inventory to a personal collection (or otherwise as a personal firearm)
by an FFL ``happens as a matter of law'' when the FFL goes out of
business. Under the GCA, 18 U.S.C. 923(c), a business inventory of
firearms held by a licensee only becomes part of a ``personal
collection'' (or otherwise a personal firearm) if the firearms were
transferred from the licensee's ``business inventory into such
licensee's personal collection'' (or other personal firearms) while the
person is licensed, and one year has passed from the time of transfer.
Additionally, such disposition or any other acquisition cannot have
been made by the licensee for the purpose of willfully evading the
restrictions placed on licensees. Under this rule, the licensee must
take affirmative steps to accomplish this task.\224\ It does not occur
automatically by operation of law, and it would frustrate the operation
of the GCA for such restrictions to apply to a licensee one day before
discontinuance of business but not one day after.
---------------------------------------------------------------------------
\224\ 27 CFR 478.11 (definition of ``personal collection''
requires that for a firearm to be in a ``personal collection,'' the
acquisition of the firearm must be recorded in the licensee's
acquisition book, recorded as a disposition from the licensee's
inventory to a personal collection, maintained and stored separately
for one year, and not have been acquired or transferred with the
intent to willfully evade the GCA); cf. Zakaria, 110 F.3d 62, 1997
WL 139856, at *2 (holding that licensee's sale to his cousin was
from his business inventory as a matter of law, saying ``[w]e find
that the district court reasonably interpreted 18 U.S.C. 923(c)
(1994) and 27 CFR 178.125a (1996) to contain a default provision
which provides that the sale of firearms held for less than one year
which are not properly recorded pursuant to 27 CFR 178.125a(a),
regardless of how acquired, are to be considered to be from the
licensee's business inventory.'').
---------------------------------------------------------------------------
13. Definition of ``Responsible Person''
Comments Received
Some commenters generally agreed with the Department's proposed
definition of ``responsible person,'' stating it is important for
accountability and oversight. Other commenters stated that the
definition of ``responsible person'' needed more clarity because,
without it, there may be unintended consequences for individuals
engaged in legitimate firearms transactions, further complicating what
they referred to as an already complex regulatory landscape. For
instance, one commenter, a large FFL with thousands of employees,
stated the definition of ``responsible person'' is overbroad and could
capture hundreds of employees in its company. As examples, they listed
logistics and shipping associates; marketing and sales associates;
value stream managers; group and team leads; associates responsible for
establishing and disseminating standard work and job instructions as
they pertain to firearms manufacture, destruction, transfer, and
testing; customer service associates; engineers; and product and
project managers involved in firearms design and manufacture. The
commenter added that, were all these employees to be considered
responsible persons, it would become extremely burdensome to add them
to their license as well as timely update the license as people join or
leave the company. The commenter, therefore, suggested that the
designation of a responsible person should be based on (1) the person's
responsibilities, and (2) the licensee's designation of the person as a
responsible person.
Another commenter stated that the proposed regulatory definition of
``responsible person'' is contrary to the statute at 18 U.S.C.
923(d)(1)(B), which they said describes an applicant for a license to
include, ``in the case of a corporation . . . any individual
possessing, directly or indirectly, the power to direct or cause the
direction of the management and policies of the corporation,
partnership, or association.'' The commenter stated that the proposed
regulatory definition adds words that are not in section 923(d)(1)(B),
specifically ``business practices of a corporation, partnership, or
association insofar as they pertain to firearms.'' The commenter argued
that ``practice'' is the ``actual performance'' of something or even
``a repeated customary action,'' regardless of whether the action is
permitted by or contrary to the organization's management or policies.
Despite the Department's explanation that store clerks or cashiers
cannot make management or policy decisions with respect to firearms and
are unlikely to be considered a ``responsible person,'' the commenter
asked whether gun store clerks who direct ``business practices'' each
time they perform their job duties could be captured under the
regulatory definition. The commenter asserted that the Department was
trying to capture more people as responsible persons than Congress
intended by adding those emphasized phrases, which the commenter
characterized as amorphous and unexplained.
Another commenter also stated the definition is too broad on
grounds that the words ``indirectly'' and ``cause the direction'' are
unclear terms. The commenter suggested the Department adopt the
definition of ``responsible person'' from the explosives context, where
it is defined in 18 U.S.C. 841(s) as ``an individual who has the power
to direct the management and policies of the applicant pertaining to
explosive materials.''
Department Response
The Department disagrees that the definition of ``responsible
person'' is overbroad; it merely establishes by regulation the
longstanding definition used on ATF Form 7/7CR, Application for Federal
Firearms License, based on statutory language in 18 U.S.C.
923(d)(1)(B). The Department declines to fully adopt the definition set
forth in the Federal explosives laws at 18 U.S.C. 841(s), because,
although it is similar, it does not include persons who indirectly
possess the power to direct or cause the direction of the management
and policies of an entity, as identified in section 923(d)(1)(B). The
Department does not intend, by means of this rule, to change how
persons apply the current definition of ``responsible person'' on ATF
Form 7/7CR. Nonetheless, the Department agrees with commenters that the
term ``responsible person'' would benefit from some additional clarity,
as follows. First, to help ensure that persons do not interpret the
term ``business practices'' to cover sales associates, logistics
personnel, human resources personnel, engineers, and other employees
who cannot make management or policy decisions on behalf of the
licensee with respect to the firearms business, the Department has
removed the term ``business practices'' from the definition of
``responsible person'' in the final rule and intends to remove the term
``business practices'' from ATF Form 7/7CR in the future. Second, to
ensure that persons understand the term ``applicant'' in 18 U.S.C.
923(d)(1)(B) to include as ``responsible persons'' sole proprietors and
individuals with authority to make management or policy decisions with
respect to firearms for companies (including limited liability
companies) the definition in this final rule includes sole
proprietorships and companies. This will make it clear that all
licensees (including sole proprietors and limited liability companies)
must
[[Page 29041]]
inform ATF of responsible persons who have the authority to make
management or policy decisions with respect to firearms, and ensure
they undergo a background check. At the same time, the Department does
not intend to include in the definition of responsible persons those
employees who have no authority to make management or policy decisions
that impact the firearms portion of a licensed business.
14. Definition of ``Predominantly Earn a Profit''
a. Overbreadth
Comments Received
Numerous commenters expressed concern over the scope of the term
``predominantly earn a profit.'' Some commenters raised questions
regarding ``intent to earn a profit,'' noting that it is only logical
for a person selling a good, like a firearm, to want to earn a profit
and that it would be ridiculous to expect any private seller to sell a
firearm for less than its expected value. For instance, one commenter
stated they had a small gun collection of primarily curio and relic
firearms and would set a sales price based on their perception of the
firearm's market value. This person stated that while they might make
some money, their motivation is not to make a profit (noting that their
last sale was to pay a medical bill) but they believe they would be
required to get an FFL under the rule.
In a similar vein, some commenters opined that they would have to
sell their firearms at a loss to avoid generating a ``profit'' and that
the proposed rule would prevent an owner from receiving fair market
value for their firearms. Similarly, other commenters pointed out how a
person might avoid the ``intent'' requirement. One commenter asked if a
person who states that their primary goal is not to earn a profit and
acts as a nonprofit organization can, as a result, sell as many guns as
they like without becoming licensed. Another commenter noted that under
IRS rules of ``income,'' an even exchange of goods means there is no
income or profit, and that if there is no profit, there is no business
activity. This commenter believed that, if the buyer and seller
determine the value of the items and make an even exchange, then the
buyer should not be captured under the definition of ``predominantly
earn a profit.'' Other commenters questioned who would determine who
made a ``profit'' where a trade involved no cash, but a person instead
traded a gun and a laser sight for a different gun.
Another commenter critiqued the definition, stating that it has
been expanded to include any pecuniary gain, which they stated is
overbroad. The commenter argued that the definition fails to recognize
that all sales have some motive of pecuniary gain; otherwise a seller
would give away or destroy their firearm. They stated that not only
does the GCA expressly allow non-licensees to make occasional sales,
but nothing in the GCA prohibits non-licensees from attempting to
derive pecuniary gain from their occasional sales. One organization
argued that the definition would apply even when a person is selling a
firearm on consignment because, if a person consigned their firearm to
an FFL, that person would be reselling with the intent to predominantly
earn a profit and therefore would need to be licensed, even though the
transaction is facilitated by an FFL.
Department Response
The Department disagrees that the rule's definition of
``predominantly earn a profit'' is overbroad. The definition merely
implements the statutory definition ``to predominantly earn a profit''
in 18 U.S.C. 921(a)(22), which defines that term, in relevant part, to
mean 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.'' The Department agrees that some persons who sell firearms
do not have the predominant intent to profit through repetitive
purchase and resale even if they do intend to obtain pecuniary gain
from firearms sales (e.g., where the intent to obtain such gain is a
secondary motive). However, even if a person has a predominant intent
to earn a profit, it does not automatically follow that they are always
engaged in the business. A predominant intent to profit through
repetitive resale of firearms is only one element of being engaged in
the business.
Under the BSCA, a person's intended use for the income they receive
from the sale or disposition of firearms is not relevant to the
question of whether they intended to predominantly obtain pecuniary
gain. If a person must sell their previously acquired firearms to
generate income for subsistence, such as to pay medical or tuition
bills, they are still subject to the same considerations as persons who
intend to sell their firearms to go on a vacation, increase their
savings, or buy a sports car. If persons repetitively resell firearms
and actually obtain pecuniary gain, whether or not it was for support
or subsistence, that gain is evidence demonstrating the intent element
of being engaged in the business. However, the Department emphasizes
that a single or isolated sale of firearms that generates pecuniary
gain would not alone be sufficient to qualify as being engaged in the
business without additional conduct indicative of firearms dealing. For
example, a person who bought a firearm 40 years ago and now sells it
for a substantial profit to augment income during retirement is not
engaged in the business because the person's intent was not to earn
that pecuniary gain through repetitive purchases and resales of
firearms.
With regard to the comment about nonprofit organizations, they can
also have the predominant intent to earn a profit from the sale or
disposition of firearms. They just do not distribute their profits to
private owners (although their employees can receive
compensation).\225\ In response to commenters who questioned whether a
like-kind exchange would result in a profit, or whether the IRS would
consider it ``profit,'' the Department reiterates that the relevant
standard is not whether an actual profit is earned under the definition
of ``engaged in the business.'' The standard is whether the person who
exchanged the firearms for money, goods, or services had the
predominant intent to earn a profit--meaning to obtain pecuniary gain--
through repetitive firearms purchases and resales.
---------------------------------------------------------------------------
\225\ See Myths About Nonprofits, Nat'l Council of Nonprofits,
https://www.councilofnonprofits.org/about-americas-nonprofits/myths-about-nonprofits (last visited Mar. 7, 2024) (``The term `nonprofit'
is a bit of a misnomer. Nonprofits can make a profit (and should try
to have some level of positive revenue to build a reserve fund to
ensure sustainability.) The key difference between nonprofits and
for-profits is that a nonprofit organization cannot distribute its
profits to any private individual (although nonprofits may pay
reasonable compensation to those providing services).'').
---------------------------------------------------------------------------
The Department disagrees with some commenters who said that a
person always has a predominant intent to earn a profit when selling or
disposing of a firearm. For example, a person may wish to get rid of
unsuitable or damaged firearms quickly, so the person intends to sell
them at a loss for less than fair market value. In that case, there is
only an intent to minimize a pecuniary loss, not obtain a pecuniary
gain. Likewise, a person who only transfers firearms: as bona fide
gifts; occasionally to obtain more valuable, desirable, or useful
firearms for the person's personal collection; occasionally to a
licensee or to a family member for lawful purposes; to liquidate
(without restocking) all or part of a personal collection; or to
liquidate firearms that are inherited, or
[[Page 29042]]
pursuant to court order, does not usually have a predominant intent to
earn a profit from those activities. This is true even if the seller
has a secondary motive to obtain pecuniary gain from those sales. To
make this clear, the final rule now expressly states that any such
evidence may be used to rebut the presumptions. See Sec. 478.13(e),
(f).
The Department agrees with commenters who suggested that a person
who consigns firearms for sale (consignor) may have a predominant
intent to earn a profit from the sale of the firearms; however, that
does not end the inquiry because that person is often not devoting
time, attention, and labor to dealing in firearms as a regular course
of trade or business. The person engaged in the business is the seller
who accepts the firearms on consignment (consignee), is paid to take
the firearms into a business inventory for resale, and determines the
manner in which to market and resell them on the consignor's
behalf.\226\ Like consignment-type auctioneers, firearms consignment
businesses must be licensed because they are devoting 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.
---------------------------------------------------------------------------
\226\ See, e.g., United States v. Strunk, 551 F. App'x 245, 246
(5th Cir. 2014) (Defendant ``without being licensed, sold firearms
entrusted to him by others for the purpose of sale. Such conduct is
unquestionably prohibited by the legislation's text.'').
---------------------------------------------------------------------------
b. Government Proof of Intent To Profit Through Repetitive Purchase and
Resale
Comments Received
Other commenters raised concerns that the proposed definition of
``predominantly earn a profit'' does not require a person to have
actually obtained pecuniary gain. Some congressional commenters stated,
``under the proposed rule, the ATF would require someone to prove he or
she is not a firearms dealer in instances where no firearms are
actually exchanged or sold'' and opined that that situation was not
consistent with the statute.
Some commenters stated that even though the proposed rule
incorporates to ``predominantly earn a profit'' from the BSCA, the
proposed definition includes language that directly contradicts the
statute and legislative history of the GCA. They stated that Congress
made clear that it is not necessary for the Government to prove profit
in cases involving the repetitive purchase and disposition of firearms
for criminal purposes or terrorism, meaning that it is necessary for
the Government to prove profit in all other cases. Thus, they argued
that the added phrase ``[f]or purposes of this definition, a person may
have the intent to profit even if the person does not actually obtain
pecuniary gain from the sale or disposition of firearms'' and
explanation from ATF that one can be a dealer without ever making a
purchase or sale are both contrary to the statute. Commenters stated
that ATF may not relieve itself of the congressionally imposed burden
to prove profit. Another commenter pointed out that eliminating the
need for profit is in tension with the concept of being in a business;
if a business does not make a profit, then they cease to exist.
Moreover, at least one commenter disagreed with all the cases that
were cited in support of the claim that the Government does not need to
prove that the defendant actually profited. The commenter claimed that
three of the cases cited--United States v. Wilmoth, 636 F.2d 123 (5th
Cir. Unit A Feb. 1981), United States v. Mastro, 570 F. Supp. 1388
(E.D. Pa. 1983), and United States v. Shirling, 572 F.2d 532 (5th Cir.
1978)--were decided before there was any statutory mention of
``profit'' as it relates to dealing. They noted that two other cases--
Focia, 869 F.3d 1269 and United States v. Allah, 130 F.3d 33 (2d Cir.
1997)--were not on point because in both cases the Government had shown
that defendants profited.
Department Response
The Department disagrees with commenters who said that the GCA
requires that a person actually obtain pecuniary gain. The only
``profit'' element in the GCA--both before and after the BSCA was
enacted--is the intent to profit through the repetitive purchase and
resale of firearms. This is because the statutory terms ``to
predominantly earn a profit'' through the repetitive purchase and
resale of firearms in 18 U.S.C. 921(a)(22), and ``with the principal
objective of livelihood and profit'' in 18 U.S.C. 921(a)(23), are both
defined to mean ``the intent underlying the sale or disposition of
firearms is predominantly one of obtaining . . . pecuniary gain.'' One
does not need to realize a profit to have the intent to profit.
The Department does not agree with commenters who argued that the
proviso concerning the disposition of firearms for criminal purposes
demonstrates otherwise. The statement that ``proof of profit shall not
be required'' in that proviso requires neither proof of profit nor
proof of intent to profit for persons who engage in the regular or
repetitive purchases and dispositions of firearms for criminal purposes
or terrorism. See United States v. Fifty-Two Firearms, 362 F. Supp. 2d
1308, 1324 (M.D. Fla.), adopted by 362 F. Supp. 2d 1323 (M.D. Fla.
2005) (``[P]roof of profit motive is not required as to a person who
engages in the regular and repetitive purchase and disposition of
firearms for criminal purposes or terrorism.'' (citing 18 U.S.C.
922(a)(22) and Eleventh Circuit Pattern Jury Instruction No. 34.1).
Reading that proviso to, by negative implication, require proof of
profit--and intent to profit--with respect to other forms of engaging
in the business would be contrary to the plain text of the definition
of ``to predominantly earn a profit,'' which refers to the ``intent
underlying the sale or disposition of firearms.'' 18 U.S.C. 921(a)(22);
see also id. 921(a)(23) (definition of ``with the principal objective
of livelihood and profit,'' similar). It would also be contrary to
decades of Federal case law on 18 U.S.C. 922(a)(1).\227\
---------------------------------------------------------------------------
\227\ See footnote 96, supra.
---------------------------------------------------------------------------
Some commenters asserted that, because some of the criminal cases
cited in the proposed rule referenced the fact that the defendant
actually profited from firearms sales, the cases support their
conclusion that actual profit must be proven in an engaged in the
business case. The Department disagrees. Of course, proof of actual
profit may be presented in a case, but that does not mean it is
required. Proof of actual profit is merely cited by courts in cases,
such as Focia, 869 F.3d at 1282 (defendant ``immediately turned around
and sold them at a steep profit''), and Allah, 130 F.3d at 44
(defendant ``had several people bring him `dough' from selling guns for
him `in the streets' ''), as evidence that supported findings that the
defendant had the requisite intent to profit. But evidence of actual
profit is not necessary where the totality of the facts otherwise
demonstrates the predominant intent to profit. For example, if the
defendant admitted to an undercover officer that he wanted ``to make a
whole lot of money'' from reselling the firearms to the officer, that
evidence would likely be sufficient to prove a predominant intent to
earn a profit from those sales. Moreover, where a person engages in the
regular and repetitive purchase and disposition of firearms for
criminal purposes or terrorism, no proof of profit, including, as
explained above, the intent to profit, is required at all in an engaged
in the business case. See 18 U.S.C. 921(a)(22).
[[Page 29043]]
c. Suggestions on Meaning of Profit
Comments Received
Numerous commenters stated that the definition of ``predominantly
earn a profit'' with its presumptions will capture practically all
firearms owners who wish to sell their personal or inherited firearms
because the value of firearms typically increases over time and will
thus always result in a profit. Several commenters stated that profit
should be defined to avoid misinterpretation while others asked how
profit should be calculated or made suggestions. For example, one
commenter asked if the labor to customize a firearm or any additional
parts that are added should be included in a calculation of profit.
Similarly, numerous commenters pointed out that determining profit
does not account for inflation and indicated that it should. Commenters
provided examples of how they would not earn a profit, or would make a
minimal profit, from the sale of a firearm due to inflation. For
example, one commenter posited that if a person purchased a firearm for
$600 ten years ago and sold it in the present for $750, this could be
viewed as making a profit, but it would actually be a loss in real
terms because the purchasing power of $600 was greater ten years ago
than the purchasing power of $750 is today due to inflation. At least
one commenter asserted that ATF's proposed definition of ``profit'' is
problematic under the U.S. tax code, as inflation is not allowed to be
accounted for in the ATF definition, even though it is an adopted
measure of the price of all goods.
Gun collectors' associations said the definition does not take into
account any other expense or time value of money associated with the
sale of the firearm, which is a part of any normal calculation of
``profit'' and hence is beyond proper basis of an interpretive
regulation. Additionally, they stated that the costs gun collectors
incur to attend events should be factored into any reasonable
definition of ``profit.''
Similarly, to account for the change in time in the fair market
value of goods, another commenter proposed adding language providing
that ``[i]f a private individual sells a firearm that they have
purchased for more than the original purchase price, they are not
considered to be selling the firearm for the purpose of primarily
making a profit if the fair market price of the firearm has increased
since the original date of purchase.''
Department Response
The Department agrees that a person who liquidates inherited
firearms from a personal collection at fair market value, absent
additional circumstances indicating otherwise, typically does not have
a predominant intent to profit from those sales. While the person may
have an intent to receive pecuniary gain when they sell these firearms
and may or may not have a predominant intent to profit, the person
would not be ``engaged in the business'' because liquidating this one
set of inherited firearms does not constitute dealing as a regular
course of trade or business. Nevertheless, because the Department
believes that persons in such a scenario typically do not have a
predominant intent to profit, the Department has incorporated, as
conduct that does not support a presumption, and as rebuttal evidence,
a person who only ``liquidate[s] firearms [t]hat are inherited.'' Sec.
478.13(e)(5)(i), (f).
In response to commenters who said that any profit should account
for inflation, or expenses incurred, again, the statute does not
require proof of actual profit. The statute's and rule's focus is on
the person's predominant intent to profit, not on whether a person
actually profits. Because the focus is on a person's intent, it makes
no difference whether the costs or inflation mentioned by the
commenters are included in the sales price or in assessing actual
profit.
The Department disagrees with the commenter who suggested that a
private individual automatically does not have an intent to profit if
they sell a firearm that was purchased for more than the original
purchase price if the fair market price of the firearm has increased
since the original date of purchase. The Department declines to make
this a blanket exception or rebuttal evidence to the current
presumptions because the fair market value of the firearm may have
increased substantially more than the original purchase price. The
details of any particular situation may vary, and those facts may
impact the determination of intent. Based on these facts, the seller
may or may not have had a predominant intent to earn a profit from that
sale.
d. Other Suggestions Related to Definition of ``Predominantly Earn a
Profit''
Comments Received
Many commenters proposed various changes to the definition of the
term ``predominantly earn a profit'' that they felt would narrow the
scope of when a person has intent to predominantly earn a profit such
that they are ``engaged in the business'' of dealing in firearms.
Proposed exceptions included excluding when a person earns less than
$5,000 per year or when they sell fewer than ten guns a month. One
commenter suggested that certain scenarios be excluded because while
there may be monetary gain there is no desire to increase the
collection or buy firearms. These scenarios include liquidation at fair
market value of inherited firearms or firearms passed down through a
family member, liquidation of firearms at fair market value due to
financial hardship or disability, and liquidation of firearms at fair
market value due to loss of interest or change in a hobby.
Similarly, one commenter pointed out that ``predominantly'' under
26 U.S.C. 118(c)(3) means ``80 percent or more'' and argued that ATF's
proposed definition should be consistent with this statutory provision
in the Internal Revenue Code. Therefore, the commenter suggested that
ATF's definition of dealer should be amended to someone who engages in
selling or disposing of firearms ``where the intent is to obtain a
pecuniary gain in 80 or more of the total transactions involving
firearms as defined by'' 18 U.S.C. 921.
Another commenter suggested that the term be revised to be clear
that a collector can liquidate all or part of their collection by
having a table at a gun show without requiring them to become a Type 01
FFL. Still another commenter suggested that the text should make clear
the sources or methods used to acquire the firearm that is subsequently
resold to ``predominantly earn a profit.''
Department Response
The Department disagrees that the scope of the PEP presumptions
should be limited to when a person earns less than $5,000 per year from
selling firearms, or when they sell fewer than ten guns per month. The
amount of money a person makes when intending to earn a profit through
repetitively purchasing and reselling firearms may be relevant in
determining whether a person is engaged in the business. The fact that
a person earns a large amount of profit from repetitively reselling
firearms may be evidence that a person had a predominant intent to
profit from those sales. However, there is no statutory requirement
that a person make a certain amount of money (or any money at all) to
have a predominant intent to profit. Persons who operate a part-time
firearms business that earns less than $5,000 per year, or even a
firearms business that loses money due to poor salesmanship or lack of
demand, would still be engaged in the business
[[Page 29044]]
if they devote time, attention, and labor to dealing with the
predominant intent to profit through repetitive purchases and resales
of firearms. As stated previously, it is the seller's intent to
predominantly earn a profit that determines whether a person needs a
license, not the number of sales or amount of profit.
The Department disagrees that the sale of firearms at fair market
value due to financial hardship or disability is evidence sufficient to
exclude a person from being considered engaged in the business, or to
rebut the presumptions. The statute's definition of ``engaged in the
business'' does not create an exception for people who intend to engage
in firearms dealing to earn income for support or subsistence; the
definition as amended by the BSCA focuses only on a person's devotion
of time, attention, and labor to that business and intent to earn a
profit, not the uses to which they put any resulting profit or income.
As a result, providing evidence that a person is engaging in the
business of firearms dealing for livelihood reasons does not rebut any
of the elements that constitute being engaged in the business.
As to the suggestion that the term ``predominantly'' be defined
consistently with 26 U.S.C. 118(c)(3) as ``80 percent or more,'' such
that 80 percent of the transactions must be for pecuniary gain, the
Department declines to do this. First, 26 U.S.C. 118(c)(3) is a
definition of ``predominantly'' that is used to determine whether a
regulated public utility that provides water or sewage disposal
services may exclude certain amounts expended on those services from
their gross income. This calculation has no connection or similarity to
intent, let alone the context of firearms sales. Second, the GCA
contains no such limitation. A person may have the predominant intent
to profit from the sale or offer to sell a single firearm, even if the
person has no such intent with respect to other firearms being
sold.\228\
---------------------------------------------------------------------------
\228\ The term ``predominant'' is commonly defined as ``more
noticeable or important, or larger in number, than others.''
Predominant, Cambridge Online Dictionary, https://dictionary.cambridge.org/us/dictionary/english/predominant (last
visited Mar. 17, 2024); see also Predominant, Oxford English
Dictionary, https://www.oed.com/dictionary/predominant_adj?tab=meaning_and_use#28860543 (last visited Mar. 17,
2024) (``Having ascendancy, supremacy, or prevailing influence over
others; superior, predominating.'').
---------------------------------------------------------------------------
In response to a commenter who suggested that the regulations be
changed to make it clear that a collector can liquidate all or part of
their collection by having a table at a gun show without a license, the
Department has revised the final rule to state that reliable evidence
that the person resells firearms only occasionally to obtain more
valuable, desirable, or useful firearms for their personal collection,
or to liquidate a personal collection, does not support a presumption
and can be used to rebut any presumption. Sec. 478.13(e)(2) and (4),
(f).
15. Presumptions That a Person Intends to Predominantly Earn a Profit
Comments Received
Commenters stated that none of the individual presumptions that a
person has the intent to predominantly earn a profit are supported by
the Federal statute and raised concerns that they generally penalize
entirely innocent and natural conduct of non-licensee sellers.
Commenters stated these criteria are overbroad and fail to
differentiate between genuine business activity and casual or
incidental actions related to firearms. They stated that it is unfair
for ATF to presume an intent to profit in scenarios where no such
intent exists and that these presumptions make it effectively
impossible for an unlicensed person to sell their firearm without
running afoul of the rule. Indeed, one commenter stated that all
avenues to make a personal sale were cut off and that he ``cannot
fathom how [he is] supposed to sell ANY firearm without being presumed
to be engaged in the business under these rules. This rule says that
[he] can sell part of [his] collection, but [he] cannot see a way to do
so without being presumed to be engaged in the business under this
rule.'' At least one commenter stated that all the presumptions ignore
the statutory requirement that the intent ``underlying the sale or
disposition of firearms is predominantly one of obtaining pecuniary
gain.''
Similarly, one commenter noted that determining when someone acts
to ``predominantly earn a profit'' requires not determining that a
profit was made, but rather, the underlying motivating factor for that
person's actions. The commenter disagreed that any of the presumptions
listed are indicators of such motivation; rather, they said, these
presumptions reflect efficient and timely ways to sell a firearm and do
not speak at all to the person's motivation when buying the firearm
initially. For instance, they said, a person who wants to sell their
car will take all actions possible to get the best price for it, such
as advertising, providing maintenance records, renting space to list it
online or a visible place to park it. A person wanting to sell their
firearm would take similar steps, but these actions that trigger the
presumptions do not shed light on the motivation for the purchase or
transaction.
A few other commenters were concerned about the fact that they have
owned firearms for a long time and are reaching an advanced age at
which they will need to sell them. One such commenter stated, ``The
idea of a profit is to sell something for more than it was purchased
for. In my collection I have firearms that were obtained over 40 years
ago. Inflation has raised their value so that any sale will make a
profit. This means I am a dealer.'' Another explained that he is not a
collector per se, but is a firearms competitor who thus has a number of
firearms that ``one day I must dispose of due to my advancing age. This
would eliminate me from making private sales from my own holdings. The
sale of which would generate a `profit' since all were bought years ago
when prices were much lower. The only choice this would leave me would
be to sell on concession through a dealer . . . if I could find one
willing to take the goods.''
Commenters stated that many businesses have a large inventory of
firearms for business purposes but are not licensed; these include
armored car services, security companies, farmers, ranchers, and
commercial hunting operations. If ``predominantly earn a profit'' is
separate from ``engaged in the business'' as a set of presumptions, the
commenters added, then a security company keeping track of its firearm
inventory and the cost of obtaining those firearms for tax or other
reasons would be captured under any of the presumptions listed under
``predominantly earn a profit.'' Or a hunting outfitter with a large
inventory of firearms for client use would easily be captured under a
``predominately-earn-a-profit'' presumption if they have security
services like monitored alarms or cameras. The commenters concluded
that the rule might therefore have the unintended consequence of
reducing public safety if some people avoid certain security measures,
such as monitored alarms, to avoid being presumed to be engaged in the
business because they qualified for one of the ``predominantly earn a
profit'' presumptions.
One comment noted that ``while this set of presumptions is separate
from the presumptions that establish that a person meets the definition
of `engaged in the business,' evidence of the conduct described in this
set of presumptions can serve to rebut evidence of conduct that, under
paragraph (c)(4) (now Sec. 478.13(e)) of the Proposed Rule's
definition of `engaged
[[Page 29045]]
in the business,' is presumed not to be engaged in the business.'' They
suggested that ATF further clarify this.
Department Response
The Department disagrees that the presumptions that separately
address the BSCA's new intent element--``to predominantly earn a
profit'' through the repetitive purchase and resale of firearms--
penalize innocent and natural conduct of sellers who are not engaged in
the business. Nothing in this rule creates any new penalties. The PEP
presumptions serve only to establish the intent element. Even when that
element is satisfied, a person would not be engaged in the business
unless the other statutory requirements are present, including the
requirements that the person ``devote[ ] time, attention, and labor to
dealing in firearms as a regular course of trade or business'' and that
the person is engaging, or intends to engage, in ``the repetitive
purchase and resale of firearms.'' 18 U.S.C. 921(a)(21)(C).
As the preamble and regulatory text explain, the EIB presumptions
are not 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. See Sec. 478.13(g). There are many other fact patterns
that could support a finding that a person is engaged in the business
requiring a license. The presumptions are tools that assist persons,
including firearms sellers, investigators, and fact finders, to
understand a set of common situations that have been found over the
course of decades to indicate that a person is engaged in the business.
Similarly, these PEP presumptions are not the only fact patterns that
could support a finding that a person has a predominant intent to earn
a profit, but they are tools to assist in assessing the element of
intent. At the same time, there are other fact patterns, such as where
a person advertises a valuable collectible firearm for sale from a
personal collection that could generate a substantial profit, that
would not require a license. The fact that the collector, or even a
company, intends to earn a profit from the sale or disposition of a
firearm is not, by itself, dispositive as to whether that person is
engaged in the business of dealing in firearms requiring a license.
These presumptions apply only to an individual's or entity's
predominant motivation in selling the firearm, and like other
presumptions, they may be refuted with reliable evidence to the
contrary.
The Department disagrees that these presumptions do not address a
person's motivation. First, as stated previously, actual profit is not
a requirement of the statute--it is only the predominant intent to earn
a profit through the repetitive purchase and resale of firearms that is
required. Indeed, a person may repeatedly advertise and display
firearms for sale, and therefore demonstrate a predominant intent to
earn a profit from repeatedly reselling the firearms purchased, but
never actually find a buyer. Second, as stated previously, intent
appropriately may be inferred from a person's words or conduct
demonstrating such intent.\229\ The motivation to predominantly obtain
pecuniary gain from the repetitive sale or disposition of firearms can
be demonstrated when a person takes certain preliminary steps to earn a
profit, such as those reflected in the PEP presumptions. Generally,
persons who do not intend to profit from firearms sales are not going
to expend time, attention, labor, and money to repetitively advertise,
secure display space, maintain profit documentation, hire security, set
up business accounts, or apply for business licenses. And even if they
do expend such time, attention, and labor without a predominant intent
to earn a profit, the person can bring forward reliable rebuttal
evidence to refute the presumed intent.
---------------------------------------------------------------------------
\229\ See footnote 186, supra.
---------------------------------------------------------------------------
The Department disagrees with the commenter who stated that a
collector who holds firearms in a personal collection for many years
would always show a profit due to inflation when they are sold, and
would therefore automatically be considered a dealer. As stated
previously, a showing of actual profit is not dispositive as to whether
a person is engaged in the business. Rather, it is the predominant
intent of obtaining pecuniary gain from the repetitive purchase and
resale or disposition of firearms that matters. See 18 U.S.C.
921(a)(22). However, a person who is occasionally selling firearms from
a personal collection to enhance it, or who liquidates it, typically
does not have that intent, which is why this final rule states that
reliable evidence of those activities and intent does not support a
presumption and may be used to rebut any presumption. See Sec.
478.13(e), (f).
The Department agrees that security companies, farmers, ranchers,
and hunting outfitters that do not purchase firearms primarily for
resale would be unlikely to have a predominant intent to earn a profit
from liquidating their businesses' firearms, particularly since these
firearms have likely lost their value over time due to constant use and
handling. Non-firearms-dealing businesses may simply want to quickly
sell them in bulk to a licensee for less than fair market value, in
order to purchase new firearms. However, even if such businesses were
to resell their firearms with a predominant intent to profit, that
would not automatically mean that they were engaged in the business of
dealing in firearms. The intent to profit is only one element of being
engaged in the business; the other elements of dealing would also have
to be established. Therefore, if these businesses engaged in conduct
that falls under one of the PEP presumptions and are presumed to have a
predominant intent to profit, that does not mean they are also
necessarily presumed to be engaged in the business of dealing in
firearms.
The PEP presumption on recordkeeping is about keeping records to
document, track, or calculate profits and losses from firearms
purchases and resales, not about general recordkeeping of a firearms
inventory or merely the cost of obtaining the firearms. Nonetheless, to
avoid confusion as to when it applies, this PEP presumption has been
revised to read, ``[m]akes and maintains records to document, track, or
calculate profits and losses from firearms repetitively purchased for
resale.'' Sec. 478.13(d)(2)(iii). Therefore, as revised, the
presumption is clarified to show that it does not include persons who
merely keep track of their firearms or what they spend on them.
The Department does agree that the PEP presumption on securing a
business security service to protect inventory is somewhat overbroad as
drafted in the NPRM, and has therefore limited it in this final rule to
maintaining security for both firearms assets and repetitive firearms
transactions. See Sec. 478.13(d)(2)(v). While some businesses may
purchase firearms, and eventually liquidate them, such activity may be
for reasons completely unrelated to any profit motive for the firearms
transactions. In contrast, if they secure business security services to
protect both their firearms assets and transactions, they are presumed
to have a predominant intent to profit from those transactions. The
focus of the licensing provisions in the GCA is on firearms
transactions, not merely storing or maintaining firearms as assets. So,
for example, if a business or other person merely purchases firearms
for their own use, but not to enter into transactions involving those
firearms, they would not fall under this presumption because it is
unlikely they would hire business security to protect firearms
transactions.
The Department declines to adopt a commenter's suggestion that
evidence of
[[Page 29046]]
conduct identified in the PEP presumptions be used to ``rebut'' conduct
not presumed to be engaged in the business (listed in paragraph (c)(4)
of the NPRM's definition of engaged in the business, and now in Sec.
478.13(e)). Section 478.13(e) is not a list of rebuttable presumptions.
Rather, it is a nonexhaustive list of conduct that does not support a
presumption of engaging in the business. As such, reliable evidence
that a person is or was engaging only in such conduct can be used to
rebut any presumption. In addition, the rule has been revised to state
that the examples of rebuttal evidence set forth in the rule are not an
exhaustive list of evidence a person may present to rebut the
presumptions. See Sec. 478.13(g).
16. PEP Presumption--Promotion of a Firearms Business
Comments Received
Several commenters disagreed with the inclusion of ``[a]dvertises,
markets, or otherwise promotes a firearms business (e.g., advertises or
posts firearms for sale, including on any website, establishes a
website for offering their firearms for sale, makes available business
cards, or tags firearms with sales prices), regardless of whether the
person incurs expenses or only promotes the business informally'' as a
presumption in determining whether a person has the intent to
predominantly earn a profit.
First, commenters noted that Congress explicitly rejected
limitations on the private transfers of firearms pursuant to classified
ads and gun shows, implying that ATF cannot now include in its rule a
presumption that advertising or promoting a firearms business shows
predominant intent to profit. Additionally, commenters stated that such
advertisements in a classified advertisement hardly qualify someone as
having such intent and that this is criminalizing protected behavior.
For instance, the commenters said, if a person is liquidating a
personally owned NFA weapon because of a move to a State where
possession of the item would be unlawful, they believed that the
presumption would capture such a person who posts an advertisement on
the internet to sell their NFA weapon even if they lose money on the
sale. In fact, stated one commenter, the presumption is so broad it
could apply to posting even a single firearm for sale on a website,
which is a common occurrence where the seller did not purchase the
firearm with intent to profit and is most likely losing money on the
sale. The commenter stated that there is ``no indicia that a seller who
posts on a website is doing so for pecuniary gain'' so ``the
presumption lacks any connection to the statutory definition of
`predominantly earn a profit.' ''
Similarly, a couple of gun collectors' associations stated this
first presumption essentially limits all sales to word of mouth if a
seller does not want to be captured under the presumption. A third
association added, ``[m]ost who collect firearms or engage in the sale
of firearms for a hobby are willing to buy or willing to sell, but this
in and of itself [does] not establish by a preponderance that they are
doing so to `predominately earn a profit'. . . . The changes in the law
did not provide that a person could not advertise a firearm for sale,
put a price tag on it, place it for sale on the internet, or rent a
table at a gun show.'' In another commenter's view, the presumptions
also preclude word-of-mouth sales. They stated that the definition of
``engaged in the business'' does not require that a firearm actually be
sold, so long as the person holds themselves out as a dealer. So, they
added, ``[i]n other words, if I converse with another person and offer
to sell a personal firearm or represent to that person that I have a
willingness, and ability, to purchase and/or sell other personal
firearms [which occurs regularly if one is a collector], I am a Dealer.
I would ask how, exactly, a person who wanted to actively seek out and
add firearms to his/her collection would do so if you are not allowed
to actually converse about it or negotiate with the owner of that
firearm? . . . You can't `spread the word' among other people as that
activity also presumes you are a dealer.'' One company raised a concern
over whether certain brand ambassadors that promote company products,
or associates that go to trade shows who promote their company, would
now be presumed to be engaged in the business of dealing in firearms.
In contrast, another commenter made a suggestion to strengthen this
presumption with regard to online sales advertising because they found,
through their own research, that the number of online sales
advertisements for firearms through sites such as Armslist was
overwhelmingly listed by unlicensed sellers rather than licensed
dealers. They suggested that ATF should also consider stating that any
person who engages in online conduct that falls within this presumption
on more than one discrete occasion will qualify for a rebuttable
presumption that the person is ``engaged in the business'' of firearms
dealing. ``Put differently,'' they explained, ``the [I]nternet is the
epicenter of the unregulated firearm sales market--and repeatedly
advertising for sales online should be presumptively considered to be
holding oneself out as a dealer. Plainly describing such an additional
rebuttable presumption . . . would make it much clearer that a person's
second or subsequent use of online advertising, marketing, or posting
of firearms for sale puts the burden on the seller to provide rebuttal
evidence demonstrating that their multiple online advertisements are
not engaging in the business of firearms dealing.''
Department Response
The Department disagrees that the presumption that a person
demonstrates a predominant intent to profit from selling firearms if
the person ``advertises, markets, or otherwise promotes a firearms
business'' is unfounded. Advertising or promoting a firearms business
has long been recognized as a primary way of increasing sales and
profits \230\ and nothing in this rule prohibits or criminalizes
isolated private transfers of firearms using classified advertisements
and at gun shows. The presumption is narrowly tailored based on the
Department's regulatory and enforcement experience, court decisions
with similar fact patterns, and the investigations and prosecutions it
has brought over the years. Because promoting a firearms business
requires investing time and money, persons typically do not engage in
such activities without intending to profit from resulting sales and
recoup potential advertising costs in the process. As a result,
advertising or promoting a firearms business is activity that indicates
a person has a predominant intent to profit from firearms sales. This
presumption does not prevent or hinder individuals from advertising to
promote occasional private transactions, as intent to
[[Page 29047]]
predominantly earn a profit is just one element of being engaged in the
business.
---------------------------------------------------------------------------
\230\ See, e.g., The Importance of Marketing for Your Firearms
Company, The Coutts Agency, https://couttsagency.com/digital-marketing-for-firearms-companies (last visited Mar. 18, 2024)
(``Whether you're an established name in the firearms manufacturing
sector or you're a new firearm company looking to find your niche on
the national level, marketing is how you'll achieve your goals.'');
Joshua Claflin, Maximizing ROI With Effective Firearms Marketing
Tactics (The Complete Guide), Garrison Everest (Nov. 24, 2023),
https://www.garrisoneverest.com/firearms-marketing/maximizing-roi-with-effective-firearms-marketing-tactics-complete-guide
(``Marketing serves as the bridge between firearms businesses and
their target audience. It's not just about promoting products;
rather, it's about building firearm brand recognition, establishing
trust, and nurturing long-term customer relationships.'').
---------------------------------------------------------------------------
Nonetheless, the Department acknowledges commenters' worries that
an advertisement for an isolated firearms sale might cause them to be
presumed to have a predominant intent to profit through the repetitive
purchase and resale of firearms. Therefore, to increase the likelihood
that promoting or advertising a firearms business as covered by this
presumption relates to persons who predominantly intend to earn
pecuniary gain from the sale of firearms, the presumption has been
revised to add the words ``repetitively or continuously'' before
``advertises, markets, or otherwise promotes a firearms business.''
Sec. 478.13(d)(2)(i). Thus, persons who do not repetitively or
continuously advertise or otherwise promote a firearms business are
excluded from the presumption that they predominantly intend to profit
from repetitive sales of firearms. Of course, like the other
presumptions, this one may be rebutted with reliable evidence to the
contrary.
With regard to employees of licensees who promote a firearms
business, such individuals do not need to be licensed because
businesses ``carry out operations through their employees,'' and no
transfer or disposition of firearms occurs when they are temporarily
assigned firearms for business purposes. ATF Ruling 2010-1, Temporary
Assignment of a Firearm by an FFL to an Unlicensed Employee, at 2 (May
20, 2010), https://www.atf.gov/firearms/docs/ruling/2010-1-temporary-assignment-firearm-ffl-unlicensed-employee/download. These employees
operate under the license of the business, and the business sells
firearms under the requirements of the GCA (e.g., background checks).
However, a contractor who is not an employee would demonstrate a
predominant intent to earn a profit from firearms sales by promoting
another person's firearms business, or posting firearms for sale for
someone else, particularly a company. This does not mean that such
persons are themselves engaged in the business, but they are promoting
a firearms business with the predominant intent to earn a profit from
the sale or distribution of those firearms, and thereby assisting
another person engaging in the business of dealing in firearms without
operating under their license.
The Department also disagrees with the alternative suggestion that
any person who advertises firearms online on more than one discrete
occasion should qualify for a rebuttable presumption that the person is
``engaged in the business'' of firearms dealing. The presumption
relates to advertising a ``business,'' and the Department recognizes
that persons who wish to dispose of all or part of a personal
collection, or ``trade up'' to enhance their personal collection, for
example, are likely to occasionally offer for resale firearms from
their personal collection online. To be engaged in the business, the
Department believes those offers must be accompanied by additional
evidence. That could include repetitive offers for resale within 30
days after the firearms were purchased, or within one year after
purchase if the firearms are new or like-new in their original
packaging or the same make and model, or a variant thereof. That is not
to say that other fact patterns will not demonstrate engaging in the
business; however, the Department has carefully considered these issues
and narrowly tailored the presumptions in this rule based on its
regulatory and enforcement experience, court decisions with similar
fact patterns, and the investigations and prosecutions it has brought
over the years.
17. PEP Presumption--Purchases or Rents Physical Space
Comments Received
Commenters disagreed with this PEP presumption that purchasing,
renting, or otherwise securing or setting aside permanent or temporary
physical space to display firearms at gun shows or elsewhere is an
indication of intent to profit. Commenters stated this presumption is
contrary to the statutory protection for those who wish to sell all or
part of a personal collection and contrary to Congress's intent in
passing 18 U.S.C. 923(j), which permits licensees to temporarily
conduct business at certain gun shows. Citing FOPA's legislative
history, S. Rep. No. 98-583 (1984), one commenter stated that
Congress's intent in passing section 923(j) was to put licensed dealers
at parity with non-licensees, whom Congress assumed could already sell
at gun shows. Further, another commenter stated that, ``[t]he act of
renting space at a gun show is obviously protected under the BSCA if
the person is only making `occasional sales, exchanges, or purchases'
or if the person is using the space to sell `all or part of his
personal collection of firearms.' ''
At least one commenter indicated that collectors or individuals
often rent temporary physical space at gun shows to dispose of any
excess guns such as World War II firearms, like Mausers, and to
complete firearms transactions face-to-face. Likewise, at least one
commenter stated that often private persons display firearms at a gun
show, and they will have FFLs process the transactions. This does not
demonstrate that these private persons are dealers with an intent to
profit, they said. At least one commenter said that a space to store
firearms is not an indicator of intent to profit or being engaged in
the business; rather, that person might simply want to store their
firearms safely.
One commenter stated that these criteria are so broad ``that a
seller of popcorn who rents a table at a gun show would presumptively
be engaged in the business of selling firearms under the proposed
rule.'' Another commenter went so far as to state that this presumption
``would turn literally every gun owner who has ever sold a gun into an
unlicensed firearms dealer'' because everyone who possesses firearms
sets aside physical space to display or store them.
Department Response
The Department agrees with commenters that collectors may secure or
set aside physical space in which to store firearms from their personal
collections that they offer for resale, including at a gun show. For
this reason, the presumption in the final rule deletes the words ``or
store,'' and replaces the phrase ``otherwise secures or sets aside''
with ``otherwise exchanges (directly or indirectly) something of value
to secure,'' to ensure that merely setting aside space to store or
display firearms is not included in the presumption, and that only
persons who secure space at a cost in order to profit from firearm
sales are included. See Sec. 478.13(d)(2)(ii). In this regard, the
Department continues to believe that it is appropriate to presume that
persons who repetitively or continuously secure permanent or temporary
physical space at a cost to display firearms they offer for resale
primarily intend to earn a profit from those sales. This is true even
if the firearms are sold at a gun show, and nothing in the GCA purports
to authorize non-licensees to rent space at a gun show to deal in
firearms without a license. The GCA provision addressing guns shows, 18
U.S.C. 923(j), authorizes licensees to conduct operations temporarily
at gun shows under certain limited conditions, not non-licensees.
Again, this does not mean that a collector who occasionally sells a
firearm from a personal collection at a gun show is required to be
licensed. The presumption means only that the collector likely has a
predominant intent to obtain pecuniary gain from the
[[Page 29048]]
sale of that firearm. To be considered a dealer, evidence would be
required to show that the collector has devoted time, attention, and
labor to dealing in firearms as a regular course of trade or business.
And if a proceeding were to be brought against a collector, that person
could refute the presumption with reliable evidence to the contrary.
To make this clear, the final rule has been revised to state that
certain conduct, including liquidating a personal collection or
occasionally reselling firearms to improve a personal collection, is
conduct that does not support a presumption that a person is engaged in
the business. See Sec. 478.13(e)(2) and (4). Additionally, to increase
the likelihood that this presumption targets persons who predominantly
intend to earn pecuniary gain from the sale of firearms, the Department
has revised the presumption to add the words ``repetitively or
continuously'' before ``purchases, rents, or otherwise exchanges
(directly or indirectly) something of value to secure permanent or
temporary physical space to display firearms they offer for resale.''
See Sec. 478.13(d)(2)(ii). The word ``continuously'' was added to
cover instances where a person buys a single location and occupies it
for this purpose over an extended period. This presumption includes
nontraditional commercial arrangements to secure display space (such as
charging a higher membership or admission fee in exchange for ``free''
display space, or authorizing attendance at a gun show or sales event
in exchange for something else). The phrase ``directly or indirectly''
was added to include indirect exchanges and clarify that nontraditional
commercial arrangements are included. The presumption excludes persons
who do not repetitively or continuously purchase, rent, or otherwise
exchange something of value to secure physical space to display
firearms they offer for resale. Of course, like the other presumptions,
this one may be rebutted with reliable evidence to the contrary. See
Sec. 478.13(f).
18. PEP Presumption--Records of Profits and Losses
Comments Received
Numerous commenters objected to including records to calculate
profits or losses from firearms purchases and sales as a presumption
that determines one has intent to earn a profit as a dealer in firearms
because it is a common behavior for any firearms owner to keep such
records. The commenters stated that the presumption is overbroad based
on their belief that a person who keeps any sort of records of
firearms, often for insurance purposes just like they would for a car
or home, would be considered a dealer. They noted that keeping such
records is important not only for insurance purposes but also to help
with recovery of a stolen firearm. Some commenters also thought that
this presumption could hurt collectors who have a Type 03 license
because they are required to keep a collector's bound book where they
record their purchases and sales. They noted that, under this
presumption, ATF could presume they have the wrong type of license and
they would be forced to get a dealer's license. Similarly, some
commenters noted that the IRS requires investors or collectors to keep
information on purchase history including acquisition date, improvement
to the asset and cost of the asset to determine taxable gain upon sale.
An additional commenter stated that businesses like a security company
would keep track of their firearms inventory and track the cost of
obtaining those firearms for tax and other reasons, but the law surely
does not presume such a company is a firearms dealer. The commenters
appeared to indicate that keeping such documentation for a transaction
does not necessarily make the person a dealer. At least one commenter
stated this presumption discourages the very behavior (i.e., personal
recordkeeping) that ATF should want to encourage while other commenters
noted that the Personal Firearms Record, P3312.8, that ATF encourages
people to keep for purposes of protecting their property and to aid in
recovery of stolen firearms, could now be used against them to make
them a dealer. One of these commenters added that even a licensed
collector of curios and relics ``would risk liability under this
presumption, because they are in fact required by ATF to maintain such
documentation. However, the NPRM will presume that even these FFLs
simply have the wrong FFL (collector, not dealer).''
Department Response
The Department disagrees that keeping records to calculate profits
and losses does not indicate a predominant intent to earn a profit from
the sale or disposition of firearms. The point of making or maintaining
such a record is to document profits or other pecuniary gain from
firearms transactions. However, to further clarify this point, and to
address comments regarding businesses that purchase and use firearms
for purposes other than resale, the final rule revises this PEP
presumption to say that the person ``[m]akes and maintains records to
document, track, or calculate profits and losses from firearms
repetitively purchased for resale,'' not merely to document profits and
losses from firearms purchased for other commercial (or noncommercial)
purposes. Sec. 478.13(d)(2)(iii).
The commenter is incorrect that the collector bound book,
maintained by Type 03 licensed collectors of curios or relics pursuant
to 27 CFR 478.125(f), is a record that documents profits and losses
from firearms purchases and sales. The format for that record in Sec.
478.125(f)(2) does not require any information concerning the purchase
or sales prices of the curio or relic firearms, or profits and losses
from those sales. Another commenter is incorrect that ATF Form 3312.8,
Personal Firearms Record (revised Aug. 2013), https://www.atf.gov/firearms/docs/guide/personal-firearms-record-atf-p-33128/download, is a
record of profits and losses. It does not document profits and losses
from the purchase and resale of firearms, nor does it document the
sales price--it documents only the cost of the firearm(s) at the time
the person acquired them and the person or entity to whom the firearms
are transferred, if any. Contrary to commenters' assertions,
individuals can certainly make and maintain records of their personal
inventories of firearms for insurance purposes without documenting
profits and losses from firearms transactions. The presumption requires
the latter, which is rebuttable by reliable evidence to the contrary.
Finally, in response to the comment that tracking profits is
necessary for tax purposes, the Internal Revenue Code taxes only income
from capital gains on personal property, meaning a positive difference
between the purchase price and the sales price.\231\ Money or other
benefits a person receives from sales of depreciated personal firearms
would not be reported as income (or treated as a capital gain for tax
purposes). Thus, the primary reason for a person to track, for tax
purposes, funds a person receives from selling firearms would likely be
to account for pecuniary gain they predominantly intend to make from
the sales. To the extent that the pecuniary gain is recorded for tax
purposes from appreciating collectible or hobby firearms, or to record
capital losses on firearms sales, that evidence can be used to rebut
the presumption that the pecuniary gain recorded was the
[[Page 29049]]
person's predominant intent.\232\ But it is inconsistent with the case
law and ATF's regulatory and enforcement experience (and common sense)
to say that maintaining these types of financial records is not
indicative of profit-motivated business activity.
---------------------------------------------------------------------------
\231\ See Topic No. 409, Capital Gains and Losses, IRS, https://www.irs.gov/taxtopics/tc409 (last updated Jan. 30, 2024).
\232\ This evidence could include, for example, that the 28
percent collectibles capital gains tax was paid on income earned
from those sales, as reported on IRS Form 8949.
---------------------------------------------------------------------------
19. PEP Presumptions--Secures Merchant Services for Payments and
Business Security Services
Comments Received
Commenters disagreed with, and stated they were confused by, the
presumptions that a person is intending to predominantly earn a profit
as a dealer in firearms if they use a digital wallet or use the
services of a credit card merchant to accept payments, or if they hire
business security services, such as a monitored security system or
guards for security. At least one commenter argued that the presumption
for using third-party services to ``make[ ] or offer[ ] to make
payments'' seems to target buyers of firearms who make electronic
payments rather than purported dealers who accept electronic payments
when they sell the firearms. They noted that one case that the
Department cited in footnote 97 of the NPRM, United States v. Dettra,
238 F.3d 424, 2000 WL 1872046, at *2 (6th Cir. 2000) (unpublished table
decision), focuses on a defendant selling firearms, i.e., accepting
payments, rather than making payments. The commenter opined that the
presumption is overbroad because it could make a dealer out of anyone
who makes electronic payments for firearms using a business account.
This would capture any business that purchases .22LR rifles for
instructional purposes. The commenter said that even if the presumption
is meant to target people who accept payments, the language is still
overbroad. The commenter offered a particular hypothetical in which,
they said, it would seem that ATF would presume a dentist has intent to
earn profit as a firearms dealer if the dentist sells a patient a
firearm after a visit, tacks it onto the dental bill, and accepts
credit card payment for that entire bill. Because the presumption could
include a case such as the hypothetical dentist, they argued that it is
clear the presumption is overbroad. They claimed every eBay seller must
worry about becoming a dealer under this presumption. Another commenter
stated that electronic transactions are commonplace even for occasional
firearms transactions. The commenter stated that the Department should
not focus on a specific method of payment but rather focus on other
factors such as the frequency, volume, and commercial nature of sales
as well as the person's intent to earn a profit.
Some commenters were of the opinion that having a security service
to protect one's firearms is simply a means of responsible firearm
ownership and that they are now being penalized for the use of a
digital payment app for a single firearms transaction. At least one
commenter disagreed with the characterization in footnote 98 of the
NPRM where the Department stated, ``for profit business are more likely
to maintain, register, and pay for these types of alarms rather than
individuals seeking to protect personal property.'' The commenter
stated that it is fairly common for individuals to have a personal
security system in their home that can cost as little as $100 per year
after initial installation, and that such a system is not necessarily
an item reserved for business owners alone. Similarly, other commenters
stated that the presumption for using security services needs to be
clarified because it seems entirely too broad. They argued that a plain
reading of the presumption is that intent to predominantly earn a
profit exists when the person selling a firearm has an alarm system at
their business to protect any business assets. For example, they
questioned whether a gas station with a centralized alarm service where
the owner keeps a firearm that is the gas station's property is
considered a dealer because the station has an intent to predominantly
earn a profit for an entirely unrelated transaction (such as selling
gas). The commenters also questioned whether a company that keeps its
company firearms in a securely monitored warehouse would be considered
a dealer if it one day sells its old firearms to a dealer so it can buy
new ones for its employees. The commenters argued this could extend
even to a sheriff's department with a security system when it trades in
old duty guns. One commenter characterized the projected outcomes in
these scenarios as nonsensical and overbroad, and questioned whether
the security services presumption was instead meant to cover firearms
transactions and business assets that include firearms rather than, as
the commenter had read the NPRM, security services purchased to secure
any business assets.
Department Response
The Department agrees with commenters that the presumption about
securing merchant services, such as electronic payment systems, is
meant to be directed at firearms sellers, not at individual firearms
purchasers. For this reason, the phrase ``makes or offers to make
payments'' has been deleted from the presumption, which now applies
only to merchant services ``through which the person intends to
repetitively accept payments for firearms transactions.'' Sec.
478.13(d)(2)(iv).
The Department disagrees that individual firearms sellers that use
online services, such as eBay, purchase or secure ``merchant services
as a business.'' These sellers are not securing merchant services as a
business, and the online companies often distinguish between the
services they provide to merchants and the services they provide to
individuals seeking to sell personal items.\233\
---------------------------------------------------------------------------
\233\ See, e.g., eBay for Business, eBay, https://www.ebay.com/sellercenter/ebay-for-business (last visited Mar. 26, 2024).
---------------------------------------------------------------------------
Additionally, the manner in which merchants accept payments is a
strong indicator of a predominant intent to earn a profit. Private
citizens generally do not sign up for credit card processing services.
Merchants are persons engaged in a profit-making business, and those
services are designed to accept payments on behalf of profit-seeking
sellers,\234\ though individual firearms sellers may also have an
intent to earn a profit when selling online. Again, this does not mean
that a person is ``engaged in the business'' requiring a license when
they occasionally sell a firearm from a personal collection with the
intent to profit. That person must also devote time, attention, and
labor to dealing in firearms as a regular course of trade or business.
For this reason, the Department does not believe the merchant service
PEP presumption is overbroad, especially as revised in this final rule
in light of comments received. And, as with the others, the presumption
may be refuted with reliable evidence to the contrary (e.g., by the
hypothetical dentist).
---------------------------------------------------------------------------
\234\ See, e.g., Venmo for Business, Venmo, https://venmo.com/business/profiles/ (last visited Mar. 26, 2024); Sell in person with
Shopify Point of Sale, Shopify, https://www.shopify.com/pos/free-trial/sell-retail; Your unique business. Our all-in-one solution,
PayPal, https://www.paypal.com/us/webapps/mpp/campaigns/business/contact (last visited Mar. 26, 2024); I'm a Small Business Using
Zelle, Zelle, https://www.zellepay.com/faq/small-business-using-zelle (last visited Mar. 26, 2024).
---------------------------------------------------------------------------
Some commenters also misunderstood the security service
presumption, which applies only to ``business security services . . .
to protect business assets or transactions,'' not to personal security
services. The Department recognizes that some
[[Page 29050]]
individuals have a central-station monitoring system, but the
regulatory text is clear that it applies only to a central-station
monitoring system registered to a business. In addition, what is being
protected are business assets that include firearms or transactions
that include firearms. Nonetheless, to reduce the concern that a
business not engaged in the business of dealing in firearms would be
considered to have the predominant intent to earn a profit by securing
business security services, the Department has revised the presumption
to replace the word ``or'' with ``and'' so the presumption applies only
where business security services have been secured to protect both
firearms ``business assets'' and firearms ``transactions.'' See Sec.
478.13(d)(2)(v). This clarifies the scope of the presumption in
response to commenter concerns.
20. PEP Presumptions--Establishes a Business Entity, Trade Name, or
Account, or Secures or Applies for a Business License
Comments Received
For these two presumptions under ``predominantly earn a profit,''
commenters argued that they were too broad and that whether a person
establishes a business entity or has a business license has nothing to
do with intent to predominantly earn a profit. Some commenters asserted
that a lot of people have an all-purpose business license that could be
for any number of purposes. Some States require multi-use licenses, the
commenters said, such as combined resale and use ones. In those cases,
a company that simply uses firearms as part of their business
operations, rather than dealing in firearms as their business, would
have a business license and be presumed to be dealing in firearms.
Having one, these commenters argued, does not necessarily mean that a
person has intent to earn a profit as a dealer in firearms. One
commenter believed that a business that sells gun accessories would be
forced to register as a licensee. Another suggested that the
presumption would also treat other businesses that have firearms, like
a security company, as dealers merely because they have a business
license or are established as a business entity in an arena other than
firearms sales.
Another commenter, who identified as a firearm owner, stated that a
true FFL is a legal business but that a trade or transaction between
two law-abiding citizens does not constitute a reason for one to obtain
an FFL. One commenter noted that the case, United States v. Gray, 470
F. App'x 468, 469-70 (6th Cir. 2012), cited in the NPRM in support of
the business entity presumption, involved facts much more indicative of
unlicensed dealing than simple use of a business name. The commenter
said the circumstances of that case stand in stark contrast to a
situation where an owner of an antique store who decides to sell the
family's World War I-era firearm at the store and could now be captured
as a dealer under this presumption.
Department Response
The Department disagrees that the business entity and business
license presumptions have nothing to do with an intent to predominantly
earn a profit from its firearm sales or dispositions. Establishing a
business entity or account ``through which the person makes or offers
to make firearms transactions'' is often a preliminary step to engaging
in the business of dealing in firearms with the predominant intent to
earn a profit. A separate business entity can potentially provide
liability protection, which is particularly advantageous when selling
dangerous instruments, like firearms. A business entity or account can
make it easier to sell firearms for a profit and may provide certain
discounts or benefits when doing so. Likewise, a business license to
sell firearms or merchandise that includes firearms is direct evidence
of an intent to earn a profit from repeated firearms transactions.
Indeed, a firearms business cannot operate lawfully without it.\235\
While the Department agrees that there may be businesses that primarily
sell merchandise other than firearms, such as an antique store, such
businesses are profit-seeking, and are likely to sell any firearms at
least on a part-time basis with the predominant intent to earn a
profit. As stated previously, even part-time firearms businesses are
required to be licensed.\236\ Again, intent to predominantly earn a
profit is just one element of engaging in the business.
---------------------------------------------------------------------------
\235\ See, e.g., State of Maryland, Obtain Licenses or Permits,
https://businessexpress.maryland.gov/start/licenses-and-permits
(last visited Apr. 2, 2024) (``State and local governments require
many industries to have permits or licenses to operate. A business
license is required for most businesses, including retailers and
wholesalers. A trader's license is required for buying and re-
selling goods.''); State of Colorado, Do I Need a Business License,
https://www.coloradosbdc.org/do-i-need-a-business-license/ (last
visited Apr. 2, 2024) (``In Colorado, if you are selling tangible
goods, you are required to collect State Sales Tax and will need a
Sales Tax License.''); State of Michigan, Who Needs a Sales Tax
License, https://www.michigan.gov/taxes/business-taxes/sales-use-tax/resources/who-needs-a-sales-tax-license (last visited March 2,
2024) (``[R]etailers must be licensed to collect tax from their
customers and remit the sales tax to the State of Michigan''); State
of Ohio, Licenses & Permits, https://ohio.gov/jobs/resources/licenses-and-permits (last visited Apr. 2, 2024) (``Businesses are
required to register with the Ohio Secretary of State to legally
conduct business in the state--this is commonly called a business
license.'').
\236\ See 27 CFR 478.11 (definition of ``dealer'' includes those
engaged in the business on a part-time basis); In the Matter of
SEL.L. Antiques, Application No. 9-87-035-01-PA-00725 (Phoenix Field
Division, July 14, 2006) (denied applicant for license that
repetitively sold modern firearms from unlicensed storefront).
---------------------------------------------------------------------------
In response to commenters who said that some States may have
general business licenses that are required to engage in any business,
the presumption would apply only if the license allowed them to sell
firearms as part of their business operation. Of course, if they do not
resell firearms, then that business would not be presumed to have a
predominant intent to profit from firearms purchases and resales. To
the extent commenters asserted that there are licensed businesses that
may technically be licensed to sell firearms, but primarily buy and use
firearms, and do not devote time, attention, and labor to dealing in
firearms as a regular course of business, they can offer reliable
rebuttal evidence, as with any of the presumptions.
21. PEP Presumption--Purchases a Business Insurance Policy
Comments Received
A few commenters, including an FFL, stated that one cannot presume
that a person or company has intent to earn a profit and is engaged in
the business of dealing in firearms merely because they have a business
insurance policy that covers firearms. They noted that many non-
firearms businesses, whether it be a hunting outfitter or an armored
security company, have one or more firearms owned by the entity or
business. If the business has insurance for its property, which would
cover the firearms owned and used by the business, it is not clear why
this should result in a presumption that a completely unrelated
transaction is an indication of intent to predominantly to earn a
profit. The commenters said that these are not the types of entities
meant to be FFLs.
Department Response
The Department notes that most firearms businesses purchase
business insurance policies that cover their firearms inventory in the
event of theft or loss, which, unfortunately, is not uncommon. The
Department also agrees with commenters that a business insurance policy
may also be purchased by a variety of companies that purchase and use
firearms and are not necessarily primarily intending to profit from
[[Page 29051]]
selling or disposing of their business inventory. For example, a
firearms business inventory maintained by a security company whose
guards use the firearms daily, or a hunting outfitter that rents
firearms on its business premises, likely have firearms that have lost
their value over time due to constant use and handling. The company may
decide to sell these firearms simply to upgrade from old to new
firearms without intending to earn a profit. In addition to these
considerations, as discussed in detail earlier in this preamble (see
Section IV.C.5.a (Department Response) of this preamble, supra), ATF
examined records of cases and investigations it initiated between 2018
and 2023 for examples of fact patterns that align with the rebuttable
presumptions in the proposed rule. The agency did not find examples
other than the criminal case cited in the NPRM involving business
insurance. 88 FR 62006 n.101. For these reasons, the Department has
revised the final rule to remove this presumption. See Sec.
478.13(d)(2).
22. Concerns With Disposition of Business Inventory After Termination
of License
Comments Received
Commenters stated that while they thought it was notable that the
Department addressed the disposition of an FFL's business inventory
upon license revocation or termination, they did not think that ATF
struck the ``right balance'' between law enforcement concerns and
business owners so that a licensee can avoid financial ruin after
having its license terminated. One commenter said the Department
created a ``Catch-22'' situation regarding transfers because, in the
commenter's opinion, ``1. Former inventory not transferred to a
personal collection may never be transferred; 2. Former inventory that
was unlawfully transferred may never be transferred; and 3. Former
inventory that was transferred cannot be transferred for one year.''
(Emphasis omitted.) Other commenters stated that the additional
requirements that establish how to dispose of remaining inventory are
unwarranted burdens that make it more challenging to wind down
operations in an efficient manner. They stated that the process should
be more streamlined to ensure fairness and flexibility. At least one
commenter criticized the 30-day period in which a licensee is expected
to liquidate their inventory, stating that it would take a minimum of
90 or 120 days. Similarly, another commenter stated it was completely
unreasonable that an FFL who has voluntarily surrendered their license
or has had it revoked would have to wait a year before they could start
selling their inventory privately.
One commenter said the proposed rule was arbitrary and had
conflicting standards within the proposed text regarding disposition of
inventory. In this commenter's opinion, ``a person or company no longer
having an FFL (and persons acting on their behalf) may transfer their
remaining firearms inventory to another third-party current FFL for
liquidation under section 478.78, but may not do so under section
478.11. The result is an arbitrary and confusing conflict . . . .'' At
least one commenter thought the rule would make it impossible for an
FFL who has had their license revoked to keep their inventory while at
least one other commenter thought the impact of the rule would mean
they could never sell their inventory if a former licensee then needed
a license to liquidate the inventory. Another commenter believed this
portion of the rule should have more detail and be clearer because
without it there is an increased chance of non-compliance and confusion
among FFLs. At least one commenter objected to the 30-day time frame
the rule would add to Sec. Sec. 478.57 and 478.78, stating that no
such timeline is required by the GCA.
One commenter noted that, if a former FFL transferring their
business inventory to another FFL is not considered ``engaged in the
business,'' then there would be no reason for ATF to limit the time
period for when such transactions can take place. In other words, they
indicated that for such a transaction, the former FFL still seems to be
``engaged in the business''; otherwise, there would not be a time limit
on when they could act. If that is the case, the commenter stated, the
rule does not make clear the effect of a former licensee transferring
their firearms to another licensee and questioned whether an FFL could
face revocation for facilitating others ``engaging in the business''
without a license.
Finally, another commenter stated that the rule fails to adequately
address the potential for exploitation of inventory liquidation by
former licensees. ``While it is important to outline lawful ways for
former licensees to dispose of their inventory upon license revocation
or termination, the rule does not establish sufficient safeguards to
prevent the diversion of firearms into the illegal market,'' they
wrote. The commenter added that this oversight leaves room for abuse.
Department Response
A license may be terminated for a number of reasons, whether it is
a voluntary surrender of license or an involuntary termination due to
license revocation or denial upon renewal. The regulations in the past
have not clearly addressed lawful methods for disposing of business
inventory before or after license termination. In the case of a
licensee who does not dispose of its business inventory prior to
license termination, both the former licensee and law enforcement are
placed in a difficult situation. Because this inventory consists of
firearms repetitively purchased for resale with predominant intent to
profit, it was clearly purchased as part of a regular course of
business or trade. If the former licensee now sells the firearms after
termination of the license to dispose of inventory, the former licensee
could be engaging in the business of dealing in firearms without a
license and violating the law. Particularly in the case of former
licensees whose licenses were revoked or denied due to willful
violations, such persons would unjustly profit from their illegal
actions. Further, allowing such sales would mean that a significant
number of firearms would be sold without background checks or the
ability to trace them if later used in crimes. This is an outcome the
BSCA was intended to reduce by amending the definition of ``engaged in
the business'' to increase licensure of persons engaged in the business
with a predominant intent to earn a profit. See Section II.D of this
preamble.
The Department disagrees that licensees face financial ruin if
their license is terminated and they cannot sell their inventory. As an
initial matter, licensees who voluntarily terminate their firearms
license have the option of waiting to surrender their license until
after they have liquidated their inventory. The final rule allows
former licensees that did not have the opportunity to properly dispose
of their business inventory before license termination to do so after
termination by either selling their remaining ``former licensee
inventory'' to an active licensee within 30 days after license
termination, or transferring the former licensee inventory to a
responsible person who may lawfully possess those firearms. See
Sec. Sec. 478.11 (definition of ``former licensee inventory''),
478.57(b), 478.78(b). The new term ``former licensee inventory'' is
necessary to clarify that business inventory transferred to a
responsible person after license termination is not a ``personal
collection'' within the meaning of 18
[[Page 29052]]
U.S.C. 921(a)(21)(C), and accordingly, former licensees or responsible
persons who devote time, attention, and labor to selling ``former
licensee inventory'' as a regular course of trade or business to
predominantly earn a profit will be presumed to be engaged in the
business of dealing in firearms. See 18 U.S.C. 922(a)(1)(A), 923(a). If
a former licensee needs more time in which to sell their business
inventory to an active licensee, the Director may authorize an
additional period of time for good cause.
The Department acknowledges that some commenters were confused
about the relationship between the presumption based on liquidation of
business inventory in the definition of ``engaged in the business,''
now in Sec. 478.13(c)(4) of the final rule, and provisions about the
discontinuance of business and operations by licensees after notice in
Sec. Sec. 478.57 and 478.78. Those proposed provisions were meant to
be read together. Like the two discontinuance provisions at Sec. Sec.
478.57 and 478.78, the two liquidation-of-business inventory
presumptions distinguish between pre-termination and post-termination
disposal of business inventory.
If the former licensee disposes of the business inventory properly
before license termination, they will have several options for
disposing of the firearms, one of which is to transfer firearms from
the business inventory to their personal collection or otherwise as a
personal firearm so long as they meet two conditions, i.e., that they
retain the firearms for at least one year from the date or transfer and
they do not transfer the firearms to willfully evade the restrictions
placed on licensees. See 18 U.S.C. 923(c). The corresponding
presumption related to firearms transferred before license termination
aligns with these requirements. See Sec. 478.13(c)(5). If the former
licensee (or responsible person acting on behalf of the former
licensee) sells a firearm: (a) after license termination that was
transferred to the former licensee's personal collection or otherwise
as a personal firearm, but (b) before one year has passed from the date
of that transfer, or (c) the sale is other than as an occasional sale
to a licensee, that sale would fall under Sec. 478.13(c)(5) and the
person would be presumed to be dealing without a license. However, once
the year has passed from the transfer date, they may occasionally sell
firearms properly transferred to their personal collection or otherwise
as personal firearms to anyone without falling under this presumption,
unless the transfer was made to willfully evade the restrictions placed
on licensees.
If the former licensee did not dispose of business inventory before
license termination, it becomes ``former licensee inventory'' (see new
definition under Sec. 478.11, below), and the former licensee has two
options to dispose of it within 30 days after license termination:
liquidate to a licensee, or transfer to a responsible person of the
former licensee. Under revised Sec. Sec. 478.57(c) and 478.78(c), the
date, name, and address of this responsible person (which can include a
sole proprietor or an individual who is acting on behalf of a business
entity) must be recorded as the transferee of such firearms in the
licensee's disposition record prior to delivery of the records by the
end of the 30 days, in accordance with 18 U.S.C. 923(g)(4) and 27 CFR
478.127.\237\ If the recipient responsible person thereafter sells the
transferred former licensee inventory, other than as an occasional sale
to a licensee, they will fall under Sec. 478.13(c)(4) and be presumed
to be dealing without a license.
---------------------------------------------------------------------------
\237\ This is consistent with the requirement for licensees to
record the personal information of an individual authorized to
receive firearms on behalf of a business entity. See ATF Form 4473,
at 4 (Aug. 2023), https://www.atf.gov/firearms/docs/4473-part-1-firearms-transaction-record-over-counter-atf-form-53009/download
(``When the transferee/buyer of a firearm is a corporation, company,
association, partnership, or other such business entity, an officer
authorized to act on behalf of the business must complete section B
of the form with his/her personal information, sign section B, and
attach a written statement, executed under penalties of perjury,
stating: (A) the firearm is being acquired for the use of and will
be the property of that business entity; and (B) the name and
address of that business entity.'').
---------------------------------------------------------------------------
To make this relationship between the post-termination
discontinuance provision and the related presumption more clear, the
presumption, which is located in the final rule at Sec. 478.13(c)(4),
has been revised to state that it does not apply when the business
inventory is being liquidated to a licensee either within 30 days of
termination of license, or occasionally thereafter, in accordance with
Sec. 478.57 or Sec. 478.78, as the case may be. The presumption now
further states that it does not matter whether such firearms were
transferred to a responsible person after the license was terminated
under 27 CFR 478.57(b)(2) or 478.78(b)(2); the presumption would apply
if those transferred firearms are subsequently resold outside the 30-
day window other than as an occasional sale to a licensee. The
Department has changed the term ``personal inventory'' to ``former
licensee inventory'' to make it easier to distinguish between the
former licensee's personal collection firearms and other personal
firearms, which a former licensee may treat the same way as other non-
licensees, and the business inventory transferred to themselves that
must be treated differently from personal collection firearms and other
personal firearms. See Sec. Sec. 478.57(b)(2), 478.78(b)(2).
The Department disagrees that the limited 30-day period for
liquidation to an active licensee is inconsistent with the GCA. While
the Department recognizes that such sales may be conducted to
predominantly earn a profit, the recipient licensee will be recording
them in its business inventory and running NICS background checks when
those firearms are further distributed into commerce. The final rule
also makes clear that any such transfers of remaining inventory within
the 30-day period must appropriately be recorded as dispositions in the
licensee's records prior to delivering the records after discontinuing
business consistent with 27 CFR 478.127. See Sec. Sec. 478.57(c),
478.78(c). This will ensure that any liquidated/transferred firearms
may be traced if they are later used in a crime. The rule is therefore
necessary to prevent former licensees from selling off numerous
business inventory firearms at retail without abiding by these
important requirements of the GCA. It also provides a reasonable
``winding down'' period that is fully consistent with the
relinquishment of licensee records requirement under the GCA. See 18
U.S.C. 923(g)(4) (records this chapter requires to be kept shall
reflect when a firearms or ammunition business is discontinued, and, if
succeeded by a new licensee, shall be transferred to that successor;
where the discontinuance is absolute, the records shall be transferred
within 30 business days to the Attorney General).\238\ Licensees who
are terminating their license should begin the winding-down process
well before the license is terminated. Otherwise, they run the risk of
having unsold inventory they cannot easily sell without either engaging
in the unlicensed business of dealing in firearms after they terminate
their license, or being able to sell only on occasion to a licensee.
Selling before license termination also ensures that background checks
are run on purchasers, and dispositions are appropriately recorded.
---------------------------------------------------------------------------
\238\ This provision is also consistent with the 30-day winding
down period for licensees who incur firearms disabilities under the
GCA during the term of their current license. See 27 CFR
478.144(i)(1).
---------------------------------------------------------------------------
The Department disagrees with the comment that the rule fails to
address the potential for exploitation of inventory liquidation by
former licensees. The rule addresses the
[[Page 29053]]
potential for diversion in several ways. Consistent with 18 U.S.C.
923(c), it limits the ability of former licensees to liquidate business
inventory firearms by establishing two rebuttable presumptions that a
person is engaged in the business when those firearms are sold--Sec.
478.13(c)(4) and (5). With regard to firearms transferred by a licensee
to a personal collection prior to license termination, the presumption
still applies even if one year has passed from the transfer if the
transfer or any other acquisition was made for the purposes of
willfully evading the restrictions placed upon licensees. 18 U.S.C.
923(c). Moreover, as provided by amended Sec. Sec. 478.57 and 478.78,
after license termination, former licensees have limited sales options
that would avoid the presumption in Sec. 478.13(c)(4), such as sales
to an active licensee where the risk of diversion is limited.
23. Concerns With the Procedure To Transfer of Firearms Between FFLs
Comments Received
Some commenters remarked on the requirement that FFLs follow
verification and recordkeeping procedures in 27 CFR 478.94 and subpart
H of part 478 instead of using ATF Form 4473 for transfers between
licensees. At least one commenter thought this provision should be made
clearer to avoid interruptions in the transfer of firearms, while
another thought the proposed changes were unnecessarily complex and
increased the risk for administrative errors. This commenter stated
that ``[l]icensees should be allowed to use the existing streamlined
form, which is already widely used and understood by both licensees and
the ATF.'' At least one commenter stated that a phrase in the proposed
amendment to Sec. 478.124--``for the sole purpose of repair or
customizing''--should be deleted because it is not part of 18 U.S.C.
922(a)(2)(A). That statutory provision only provides, in relevant part,
that ``this paragraph [prohibiting transfer in interstate commerce to a
non-licensee] and subsection (b)(3) shall not be held to preclude [an
FFL] from returning a firearm or replacement firearm of the same kind
and type to a person from whom it was received.''
Department Response
The Department disagrees that the changes proposed to be made to 27
CFR 478.124(a) are unnecessarily complex and increase the chance for
administrative errors. To the contrary, licensees know that ATF Form
4473 documents the transfer of a firearm from a licensee to an
unlicensed person. It is not intended to be used by a licensee to
purchase personal firearms. 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. The well-established procedure for licensees
to purchase firearms is through the verification and recordkeeping
procedures in 27 CFR 478.94 and subpart H of 27 CFR part 478.
Regarding the comment that the phrase ``for the sole purpose of
repair or customizing'' should be stricken from Sec. 478.124(a), that
provision allowing a limited exception to the requirement to complete
an ATF Form 4473 has long been found in the regulations and this rule
does not change that proviso in any manner. Allowing licensees to sell
or otherwise dispose of firearms without completion of this form or
recording NICS checks on the form would undermine the purposes of the
GCA and BSCA. Crime gun traces would not be able to be completed, and
there would be no way to verify that the identity of firearms
purchasers had been checked, or that background checks had been
properly run. The Department therefore disagrees with the comment
seeking to remove this phrase.
D. Concerns With the Economic Analysis
1. Need for Rule
Comments Received
One commenter stated that the Department's need for this rulemaking
was contrived without the Department providing any facts or persuasive
arguments. The commenter specifically challenged the statement in the
preamble that ``ATF has observed a significant level of noncompliance
with the GCA's licensing requirements even prior to the BSCA,'' and
asked for the number of incidents of noncompliance and by what standard
that level of noncompliance was determined to be ``significant'' enough
to justify rulemaking. The commenter also stated that a rulemaking
should not be justified by a presidential executive order, ``which is
not now nor has it ever been a reason for rulemaking sufficient for APA
purposes.'' The same commenter also stated that the agency has not
identified any market failure demonstrating that, in the absence of the
rule, the free market will fail to reach the optimal number of gun
sales outside of current FFL dealers.
Department Response
The Department disagrees that the need for this regulation was
``contrived without any facts or persuasive arguments.'' The Department
has explained the public safety need for this rule and has extensively
laid out and discussed the facts and arguments supporting that need in
both the NPRM and in this final rule. For reference, those discussions
are included in the Background discussion in Section II.D of this
preamble, in the Benefits section of the Executive Order 12866 economic
analysis in Section VI.A.7 of this preamble, throughout Section III of
this preamble (which includes the Department's discussion of proposed
revisions from the NPRM), elsewhere in the Department's responses to
comments under Section IV of this preamble, and in other portions of
this preamble. This rulemaking implements certain statutory changes
enacted by Congress in the BSCA, which Congress passed in the interest
of public safety after at least one mass shooting in which the
perpetrator purchased a firearm from an unlicensed dealer. In addition,
this final rule implements the Department's response to Executive Order
14092, which was also issued to implement and enforce the BSCA's
statutory changes and public safety goals.
The public safety justifications referenced above include the
accounts and analysis of ATF agents and investigators with years of
experience enforcing the relevant provisions of the GCA, who reported
significant levels of firearms dealing that was not in compliance with
pre-BSCA statutory licensing requirements. More specific data or
statistics regarding such noncompliance, as requested by the commenter,
are not readily available and not needed in light of the Department's
experience and the other public safety justifications underlying this
rule.
Finally, the Department is not required to identify any market
failure demonstrating that, ``in the absence of the rule, the free
market will fail to reach the optimal number of gun sales outside of
current FFL dealers.'' For example, OMB Circular A-4 (2003)
specifically recognizes that ``[c]orrecting market failure'' is ``not
the only reason'' for regulation, and allows regulations based on other
social purposes.\239\ In
[[Page 29054]]
addition, Executive Order 12866, Regulatory Planning and Review, 58 FR
51735 (Sept. 30, 1993), permits agencies to promulgate rules that are
necessary to interpret the law or are necessary due to compelling need,
which includes when private markets are not protecting or improving
public health and safety. This rule is necessary on both grounds. As
explained throughout this preamble, there is a public safety need for
this rulemaking. This position on public safety is supported by the
facts and arguments laid out by the Department and affirmed by the
hundreds of thousands of public comments ATF received in support of
this rulemaking that specifically explained that the rule is needed for
public safety (in many cases emphasizing that the rule is the minimum
action needed to address public safety). See Sections IV.A.1-2, 4-7 of
this preamble.
---------------------------------------------------------------------------
\239\ Off. of Mgmt. & Budget, Exec. Off. of the President, OMB
Circular No. A-4, at 5 (2003) (``OMB Circular A-4''), https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf. Because the NPRM was published in September
2023, prior to the November publication of the 2023 version of OMB
Circular A-4, the Department based its Executive Order 12866
economic analysis in the NPRM on the 2003 guidance. Although the
November 2023 version of OMB Circular A-4 supersedes the version
from 2003, OMB allowed agencies to continue following the 2003
version in final rules published prior to January 1, 2025, if their
NPRM relied on the 2003 version and was published prior to February
29, 2024. See Off. of Mgmt. & Budget, Exec. Off. of the President,
OMB Circular No. A-4, at 93 (2023), https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf. Accordingly, the Department
is continuing to follow the 2003 version of OMB Circular A-4 in this
final rule.
---------------------------------------------------------------------------
2. Population Accuracy
Comments Received
Various commenters objected to the Department's calculation of the
population impacted by this rulemaking. Some of these commenters argued
that the Department's high population estimate (328,296, which was
derived from the Russell Sage Foundation (``RSF'') survey) should be
used as the primary cost estimate, including one commenter who opined
that the RSF-derived estimate was more accurate because, they stated,
the Department's subject matter expert (``SME'')-derived estimate uses
a single, private party firearm sales website as the primary source of
unlicensed firearms seller numbers. This same commenter added that the
RSF survey considered multiple mediums of firearm sales.
In addition, various commenters opined that the Department's
population estimates were not accurate or requested more ``accurate''
numbers. A couple of commenters provided critiques of the methodology
used to generate population estimates. These commenters opined that the
Department should use standards accepted by scientific, peer-reviewed
journals as the basis for estimating the relevant population.
Furthermore, they opined that the Department's population estimates
should have used statistical calculations such as ``[c]onfidence
intervals, [p]-[v]alues, and K-values.'' Primarily, these commenters
objected to the Department's SME estimate that Armslist may constitute
50 percent of the market share for online non-FFL sales, contending
that this estimate is not supported by data and that using an SME-
derived estimate is biased and unsupported. One commenter stated that
Gunbroker.com is the largest online marketplace where people perform
private firearms transactions and suggested that the impacted
population would be higher if the Department included individuals
conducting private sales on that website. Another commenter went
further, stating that ``the number put forth by ATF, an estimation of
24,540 to 328,926 unlicensed persons who could be considered `engaged
in the business' of dealing firearms, is at worst a shot in the dark,
and at best, an educated guess.'' This commenter noted that there are
``numerous other venues in which firearms are sold, including
GunBroker.com, as well as social media platforms such as Facebook,
where clever sellers can get around the Facebook Marketplace rules
against selling firearms.''
Finally, one commenter opined that this rule will affect all
persons who own firearms in the United States and even some portions of
the population that have never owned a firearm. None of these
commenters provided data recommendations or alternate sources of
relevant data except as noted above.
Department Response
The Department does not agree that the SME/online sample and the
SME-derived primary estimate it put forth in the NPRM are less viable
than the RSF survey-derived estimate it also included for comparison.
Each estimate is necessarily imperfect due to the paucity of data on
how many unlicensed persons currently sell firearms and how many such
persons would need to be licensed under this rule. The estimates from
each source the Department used have different limitations, which is
why the Department included them both as potential alternatives. The
SME-derived estimate is based on historical data and experience with
unlicensed sales activities, combined with sampling from an online
sales site and ATF's law enforcement and regulatory experience. The
Department thus considers its SME-derived estimate to be a more
reliable data source for this purpose than the RSF survey. The RSF
survey was not limited to capturing sales by unlicensed persons, which
is the population potentially impacted by this rule. Rather, the
authors sought to establish the total number of citizens who sold their
firearms over a given period, not the current number of unlicensed
sellers who are engaged in the business of firearms dealing or who are
making sales on publicly accessible marketplaces and platforms. As a
result, the population set derived from the RSF results is
significantly higher and includes people who would not be covered by
the rule. The Department thus considers the SME-derived estimate to be
more realistic.
It is because the RSF survey used a larger sample that the
Department provided the RSF population estimates in the NPRM analysis
as an alternative unlicensed seller population set (and continues to do
so in this final rule). However, in order to be able to meaningfully
compare results from the two starting sets of unlicensed seller
population estimates (SME-derived and RSF-derived), the Department
applied the same treatment regarding the rule's potential impact to
both numbers. This included applying the same SME estimates to both
starting populations to determine, for each group, the proportion of
unlicensed sellers affected by various provisions of the rule. For
example, the Department applied the same SME estimate of the proportion
of unlicensed sellers estimated to be engaged in the business without a
license under the rulemaking (approximately 25 percent) to each
starting population, as well as the same estimate of the proportion of
those sellers who are likely to be either unwilling or unable to become
licensed as an FFL as a result of the rule (10 percent). Because there
is no other source of data on the size of these groups of currently
unlicensed dealers likely to be impacted by this rule, the Department
used the best estimates from SMEs as the percentages for each, and then
applied those estimates to both starting population sets for consistent
treatment and comparable outcomes. In the NPRM, the Department
explained these estimates, solicited public comment on them, requested
alternative data sources and models, and welcomed more accurate data on
the number of unlicensed persons selling firearms. However, the
Department did not receive any specific information--including any
alternative data sources
[[Page 29055]]
or models--or more accurate numbers in response.
At this time, the Department does not consider any peer-reviewed
statistical sample to be possible, much less perfectly accurate.
Typically, peer-reviewed journal articles use research data they gather
themselves or a database, such as for the U.S. Census, from which to
extrapolate a number, such as a covered population. The Department
noted, and continues to note, that it is currently not possible for the
Department to base population estimates in this rule on a peer-reviewed
statistical sample because there is no database that could be used to
extrapolate a population as specific as unlicensed individuals who may
be selling firearms, let alone one that includes data on factors from
which to determine the population of such individuals who may be
engaged in the business as a dealer under the definitions included in
this rule. The very limited options for source data make it impossible
to arrive at a more precise number than is currently reflected in this
rule. The Department reiterates, however, that this rule will not
impact all individuals who own a firearm, nor will it require everyone
who sells a firearm to become a licensed dealer.
While the journal and news articles cited by the commenters may
estimate the population of individuals who own a firearm, these numbers
are still estimates and are not any more accurate than the Department's
estimates (as requested or suggested by these commenters), nor do they
pertain more specifically to the situation covered by this rule. Based
on the little information available, the Department used a related
literature review, and combined professional expertise and an online
site sample to provide two estimates on population. OMB Circular A-4
encourages agencies to use the ``best reasonably obtainable scientific,
technical, and economic information available,'' including peer-
reviewed literature ``where available.'' \240\ The Department did so
using the two estimates described above: one (the RSF survey) gleaned
from a peer-reviewed journal article about survey results that
correlated with the data set relevant to this rule more than any other
article the Department was able to find; and another gleaned from SME
knowledge and experience, and sampling from a website (Armslist) that
identifies which sellers are licensed and is recognized as being a
popular online site used by the potentially affected population to sell
firearms.
---------------------------------------------------------------------------
\240\ OMB Circular A-4, at 17, https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf.
---------------------------------------------------------------------------
As for the comments suggesting that ATF incorporate another online
site, GunBroker, into the analysis, the Department concurs that a
subset of non-FFL sellers on GunBroker may also be considered ``engaged
in the business'' despite already transferring firearms advertised
online through an FFL intermediary. However, the Department already
accounted for the existence of online platforms other than the one it
sampled (Armslist) by assigning a 50 percent share of the market to all
other platforms, including GunBroker. Nonetheless, in response to the
comments, ATF requested further SME estimates of the relative
proportions of Armslist and GunBroker sales as part of the total, as
well as social media. Website traffic data for GunBroker and Armslist
and additional and more specialized SME opinions were incorporated into
the model and informed the Department's assumptions. As a result, the
Department has revised its estimate of the portion of unlicensed
population making sales through Armslist from the initial 50 percent of
the online marketplace to 30 percent, adjusting the estimate of total
unlicensed sellers that use non-traditional mediums accordingly. These
changes are reflected in Section VI.A.2 of this preamble.
3. Sample Size and Confidence Interval
Comments Received
One commenter stated that the Department did not specify the
methodology used to determine and collect the sample size included in
the NPRM. In particular, they stated the Department did not specify
whether the sampling obtained on Armslist was collected ``randomly,
stratified random, [or] non-random.'' Furthermore, this commenter
stated that the Department did not include the results of the sampling
for public inspection and that the commenter was thus unable to verify
the Department's claim that the sample size has a 95 percent confidence
interval. Another commenter recognized that the Department used a
sample size generator to estimate a sample size but stated that the
confidence interval cannot be calculated without knowing the standard
deviation of a sample. One commenter questioned how the Department
derived its estimate of individuals ``engaged in the business'' from
the sample collected from Armslist when Armslist does not indicate
whether sellers meet the statutory definition of being ``engaged in the
business.'' This commenter stated that not providing the methodology
through which the Department made this calculation was a violation of
the APA and the Small Business Regulatory Enforcement Fairness Act
(``SBREFA'').
Department Response
The Department decided to take a random sample from among the
firearms listings on Armslist to use in its survey. A sample-size
calculator was then used to determine the statistically valid sample
size from those listings, as explained in more detail in both the NPRM
and this final rule under the methodology section (Section VI.A.2) of
this preamble. A standard deviation was not separately calculated
because the Department assumed a normal distribution, which is in
accordance with usual practice when there is no reason to anticipate
that the data may skew in one direction or another and the sample is
used to calculate a population rather than a regression or other
statistically driven analysis. Therefore, in accordance with standard
practice, to estimate the sample size, the Department assumed the
largest standard deviation (0.5 or 50 percent) to obtain the most
conservative (largest) sample size. While the sample is one unit of
measurement at a single point in time over a several-day period, the
Department verified its viability by taking another sample after the
comment period closed, to determine that the overall population
remained stable over time.
The Department acknowledges that there are inherent limitations to
the lower estimate. However, the Department's prior experience helped
inform its estimate as well. As explained in the NPRM's Benefits
section, the Department previously provided guidance in 2016 to
sellers, clarifying the circumstances in which they would need to
obtain a license as a dealer under the previous statutory definition,
which focused on similar factors to those included in this rule.
Thereafter, the Department encountered an increase of only 567 new FFL
applications. This and similar historical data support the SME
estimates arising from the combined information and Armslist sampling.
Furthermore, regardless of the sales or transaction volume of firearms,
the number of FFLs has been relatively stable over time.
The Department derived its estimate of unlicensed individuals by
extrapolating from Armslist listings. Armslist uses the categories of
``private party'' ``and ``premium vendors.'' When the Department
reviewed the entries, it found that the premium vendors were
[[Page 29056]]
all listed as FFLs. Therefore, the sample did not include entries
categorized as premium vendors. Although the ``private party'' sales
did not indicate whether they were FFLs or unlicensed sellers, other
information included in the listings indicated that ``private party''
sellers were likely to be home-based individuals rather than FFLs with
funds to advertise on the website. Nonetheless, the Department could
not be certain, so the sample from Armslist (and thus the estimated
population of unlicensed sellers) might be larger than the actual
number of unlicensed sellers. Because the population estimate was being
used to estimate impact and potential cost for purposes of this
rulemaking, the Department erred on the side of overinclusiveness (thus
generating a potentially larger overall population of unlicensed
sellers, higher cost estimates, and potentially more impacted persons)
rather than underinclusiveness (by instead trying to remove some of the
private party sellers that could potentially be FFLs).
Generally, the Department incorporated a model where the relative
size of the total online marketplace was derived from the estimated
size and characteristics of Armslist. From there, the Department made
estimates regarding the total unlicensed market both online and
offline, before filtering for intention and incentives. Again, as there
is no definitive source of accurate data from which to generate these
numbers and resulting estimates, the Department was forced to use
available data, public comments, and internal surveys of SMEs who have
specialized, often decade-long experience with the industry to meet its
standard of best available information.
4. Russell Sage Foundation Model Calculation
Comments Received
One commenter argued that the population derived from the Russell
Sage Foundation (``RSF'') survey data (the NPRM's high estimate) was
overcalculated, including transactions that the commenter did not
believe required a license, such as ``family, friends, gifts,
inheritance, trades, and other.'' This commenter further suggested that
the portion of the total unlicensed seller population considered to be
engaged in the business in both the RSF and SME-derived models should
be less than 10 percent, not the 25 percent estimated by the SMEs.
Furthermore, they stated the Department incorrectly used the overall
percentage of RSF survey dispositions over the course of five years
rather than ``annualizing'' that survey result over the course of five
years.
One commenter could not recalculate how the Department used the RSF
survey to calculate percentages. Another commenter estimated that the
affected population of individuals is 478,000 and that the methodology
used by the Department over-estimated the population by a minimum of 45
percent. Overall, this commenter estimated that this rule will have a
marginal increase of 150,000 new FFLs. The commenter, however, did not
point to or provide a data source for their numbers. One commenter
challenged the RSF data, claiming the model is based on a ``small
sample size of just 2,072 gun-owning respondents, providing
questionable representativeness.'' Moreover, by analyzing ``outdated
2015 survey data,'' the commenter suggested that the study fails to
account for increases in the rates of American gun ownership in recent
years, and that the Department therefore undercounted the number of
sellers this rule would affect. The commenter cited a 2020 Gallup study
\241\ that estimated that what the commenter described as a ``whopping
32 percent'' of adults own firearms, not 22 percent as estimated in the
2015 RSF survey data.
---------------------------------------------------------------------------
\241\ What Percentage of Americans Own Guns?, Gallup: The Short
Answer (Nov. 13, 2020) (summarizing Gallup's crime poll for
September 30 to October 15, 2020), https://news.gallup.com/poll/264932/percentage-americans-own-guns.aspx.
---------------------------------------------------------------------------
Department Response
The Department partially agrees with the commenter's suggestion
that firearms transfers listed in the RSF survey that involve ``family,
friends, gifts, inheritance, trades, and other'' should not be included
in the Department's estimate. The RSF survey did not include sufficient
information about private transactions between friends and families, as
gifts, inheritances, or other similar transfers, from which the
Department could assess whether any of those transferors might have
been engaged in the business as a dealer. However, the rule
specifically excludes these categories of transactions--e.g.,
transactions between family, as gifts, or due to inheriting firearms--
when they are not made repetitively with predominant intent to profit.
In the Department's experience, most such transactions have not
involved a dealer engaged in the business of dealing in firearms as
defined in this rule. Therefore, the Department did not include RSF
survey results involving private transactions between friends and
families in the NPRM. However, transactions such as trading or
bartering, or sales conducted through FFLs, such as wholesale and
retail dealers, are more likely to include transactions involving
qualifying ``engaged in the business'' dealers, so the Department
included them to calculate the RSF survey-generated population estimate
it used in the NPRM. The Department explained this in the NPRM and does
so again in this final rule under Section VI.A of this preamble.
Although a commenter suggested that ATF's SME-derived estimate that
25 percent of the population of unlicensed sellers would be engaged in
the business under this rule was too high, they did not provide a basis
for their recommended estimate of 10 percent. The commenter suggested
that ATF's estimate of the unlicensed seller population was too high,
but even if that were true, it would not affect what percentage of such
unlicensed sellers would be determined to be engaged in the business
under this rule. In addition, the commenter suggested that the estimate
of those engaged in the business under this rule should not include
unlicensed sellers who solicit background checks from FFLs, but the
Department disagrees with this, as discussed in detail in Section
IV.D.10 of this preamble. As a result, the Department continues to use
the SME-derived estimate of 25 percent for the population of currently
unlicensed sellers who would be deemed engaged in the business under
this rule.
The Department concurs with the commenter's understanding that, in
the RSF survey, the sales rate of personal firearms was 5 percent over
the course of five years rather than 5 percent over one year as
initially interpreted by the Department. Accordingly, the Department
recalculated its estimate, using a personal sales rate of 5 percent
over the course of five years, or 1 percent annually.
The RSF survey contained many percentages and descriptions of
different types of firearms transactions. As explained in response to
comments under Section IV.D.1-2 of this preamble, the RSF survey and
resulting journal article were not designed to capture or address
information specifically relevant to this rule. As a result, the data
the Department could glean from the RSF survey, while useful in some
respects, were not directly on point for purposes of making estimates
related to the area affected by this rule. In addition, the RSF survey
results are compiled in a way that does not provide accurate data on,
or align with, issues related to whether a seller or transaction might
be among the total potentially affected population base or might be
[[Page 29057]]
among the portion that could qualify as engaged in the business under
this rule. This is not a flaw in RSF's data but is a result of
different focuses between RSF's article and this rule.
Because this rule is focused on dispositions (or ``sales'') of
firearms, the Department used only survey results and percentages
outlined in the Dispositions portion of the RSF survey journal article
on page 51 and made its best effort to include categories that were
potentially likely to contain relevant kinds of transactions, while
excluding categories that were less likely to contain such
transactions. The Department therefore continues to use those NPRM
percentages as derived from the RSF survey to determine the high
population estimate in this final rule.
The Department acknowledges that the estimated populations are
estimates using the best available information and are not perfect.
However, the Department disagrees that there will now be 478,000
individuals who must be licensed. The commenter who made that assertion
did not provide a source or data to support this estimate. As explained
above, there is no definitive source of accurate data from which to
generate these numbers and resulting estimates. As a result, the
Department used available data combined with public comments and
internal surveys of SMEs with specialized, often decades-long
experience with the industry, to meet its standard of best available
information. Nonetheless, as discussed elsewhere in this preamble and
based on comments pointing out calculation errors from using the RSF
survey, the Department has reduced the overall high estimated
population of the estimated affected individuals. For more information,
please see the discussion under Section VI.A.2 (Population) of this
preamble.
Finally, the Department concurs that the percentage of individuals
owning a firearm in the United States may have changed since 2015 and,
as a result, now uses the 32 percent estimate from the more recent
Gallup study the commenter cited. Nonetheless, the Department disagrees
that the sample size of gun owners in the RSF survey is, as the
commenter suggested, ``too small,'' with ``just 2,072 gun-owning
respondents.'' The RSF study surveyed 3,949 persons; of that number,
2,072 respondents stated they owned firearms. The RSF sample size of
3,949 is larger than the sample size in the Gallup study of 1,049
survey respondents cited by the commenter. However, while both samples
are statistically viable sample sizes, the Department has elected to
use the commenter's suggestion of the more recent Gallup study.
5. Inability To Comply
Comments Received
One commenter suggested that the Department did not account for
individuals who wish to become an FFL but are not otherwise able to
obtain a license due to State or local zoning ordinances, or even
restrictions from a Homeowner's Association (``HOA''). This commenter
further suggested that the Department should calculate a loss of social
welfare due to the indirect reduction of firearm sales resulting from
this rule and indirect requirements stemming from local restrictions.
One commenter suggested that there may be individuals who, after
publication of this final rule, will choose to leave the market of
selling firearms altogether so as to avoid coming under scrutiny under
this new definition.
Department Response
The Department concurs that there may be individuals who are
restricted from engaging in commercial activity from their homes or
other spaces by State, county, and local laws or ordinances, or by
residential HOAs. Individuals who fall under this category may apply
for a zoning permit or variance through their local jurisdictions, or
may arrange to conduct sales from a rented business premises or other
space that permits commercial activity instead. But some may
nonetheless choose not to continue making supplemental income through
firearm sales activity from residential spaces. However, the Department
notes that these persons, if making commercial sales from such
locations, were most likely already prohibited from such sales before
this rule was issued, unless they had requested a permit, variance, or
other appropriate exception. Zoning ordinances and HOA restrictions on
commercial activity often include limitations on foot traffic, number
of employees, or the amount of interference with neighbors.\242\ Most
of these zoning restrictions are not predicated on whether a resident
is formally established as a business, whether they sell firearms
versus some other product (although there may also be additional
ordinances specifically addressing firearms), or whether they are
determined by Federal law to be engaged in the business as a firearms
dealer. But the Department has no source (and no commenter provided
any) from which to gather data on the number of people who might have
been permitted to sell firearms under their zoning or HOA requirements
before this rule and would now be unable to continue selling firearms
for this reason.
---------------------------------------------------------------------------
\242\ See Van Thompson, Zoning Laws for Home Businesses, Hous.
Chron.: Small Business, https://smallbusiness.chron.com/zoning-laws-home-businesses-61585.html (last visited Mar. 7, 2024); A.J.
Sidransky, Home-Based Businesses: Challenges for Today's Co-ops,
Condos and HOAs, New Eng. Condominium (Oct. 2016), https://newenglandcondo.com/article/home-based-businesses.
---------------------------------------------------------------------------
However, there may also be other subsets of individuals who are
affected by this rule and may choose to leave the firearm sales market
for personal reasons. For example, some people may not want to go
through the process of getting a license or some may not agree with it
on principle and would rather forego firearms sales than comply. The
Department acknowledges that there may be individuals who leave the
market for a variety of reasons, including zoning ordinances, licensing
requirements, or personal philosophy. Although the Department does not
have data from which to extrapolate an estimated percentage for each
such group, based on past experience with parallel requirements and SME
expertise, the Department has combined these groups into a single
estimate for individuals who may leave the firearm sales market for
personal reasons, which is now accounted for in the economic analyses
in Section VI.A of this preamble.
6. Costs of the Rule
a. Accuracy of Costs
Comments Received
Other commenters stated that it was unclear how accurate the costs
and time burdens were that ATF calculated for the rule asserted that
ATF underestimated costs, or alleged that ATF's estimates were
``random'' or had no ``data to support them.'' Another commenter asked
how many of the 30,806 Armslist listings were, for example, selling
inherited firearms, whether any of the listings were misclassified as
``private'' when they actually involved a licensed dealer, or whether
the 30,806 listings were representative of the typical number of
listings at any given time. This commenter also asked whether the
average of 2.51 listings per seller was skewed by a minority of extreme
outliers. One commenter suggested that the population characteristics
derived from Armslist could not be used to generalize the potentially
affected population that use non-traditional mediums (such as other
online platforms) outside Armslist.
[[Page 29058]]
One commenter stated that, based on their calculations, the rule
would ``cost private citizens about $338 to obtain a new license, and
$35 to $194 annually to maintain the license.'' Additionally, in the
commenter's opinion, this new rule would cost the government ``$116
million to process new licenses.'' Another commenter provided their own
cost estimate of the rule and estimated that the 10-year annualized
cost would be $18,813,987.17 or 14.7 times more expensive than ATF's
primary estimate. Another commenter noted that the Department rounded
cost estimates, including rounding wages from $16.23 to $16, which they
stated could result in a 6 percent difference in total amounts. This
commenter argued that costs considered in rulemakings should not be
rounded (or should be rounded to the penny) to avoid the rounding
errors that, they stated, were present in the Department's analysis.
A few commenters stated that the Department did not include
compliance costs such as alarms, cameras, gun safes, secure record
storage, and secure doors. One of these commenters further estimated
that such security items cost them $1,000, plus monthly monitoring
charges of $40. An additional and separate gun safe can range from
$1,000 to $3,000, they stated, and a security door would cost between
$800 and $1,000. Furthermore, this commenter stated that the Department
did not include liability insurance, much less labeling costs. Another
commenter suggested that the Department did not include business start-
up costs such as attorney drafting of articles of incorporation or
other legal advice. One commenter suggested that the rule would
increase litigation costs. Another commenter suggested that the
Department's estimate of the costs should include the costs of
obtaining a State dealer's license and local and State business
licenses, because, they said, people who now get licensed at the
Federal level to engage in the business of dealing firearms will also
have to be licensed as a business and as a dealer at the State level.
Department Response
The Department disagrees that ATF's estimated costs are ``random''
or are not supported by data. They are, however, estimates. Wherever
possible, the Department used publicly available information to
calculate costs and time burdens. Where relevant, the Department
included footnotes and explanations regarding the calculations. Where
applicable, the Department provided (and continues to provide) sources
and methodologies demonstrating its means of determining the overall
cost of the rule. Sources of data included, but were not limited to,
fees required by ATF to apply for a license, costs for having
photographs or fingerprints commercially taken (as posted by private
companies), and similar costs of obtaining a license. However, despite
best efforts, the Department acknowledges that not all licensing costs,
like time burdens, could be substantiated in the same manner by third-
party or publicly available data. In these cases, ATF made estimates
based on its experience, such as the time needed to obtain fingerprints
or passport photographs.
In the NPRM, the Department welcomed comments as to any assumptions
made, and in particular solicited input about any countervailing costs
or time estimates that commenters felt the Department could not or did
not consider. In this final rule, the Department considered the
suggestions it received in response and, where appropriate, updated the
overall costs of the rule, including by incorporating new data or
updating to a more appropriate source. For example, the final rule uses
wage inflation per the Bureau of Labor Statistics (``BLS'') rather than
BLS's Consumer Product Index to update household income, based on a
commenter's suggestion and further Department assessment.
The Department acknowledges that estimates that round to the penny
might differ from estimates that do not. However, the Department
disagrees that rounding to the penny provides the public a more
accurate total cost of the rule in this context because, as discussed
above, there is an inherent lack of precise numbers that arises from
estimating a total population or total cost without a comprehensive
database, registry, survey, or other source of accurate data. OMB
Circular A-4 allows agencies to make predictions and estimates during
the rulemaking process and provides guidance for accuracy in making
such estimates. It instructs agencies to make their estimates based on
the precision of the underlying analysis. For example, OMB Circular A-
4, section G (Precision of Estimates) suggests that an estimate of $220
million implies rounding to the nearest $10 million.\243\ In accordance
with this guidance and to avoid misrepresenting the Department's
estimates as a more precise cost value than they are (as rounding to
the penny would indicate), the Department continues to choose to round
estimates to the dollar.
---------------------------------------------------------------------------
\243\ See OMB Circular A-4, at 46, https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf.
---------------------------------------------------------------------------
In response to comments on the Armslist sampling, the agency
acknowledges that Armslist does not label vendors based on whether they
are engaged in the business of firearms dealing or not. Armslist uses
the categories of ``private party'' and ``premium vendors.'' When the
Department reviewed the entries, it found that the premium vendors were
all listed as FFLs. Therefore, the sample did not include entries
categorized as premium vendors. Although the ``private party'' sales
did not indicate whether they were by FFLs or unlicensed sellers, other
information included in the listings indicated that ``private party''
sellers were likely to be unlicensed individuals rather than FFLs with
funds to advertise on the website.
Nonetheless, the Department cannot be certain, so the sample size
from Armslist (and thus the estimated population of unlicensed sellers)
might be larger than the actual number of unlicensed sellers. However,
even if we assume all the private party sellers on Armslist are
unlicensed (which we cannot conclusively ascertain), not all unlicensed
sellers of firearms will qualify as being ``engaged in the business''
under this rule. Some portion of them will be persons selling without
the requisite intent to profit and only occasionally, selling inherited
firearms, selling to upgrade a personal collection, selling to exchange
for a curio or relic they prefer, selling to acquire a firearm for
hobbies like hunting, or other similar situations. Many persons fitting
into various of these categories will be unaffected by this rule to the
extent that they would potentially not meet the requirements to be
engaged in the business as a dealer, depending on the specifics of
their operation.
Because of the known existence of such sellers in potentially large
numbers, and to account for the uncertainty of the number of
individuals sampled who might simply be engaging in activities not
affected by this rulemaking, the Department estimated that, of all
private sellers of firearms, 25 percent might be deemed to be ``engaged
in the business'' and the other 75 percent will not be affected.
In response to the comment asking whether the average of 2.51
listings per seller was skewed by a minority of extreme outliers, the
Department used this number as an average per seller in order to
estimate the number of sellers in the sample set of listings from
Armslist. The number of firearms per seller was otherwise not relevant
to the Department's calculations. The sampled
[[Page 29059]]
sellers on Armslist in the private sales category varied in the number
of firearms they had listed for sale, skewed to mostly selling one
firearm or to a few selling multiple firearms. This partially informed
the Department's estimate that approximately 75 percent of the
population of currently unlicensed sellers would not be deemed engaged
in the business under this rule and accordingly would not need to
obtain a license.
With respect to the comment about whether Armslist could be used as
a proxy for other sellers on other online platforms, the Department is
unclear how sellers of firearms on Armslist might have significantly
different characteristics than those of firearms sellers on other
online platforms. Generally, there are two types of sellers on online
platforms, licensed (FFLs) and unlicensed persons. While there may be
differences in certain terms and conditions on given websites--for
example, GunBroker requires that firearm transactions be mediated
through a local FFL while Armslist does not--those aspects of online
sales are not relevant to determining the affected population or
calculating the costs of this rule. The terms and conditions that
online platforms offer are also not impacted by this rule and will
continue to be set at the discretion of the entities operating such
platforms. Sellers on online platforms such as Armslist may continue to
perform in-person transactions simply by making a phone call to perform
a NICS background check for a buyer and will not be required to use a
local FFL to complete a firearms transaction like sellers on GunBroker.
These characteristics that may differentiate between online platforms
do not affect the costs or the impacts to sellers due to the
requirements of this rule.
The Department disagrees that items such as alarms, cameras, gun
safes, or other security measures are costs under this rule. Although
it recommends FFLs consider purchasing such items for security purposes
and theft avoidance, the Department does not require--in this rule or
anywhere else--that they purchase such items. Therefore, the Department
is not including these costs in this rule. The Department also did not
include litigation costs because possible future lawsuits are
speculative.
The Department disagrees that the costs of the rule should include
costs for all persons who are dealing in firearms to also obtain State
dealer's licenses and State and local business licenses. Persons who
are purchasing and reselling firearms in a State have always been
required to follow State and local laws regarding licensing and
business operations. The fact that the statute is now further defining
the circumstances in which such individuals will be required to be
licensed at the Federal level does not change State licensing
requirements.\244\ This regulation does not change the GCA statutory
definition, as amended by the BSCA, and it does not require any State
to adopt any presumptions or other clarifying provisions under Federal
law into their State requirements. So, in general, State licensing
requirements or costs are not affected by this rule. However, ten
States and the District of Columbia tie their dealer licensing
requirements to the definition of dealer at 18 U.S.C. 921 or the dealer
licensing requirements at 18 U.S.C. 923 (though not to any ATF
regulations) or require that a person with a Federal firearms license
for dealing must also get a State dealer's license. As a result, in
those 11 jurisdictions, firearms sellers who must get a Federal
firearms license for dealing due to the changes in the BSCA and,
therefore, this rule, will likely also need to obtain State dealer
licenses for the same reason. The Department has added those costs in
the economic analysis under Section VI.A.3 of this preamble.
---------------------------------------------------------------------------
\244\ See 27 CFR 478.58 (Federal license confers no right or
privilege to conduct business or activity contrary to State or other
law, grants no immunity for violations of State or other law, and
State or other law grants no immunity under Federal law or
regulations.).
---------------------------------------------------------------------------
b. Derivation of Leisure Wage Rate
Comments Received
Some commenters had questions or concerns about the leisure wage
rate. One commenter asked why ATF referred to the Department of
Transportation (``DOT'') guidance as a method of determining a leisure
wage rate. A few commenters opined that the calculated leisure wage
rate was too low. One of these commenters estimated that a $16 leisure
wage would not result in a livable household income. Another commenter
suggested that an average occupational wage rate of $34 per hour was
more realistic since individuals would be considered engaged in the
business of dealing in firearms and not engaged in leisure time.
Another commenter stated that the Department underestimated the
leisure wage rate, which should have been adjusted from $16 to $19.48
to account for wage inflation between April 2020 and the present (which
this commenter calculated to September 2023). This commenter used the
BLS's Consumer Price Index (``CPI'') as a means of calculating wage
increases over time to $19.48.
Department Response
The Department assumes that currently unlicensed persons who may be
affected by this rule are not already engaged in a full-time occupation
of selling firearms for their income because, if they were, they would
already either be licensed in compliance with the GCA as it existed
before the BSCA or working for such a licensee. The Department
therefore also assumes these persons are not paying themselves a
specific wage from their monetary gain from selling their firearms as,
typically, a sideline. In other words, the changes enacted by this rule
are not likely to cause individuals to qualify as being engaged in the
business based on having a full-time or part-time job, including a job
working for an FFL, where they get paid salaries or hourly wages as
part of an occupation. Instead, the firearms sales activities that
would require unlicensed individuals to obtain a license as a result of
this rule likely constitute a supplemental source of income or a side
business. Such activities are not correlated to an actual wage because
they are typically done on the side and this rule does not require FFLs
to pay themselves an occupational wage. The affected dealers typically
have another job that generates an occupational wage, receive
retirement pay, or receive similar primary income. As a result, ATF
used a leisure wage to calculate the cost of their non-work time spent
on dealing, rather than an occupational wage.
As such, the BLS does not track or assign a specific wage in this
context, as there is no wage involved. Nonetheless, the Department
recognizes that the rule imposes an opportunity cost of time on persons
who will now need to apply for and maintain a license in order to
continue dealing in firearms. In the NPRM, the Department therefore
assigned a monetary value to that unpaid, hourly burden, as a
comparison in ``cost,'' even though these persons are not likely paying
themselves an hourly wage for such duties. As a result, the Department
opted to use a ``leisure'' wage rather than a retail wage and continues
to do so in this final rule. The Department used DOT's guidance on the
value of travel time to calculate a leisure wage rate in the NPRM.
During the final rulemaking process, however, the Department determined
that the methodology used by the Department of Health and Human
Services (``HHS'') to calculate the cost of time that persons use to
perform actions that are not part of an official occupation is a more
[[Page 29060]]
accurate measure of the relevant leisure wage rate than the DOT
methodology used in the NPRM. As a result, the Department has used
HHS's methodology to derive the leisure wage it used for this final
rule. Because HHS's methodology relies on BLS data that is updated on a
monthly basis, the Department does not need to use an inflation-
adjusted wage rate as suggested by the commenter.
Using this methodology, the Department raised the leisure wage rate
to $23 an hour, which is higher than the $19 suggested by the
commenter. For more discussion on how the new wage of $23 per hour was
derived, see Section VI.A.3 of this preamble.
c. Hourly Burden
Comments Received
One commenter suggested that the Department underestimated the
hourly burdens to complete a Form 7 application and to undergo a
licensing inspection. This commenter estimated that it would take more
than one hour to read, understand, and complete a Form 7. In addition,
they said, the estimated hourly burdens should include the time needed
to closely read and understand hundreds of pages of Federal laws and
regulations, which they estimated would take at least 22 hours (100,000
words at 75 words per minute). They also estimated that it would take
an additional 5.5 hours to read Form 7 and acknowledge it via signature
prior to the license being issued, and 4.5 hours to do a renewal Form.
Therefore, this commenter estimated that the per FFL cost should be
$1,165, to account for 27.5 hours of work, at an average hourly
occupational wage rate of $34 per hour, in addition to the $230 cost of
items such as the Form 7 application fee, fingerprints, and
photographs.
Department Response
The Department concurs with the commenter that the estimated time
for inspections was underestimated and has revised the amount of time
needed to perform an inspection. From additional research it conducted
based on the comment, ATF found that ATF Industry Operations
Investigators (``IOIs'') report an average of 15 hours for an initial
inspection and 34 hours for a compliance inspection, as opposed to the
three hours for each inspection estimated under the NPRM. These
averages account for all sizes of licensee operations, some of which
may take far less time to inspect and others of which may take far more
time, depending on various factors about the licensee's operations.
Accordingly, the Department has revised and updated the hourly burdens
for initial and compliance inspections in Section VI.A of this
preamble.
However, the Department disagrees with the commenter regarding the
hourly burden to complete a Form 7. First, the Form 7 application
itself is only four pages long and the questions for the person
establishing the license are on only pages 1 and 2. They also primarily
pertain to the individual's personal demographics and what type of
license the individual is requesting.\245\ For ease of access, pages 3
and 4 include the responsible person questionnaire that an applicant
can fill out about another person if the applicant is applying for an
FFL license to include more than one person. Form 7 also includes
instructions and definitions of terms, to make filling out the form
easier and faster. They are for reference, as needed, and do not
necessitate reading and studying in such a way that would require
significant additional time. In addition, the Department's hourly
burden calculation does not need to account for a person taking any
time to read regulations and laws. Most persons who need to fill out
Form 7 are unlikely to need to read regulations or laws in order to do
so. Moreover, the Department prepares guidance documents that summarize
the relevant regulations, and those guidance documents are freely
available online and do not necessitate any reading and studying that
would require significant additional time. In addition, if a person did
wish to read the regulation, the relevant regulatory text is about five
pages long at 12-point font and does not require significant additional
time to read. Nonetheless, the Department has added familiarization
costs to the costs outlined in Section VI.A.3 of this preamble.
---------------------------------------------------------------------------
\245\ Application for Federal Firearms License, ATF Form 7
(5300.12)/7CR (5310.16) (revised Oct. 2020), https://www.atf.gov/file/61506/download.
---------------------------------------------------------------------------
The Department also notes that Form 7 has undergone public review
and OMB review through the required Paperwork Reduction Act process,
including detailed explanations for the time burden the Form entails.
Those vetted and approved numbers form the basis for estimates included
in the NPRM and now in the final rule regarding this Form. Therefore,
hourly burdens to complete Form 7 and travel times to obtain items such
as forms, fingerprints, and photographs have not been modified because
Form 7 can be requested by mail or downloaded via the internet.
Furthermore, fingerprints and photographs are commercially available
throughout the United States for employment or passport purposes. The
Department has determined that travel times and mileage costs have been
appropriately calculated.
d. Office Hours/Business Operational Costs
Comments Received
One commenter suggested that the Department failed to include
business operational costs stemming from maintaining at least one hour
of operation or availability every week, as they believe Form 7
requires. This commenter estimated that, based on a wage rate of $34 an
hour, maintaining business operations for one hour a week for 52 weeks
would cost an individual 52 hours, or $1,768 in wages. They also
suggested that the cost of becoming a licensee and maintaining a
license to deal in firearms should include hourly burdens of 40 hours a
week for 50 weeks, allowing for two weeks of vacation.
Another commenter suggested that this rule did not include expenses
or time burden associated with selling a firearm. This commenter
further suggested that these expenses should be subtracted from any
``profit'' from a sale. A third commenter suggested that ATF should
include the time factor to run a business operation, and another
commenter suggested including insurance and retirement as costs to
comply with the rule.
Department Response
The Department disagrees with the commenter's analysis regarding
operational costs. Neither this rule, nor any existing Federal firearms
regulation, requires that a licensed dealer maintain full-time business
hours, much less hire staff or provide benefits. As discussed in more
detail under Section IV.D.6.b of this preamble, unlicensed sellers who
would be affected by this rule would not have been engaging in the
business as their full-time occupation; full-time firearms sellers were
clearly already covered by the GCA licensing requirements before the
BSCA and this rule and are thus not counted in the affected population.
Therefore, the unlicensed sellers who would be affected by this rule
would not have been earning a wage from such activities or paying
staff. This rule does not change that, nor does it require that such
sellers begin engaging in such activities as part of obtaining a
license to deal in firearms. As a result, the Department is not
requiring or anticipating that these individuals will,
[[Page 29061]]
as a result of this rule, begin paying themselves an occupational wage
with benefits. In addition, the Department acknowledges that Form 7
requires that an applicant list at least one business hour per week
during which they are available and may be contacted for information or
scheduling purposes in the event the newly licensed individual needs to
be inspected. But there is no requirement that the affected individual
engage in or maintain actual business operations or otherwise actively
sell firearms during this time (or during any other specified time or
frequency); that individual would be able to maintain the operational
hours and frequency that they had prior to being licensed. Therefore,
no additional operational opportunity costs were assessed in this final
rule.
The time burden associated with the sale of a firearm or to run a
business operation is not included because these actions are not
required by this rule and are otherwise considered to be ``sunk''
costs. The same is true for other operational costs, including
insurance and retirement benefits. Because the rule does not require
that a business operator incur any such costs, it is reasonable to
presume that, to the extent such costs are incurred, the business
operator was already incurring them before the rule, or will only incur
them thereafter on a voluntary basis. This rule only requires
individuals that are engaged in the business of dealing in firearms to
apply for and maintain a license to be a dealer in firearms. The only
costs this rule requires to be incurred are costs to become a licensed
dealer and costs to maintain that license. While the Department agrees
that an individual may have expenses and time burdens with respect to
the actual sale of a firearm or to operate a business, these actions
are not required by the Department, are voluntary, and are not
considered costs of this rule.
e. Costs to the Government
Comments Received
One commenter calculated the annual Government cost as derived from
the RSF survey--the ``high'' population estimate--and estimated that,
using the upper population estimate, the Government cost is about 14.7
times higher than the Department's estimated Government cost.
Department Response
The Department agrees that using the population estimates derived
from the RSF survey would result in a higher government cost estimate.
However, for reasons discussed in Section IV.D.2 of this preamble, the
Department included the RSF estimate for comparative purposes so people
could see the possible options but believes that the more accurate
estimate is the lower SME-based estimate. As mentioned above, the SME-
derived estimate is based on real historical data and experience with
relevant sales activities, combined with sampling from an online sales
site and ATF's law enforcement and regulatory experience. The
Department thus considers it to be a more reliable data source for this
purpose than the RSF survey and therefore uses the SME-derived estimate
as the primary estimate for this rulemaking.
7. Impact on Jobs and Economy
Comments Received
One commenter suggested that requiring additional firearms sellers
to become licensed will increase the prices of firearms sold in the
marketplace. This commenter further estimated that the total U.S.
firearms market was $32.1 billion as of 2022 and that this rule, based
on their own estimates, would cause a 0.099 percent increase in firearm
prices across the overall firearms market. The commenter used an
internal model to compare the cost of the rule to their estimated
increase in prices; from that, they estimated that the increased prices
they assessed would result in 0.89 percent fewer firearm sales, which
would in turn result in fewer jobs, including jobs represented by newly
licensing these sellers as FFLs. Based on their internal modeling, this
commenter estimated that this rule will indirectly result in a loss of
350 direct retail jobs. The commenter went on to estimate that,
including supplier jobs, the rule will indirectly result in over 550
fewer jobs and a total of $26.5 million in lost wages and benefits.
Finally, this commenter estimated that the American economy would be
$70 million smaller.
Department Response
The Department disagrees with the commenter's assessment of the
effect this rule will have on the price of firearms and the effect on
the U.S. firearms market and overall economy. The Department has
reviewed the literature provided by the commenter and determined that
the estimated impacts on the economy, retail jobs, wages, and
subsequent taxes detailed by the commenter's internal literature are
largely not connected to the market impacted by this rule. The
literature cited by this commenter primarily focused on existing
licensees, their retail jobs, and their firearms market. The literature
does not cover unregulated persons who sell firearms on the secondary
market. While there may be some effects due to an increase in the
number of licensed FFLs, the new licensees that would be generated by
this rule have already been selling, and would continue to sell,
firearms on the secondary market, and thus would not impact the primary
market. Based on the totality of public comments and the Department's
experience and analysis, the Department has no basis to believe that
persons obtaining new licenses under the clarifications in this rule
would enter the primary firearms market industries of manufacturing
firearms, becoming intermediaries, or engaging in retail sales of new
firearms. Instead, the majority of the unlicensed sellers who would
need to obtain a license pursuant to this rule already obtain firearms
through existing retail FFLs and subsequently resell them on the
secondary market. Some also acquire firearms through estate sales or
other secondary sources. Since this buying and further reselling
secondary market has been and will continue to operate, the Department
does not estimate a significant impact on the firearms industry as
suggested by this commenter.
8. Impact on Existing FFLs
Comments Received
Some commenters suggested that the rule would cause windfall gains
to current FFLs under the belief that the rule would require all
firearm transactions to be done through an existing FFL. Other
commenters claimed that the rule would make it harder to lawfully
transfer firearms due to the costs of obtaining and maintaining an FFL.
Several individuals claimed that the rule would cause more so-called
``mom-and-pop'' businesses to go out of business.
Department Response
The Department acknowledges that this rule will create more FFLs,
which will result in an increase in the amount of licensed competition.
However, competition from these new licensees does not equate to an
increase in sales competition, nor is the competition new, because
those same people who will be required to obtain licenses under the
rule are currently selling as unlicensed dealers. And they are
operating at an unfair advantage. As one set of commenters pointed out,
``[a]s recognized in the Proposed Rule, these requirements would come
at modest cost to most people falling under the
[[Page 29062]]
clarified definition. Furthermore, requiring regulatory compliance by
dealers operating on the margin of the current scheme would have the
equitable effect of subjecting them to the same requirements as current
FFLs engaged in substantially similar business activities.'' These
sellers would have already existed in the marketplace under the
baseline prior to this rule, but they have been operating and competing
with FFLs in a largely unregulated state--without being subject to the
laws and regulations under which FFLs are required to operate. Rather
than adding competition to existing FFLs, clarifying when sellers are
likely to be engaged in the business under this rule and would need to
become licensed would increase equity in the marketplace by extending
costs and obligations incumbent upon all existing FFLs to include
currently unlicensed sellers that are acting as dealers in firearms.
There may be additional positive market effects on FFLs as a result
of their serving as an intermediary for private party firearm
transactions at a greater rate, but the Department finds this effect
difficult to estimate based on the lack of existing data sources and
subject matter expertise. However, the Department disagrees that this
rule will cause more ``mom-and-pop'' businesses to go out of business.
The majority of existing licensees are considered to be small
businesses and will continue to operate as small businesses.
Furthermore, as other commenters have pointed out and as discussed in
Sections IV.D.10.c and IV.D.12 of this preamble, many States already
require background checks for all private party transactions and any
costs associated with such background checks are not due to this rule.
Finally, a newly licensed seller who might newly need to undertake
background checks may do so under FBI processes by making a simple
phone call for free. The Department included these qualitative effects
of the rule.
9. License Revocation Costs
Comments Received
One commenter questioned ATF's assumption that, upon revocation of
a license, the underlying market value of the revoked FFL's existing
inventory of firearms would be unchanged when sold or transferred to
another FFL's inventory. This commenter suggested that during a
comprehensive sale or transfer of an existing FFL's inventory to
another FFL, the selling FFL would need to liquidate their existing
inventory at a loss to the purchasing FFL. In other words, the
commenter suggested the selling FFL would experience an adverse price
when liquidating their existing inventory.
Another commenter suggested that the adverse price response
described above would be large. The same commenter also suggested that
those who choose to surrender their FFLs must still liquidate their
business-owned firearm assets within 30 days, with the same adverse
price response of those who have had their license revoked, rather than
engage in an ``orderly, lawful liquidation'' as ATF estimates.
Department Response
The Department estimated that the rule would likely have a
qualitative impact on FFLs that fail to comply with existing
regulations and requirements, mainly due to the rule's clarification of
what must occur with their existing inventory when their license is
terminated. FFLs that have had their licenses terminated before this
rule were already not permitted to engage in unlawful means of
disposing of their remaining inventory, but the rule makes the lawful
options clearer. However, ATF revokes or denies renewal of FFL licenses
very rarely, with a de minimis 0.093 percent of all active FFLs being
revoked annually as described below in Section VI.A.4 of this preamble.
Furthermore, the economic impact of transferring inventory to another
FFL is unclear, given the range in volume and value of firearm
inventories. Public comment was specifically sought on these topics,
but the Department did not receive any data. In addition, the disposal
requirements are not expected to have an adverse cost impact on FFLs
that choose to cancel or not renew their licenses. Because such FFLs do
so voluntarily, they know in advance that they will need to dispose of
their inventory and thus do not have the same disruption and urgency
that disposition due to a license revocation would potentially carry.
10. Benefits of the Rule
a. Costs Outweigh the Benefits
Comments Received
A couple of commenters opined that the costs of this rule outweigh
the benefits. Of those two commenters, one calculated a 188 percent
increase in Form 7 applications but stated there would be less than a
0.2 percent increase in background checks resulting from that increase
in FFLs. Further, this commenter suggested that the ``actual number of
firearm transactions at licensed dealers is likely a good bit higher''
because ``[m]ultiple guns can transfer based off of one background
check.''
One commenter asserted that ATF incorrectly included individuals
who sell firearms through existing licensees and, therefore, no benefit
should accrue from such individuals because these firearm transactions
are already subject to the background check process. The commenter
further stated that the Department failed to account for sellers that
currently undergo background checks for all private transactions, as
required by certain States. This commenter estimated that 50 percent of
the population lives in States that already require background checks
and thus implied that any benefits derived from the rule are not as
abundant as stated by the Department.
Department Response
The Department disagrees that the benefits of the rule are
outweighed by the costs, as outlined in the economic analysis in
Section VI.A.6 of this preamble. The value society places on the
qualitative social benefits of the rule cannot be quantitatively
represented in a way that would allow them to be compared to the
quantitative costs of licensing more people, so the comment's
comparison of the two is not accurate or appropriate. People know that
society has placed a high positive value on increasing the licensure of
sellers who engage in the business of dealing, in aid of public safety,
because Congress passed a law to change the definition for that
purpose. In addition, hundreds of thousands of commenters on this rule
have also expressed that they place a high positive value on increasing
licensure for public safety needs. But people cannot place a numerical
value on the qualitative benefits flowing from those statutory changes
and thus from this rule. However, there are quantitative benefits that
relate to the subject indirectly. The Department does not have
sufficient data from which to assess these indirect benefits and has
thus not included or relied on them as quantitative benefits resulting
from this rule. However, the Department is including some quantitative
illustrative considerations in response to this comment as they shed
some light on the indirect benefits. For example, there are studies
that have examined the economic costs of gun violence. Those studies
have demonstrated that the annual healthcare and medical costs of
firearms violence alone run into the billions.\246\ Therefore,
[[Page 29063]]
even a marginal decrease in firearms violence as a result of this rule
would constitute a large enough quantitative benefit from the rule to
offset the estimated costs of the rule.
---------------------------------------------------------------------------
\246\ See, e.g., Everytown for Gun Safety, The Economic Cost of
Gun Violence (July 19, 2022), https://everytownresearch.org/report/the-economic-cost-of-gun-violence/ (estimating $1.57 billion in
directly measurable medical costs to taxpayers due to firearms
violence, including immediate and long-term medical care, mental
health care, and ambulance and patient transport (not including
costs to families, survivors, and employers); Nathaniel J. Glasser
et al., Economics and Public Health: Two Perspectives on Firearm
Injury Prevention, 704 Annals Am. Acad. Pol. & Soc. Sci. 44 (``The
direct and associated medical care costs of firearm injury are high.
In 2019, medical costs associated with firearm fatalities totaled an
estimated $233million (CDC 2022). For nonfatal firearm injuries in
2019, the estimated 12-month attributable medical care cost was
$24,859 per patient (Peterson et al. 2019; Peterson, Xu, and
Florence 2021). While further research is needed to estimate long-
term-care costs, the annual direct medical cost of firearm injuries
has been conservatively estimated to exceed $2.8 billion (CDC
2022).''); Government Accountability Office, Firearm Injuries:
Health Care Service Needs and Costs (2021), https://www.gao.gov/assets/gao-21-515.pdf (finding that initial inpatient costs from
firearms violence in 2016 and 2017 were more than $1 billion, plus
another 20 percent for physician costs, and additional first-year
costs of $8,000 to 11,000 each for 16 percent of such patients, and
stating that there are additional costs thereafter).
---------------------------------------------------------------------------
The Department further disagrees that there is a marginal decrease
in returns with respect to the costs attributed to this rule. This rule
is primarily intended to implement the BSCA and to accordingly reduce
the means by which a prohibited person can obtain firearms, including
those subsequently used in a crime. The ratio between the number of
Form 7 applications versus the number of background checks versus how
many firearms a buyer can purchase under one background check is not
relevant in determining benefits. In other words, benefits stem from
having more firearms sellers be licensed, for multiple public safety
reasons (as discussed in this section and Section IV.D.10 of this
preamble)). These benefits are not solely the result of increasing
background checks, so the perceived increase in the number of
background checks does not offset the rule's benefits. In addition,
even comparing the number of background checks with and without the
rule would not be accurate because there are other factors involved.
For example, although some prohibited persons do attempt to purchase
firearms from FFLs, many currently buy from unlicensed dealers.
Imposing a requirement that those dealers now be licensed would likely
deter more prohibited persons from trying to purchase firearms, which
would decrease the number of background checks. The number of firearms
that are being purchased and resold per transaction is also not
relevant. Multiple transactions already occur pursuant to a single
background check and neither the BSCA nor this rule are directed at
reducing firearm transactions. The commenter's comparison of the number
of firearms that are purchased and resold per transaction therefore
also does not result in an offset of the rule's benefits.
An increase in background checks is not the only benefit accrued
from requiring that persons engaged in the business as dealers obtain a
license. Increasing the number of licensed dealers also results in an
increase in sellers who maintain firearms transaction records, submit
multiple sales reports, report theft and losses of firearms, and
respond to crime gun trace requests. These activities are directly
correlated with an increase in the number of prohibited persons who are
denied firearm purchases, law enforcement's ability to investigate and
retrieve lost or stolen firearms before they can be used in crimes or
trafficked, and law enforcement's ability to trace firearms that have
been used in crimes and use them to find the perpetrators, among other
benefits. This is particularly beneficial for States that have higher
rates of straw purchasing or are otherwise larger sources of firearms
trafficking, but it benefits society as a whole because each of these
actions help law enforcement reduce criminal activities and
opportunities. Furthermore, the Department believes that this rule will
increase background checks, primarily in States that have less
stringent background check requirements, which reduces the potential
sources of firearms trafficking.
The Department concurs with the statement that the economic
analysis model failed to account for sellers that currently undergo
background checks for all private transactions, as required by certain
States, but disagrees that the fact that some States currently require
background checks for private firearm transfers reduces the benefits
accrued from this rule. While the Department acknowledges that certain
States already require background checks, States that currently do not
require background checks pose a greater risk to public safety. These
States tend to have higher rates of straw purchasing or otherwise are
sources of firearms trafficking. Although State requirements that all
sales undergo background checks could be relevant in general terms,
they do not reduce the benefits accrued from this rule because
relatively few States have universal background check requirements,
because State background checks differ with respect to their
thoroughness and which databases are utilized, and because the benefits
of increasing licensees are not solely due to an increase in background
checks. Please see Section VI.A.7 of this preamble for more information
about States and firearms trafficking.
The Department further disagrees that the benefits derived from the
rule should be reduced to account for unlicensed persons who sell
firearms or obtain background checks through existing FFLs (either
voluntarily or due to State requirements).
As a result of the comments on this topic, the Department has added
a discussion of State background checks, tracing, and firearms
trafficking to the Benefits discussion in Section VI.A.6 of this
preamble to supplement the Department's position that the benefits of
this rule outweigh the costs.
b. Lack of Benefits From Licenses
Comments Received
One commenter argued that benefits attributed to this rule ``do not
flow from licenses''; rather, the rule's benefits are derived from the
act of undergoing background checks and maintaining records. This
commenter also stated that the Department failed to use denied
background checks and responsiveness to traces as a benefit to the
rule, suggesting, according to the commenter, that this rule does not
address public safety as stated by the Department.
Department Response
The Department disagrees that the act of obtaining and maintaining
a license does not directly contribute to the safety and welfare of the
public. Congress chose to make the dealer the ``principal agent of
federal enforcement'' in ``restricting [criminals'] access to
firearms.'' Huddleston v. United States, 415 U.S. 814, 824 (1974). As
the Supreme Court explained in a later case, Abramski, 573 U.S. at 172-
73:
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. Other provisions then
require the dealer to check and make use of certain identifying
information received from the buyer. Before completing any sale, the
dealer must ``verif[y] the identity of the transferee by examining a
valid identification document'' bearing a photograph. Sec.
922(t)(1)(C). In addition, the dealer must procure the buyer's
``name, age, and place of residence.'' Sec. 922(b)(5). And finally,
the dealer must (with limited exceptions not at issue here) submit
that information to the National Instant Background Check System
[[Page 29064]]
(NICS) to determine whether the potential purchaser is for any
reason disqualified from owning a firearm. See Sec. Sec.
922(t)(1)(A)-(B).
The benefits of this rule therefore stem from bringing potential
purchasers onto a licensed business premises to prevent prohibited
persons from obtaining firearms, channeling the commerce in firearms
through licensed dealers so that State and local law enforcement can
regulate firearms commerce in their borders, and allowing the tracing
of crime guns. Making it harder for prohibited persons to obtain
firearms makes it less likely that such persons will use a firearm in a
crime. To the extent that a firearm purchased through an FFL is used in
a crime, that firearm can then be traced by law enforcement.
Furthermore, should firearms be stolen from an FFL, there are
requirements that thefts be reported so that ATF and local law
enforcement can analyze theft patterns for future reduction purposes.
This approach helps to ensure that regulated firearms continue to be
used for legal purposes and not criminal activities.
c. Lack of Empirical Data
Comments Received
Some commenters asserted that the proposed rule would not improve
public safety, and cited statistics to support their view. One
commenter stated that the proposed rule would not hinder criminals or
save lives. In support of that view, the commenter stated that the
State of Washington's per capita gun murder rate increased by more than
26 percent following its 2014 passage of universal background checks
(``UBCs'') versus an unnamed neighboring State that the commenter
stated had no such increase and no UBC requirement. Another commentator
stated that numerous studies, including in peer-reviewed journals,
found that the correlation between gun control measures and reduction
in gun violence is negligible. See Michael Siegel et al., The
Relationship Between Gun Ownership and Firearm Homicide Rates in the
United States, 1981-2010, 103 Am. J. Pub. Health 2098 (2013) (cited by
the commenter as in the Journal of the American Medical Association
instead). Another commenter stated that the Bureau of Justice
Statistics shows that less than 1 percent of individuals obtain
firearms at gun shows. Finally, some commenters believed the proposed
rule itself is reactive or lacks supporting evidence, analysis, or
well-considered evidence to show that it will have a meaningful impact
on crime reduction or improve public safety.
Similar to the comments on the population estimates, one commenter
stated that the benefits lacked empirical data that would demonstrate
the effects on public safety. The commenter referenced a peer-reviewed
study that stated that each percentage point increase in gun ownership
increased the homicide rate by 0.9 percent. One commenter questioned
the lack of quantifiable benefits, including the lack of tracing data.
Many commenters who supported the proposed rule referenced research
showing that one in five firearms are sold without a background check
\247\ and further stated that allowing firearms to be purchased without
a background check is a significant threat to public safety. One
commenter reinforced this sentiment by citing an article from
Bloomberg.\248\ Some commenters stated that firearms that are purchased
without a background check cannot be later be traced. Many public
commenters agreed with the rule and suggested that requiring background
checks for sales of firearms increases public safety.
---------------------------------------------------------------------------
\247\ German Lopez, Study: 1 in 5 gun purchases reportedly go
through without a background check, Vox (Jan. 4, 2017), https://www.vox.com/policy-and-politics/2017/1/4/14153594/gun-background-check-study (discussing a study published in the Annals of Internal
Medicine).
\248\ Brentin Mock, Mapping How Guns Get Around Despite
Background Check Laws, Bloomberg (Oct. 22, 2015), https://www.bloomberg.com/news/articles/2015-10-22/40-percent-of-gun-owners-got-them-without-background-checks.
---------------------------------------------------------------------------
Department Response
The Department disagrees that there is no quantitative data to
support the analysis in the NPRM and the public safety justification
for the provisions of this rule; on the contrary, there is much data in
support. Such data include the National Firearms Commerce and
Trafficking Assessment (``NFCTA'') referenced by one commenter and
released by ATF as a two-volume report in May 2022 and January
2023.\249\ That report revealed, for example, that even though only 3
percent (41,810) of crime guns traced between 2017 and 2021 were
acquired from licensees at a gun show, the percentage of those traces
increased year-over-year by 19 percent. And as ATF noted in the report,
``[i]t is important to recognize that this figure does not represent
the total percentage of recovered crime guns that were sold at a gun
show during the study period as private citizens and unlicensed dealers
sell firearms at gun show venues. National data, however, are not
available on unregulated firearm transfers at gun shows.'' \250\
---------------------------------------------------------------------------
\249\ ATF, National Firearms Commerce and Trafficking
Assessment: Firearms in Commerce (May 5, 2022), https://www.atf.gov/firearms/docs/report/national-firearms-commerce-and-trafficking-assessment-firearms-commerce-volume/download; ATF, National Firearms
Commerce and Trafficking Assessment (NFCTA): Crime Gun Intelligence
and Analysis, Volume Two (Jan. 11, 2023), https://www.atf.gov/firearms/national-firearms-commerce-and-trafficking-assessment-nfcta-crime-guns-volume-two.
\250\ ATF, National Firearms Commerce and Trafficking Assessment
(NFCTA): Crime Gun Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the United States and Its
Territories 14 (Mar. 27, 2024), https://www.atf.gov/firearms/docs/report/nfcta-volume-ii-part-iii-crime-guns-recovered-and-traced-us/download.
---------------------------------------------------------------------------
Furthermore, the Department disagrees with the commenter's
interpretation of the article in the American Journal of Public Health.
The commenter argued that the article found that any correlation
between gun control measures and reduction in gun violence is
negligible. But the article states, ``[g]un ownership was a significant
predictor of firearm homicide rates (incidence rate ratio = 1.009; 95%
confidence interval = 1.004, 1.014). This model indicated that for each
percentage point increase in gun ownership, the firearm homicide rate
increased by 0.9%.'' Siegel, Ross, & King, supra, at 2098. The
Department interprets this article to suggest that for every percent
increase in gun ownership, there is almost a comparable (almost 1:1
ratio) increase in firearm homicide, which is not negligible. In other
words, for every percent increase in firearms ownership, there was an
almost equal percentage increase in firearm homicide.
However, the Department concurs with many of the statistics
provided by the commenters and has incorporated those statistics into
the economic analysis in Section VI.A of this preamble. Additionally,
the Department used information provided by the commenters to
illustrate the effectiveness of tracing data to help determine firearms
trafficking or straw purchasing patterns. Finally, the Department
compared commenters' statistics on States that require background
checks for all private firearms transactions to States that have the
highest and lowest time-to-crime statistics and determined that States
with the least restrictive background check requirements may be larger
sources of firearms trafficking and straw purchases. For more details,
see Section VI.A.7 of this preamble, which discusses the benefits of
the rule.
[[Page 29065]]
11. Federalism Impact
Comments Received
One commenter estimated that this rule will increase the number of
FFL dealers nationwide by 903 percent. Many States will have a
subsequent ``massive burden'' due to this increase, the commenter
concluded. This commenter also suggested that due to the burden this
rule will have on States, the Department should have included a
federalism summary impact statement as to how these new licensees will
affect State regulatory agencies. This commenter suggested that this
rule will have a significant impact on States because many States
license FFLs themselves, separately from the Federal licensing scheme.
In addition, another commenter stated that the proposed rule presented
a potential conflict in which an individual might be engaged in a
business operation requiring a license under Federal law but might not
be required to obtain a license under State law. The commenter added
that this would create potential problems for people who are legally
required to hold an FFL, but then are prohibited from operating or
possessing such a license under local ordinances. They also stated that
ATF is seeking to broadly regulate a field that states have already
addressed in different ways.
Another commenter challenged the NPRM's statement that ``[t]his
rulemaking would not result in the expenditure by State, local, and
Tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year, and it will not significantly or
uniquely affect small governments.'' They claimed that ATF failed to
consider the impact of its expansion of mandatory background checks for
firearm transactions on State, local, and Tribal government budgets, as
those political entities may have to expand their staffing and
infrastructure to respond to a greater number of declined background
checks.
Department Response
The Department disagrees that a federalism impact statement is
needed for this rulemaking under Executive Order 13132. Nothing in this
rule changes how State and local authorities conduct background checks
or otherwise regulate persons engaged in a firearms business. This
rule, which implements the GCA, and the changes made to it by the BSCA,
does not preempt State laws or impose a substantive compliance cost on
States. Under 18 U.S.C. 927, no provision of the GCA ``shall be
construed as indicating an intent on the part of Congress to occupy the
field in which such provision operates to the exclusion of the law of
any State on the same subject matter, unless there is a direct and
positive conflict between such provision and the law of the statute so
that the two cannot be reconciled or consistently stand together.''
State and local jurisdictions are therefore free to create their own
definitions of terms such as ``engaged in the business'' to be applied
for purposes of State or local law within their respective
jurisdictions. They are free to mandate their own requirements
concerning the licensing of firearms dealers.
State licensing schemes for retail dealers in firearms (or
merchandise that includes firearms) stand on their own and are not
dependent on Federal law. If persons have been engaged in a firearms
business requiring a State or local business license, then they should
have acquired the State or local business license regardless of the new
rule. In fact, as set forth below, the new rule looks to whether a
person ``[s]ecures or applies for a State or local business license to
purchase for resale or to sell merchandise that includes firearms'' to
help determine whether a person is engaged in the business requiring a
license under Federal law, 18 U.S.C. 922(a)(1) and 923(a). See 27 CFR
478.13(d)(2)(vii) (definition of ``predominantly earn a profit'')
(final rule).
The Department disagrees with the estimate that the rule will
significantly or uniquely affect small governments due to increased
background checks by local authorities since 22 States already require
background checks for private party sales. Of the States that do not
currently require background checks for all private sales, only three
States (Florida, Tennessee, and Utah) \251\ do not rely on Federal law
enforcement for their background checks and are ``point of contact''
States in which designated State agencies conduct NICS checks.
---------------------------------------------------------------------------
\251\ FBI, How We Can Help You: NICS Participation Map (Feb. 1,
2024), https://www.fbi.gov/how-we-can-help-you/more-fbi-services-and-information/nics/about-nics.
---------------------------------------------------------------------------
12. Regulatory Flexibility Act
Comments Received
Various commenters stated that this rule, by increasing operational
and administrative costs, will have a significant and disproportionate
impact on, or otherwise destroy, small businesses (some of which have
operated for decades) or even destroy a sector of business. One
commenter stated that the proposed rule inappropriately did not contain
an analysis under the Regulatory Flexibility Act (``RFA''). The same
commenter opined that small businesses may not have the resources or
infrastructure to comply with enhanced recordkeeping requirements.
Another commenter opined that with more people applying for a license,
existing FFLs that operate a brick-and-mortar store will go out of
business.
One commenter requested various data regarding the analysis
performed under the RFA. This commenter stated that ATF may not have
properly considered small entities and further asked a series of
questions:
1. ATF did not list a cost per business. . . . What is the average
additional cost a small business would incur as a result of this rule?
2. Why did the ATF not include [the additional cost] in the
published rule?
3. What alternatives [for small businesses] did ATF consider?
a. What would have been [the alternatives'] impact on small
entities?
b. Why were these alternatives deemed insufficient?
c. Why did the ATF not explain the alternatives in its original RFA
analysis?
4. ATF anticipates that nearly 25,000 new individuals or entities
must register as a firearm dealer. Of these entities, how many does the
ATF anticipate will stop selling firearms?
5. What impact will this rule have on existing FFL dealers, many of
whom are small businesses and how did ATF assess the costs of this rule
on large entities, compared to the 25,000 new small businesses it
created?
6. What impact does the ATF believe adding 25,000 new FFL dealers
will have on the price of firearms?
7. Why did ATF not explain this rule's impact on the 25,000
businesses?
Department Response
The Department disagrees that this rule will destroy a whole sector
of business (i.e., the firearms industry). FFL dealers are a subsector
of the firearms industry, and the impact on some dealers will not
destroy that subsector or the entire firearms industry. The firearms
industry is significantly large and robust, and the impact of this rule
affects only a small portion of one subsector of it. In any event, as
stated above in Section IV.D.8 of this preamble, the Department
believes that, rather than adding competition to existing FFLs,
requiring sellers engaged in the business under this rule to become
licensed adds equity to the marketplace by spreading costs and
obligations incumbent upon all existing FFLs to include currently
unlicensed sellers that are acting as
[[Page 29066]]
dealers in firearms. There may be additional positive market effects on
FFLs as a result of them serving as an intermediary for private party
firearm transactions at a greater rate, but the Department finds this
effect difficult to estimate based on the lack of existing data sources
and subject matter expertise. Finally, the Department does not believe
the congressionally mandated recordkeeping requirements constitute a
significant burden for a small business. Many existing FFLs are small
businesses and already comply with the recordkeeping requirements.
Regarding the first and second questions on small business impacts,
the Department did not distinguish between the cost of individuals
complying with this rule versus small businesses complying with this
rule. For the purposes of this rule and Final Regulatory Flexibility
Act analysis, the Department assumed individuals becoming licensed will
become small businesses and the cost per person (or small business) is
outlined in Section VI.A.3 of this preamble, discussing ``Costs for
Unlicensed Persons Becoming FFLs.'' The Department did not determine
that there were additional costs beyond those individuals (or newly
formed businesses) complying with this rule; therefore, no other costs
were attributed to small businesses that were not already outlined in
Section VI.A.3 of this preamble.
Regarding the third question on consideration of alternatives, the
Department considered alternatives in the NPRM (88 FR 62016 and 62017)
and discusses them in the final rule in Section VI.A.8 of this
preamble. No separate alternative was considered for small business
specifically because it was assumed that all individuals complying with
this rule will become small businesses. Other alternatives suggested
during the comment period and the Department's response to such
suggestions are discussed in Section IV.D.13 of this preamble. All
alternatives (including the proposed alternative) were considered
alternatives for small business compliance. All impacts considered in
the alternatives and all impacts under this rule were considered to be
alternatives and regulations for small business compliance.
Alternatives such as lower fees or guidance were deemed insufficient
for various reasons, including that fees are imposed by statutory
requirement and guidance alone would result in insufficient compliance.
These alternative discussions are outlined below in Section VI.A.8 of
this preamble (``Alternatives'') and above in the Department's response
to comments received on alternatives in Section IV.D.13 of this
preamble. The Department did not discuss alternatives targeted at small
businesses separately from alternatives aimed at all affected parties
because they were deemed to be one and the same.
Regarding the fourth question, on the estimated number of
individuals leaving the market: of the individual or new entities
affected by this rule, the Department estimates in this final analysis
that 10 percent of affected individuals (or potential entities) may opt
to stop selling firearms. Discussions on that are located in Sections
IV.D.2 (``Population Accuracy''), IV.D.4 (``Russell Sage Foundation
Model Calculation''), and VI.A.2 (``Population'') of this preamble.
Regarding the fifth question, as responded to in Section IV.D.8
(``Impact on Existing FFLs'') of this preamble, there may be some
impact on existing FFLs as there will now be more licensed dealers.
However, these newly licensed dealers have been selling firearms prior
to this rule, and most of them will continue to sell firearms
regardless of this rule, so the impact on existing FFLs will not be
significant since the overall number of firearm transactions are
unlikely to be significantly affected. For a more detailed discussion,
please see Section IV.D.8 of this preamble.
Regarding the sixth question, the Department does not anticipate a
significant impact on the prices of firearms. The firearm transactions
affected by this rule are primarily firearms sold on the secondary
market (i.e., previously purchased firearms for resale). Furthermore,
sales of these firearms have been and will continue to occur regardless
of the implementation of this rule; therefore, no impact on the prices
was considered. The Department further notes that this rule is not
affecting the manufacture or importation of firearms, so supply is
considered to be stable.
Regarding the seventh question, the Department considered the
impact of this rule on all unlicensed sellers (or newly created
businesses) and addressed cost under Section VI of this preamble. As
mentioned above, no distinction was made between small businesses
because it was assumed that all unlicensed sellers (or businesses)
affected by this rule are small.
13. Alternatives
Comments Received
One commenter opined that only retailers of firearms who own brick-
and-mortar stores should be required to have a license. Another
commenter suggested using a minimum threshold number and accounting for
inflation to define a dealer. One commenter suggested a stricter
background check for all firearms transactions. Another suggested that
ATF charge a $10 per application fee for a dealer's license, not $200.
Two commenters suggested a plethora of alternatives, including
education for individuals and local law enforcement. One of those two
commenters also suggested revisions to the NFA and GCA for items such
as increasing the fees of NFA weapons, and the other commenter
suggested that the Department track and report on citizens using
firearms to prevent a crime or protect themselves. One commenter
suggested that, rather than expanding the Federal licensing
requirements, ATF should institute a permitting system where purchasers
could use a firearms ID or demarcation on their license to provide
proof of ability to purchase firearms.
A commenter recommended leaving the regulations as they are but
suggested adding straw purchases because ``ATF has estimated that 50
percent of the illegal firearms market is conducted through straw
purchases.'' Another commenter agreed and said that rather than
implementing universal background checks, ATF should focus on cracking
down on illegal straw purchases.
Department Response
The Department disagrees that only retailers who operate out of
brick-and-mortar stores should be required to have licenses. Currently,
a portion of ATF's existing FFLs include high-volume sellers of
firearms who do not operate in brick-and-mortar store locations; they
should not be excluded from licensing requirements simply because they
sell from other locations or through other mediums. There are
unlicensed sellers who operate out of brick-and-mortar locations and
others who do not; the law requires any such sellers who qualify as
engaged in the business as a dealer to be licensed. The BSCA does not
distinguish on the basis of where the sales occur--and the rule
provides details to aid people in understanding that approach. The BSCA
was enacted with the intent to increase, not reduce, the population of
regulated dealers. Therefore, this alternative has not been included in
the analysis.
As explained in detail in the NPRM, the Department considered, but
did not propose, a specific number of firearms sales as a threshold for
being engaged in the business as a dealer. Although some commenters
suggested this alternative again, they did not provide any
[[Page 29067]]
information or reasons to overcome or refute the explanations and
evidence cited in the NPRM discussion on this topic. As those reasons
still hold true, the Department continues to decline to adopt this
alternative.
The Department understands that some commenters consider the
license fee of $200 and other costs related to obtaining a license too
costly for some people transacting in firearms as part of a hobby or to
enhance a personal collection. However, the Department does not set the
application fee or the costs of obtaining photographs or fingerprints.
The application fee is set by statute and the Department cannot change
it.\252\ The other costs (such as for photographs or fingerprints) are
set by private companies and similarly cannot be changed by the
Department. Nonetheless, the rule does not require occasional sellers
of firearms as part of a hobby or to enhance personal collections to
obtain a license, so the costs of complying with this rule would not
present a burden to them. Instead, the rule impacts persons who have
been engaging in certain repetitive firearms dealing that demonstrates
they are engaged in the business as a firearms dealer and should be
licensed. For these reasons, the Department declines to pursue
alternatives to licensing fees.
---------------------------------------------------------------------------
\252\ Application fees for firearms regulated under the GCA are
set by 18 U.S.C. 923(a). Rates for the NFA special (occupational)
tax (SOT) are established by 26 U.S.C. 5801(a).
---------------------------------------------------------------------------
The Department previously considered and rejected guidance as an
alternative means of implementing the statutory changes to the
definition of ``engaged in the business.'' The Department does not
believe guidance would be an effective method, based partly on prior
experience with guidance on this topic. ATF's 2016 guidance, for
example, outlined the general factors and examples of being engaged in
the business under the statutory definition of that term in effect at
the time,\253\ but compliance with that guidance document was voluntary
and it was not included in the Code of Federal Regulations for broader
distribution to the public. Therefore, the guidance resulted in only a
brief increase in the number of persons engaged in the business
becoming licensed dealers. Although this increase of 567 additional
dealers illustrated that people would try to comply with the licensing
requirement when they better understood the requirement, this approach
was not effective enough, by itself, to address the problem of
unlicensed dealing.
---------------------------------------------------------------------------
\253\ See ATF Publication 5310.2, Do I Need a License to Buy and
Sell Firearms? (2016), https://www.govinfo.gov/content/pkg/GOVPUB-J38-PURL-gpo125446/pdf/GOVPUB-J38-PURL-gpo125446.pdf.
---------------------------------------------------------------------------
A regulation is much more effective at achieving compliance with
the GCA, as amended by the BSCA, than guidance that is both voluntary
and distributed by ATF at gun shows or other venues when the agency is
present (or found online if people search for it). People recognize
that a regulation sets the requirements they must follow and affects
all those participating in the topic area; they also know where to look
for a regulation. Now that the BSCA has redefined ``engaged in the
business,'' there is even more of a need to ensure that unlicensed
people who meet the definition of that term understand that they are
violating the law if they do not obtain a license. And if the
Department does not update its regulations, they would not accurately
reflect the statutory text and would thus create confusion.
As a result, the Department did not select the alternative to
publish only guidance documents in lieu of this regulation because
guidance alone would be insufficient as a means to inform the public in
general, rather than solely the currently regulated community. Guidance
would not have the same reach and attention as a regulation, and it
would not be able to change existing regulatory provisions on the
subject of ``engaged in the business'' or impact intersecting
regulatory provisions. The Department considers it necessary to use a
regulatory means of putting sellers who continuously or repetitively
engage in firearm sales on notice regarding the impacts the statute
will have on them, and to clarify the parameters of the new definition.
For more detail, please refer to Section VI.A.8 of this preamble.
The Department did not consider the remaining alternatives proposed
by commenters, such as creating and including educational training,
cracking down on straw purchases, or adopting a buyer permitting
system, because they are outside the scope of this rulemaking and the
Department's NPRM. ATF will provide training and outreach as it
routinely does, but such activities are not included in a regulation.
V. Final Rule
Subsections in Section V
A. Definition of ``Dealer''
B. Definition of Engaged in the Business--``Purchase,'' ``Sale,''
and ``Something of Value''
C. Definition of ``Engaged in the Business as a Dealer in Firearms
Other Than a Gunsmith or Pawnbroker''
D. Definition of ``Engaged in the Business'' as Applied to
Auctioneers
E. Presumptions That a Person Is Engaged in the Business
F. Definition of ``Personal Collection (or Personal Collection of
Firearms, or Personal Firearms Collection)''
G. Definition of ``Responsible Person''
H. Definition of ``Predominantly Earn a Profit''
I. Disposition of Business Inventory After Termination of License
J. Transfer of Firearms Between FFLs and Form 4473
K. Effect on Prior ATF Rulings
L. Severability
A. Definition of ``Dealer''
The rule finalizes, with minor edits, the amendments proposed in
the NPRM to the definition of ``dealer'' in 27 CFR part 478, which
clarify that this term includes such activities wherever, or through
whatever medium, they are conducted. In this regard, the Department
replaced the words ``may be conducted'' with ``are conducted'' to help
ensure that the definition is not interpreted as authorizing a firearms
business to operate at unqualified gun shows, events, or other
locations, where such activities could not serve as a proper business
premises at which a license could be issued under the GCA.
B. Definition of Engaged in the Business--``Purchase,'' ``Sale,'' and
``Something of Value''
To conform with designation of paragraphs elsewhere in this rule,
the final rule redesignates paragraphs (a) through (f) of the ``engaged
in the business'' definition in Sec. 478.11 to paragraphs (1) through
(6) and continues the numerical designation in new paragraphs
thereafter. The rule finalizes the definitions of ``Purchase,''
``Sale,'' and ``Something of value'' with minor amendments. First, for
consistency across those who deal in firearms, the definitions were
moved in the definition of ``engaged in the business'' to a new
paragraph (7), to apply, not only to the definition of ``dealer in
firearms other than a gunsmith or pawnbroker,'' but generally to all
persons engaged in the business of dealing in firearms. This includes
importers and manufacturers who are authorized by 27 CFR 478.41(b) to
engage in business on the licensed premises as a dealer in the same
type of firearms authorized by the license to be imported or
manufactured. Second, in the definitions of ``purchase'' and ``sale,''
the words ``an agreed'' were inserted before ``exchange for something
of value'' to clarify that the transaction must be intentional. Such
transactions include indirect exchanges of something of value. Third,
the Department revised the term ``sale'' to change ``providing
[[Page 29068]]
to'' to ``disposing of'' to be more consistent with the statutory
language, and for further clarity, to define the term ``resale'' as
``selling a firearm, including a stolen firearm, after it was
previously sold by the original manufacturer or any other person.''
Finally, the phrase ``legal or illegal'' was added at the end of the
definition of ``something of value'' to make clear that the item or
service exchanged for a firearm could be one that is unlawful to
possess or transfer (e.g., a controlled substance).
C. Definition of ``Engaged in the Business as a Dealer in Firearms
Other Than a Gunsmith or Pawnbroker''
The rule finalizes the definition of ``engaged in the business'' of
wholesale or retail dealing in a new section of the regulation at Sec.
478.13, instead of keeping the definition under the overall definitions
section at Sec. 478.11, due to its length. In conjunction with this
change, the final rule has also moved the definition of ``predominantly
earn a profit'' to Sec. 478.13 because it is an element of the
definition of ``engaged in the business as a dealer.'' As a result of
consolidating the two definitions into one integrated section, the rule
also eliminated duplication of identical paragraphs on rebuttal
evidence, the non-exhaustive nature of the listed rebuttal evidence,
and applicability to criminal proceedings, which were previously
located in each definition. In conjunction with these changes, the
final rule has also included cross-references to these definitions in
Sec. 478.11.
D. Definition of Engaged in the Business as Applied to Auctioneers
The rule finalizes the definition of ``engaged in the business'' of
wholesale or retail dealing with minor edits to make clear that estate-
type auctioneers may assist in liquidating all firearms as a service on
commission without a license, not merely those in a personal collection
(as that term is defined in this rule). Additionally, the final rule
addresses the concerns of estate-type auctioneers by limiting the
caveat for possession of the firearms prior to the auction of the
firearms to those that are ``for sale on consignment.''
E. Presumptions That a Person Is Engaged in the Business
The rule finalizes the presumptions that a person is ``engaged in
the business'' of dealing in firearms at wholesale or retail by making
the following changes: (1) in the introductory paragraph (a),
separating the definition of ``engaged in the business'' in that
paragraph from a new paragraph (b), ``fact-specific inquiry,'' which
sets forth the factual analysis courts have historically applied to
determine whether a person falls within the definition in paragraph
(a); including in paragraph (b) the example to compare a single firearm
transaction, or offer to engage a transaction, in which a person
represents to others ``a willingness and ability'' to purchase more
firearms for resale, which may require a license, with ``a single
isolated firearm transaction without such evidence'' that would not
require a license; and adding the following at the end of the same
paragraph (b): ``At all times, the determination of whether a person is
engaged in the business of dealing in firearms is based on the totality
of the circumstances''; (2) revising the sentence at the beginning of
the presumptions to move the phrase ``[i]n civil or administrative
proceedings'' to the beginning of the sentence, and adding ``it is
shown that'' before ``the person--''; (3) adding the prefix ``re''
before ``sell'' and ``sale'' in the various presumptions to more
closely track the statutory definition of ``engaged in the business''
in 18 U.S.C. 921(a)(21)(C); (4) adding to the EIB presumption on
willingness and ability to purchase and sell more firearms the
parenthetical ``(i.e., to be a source of additional firearms for
resale)'' to clarify what it means to represent to potential buyers or
otherwise demonstrate a willingness and ability to purchase and resell
additional firearms; (5) removing the EIB presumption relating to gross
taxable income to address concerns raised by commenters about how it
would apply in certain low-income situations; (6) revising the EIB
presumption on certain types of repetitive transactions to add the word
``repetitively'' before ``resells or offers for resale'' to more
closely track the statutory language in 18 U.S.C. 921(a)(21)(C); (7)
revising the same EIB presumption to make it applicable to firearms
that cannot lawfully be purchased, received, or possessed under
Federal, State, local, and Tribal law, not merely under Federal law (as
the citations made it appear to commenters), and to explain that
firearms not identified as required under 26 U.S.C. 5842 are among the
types of firearms that cannot lawfully be possessed; (8) revising the
EIB presumption on repetitively selling firearms in a short period of
time to include a time limitation of one year with respect to
repetitive resales or offers for resale of firearms that are new or
like new, and those that are the same make and model; in addition,
revising and limiting the presumption for firearms that were the ``same
or similar kind'' to those firearms that are of the ``same make and
model, or variants thereof''; (9) revising the EIB presumption on
liquidation of business-inventory firearms by a former licensee that
were not transferred to a personal collection prior to license
termination, to reference the rules pertaining to liquidation of former
licensee inventory in Sec. Sec. 478.57 and 478.78 to ensure that they
are read consistently with each other; (10) revising the EIB
presumption on liquidation of firearms transferred to a personal
collection or otherwise as a personal firearm prior to license
termination, to reference the rules pertaining to the sale of such
firearms in 18 U.S.C. 923(c) and 27 CFR 478.125a(a) to ensure that they
are read consistently with each other; (11) adding explanatory headers
for the paragraphs in the regulatory text; (12) clarifying, in a new
paragraph, that the list of conduct not supporting a presumption that a
person is ``engaged in the business'' is also evidence that may be used
to rebut any presumption should an enforcement proceeding be initiated;
and (13) expanding the list of conduct that does not support a
presumption to not only include firearms resold or otherwise
transferred as bona fide gifts and those sold occasionally to obtain
more valuable, desirable, or useful firearms for the person's personal
collection, but also those sold ``[o]ccasionally to a licensee or to a
family member for lawful purposes''; ``[t]o liquidate (without
restocking) all or part of the person's personal collection''; ``[t]o
liquidate firearms that are inherited'' or ``[p]ursuant to a court
order; or ``[t]o assist in liquidating firearms as an auctioneer when
providing auction services on commission at an estate-type auction.''
F. Definition of ``Personal Collection (or Personal Collection of
Firearms, or Personal Firearms Collection)''
The rule finalizes the definition of ``Personal collection (or
personal collection of firearms or personal firearms collection)'' with
some additional clarifying edits. First, headers were added to each
main paragraph for clarity. Second, a parenthetical was added to
clarify that ``collecting curios or relics'' and ``collecting unique
firearms to exhibit at gun club events'' are examples of firearms
accumulated ``for study, comparison, exhibition,'' and that
``historical re-enactment'' and ``noncommercial firearms safety
instruction'' are examples of firearms accumulated ``for a hobby.''
Third, to clarify the nature of the firearms not
[[Page 29069]]
included in the definition of ``personal collection'' due to the fact
that they were purchased for the purpose of resale with the predominant
intent to earn a profit, the following was added to examples in the
parenthetical: ``primarily for a commercial purpose or financial gain,
as distinguished from personal firearms a person accumulates for study,
comparison, exhibition, or for a hobby, but which the person may also
intend to increase in value).'' Fourth, to clarify that firearms
accumulated primarily for self-protection are not included in the
definition of ``personal collection,'' but can be purchased for
personal use, the following was added: ``In addition, the term shall
not include firearms accumulated primarily for personal protection:
Provided, that nothing in this definition shall be construed as
precluding a person from lawfully acquiring a firearm for self-
protection or other lawful personal use.'' Finally, minor edits were
made to the definition of personal collection as it pertains to
licensees, to explain that licensees may transfer firearms to a
personal collection ``or otherwise as a personal firearm,'' and that
the separation requirement for personal firearms applies ``[w]hen
stored or displayed on the business premises,'' as distinguished from
those personal firearms that are being carried by the licensee for
self-protection.
G. Definition of ``Responsible Person''
The rule finalizes, with minor changes, the amendments proposed in
the NPRM to the definition of ``responsible person'' in 27 CFR part
478. The proposed definition was revised to remove the term ``business
practices,'' which term was considered confusing and overbroad to some
commenters. It was also changed to explain that sole proprietorships
and companies are included in the list of businesses that have
responsible persons and to indicate that both the individual sole
proprietor and their authorized employees are responsible persons. This
change ensures that individual sole proprietors (who are always
responsible for the management and policies of their firearms
businesses), companies, and their authorized employees will be
identified as responsible persons when submitting an Application for
License, Form 7/7CR, and undergo the required background check.
H. Definition of ``Predominantly Earn a Profit''
The rule moves the definition of ``predominantly earn a profit''
into a stand-alone section with the definition of ``engaged in the
business'' at Sec. 478.13. The rule also breaks down the definition of
``predominantly earn a profit'' into subparagraphs for ease of
reference and finalizes that definition with minor edits to the last
sentence in the first paragraph. Specifically, the final rule adds the
word ``intended'' before ``pecuniary gain,'' consistent with the
statutory language. The rule also finalizes the introductory paragraph
to the ``Presumptions'' subsection with minor edits. Specifically, the
sentence at the beginning of the paragraph was revised to move the
phrase ``[i]n civil or administrative proceedings'' to the beginning of
the sentence; the phrase ``from the sale or disposition'' of firearms
was changed to ``the repetitive purchase and resale'' of firearms, to
more closely track the statutory language; and ``it is shown that'' was
added before ``the person.'' Additionally, the following clarifying
edits were made to the set of presumptions in the definition of
``predominantly earn a profit'': (1) the term ``repetitively'' was
added into various presumptions to better focus them on persons who are
reselling firearms with the requisite intent under the statute; (2) in
the PEP presumption on marketing, the words ``or continuously'' were
inserted at the beginning to include advertising that is perpetual, and
the phrase ``on any website'' was revised to ``through the internet or
other digital means''; (3) the PEP presumption on purchasing or renting
space was revised by adding ``repetitively or continuously'' to the
beginning to better demonstrate the requisite intent, and by removing
the phrases ``or otherwise secures or sets aside'' and ``or store,''
and replacing those phrases with ``or otherwise exchanges (directly or
indirectly) something of value to secure,'' to focus the presumption on
firearms that are displayed for resale by a person who has paid for
that service, and to make clear that the item or service exchanged for
a firearm could be either a direct or an indirect form of payment
(e.g., payment of cash or an indirect membership or admission fee); (4)
the PEP presumption on maintaining records was revised to make clear
that ``repetitive'' firearms purchases for resale are being tracked;
(5) the PEP presumption on purchasing or otherwise securing merchant
services was limited to those through which a person intends to
repetitively accept payments for firearms transactions, to focus on the
seller as opposed to the purchaser or end user of firearms who makes or
offers to make payments for firearms transactions, and to add the word
``repetitive'' before ``firearms transactions'' to further support the
intent element of the statute; (6) the PEP presumption on securing
business security services was limited to those services intended ``to
protect firearms assets and firearms transactions,'' to focus on
businesses that conduct transactions involving firearms rather than
those that may purchase security services solely to protect or store
their business inventory for company use; and (7) the PEP presumption
on business insurance policies was removed to address commenter
concerns and because information indicated it was not commonly found in
ATF cases.
I. Disposition of Business Inventory After Termination of License
Several changes were made to the liquidation provisions on the
disposition of business inventory by a former licensee after
termination of license, 27 CFR 478.57 and 478.78. Specifically, with
respect to business inventory that remains after license termination,
the term ``personal inventory'' was replaced with the term ``former
licensee inventory'' to better explain the business nature of this
inventory. A definition of ``[f]ormer licensee inventory'' was added to
27 CFR 478.11, which includes a sentence to explain that ``[s]uch
firearms differ from a personal collection and other personal firearms
in that they were purchased repetitively before the license was
terminated as part of a licensee's business inventory with the
predominant intent to earn a profit.'' The liquidation provisions at 27
CFR 478.57(c) and 478.78(c) now expressly require that transfers of
firearms in a former licensee inventory must be appropriately recorded
as dispositions in accordance with 27 CFR 478.122(b) (importers),
478.123(b) (manufacturers), or 478.125(e) (dealers) prior to delivering
the records after discontinuing business consistent with 27 CFR
478.127. This will allow former licensee inventory to be traced if
later used in crime and is consistent with the existing delivery of
records requirement in 18 U.S.C. 923(g)(4) and 27 CFR 478.127. The
liquidation provisions also expressly state, in Sec. Sec. 478.57(b)(2)
and 478.78(b)(2), that transferring former licensee inventory to a
responsible person of the former licensee within 30 days after license
termination does not negate the fact that the firearms were
repetitively purchased, and were purchased with the predominant intent
to earn a profit. Finally, the liquidation provisions now expressly
recognize that a responsible person of a former
[[Page 29070]]
licensee may occasionally sell a firearm even after the 30-day
liquidation period to a licensee without being presumed to be engaged
in a firearms business. See Sec. Sec. 478.57(c), 478.78(c).
J. Transfer of Firearms Between FFLs and Form 4473
The rule finalizes the provision on the proper procedure for
licensee transfers of firearms to other licensees, 27 CFR 478.124(a),
with a minor edit to add the phrase ``or otherwise as a personal
firearm'' after ``personal collection.'' The rule makes it clear that
Form 4473 may not be used by sole proprietors when they transfer to
themselves other personal firearms that are not in a ``personal
collection'' as defined in this rule. Sec. 478.124(a).
K. Effect on Prior ATF Rulings
ATF publishes formal rulings and procedures to promote uniform
understanding and application of the laws and regulations it
administers, and to provide uniform methods for performing operations
in compliance with the requirements of the law and regulations. ATF
Rulings represent ATF's guidance as to the application of the law and
regulations to the entire state of facts involved, and apply
retroactively unless otherwise indicated. The following ruling is
hereby superseded: ATF Ruling 96-2, Engaging in the Business of Dealing
in Firearms (Auctioneers) (Sept. 1996), https://www.atf.gov/file/55456/download.
L. Severability
Based on the comments received in opposition to this rule, there is
a reasonable possibility that this rule will be subject to litigation
challenges. The Department has determined that this rule implements and
is fully consistent with governing law. However, in the event any
provision of this rule, an amendment or revision made by this rule, or
the application of such provision or amendment or revision to any
person or circumstance, is held to be invalid or unenforceable by its
terms, the remainder of this rule, the amendments or revisions made by
this rule, and the application of the provisions of such rule to any
person or circumstance shall not be affected and shall be construed so
as to give them the maximum effect permitted by law. The Supreme Court
has explained that where specific provisions of a rule are unlawful,
severance is preferred when doing so ``will not impair the function of
the [rule] as a whole, and there is no indication that the regulation
would not have been passed but for its inclusion.'' K Mart Corp. v.
Cartier, Inc., 486 U.S. 281, 294 (1988); see also Sw. Elec. Power Co.
v. EPA, 920 F.3d 999, 1033 (5th Cir. 2019) (vacating only challenged
portions of a rule). It is the intent of the Department that each and
every provision of this regulation be severable from each other
provision to the maximum extent allowed by law.
For example, if a court invalidates a particular subpart of Sec.
478.78 of the final rule concerning the liquidation or transfer
procedure of former licensees, that invalidation would have no effect
on other subparts of Sec. 478.78 or the rest of the final rule and its
provisions, which should remain in effect. The Department's intent that
sections and provisions of the final rule can function independently
similarly applies to the other portions of the rule.
VI. Statutory and Executive Order Review
Subsections in Section VI
A. Executive Orders 12866, 13563, and 14094
B. Executive Order 13132 (Federalism)
C. Executive Order 12988 (Civil Justice Reform)
D. Regulatory Flexibility Act
E. Small Business Regulatory Enforcement Fairness Act of 1996
F. Congressional Review Act
G. Unfunded Mandates Reform Act of 1995
H. Paperwork Reduction Act of 1995
A. Executive Orders 12866, 13563, and 14094
Executive Order 12866 (Regulatory Planning and Review) directs
agencies to assess the costs and benefits of available regulatory
alternatives and, if regulation is necessary, to select regulatory
approaches that maximize net benefits (including potential economic,
environmental, public health and safety effects, distributive impacts,
and equity). Executive Order 13563 (Improving Regulation and Regulatory
Review) emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. Executive Order 14094 (Modernizing Regulatory Review)
amends section 3(f) of Executive Order 12866.
OMB has determined that this proposed rule is a ``significant
regulatory action'' under Executive Order 12866, as amended by
Executive Order 14094, though it is not a significant action under
section 3(f)(1) of Executive Order 12866. Accordingly, the rule has
been reviewed by OMB. While portions of this rule merely incorporate
the BSCA's statutory definitions into ATF's regulations, this rule will
likely result in additional unlicensed persons becoming FFLs to the
extent that currently unlicensed persons intend to regularly purchase
and resell firearms to predominantly earn a profit.
1. Need for Federal Regulation
This final rule implements the BSCA by incorporating statutory
definitions into ATF's regulations and clarifying the criteria for
determining when a person is ``engaged in the business'' requiring a
license to deal in firearms. The rulemaking is necessary to implement a
new statutory provision that alters the definition of being engaged in
the business as a wholesale or retail firearms dealer; to clarify prior
regulatory provisions that relate to that topic; and to establish by
regulation practices and policies on that issue. In addition to
establishing specific, easy-to-follow standards regarding when buying
and selling firearms presumptively crosses the threshold into being
``engaged in the business,'' the rule also recognizes that individuals
are allowed by law to occasionally buy and sell firearms for the
enhancement of a personal collection or a legitimate hobby without the
need to obtain a license. As discussed in detail under this rule's
Background discussion (Section II.D of this preamble), in the Benefits
section of this economic analysis (Section VI.A.7 of this preamble),
throughout Section III discussing each revision as it was originally
proposed, in the Department's responses to comments under Section IV of
this preamble, and in other portions of this rule, the changes in this
rule--like the statutory provisions they implement--were designed to
address public safety needs. Specifically, this rulemaking implements
the statutory changes enacted by Congress in the BSCA, which Congress
passed in the interest of public safety after at least one mass
shooting in which the perpetrator purchased a firearm from an
unlicensed dealer. Congress was also concerned with prohibited persons
receiving firearms without background checks and significant increases
in straw purchasing and firearms trafficking, all of which increase
public risk of gun violence and occur more frequently when persons
dealing in firearms are unlicensed. Unlicensed dealers also hinder law
enforcement efforts to track and curb these prohibited and endangering
activities. Congress deemed those public safety needs compelling
enough, and the private market response insufficient, such that it was
necessary to pass a law to address them. This rule is necessary to
further address those same public safety needs and implement Congress's
statutory
[[Page 29071]]
response. Executive Order 12866 \254\ permits agencies to promulgate
rules that are necessary to interpret the law or are necessary due to
compelling need, which includes when private markets are not protecting
or improving public health and safety. This rule is necessary on both
grounds. The Department considered other alternatives to rulemaking and
determined they would be insufficient to meet its articulated public
safety needs or to fully interpret and implement the law.
---------------------------------------------------------------------------
\254\ See also OMB Circular A-4 at 5, https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf.
---------------------------------------------------------------------------
2. Population
This rule implements a statutory requirement that affects persons
who repetitively purchase and resell firearms, including by bartering,
and are required to be, but are not currently, licensed. As described
in the preamble of this final rule, these may be persons who purchase,
sell, or transfer firearms from places other than traditional brick-
and-mortar stores, such as at a gun show or event, flea market, auction
house, or gun range or club; at one's home; by mail order, or over the
internet (e.g., an online broker, online auction); through the use of
other electronic means (e.g., text messaging service or social media
raffle); or at any other domestic or international public or private
marketplace or premises. A person may be required to have a license to
deal in firearms regardless of where, or the medium through which, they
purchase or sell (or barter) firearms, including locations other than a
traditional brick-and-mortar store.
Furthermore, because those willfully engaged in the business of
dealing in firearms without a license are violating Federal law, these
individuals often take steps to avoid detection by law enforcement,
making it additionally difficult for the Department to precisely
estimate the population. Therefore, for purposes of this analysis, the
Department used information gleaned from Armslist, an online broker
website that facilitates the sales or bartering of firearms, as a means
of estimating a population of unlicensed persons selling firearms using
online resources.\255\ The Department focused its efforts on estimating
an affected population using Armslist since that website is considered
to be the largest source for unlicensed persons to sell firearms on the
internet.\256\
---------------------------------------------------------------------------
\255\ See www.armslist.com.
\256\ Colin Lecher & Sean Campbell, The Craigslist of Guns:
Inside Armslist, the online `gun show that never ends,' The Verge
(Jan. 16, 2020). https://www.theverge.com/2020/1/16/21067793/guns-online-armslist-marketplace-craigslist-sales-buy-crime-investigation
(``Over the years, [Armslist] has become a major destination for
firearm buyers and sellers.''); Tasneem Raja, Semi-Automatic Weapons
Without a Background Check Can Be Just A Click Away, National Public
Radio (June 17, 2016), https://www.npr.org/sections/alltechconsidered/2016/06/17/482483537/semi-automatic-weapons-without-a-background-check-can-be-just-a-click-away (``Armslist
isn't the only site of its kind, though it is considered to be the
biggest and most popular.'').
---------------------------------------------------------------------------
Out of a total listing of 30,806 entries in the ``private party''
category (unlicensed users) on Armslist, the Department viewed a random
sample \257\ of 379 listings, and found that a given seller on Armslist
had an average of three listings per seller.\258\ Based on
approximately 30,806 ``private party'' (unlicensed) sales listings on
Armslist, the Department estimates that there are approximately 12,270
unlicensed persons who sell on that website alone, selling an average
of approximately three firearms per user.\259\ The Department estimates
that Armslist may hold approximately 30 percent of the market share
among websites that unlicensed sellers may frequent. This means the
12,270 estimated unlicensed persons on Armslist would be about 30
percent of all such online sellers, and that the estimated number of
unlicensed sellers on all such websites would therefore be
approximately 40,900 nationwide. The estimate of Armslist's market
share is based on ATF Firearms Industry Programs Branch (``FIPB'')
expert opinion, news reports,\260\ and public web traffic lists.\261\
This estimate of the online market share proportion held by Armslist
has been revised downward from the initial estimate of 50 percent used
in the NPRM, based on public comment and additional data sources that
supported attributing a larger share of the unlicensed firearm market
to GunBroker than had originally been estimated. GunBroker had been
originally included with other smaller platforms within the remaining
(non-Armslist) 50 percent of the online market. However, due to the new
estimates of GunBroker's proportion of the online market share, the
Department has increased its estimated total market share for the non-
Armslist platforms (inclusive of GunBroker) to 70 percent of the online
marketplace.
---------------------------------------------------------------------------
\257\ In accordance with standard practice, to estimate the
sample size, the Department assumed the largest standard deviation
(0.5 or 50 percent) to obtain the most conservative (largest) sample
size.
\258\ Using an online sample size calculator, the Department
determined that a statistical sample for a universe of 30,806
listings would require a sample size of 379, using a 95 percent
confidence level and a confidence interval of five. A random sample
of 379 was gathered between March 1 and 2, 2023. Sample Size
Calculator, Calculator.net (last accessed April 8, 2024), https://www.calculator.net/sample-size-calculator.html.
\259\ 12,270 unlicensed individuals = 30,806 ``private party''
unlicensed listings on Armslist/2.51 average listings per user.
\260\ See footnote 256, supra.
\261\ Such lists are available at https://www.similarweb.com/website/armslist.com/#overview.
---------------------------------------------------------------------------
To better estimate both online and offline sales, the Department
assumes, based on best professional judgment of FIPB SMEs \262\ and
with limited available information, that the national online
marketplace estimate above might represent 40 percent of the total
national firearms market, which would also include in-person, local, or
other offline transactions like flea markets, State-wide exchanges, or
consignments to local FFLs within each of the 50 States. This estimate
of the online marketplace has been revised upwards from the 25 percent
estimate that was published in the NPRM to 40 percent in the final
rule, based on more in-depth SME questioning in the course of reviewing
each aspect of the models due to public comments about other parts of
the models. Given the lack of data on the question of online avenues
for unlicensed firearm sales, and the illicit nature of firearms
trafficking, the limited empirical inputs that exist must be
contextualized using qualitative and subjective assessments by industry
experts. ATF also solicited additional opinions from the public and
incorporated those that were found to be credible into the Department's
population model.
---------------------------------------------------------------------------
\262\ Experts were identified within ATF and interviewed in a
group setting to reach a consensus. These conclusions were validated
based on best professional estimates by additional ATF personnel,
who are familiar with the field and with the industry, until a
reasonable estimate was accepted by all of them. See OMB Circular A-
4 at 41.
---------------------------------------------------------------------------
While the above analysis would bring the total estimated market of
unlicensed sellers to approximately 102,250 persons,\263\ this figure
must be reduced by the estimated subset of this population of persons
who occasionally sell their firearms without needing to obtain a
license (e.g., as part of their hobby or enhancement of their personal
collection). The Department assumes this subset of unlicensed sellers
constitutes the majority of the unlicensed seller market, based on
estimates from FIPB SMEs. Based on limited available information, the
best assessment from FIPB SMEs is that, based on their long-time
experience with the firearms industry, at least 25 percent of the
estimated total number of
[[Page 29072]]
unlicensed sellers may be considered ``engaged in the business'' under
this rule and would subsequently need to become an FFL in order to
continue repetitively selling firearms. The actual number may be higher
or lower, and the Department does not have data to support a higher
number, but FIPB SMEs do expect their estimate to be conservative and
closer to the lower end of a possible range. Using the information
gleaned from Armslist and multiplying it according to these estimated
percentages, the Department estimates that 25,563 unlicensed persons
may be classified as engaged in the business of firearms dealing and
thus affected by this rule, an upward revision from the 24,540 estimate
included in the NPRM.
---------------------------------------------------------------------------
\263\ The Department's online estimate of 40,900 individuals is
equal to at least 40 percent of the national firearms market. Thus,
100 percent of that estimated firearms market would be 40,900/.4 =
102,250.
---------------------------------------------------------------------------
Finally, the Department has introduced an additional assumption
into its revised model: the proportion of unlicensed persons who would
be considered ``engaged in the business'' under this rule but who are
unwilling or unable to become FFLs and will instead choose to cease
their dealing in firearms altogether. These persons may choose this
option due to the new requirements, other disincentives such as costs
or discomfort with inspections, prohibitions or restrictions in their
respective State or local laws, ordinances or HOA rules, or other
reasons. Based on the public's responses to previously published
firearms rules and regulations, Department SMEs estimate that this
group constitutes approximately 10 percent of all currently unlicensed
sellers who would be required to obtain a license under this rule.
Removing this segment from the total population of 25,563 persons
affected by this rule results in an estimated 23,006 unlicensed persons
engaged in the business of firearms dealing who would, under the rule,
apply for licenses in order to continue repetitively selling firearms.
Because there is no definitive data on this topic, the actual
number of unlicensed sellers may be higher. Therefore, the Department
also calculated a second possible estimate using information published
by RSF based on a survey it conducted regarding a similar, but
differently sourced, estimated population of private sellers of
firearms.\264\ This survey showed that 22 percent of the U.S. adult
population owned at least one firearm (56.84 million adults).\265\ In
the NPRM, the Department used this 22 percent figure, applied to the
U.S. Census as a basis for the population, to calculate this second
population estimate of individuals owning firearms. However, one public
commenter suggested the Department use a more recent survey (Gallup
Survey, published in 2020), which showed that the number of U.S. adults
owning firearms was 32 percent.\266\ The Department concurred and has
updated the estimated population of individuals owning a firearm from
22 to 32 percent (82.7 million individuals) in this second model.\267\
However, the Department continues to use the RSF survey data for the
remaining estimates, such as number of transactions, because the
Department still considers that survey to provide the best available
data, and no other sources were provided by public commenters.
---------------------------------------------------------------------------
\264\ Azrael, D., Hepburn, L., Hemenway, D., & Miller, M.
(2017). The stock and flow of U.S. firearms: Results from the 2015
National Firearms Survey. The Russell Sage Foundation Journal of the
Social Sciences 3(5), 38-57 (pp. 39 and 51). https://www.jstor.org/stable/10.7758/rsf.2017.3.5.02.
\265\ Id. at 39.
\266\ What percentage of Americans own guns?, Gallup: The Short
Answer (Nov. 13, 2020), https://news.gallup.com/poll/264932/percentage-americans-own-guns.aspx.
\267\ 82,699,849.92 (rounded to 82,699,950, or 82.7 million)
owners of firearms = 258,343,281 individuals living in the United
States multiplied by 32 percent.
---------------------------------------------------------------------------
The RSF survey found that 5 percent of the total population
transferred firearms in some manner over the course of five years, or
an annualized total of 1 percent of owners (826,699 individuals).\268\
Of the owners that transferred a firearm, 71 percent did so by selling
(586,956 individuals). Of those that sold a firearm, 51 percent
(299,348 individuals) sold through various mediums (e.g., online,
pawnshop, gun shop) other than through or to a family member or friend
(which likely would not be affected by this rule).\269\ Of the owners
that transferred a firearm, an additional 10 percent (82,670) did so by
trading or bartering rather than selling. Thus, taking the 299,348 that
sold and the 82,670 that traded or bartered according to these survey
results, the total number of unlicensed persons that might transfer a
firearm through a manner that could be affected by this rule is
382,018. Of the 382,018 unlicensed persons selling, trading, or
bartering firearms under this RSF-derived estimate, the Department
continues to estimate (as it did in the SME-derived estimate described
above) that 25 percent (or 95,505 unlicensed individuals) may be
engaged in the business of firearms dealing with an intent to profit
and thus potentially affected by this rule. Consistent with the
modification introduced in the SME-derived model, the Department also
reduced this estimate by 10 percent to account for the proportion of
unlicensed persons unwilling or unable to become FFLs as required by
this rule. This brings the estimated population of unlicensed persons
``engaged in the business'' who would obtain licenses in order to
continue selling under this rule to 85,954 using this RSF/Gallup-
derived model.
---------------------------------------------------------------------------
\268\ 826,699 individuals transferring a firearm = 82,699,850
individuals owning a firearm multiplied by 1 percent.
\269\ The RSF survey did not distinguish individuals who sold to
family or friends on a recurring basis from those who made an
occasional sale; nor did it distinguish between those who did so
with intent to earn a profit from those who did not. As noted
earlier in the preamble, a person who makes only occasional firearms
transfers, such as gifts, to immediate family (without the intent to
earn a profit or circumvent requirements placed on licensees),
generally does not qualify as a dealer engaged in the business.
Although it is possible that some portion of the RSF set of family
and friend transferors might qualify as dealers if they engage in
actions such as recurring transfers, transfers to others in addition
to immediate family, or transfers with intent to profit, the survey
did not provide enough information for the Department to make that
determination. Therefore, the Department erred on the side of
caution by assuming, for the purpose of this analysis, that the
persons identified on the RSF survey as engaging in transfers to
family and friends would likely not be affected by this rule, since,
in general, such transfers are less likely to be recurring or for
profit.
---------------------------------------------------------------------------
In sum, based on the limited available sources of information, the
Department estimates that either 23,006 or 85,954 could represent the
number of currently unlicensed persons who might be engaged in the
business as defined in this rule, and who would obtain a license to
continue engaging in the business of dealing in firearms in compliance
with the rule. The SME-derived estimate of 23,006 is based on real
historical data and experience with relevant sales activities, combined
with sampling from an online sales site and ATF's law enforcement and
regulatory experience. Because of this, the Department considers the
SME-derived estimate to be a more reliable data source than the RSF/
Gallup estimate and uses it as the primary estimate. Nevertheless, for
purposes of this final analysis, the Department provides the estimated
costs under both population estimates.
The first cost that may apply to both estimated populations is the
cost of initial familiarization with the final rule. Given the
widespread attention, awareness, and publicly available discourse on
these and other firearm regulations, and the nature of the firearms
community, existing firearms owners would not need to spend a greater
amount of time researching regulations and becoming updated on these
topics than they already do as a regular course of activity. The
[[Page 29073]]
Department therefore assumed familiarization costs would be minimal for
existing firearm owners and particularly for the affected population of
sellers. Nevertheless, because of widespread attention and ATF
outreach, among other efforts, the Department has costed a
familiarization burden of approximately 12 minutes on all unlicensed
sellers to account for the time they might spend gleaning guidance or
accessing online blogs to determine whether the rule applies to them.
Based on HHS's methodology for leisure time, the Department attributes
a rounded value of $23 per hour for the estimated 12 minutes spent
gaining familiarization with the rule, which amounts to an individual
burden of $5 per unlicensed seller. Under the SME model, this cost
would fall on all 102,250 sellers, while under the RSF model it would
fall on all 382,018 sellers. Familiarization costs would amount to
$470,350 in the first year of implementation under the primary SME
model, and $1,757,283 in the first year under the alternative RSF
model.
3. Costs for Unlicensed Persons Becoming FFLs
As stated earlier, consistent with the statutory changes in the
BSCA, this rule implements a new statutory provision that requires
individuals to become licensed dealers if they devote 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. Costs to become an FFL include an initial
application on Form 7, along with fingerprints, photographs, and a
qualification inspection. This application requires fingerprints and
photographs from the person applying and, in the case of a corporation,
partnership, or association, from any other individual who is a
responsible person of that business entity.
For purposes of this analysis, the Department assumes that most, if
not all, unlicensed persons may be operating as sole proprietors
because this new requirement would likely affect persons who have other
sources of income and currently view dealing in firearms as a
supplemental source of income not subject to a licensing requirement.
Besides the initial cost of becoming an FFL, there are recurring costs
to maintaining a license. These costs include renewing the license on a
Federal Firearms License Renewal Application, ATF Form 8 (5310.11)
(``Form 8'') every three years, maintaining acquisition and disposition
(``A&D'') records, maintaining ATF Forms 4473, and undergoing periodic
compliance inspections.
This rule, which further implements the statutory changes in the
BSCA, would affect certain currently unlicensed persons who purchase
and resell firearms with the intent to predominantly earn a profit (as
defined), not those who are already licensed. Because affected
unlicensed persons will need a license to continue to purchase and
resell firearms, the Department estimates that the opportunity costs of
acquiring a license would be based on their free time or ``leisure
time.'' For this final rule, the Department has updated its estimate of
the cost for leisure time below, relying on a new HHS methodology for
calculating that cost, rather than the DOT methodology it used in the
NPRM.\270\ The Department considers the HHS methodology to more
accurately measure the value of ``leisure time,'' for the purposes of
this rule, than the DOT methodology used in the NPRM. Accordingly,
consistent with HHS's methodology, the Department used the BLS median
weekly income for full-time employees as the base for calculating the
pre-tax hourly wage. The Department then used the proportion between
Census publications on median household income and median household
income after taxes to estimate the percent of State and Federal taxes
(14 percent). This percent was deducted from the hourly pre-tax wage to
derive the post-tax hourly wage, which becomes the leisure wage under
the HHS methodology. Table 1 outlines the leisure wage.
---------------------------------------------------------------------------
\270\ U.S. Dep't of Health and Human Servs., Valuing Time in the
U.S. Department of Health and Human Services Regulatory Impact
Analyses: Conceptual Framework and Best Practices 40-41 (June 2017),
https://aspe.hhs.gov/sites/default/files/private/pdf/257746/VOT.pdf.
---------------------------------------------------------------------------
BILLING CODE 4410-FY-P
[[Page 29074]]
[GRAPHIC] [TIFF OMITTED] TR19AP24.070
Based in part on HHS's methodology for leisure time, the Department
attributes a rounded value of $23 per hour for time spent buying and
reselling (including bartering) firearms on a repetitive basis. The
same hourly cost applies to persons who will become licensed as a
firearms dealer who would not have become licensed without the
clarifications provided by this rule. This could include persons who
begin selling firearms after the final rule's effective date and
understand from the rule that they qualify as firearms dealers (as
defined by the statute and regulations), or persons who were previously
selling without a license and now realize they must acquire one to
continue selling because their firearms transactions qualify them as
dealers.
In addition to the cost of time, there are other costs associated
with applying to become an FFL. To become an FFL, persons need to apply
on a Form 7 and submit payment to ATF for fees associated with the Form
7 application. Furthermore, these unlicensed persons will need to
obtain documentation, including fingerprints and photographs, undergo a
background investigation, and submit all paperwork via mail. While not
a cost attributed towards their first-year application to become an
FFL, an FFL will need to reapply to renew their license every three
years on a Form 8 renewal application to ensure that that they can
continue to sell firearms thereafter. Table 2 outlines the costs to
become an FFL and the costs to maintain a license.
[[Page 29075]]
[GRAPHIC] [TIFF OMITTED] TR19AP24.071
BILLING CODE 4410-FY-C
For purposes of this rule, the Department assumes that unlicensed
persons applying for a license as a result of this rule are likely to
file for a Type 01 Dealer license.\271\ This license costs $200 and
requires the submission of a Form 7 application; every three years
thereafter, the licensee must pay $90 to renew the license using Form
8. Applicants also need to obtain and submit fingerprints in paper
format. The unlicensed person can obtain fingerprint cards for free
from the Department and travel to select law enforcement offices that
perform fingerprinting services (usually also for free). Or the
unlicensed person may pay a fee to various market entities that offer
fingerprinting services in paper format. The average cost found for
market services for fingerprinting on paper cards is $24 (rounded).
---------------------------------------------------------------------------
\271\ A Type 01 Dealer license is used to purchase and resell
firearms at wholesale or retail.
---------------------------------------------------------------------------
Because it is not clear whether an unlicensed person would choose
to obtain fingerprint cards from the Department and go to a local law
enforcement office that provides fingerprinting services or use
commercial services to obtain cards and fingerprinting services, an
average cost of $12 was used. In addition to paper fingerprint cards,
the unlicensed person must also submit a photograph appropriate for
obtaining a passport. The average cost for a passport photo is $17
(rounded). Once they complete the application and gather the
documentation, unlicensed persons must submit the Form 7 package by
mail. The Department rounds the first-class stamp rate of $0.63 to $1
for calculating the estimated mailing cost.
In addition to the direct costs associated with compiling
documentation for a Form 7 application, the Department estimates the
time burdens related to obtaining and maintaining a Federal firearms
license. Table 3 outlines the hourly burdens to apply, obtain, and
maintain a license.
[[Page 29076]]
[GRAPHIC] [TIFF OMITTED] TR19AP24.072
As stated above, hourly burdens include one hour to complete a Form
7 license application and the time spent to obtain the required
documentation. For purposes of this analysis, the Department assumes
that vendors that offer passport photograph services are more readily
available than places that provide fingerprinting services; therefore,
the Department estimates that it may take 30 minutes (0.5 hours) to
travel to a vendor and obtain a passport photograph, and up to one hour
to travel to and obtain fingerprinting services. Other time burdens may
include 0.05 hours (three minutes) to enter and maintain A&D records
for each firearm transaction (0.3 hours for 6 transactions); 0.5 hours
for maintaining a Form 4473 for each firearm sale (1.5 hours for 3
firearms); and 15 to 34 hours for an inspection (qualification or
compliance, respectively).\272\
---------------------------------------------------------------------------
\272\ These inspection times are an average of all currently
regulated FFLs, including small and large dealers and manufacturers,
and are not necessarily representative of the time involved in
inspecting small dealers.
---------------------------------------------------------------------------
The Department then multiplied each of these hourly burdens by the
$23 hourly leisure wage rate to account for the value of time spent
applying for and obtaining a license using a Form 7 (including any
other actions related to obtaining a license), then added the cost per
item to determine a cost per action taken. Table 4 outlines the first-
year costs to apply for an FFL.
[GRAPHIC] [TIFF OMITTED] TR19AP24.073
[[Page 29077]]
Overall, the Department estimates that it would cost an unlicensed
person $675 in terms of time spent and fees paid to apply under a Form
7 to become a Type 01 FFL. The Department considers the $675 to be an
unlicensed person's initial cost. In addition to their initial cost,
the newly created FFL would need to maintain a Form 4473 and A&D
records (two entries per firearm: one entry to purchase and one entry
to sell) for every firearms transaction, undergo periodic compliance
inspections, and renew their license every three years (ATF Form 8
application). Table 5 outlines the cost per recurring activity to
maintain an FFL.
[GRAPHIC] [TIFF OMITTED] TR19AP24.074
While renewing a license under a Form 8 application occurs every
three years, there are additional costs associated with Form 4473 and
A&D records that may occur more often. There are also costs from
compliance inspections that may occur periodically. The Department
notes that an FFL's actual number of firearms sales may range from zero
sales to more than three per year. Persons engaged in the business of
dealing in firearms can sell anywhere from a few firearms to hundreds
per year, depending on the size of their operation and other factors.
Information on these factors or on the number of sellers who might be
at each level is not available. However, the average number of listings
per seller on Armslist was three. So, for purposes of this economic
analysis only, the Department uses three firearms (six A&D entries) per
year to illustrate the potential costs that a person may incur as a
result of this rule. Although a person might not resell a given firearm
in the same year they purchase it, for the purposes of these estimates
the Department includes both ends of the firearm transaction because
the person could buy and sell the same firearm, or buy one and sell a
different one in a given year.
As for compliance inspections, based on information gathered from
ATF's Office of Field Operations, the frequency of such inspections
varies depending on the size of the area of operations and the number
of FFLs per area of operations. Overall, the Department estimates that
it inspects approximately 8 percent of all existing FFLs in any given
year. In the chart above, ATF has indicated the cost of an inspection,
which would normally not occur more than once in a given year per FFL.
ATF performs compliance inspections annually, so while every single FFL
does not necessarily undergo a compliance inspection every year, this
analysis includes an annual cost for inspections to account for a
subset of the total number of affected FFLs that may be inspected in
any given year (8 percent). The Department estimates that it would cost
$782 for the time an individual will spend on a compliance inspection
in a given subsequent year. Therefore, this individual would incur
annually recurring costs that could range from a low of $42 a year to
complete Forms 4473 and maintain A&D records, to a high of $926 to
include that $42, Form 8 renewal costs ($102), and compliance
inspection time ($782).\273\
---------------------------------------------------------------------------
\273\ The Department notes that the high $926 estimate may be
higher than actual costs because it assumes that an FFL would
simultaneously renew their license (which occurs every three years)
in the same year that they perform a compliance inspection, which
typically occurs only periodically.
---------------------------------------------------------------------------
In addition to the cost burdens of becoming licensed at the Federal
level, persons who are currently engaged in the business as a dealer
without a license under the Federal definition may reside in a State
that either defines a dealer at the State level by linking it to the
Federal statutory definition, or that requires any Federal dealer
licensee to also become licensed as a dealer with the State. While this
rule does not impose costs on States and does not directly impact
whether persons must be licensed under State requirements, in the case
where States have tied their dealer licensing requirements to Federal
statutory licensing requirements, this rule indirectly causes new
Federal licensees in those States to also incur State dealer licensing
costs because they are incurred due to BSCA's amendments to the GCA.
The Department accounts for such costs for that segment of the affected
population in this final rule.
The Department found that State-level licensing linked to or
contingent on Federal firearms licensing was required by State and
local laws in ten states and the District of Columbia (DC).\274\ Five
of
[[Page 29078]]
those States and DC required licensing for dealing in any type of
firearms, and the other five States required licensing only for dealing
in handguns. For the purposes of this analysis, the Department grouped
all such States together as imposing additional licensing costs, so
that all 11 jurisdictions were included in the cost analysis where data
was available. The respective populations of each of these
jurisdictions as a percentage of the total U.S. population were
aggregated to a total of 29.08 percent. This total was applied to the
populations estimated to be EIB under both the primary SME model and
the alternative RSF model to estimate how many sellers affected by this
rule at the Federal level would incur the additional State licensure
costs as well. The respective State populations were also used as
weights to their respective licensure costs, which ranged from 50 cents
to $300 a year, in order to determine a weighted average cost per
seller, which was $73.37 per year, rounded to $73.00 for calculations.
The Department estimated a processing time of one hour of leisure time,
since the application forms ranged from one to five pages, while
maintaining the same dollar postage cost as for FFLs. Both photograph
and fingerprint costs were assumed to be accounted for when securing
both for FFL applications, as they are frequently secured in pairs.
These costs are outlined in Table 6.
---------------------------------------------------------------------------
\274\ Giffords Law Center surveyed all 50 States and the
District of Columbia to determine which States have laws regulating
firearms dealers. They determined that 26 States and DC have such
laws. Of those with laws regulating dealers, Giffords Law Center
found that 16 States and DC require persons dealing in firearms to
obtain a State dealers license. See Giffords Law Center to Prevent
Gun Violence, Gun Dealers, https://giffords.org/lawcenter/gun-laws/policy-areas/gun-sales/gun-dealers/ (last accessed Mar. 30, 2024).
The Department researched requirements it could access online for
those 16 States and DC and determined that 10 of those 16 States,
and DC, either link their definition of a dealer at the State level
to the Federal definition of dealer or require a person selling
firearms with a Federal firearms license for dealers to also obtain
a State dealers license. The Department used the information on
those 10 States and DC to calculate the costs in this section.
\275\ Several States had 3- or 6-year renewal windows/validity
periods rather than annual licensing costs. Using a 10-year horizon
underestimates the cost burden in those cases, particularly for the
States that had a 6-year validity window. The Department therefore
calculated the total for 12 years for each State before annualizing
them to find the weighted average.
[GRAPHIC] [TIFF OMITTED] TR19AP24.075
The $73.37 average State costs, rounded to $73, were combined with
the hour burden and postage cost, resulting in a total per-seller cost
of $97. This total per-seller cost was applied to 29.08 percent of the
EIB population, resulting in an estimated 6,689 sellers under the SME-
derived model and 24,992 sellers under the RSF-derived model. This adds
a total of $648,862 and $2,424,237 in annual costs for State dealer
licenses, respectively.
4. Costs for FFLs After Termination of License
This rule is also designed to enhance compliance by former FFLs who
no longer hold their licenses due to license revocation, denial of
license renewal, license expiration, or surrender of license but
nonetheless engage in the business of dealing in firearms. Under
existing standards, such persons sometimes transfer their inventory to
their personal collections instead of selling or otherwise disposing of
the firearms to a licensed importer, licensed manufacturer, or licensed
dealer for sale, auction, or pawn redemption. This rule clarifies what
dispositions of former licensee inventory former FFLs may make after
their license is terminated. The former licensee may transfer their
business inventory within 30 days, or occasionally thereafter, to
another licensee if they meet the requirements set out in the new
provisions under 27 CFR 478.57 or 478.78. Another possibility is that
the licensee may transfer their business inventory within 30 days to
themselves in a personal capacity--called a ``former licensee
inventory'' in the final rule. After that time, the firearms may be
sold
[[Page 29079]]
only occasionally to a licensee or the former dealer risks being
presumed to be ``engaged in the business'' of dealing without a
license. In that case, former FFLs who sell such firearms would
potentially be in violation of the statutory prohibitions (18 U.S.C.
922(a)(1)(A) and 923(a), (c)) on unlicensed dealers.
The various means by which a license can be terminated--revocation
of a license, denial of license renewal, license expiration, or
surrender of license--present two categories of affected populations.
Group 1, comprising individuals who have their license revoked or are
denied license renewals, could be described as former FFLs who have
failed to comply with existing regulations and requirements to a degree
that resulted in the revocation or denial of their licenses. This rule
is likely to have a qualitative impact on this group because a
revocation or denial may not provide ample opportunity for an orderly
and planned liquidation or transfer of inventory before losing the
license, which may therefore be disruptive. Based on data from the
FFLC, such FFL license revocations and non-renewals are rare, with an
annual average of 76 licenses revoked or denied renewal over the past
five years (with a range between 14 and 180),\276\ or a de minimis
percentage of 0.093 percent of all active FFLs.\277\ Furthermore, the
economic impact of transferring inventory to another FFL instead of the
former FFL holder retaining the inventory is unclear, as the underlying
market value of the inventory is unchanged by this rule's requirements.
Additional factors surrounding the potential cost of no longer being
able to transfer one's business inventory after the first 30 days post-
license termination are also unknown and presumed to be similarly de
minimis. Therefore, the Department believes there are no quantitative
impacts associated with this population. Although ATF requested public
comments on the potential impacts on former FFLs with revoked licenses,
ATF did not receive any data from which to assess such potential costs.
---------------------------------------------------------------------------
\276\ Data on FFL revocations and denials of renewal has been
updated from the NPRM to cover 2018 through 2023.
\277\ The Department did not reduce the estimated number of
persons affected by this EIB rule to account for this reduction of
FFLs that may have their license revoked, denied, expired, or
surrendered because historically, the number of FFLs has been stable
over time. This means that the increase and decrease of FFLs have
been relatively equal to each other. Because the Department is not
calculating an increase of population over time, the Department did
not calculate a decrease of population over time. Additionally, for
the existing number of FFLs, the number of revoked/denied renewals
annually is 0.093 percent of all active FFLs. Therefore, applying
this percentage to the estimated EIB population above (23,006) will
affect a very small number (21) of the estimated EIB FFL population.
For both of these reasons, the Department believes that any change
in cost would be de minimis and would overestimate a decrease in
population where the population has been held as constant in this
analysis.
---------------------------------------------------------------------------
Group 2, comprising individuals who surrender their license or let
it expire, captures those who no longer have a license for
discretionary or lawful reasons. This group also comprises former FFLs
that choose to close or to sell their business to another party. They
are similarly excluded from expected impacts attributable to this rule:
because the closure is planned, it is likely that the FFL will include
reasonable considerations for orderly, lawful liquidation or inventory
transfer as part of closing or selling their enterprise. Such
considerations are also likely to occur ahead of, rather than
subsequent to, the expiration or surrender of their license. As a
result, the Department assumes that the options that exist under
current standards--transferring business inventory to the licensee's
personal collection or selling business inventory to another FFL--would
similarly be freely available to Group 2 FFLs under this rule. As a
result, we are excluding both groups from the affected population.
5. Government Costs
In addition to the private costs to unlicensed persons, ATF will
incur additional work due to the increase in Form 7 and Form 8
applications for unlicensed persons who become FFLs, which would be
offset by the fees received with FFL applications ($200) and renewals
($90). Based on information gathered from the FFLC, which processes and
collects the fees for FFL applications, various contractors and Federal
Government employees process Form 7 and 8 applications, verify and
correct applications, and further process them for background checks
and approval.
Based on information provided by the FFLC, the average hourly rate
for contracting staff, including benefits, is $13.29.\278\ To determine
the wage rates for Federal employees, the Department used the wage
rates set forth in the General Schedule (``GS''). At any level within
the GS, step 5 is used as an average wage rate per activity. Government
processing activities range from an entry level Federal employee
between a GS-5/7, upwards to a GS-13.\279\ To account for fringe
benefits such as insurance, the Department estimated a Federal load
rate using the methodology outlined in the Congressional Budget
Office's report comparing Federal compensation to private sector
compensation. It states that total compensation to Federal workers,
factoring in both wages and benefits, is 17 percent higher than for
similar private sector workers' benefits (or a multiplier factor of
1.17).\280\ The Department calculated private sector benefits from the
BLS (in 2022) and determined that the overall private sector benefits
are 41.9 percent in addition to an hourly wage, or a load rate of
1.419. This makes the Federal load rate 1.66 above the hourly wage rate
(after applying the 1.17 multiplier).\281\
---------------------------------------------------------------------------
\278\ The Department notes that because the contracting salary
is a loaded wage rate, a base wage rate (not including benefits) was
not included in Table 7 below.
\279\ Off. of Pers. Mgmt, OPM Salary Table 2023 For the Locality
Pay Area of Washington-Baltimore-Arlington, DC-MD-VA-WV-PA
(effective Jan. 2023), https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2023/DCB_h.pdf.
\280\ Cong. Budget Off., Comparing the Compensation of Federal
and Private-Sector Employees, 2011 to 2015 (Apr. 2017), https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/52637-federalprivatepay.pdf.
\281\ 1.66 Federal load rate = 1.416 private industry load rate
* 1.17 multiplier factor. BLS Series ID
CMU2010000000000D,CMU2010000000000P (Private Industry Compensation =
$37.15)/BLS Series ID CMU2020000000000D,CMU2020000000000P (Private
Industry Wages and Salaries = $26.23) = 1.416. BLS average 2021.
U.S. Bureau of Labor Statistics (2021), Database for Employee
Compensation, https://data.bls.gov/cgi-bin/srgate.
---------------------------------------------------------------------------
Table 7 outlines the Government costs to process a Form 7
application to become an FFL.
[[Page 29080]]
[GRAPHIC] [TIFF OMITTED] TR19AP24.076
Based on the hourly burdens and the hourly wage rates for various
contract and Federal employees, the Department estimates that it would
take on average 20.5 hours to process a Form 7 application, at a cost
of $1,303 per application. This would be offset by the new $200
application (Form 7) fee paid to the government, for an overall net
cost to the government of $1,103 per application as a result of this
rule. Form 8 application renewals are estimated to cost $71 every three
years (or $1,303 less the $1,062 inspection time and the $170
fingerprint costs). However, the cost to review a Form 8 application
($71) is offset by the renewal fee of $90 (which is set by statute),
making the net cost or overall savings to Government for this rule $19
per FFL renewal (subsequently represented in this analysis as -$19).
In addition to processing Form 7 applications, ATF IOIs will need
to perform qualification and compliance inspections. The qualification
inspection occurs once during the application process and is accounted
for in Table 7 above. But, as discussed above, there is a recurring
compliance inspection after the person becomes a licensee. For both the
qualification and compliance inspections, the Department notes that the
respective 17-hour or 36-hour inspection time estimates for the
Government are more than the inspection time for the private sector, as
discussed above, because the Department is including travel time for an
IOI to travel to the person's location. Based on the hourly burdens and
wage rates of IOIs, the Department anticipates that it costs ATF $2,250
to perform a compliance inspection.
Table 8 outlines the recurring Government costs to inspect an FFL.
[GRAPHIC] [TIFF OMITTED] TR19AP24.077
To summarize the overall Government costs, Table 9 outlines the
Government costs to process Form 7 applications, process Form 8 renewal
applications, and conduct FFL compliance inspections.
[GRAPHIC] [TIFF OMITTED] TR19AP24.078
[[Page 29081]]
The Department estimates that the Government costs of this rule
include the initial application cost that occurs in the first year
(including the qualification inspection), renewal costs that typically
occur every three years after the first year, and the cost for the
Government to conduct a compliance inspection of an FFL in a given year
(the Government currently conducts compliance inspections of
approximately 8 percent of FFLs per year).
6. Total Cost
The total costs take into account the familiarization burden, State
and Federal private licensing costs, and Government costs to process
and support the increase in licensing of this rule, as described above
in Section VI.A.3 and VI.A.5 of this preamble. The Department estimates
that the initial application cost (Form 7 and initial inspection)
occurs in the first year, that renewal costs (Form 8 renewals) occur
every three years after the first year, and that completion and
maintenance of Forms 4473 and A&D records and compliance inspection
costs (for a subset of FFLs affected by this rule) occur annually.
Tables 10 to 13 illustrate the quantitative 10-year familiarization,
Federal, and State licensing costs of this final rule. As discussed
above, qualitative costs have been identified but were unable to be
quantified for the de minimis proportion of FFLs that will have their
licenses revoked for failure to comply with existing regulations.
Qualitative costs have also been identified but not quantified for the
estimated 10 percent of unlicensed sellers currently engaged in the
business (or between 2,550 and 9,550 individuals) that are assumed to
be unwilling or unable to become licensed as required by this rule.
These individuals are expected to cease selling firearms altogether by
choice or as a result of State or local restrictions acting as
obstacles to their becoming FFLs.
Tables 10 and 11 provide the 10-year costs using the SME-derived
estimate.
BILLING CODE 4410-FY-P
[GRAPHIC] [TIFF OMITTED] TR19AP24.079
[GRAPHIC] [TIFF OMITTED] TR19AP24.080
[[Page 29082]]
Tables 12 and 13 provide the 10-year licensing costs using the RSF-
derived estimate.
---------------------------------------------------------------------------
\282\ The ``Undiscounted'' column represents totals from the
underlying costs. Consistent with guidance provided by OMB in
Circular A-4, the ``3 Percent Discount Rate'' and ``7 Percent
Discount Rate'' columns result from applying an economic formula to
the number in each row of this ``Undiscounted'' column to show how
these future costs over time would be valued today; they do not
contain totals from other tables.
[GRAPHIC] [TIFF OMITTED] TR19AP24.081
[GRAPHIC] [TIFF OMITTED] TR19AP24.082
BILLING CODE 4410-FY-C
Overall, the total familiarization, Federal, and State licensing
costs of this rule are $112.52 million over 10 years, which are
annualized to $11.70 million at three percent discounting and $12.34
million at seven percent discounting under the SME-derived estimate.
Meanwhile, under the RSF-derived estimate, the total familiarization,
Federal, and State licensing costs of the rule are $318.39 million over
10 years, which are annualized to $33.69 million at three percent
discounting and $36.29 million at seven percent discounting.
---------------------------------------------------------------------------
\283\ The ``Undiscounted'' column represents totals from the
underlying costs. Consistent with guidance provided by OMB in
Circular A-4, the ``3 Percent Discount Rate'' and ``7 Percent
Discount Rate'' columns result from applying an economic formula to
the number in each row of this ``Undiscounted'' column to show how
these future costs over time would be valued today; they do not
contain totals from other tables.
---------------------------------------------------------------------------
7. Benefits
By ensuring that ATF's regulatory definitions conform to the BSCA's
statutory changes and can be relied upon by the public, this final rule
will provide significant public safety benefits. The rule clarifies
that persons who intend to predominantly earn a profit from the
repetitive purchase and resale of firearms are engaged in the business
of dealing in firearms. It also clarifies that such sellers must be
licensed in order to continue selling firearms, even if they are
conducting
[[Page 29083]]
such transactions on the internet or through other mediums or forums.
As part of the license application, those dealers will undergo a
background check, as will those who subsequently purchase a firearm
from the licensed dealers.
The background check process for license applicants helps ensure
that persons purchasing and selling (including bartering) firearms with
the intent to earn a profit are not themselves prohibited from
receiving or possessing firearms. It also correspondingly reduces the
risk that those sellers engage in selling firearms to persons who are
prohibited from receiving or possessing such firearms under Federal,
State, local, or Tribal law--including violent criminals--because those
prospective purchasers will also be subject to a background check. The
NFCTA, a study conducted by ATF and a team of academic and other
subject matter experts, concluded that ``[i]ndividuals who are
prohibited due to their criminal records or other conditions are
unlikely to purchase directly from a licensed federal firearms dealer.
Instead, prohibited persons determined to get crime guns acquire them
through underground crime gun markets that involve unregulated
transactions with acquaintances and illicit `street' sources.'' \284\
By clarifying when a person is engaged in the business of dealing in
firearms, the rule helps ensure such persons obtain licenses and comply
with the safeguards in the GCA. This thereby promotes public safety by
reducing the number of firearms transferred to violent criminals and
others whom Congress has determined are prohibited from receiving or
possessing firearms. In particular, these safeguards reduce the danger
to public safety that results when firearms are trafficked to criminals
who are likely to use them to commit violent crimes. Finally, beyond
reducing unlicensed dealing of firearms to violent criminals, the
safeguards applicable to licensees also help prevent the acquisition of
firearms by those who may use a firearm to harm themselves,\285\ or who
allow children to access them because they cannot make proper decisions
concerning the acquisition, use, storage, and disposition of firearms
and ammunition.\286\
---------------------------------------------------------------------------
\284\ ATF, National Firearms Commerce and Trafficking Assessment
(NFCTA): Crime Gun Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the United States and Its
Territories 41 (Mar. 27, 2024), https://www.atf.gov/firearms/docs/report/nfcta-volume-ii-part-iii-crime-guns-recovered-and-traced-us/download.
\285\ For example, in 2021, there were an average of 127.2
suicides per day among U.S. adults, including 17.5 per day among
veterans and 109.6 per day among non-veteran adults. Firearms were
involved in 73.4% of deaths among veteran men, and 51.7% of veteran
women. See U.S. Dep't of Veterans Affairs, 2023 National Veteran
Suicide Prevention Annual Report 15, 27 (Nov. 2023).
\286\ In Huddleston, the Supreme Court examined the legislative
history of the GCA and determined that ``[t]he principal purposes of
the federal gun control legislation . . . was to curb crime by
keeping firearms out of the hands of those not legally entitled to
possess them, because of age, criminal background, or
incompetency.'' 415 U.S. at 824.
---------------------------------------------------------------------------
The rule will also benefit public safety by enhancing ATF's ability
to trace firearms recovered in criminal investigations. The GCA
requires licensees to maintain records when they transfer a firearm to
an unlicensed purchaser, commonly referred to as both the ``first
retail purchaser'' and, if they are the only known sale, the ``last
known purchaser'' (the tracing process may also identify additional
unlicensed purchasers beyond this first retail purchaser, in which case
one of these unlicensed purchasers would become the last known
purchaser instead). When a firearm is recovered in a criminal
investigation and submitted for tracing, ATF is often able to identify
the last known purchaser through records maintained by the licensee,
providing crucial leads in the underlying criminal investigation. When
a firearm is transferred by an unlicensed person, however, such records
rarely exist and, if such records do exist, they are not accessible to
ATF through the tracing system. By helping increase compliance with the
GCA's licensing and recordkeeping requirements, the rule will enhance
ATF's capacity to complete crime-gun traces, thereby expanding the
evidentiary leads ATF provides to law enforcement investigating crimes
involving firearms, particularly violent offenses such as homicide,
aggravated assault, armed robbery, and armed drug trafficking.
Moreover, because unlicensed dealers who are engaged in the
business of selling firearms often deal in used firearms, the rule will
also enhance the tracing of crime guns that have been recovered after
an initial retail sale by an FFL. By facilitating licensure of those
who engage in the business of dealing firearms through purchasing and
reselling used firearms, the rule will enhance the tracing system's
capacity to identify ``secondary purchasers'' of crime guns. This
capacity will be enhanced because new licensees will be required by the
GCA to maintain records on sales of used firearms that are accessible
to the Department when conducting a trace on a crime gun. When a used
``firearm re-enters regulated commerce, the tracing process may
identify additional unlicensed purchasers beyond the first retail
purchaser.'' \287\
---------------------------------------------------------------------------
\287\ ATF, National Firearms Commerce and Trafficking Assessment
(NFCTA): Crime Gun Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the United States and Its
Territories 23 (Mar. 27, 2024), https://www.atf.gov/firearms/docs/report/nfcta-volume-ii-part-iii-crime-guns-recovered-and-traced-us/download.
---------------------------------------------------------------------------
Crime-gun tracing is one of the most valuable and effective
services ATF provides to law enforcement agencies--nationally and
internationally--in investigating crimes involving firearms. As one
public commenter noted, law enforcement agencies submitted a total of
``1,922,577 crime guns for the Department to trace between 2017 and
2021.'' Largely as a result of the records the GCA requires licensees
to maintain, ``ATF was able to determine the purchaser in 77 percent
(1,482,861)'' of those trace requests.\288\ By clarifying when a
Federal firearms license is required, the rule will promote compliance
by increasing licensure of those engaged in the business of dealing in
firearms, and correspondingly increase the availability of GCA-required
records from those newly licensed dealers. As a result, the rule will
enhance the capacity of the Department to successfully complete crime-
gun traces for law enforcement partners globally.
---------------------------------------------------------------------------
\288\ Id. at 2.
---------------------------------------------------------------------------
The benefits to public safety of crime-gun tracing are substantial.
For example, in fiscal year 2022, the Department performed over 623,000
crime-gun traces.\289\ Of these, 27,156 were deemed ``urgent,'' which
included firearms used in criminal activities such as mass shootings,
homicides, bank robberies, and other immediate threats to officer and
public safety.\290\ Tracing also allows ATF to determine if there are
straw purchasing patterns or individuals operating as straw purchasers.
Straw purchasers--individuals without a criminal record who purchase
firearms for drug dealers, violent criminals, or persons who are
prohibited by law from receiving firearms--are the lynchpin of most
firearms trafficking operations.\291\ Straw purchasers, often acquiring
a relatively small number of firearms in each transaction, make it
possible for firearms traffickers to effectively circumvent the
background check and
[[Page 29084]]
recordkeeping requirements of Federal law to get guns into the hands of
criminals. Straw purchasers may acquire firearms directly for
prohibited persons or purchase them for other middlemen on behalf of
violent criminals.
---------------------------------------------------------------------------
\289\ ATF, Fact Sheet--eTrace: Internet-Based Firearms Tracing
and Analysis (Apr. 2023), https://www.atf.gov/resource-center/fact-sheet/fact-sheet-etrace-internet-based-firearms-tracing-and-analysis.
\290\ Id. at 1.
\291\ The BSCA amended the GCA to expressly prohibit straw
purchasing of firearms. See 18 U.S.C. 932.
---------------------------------------------------------------------------
After a trace is conducted on a recovered crime gun, ATF is able to
determine whether the purchaser was also the possessor of the firearm
when it was used in a crime, or whether the purchaser is different from
the possessor. Traces where the purchaser and possessor are different
provide leads to help determine whether the possessor or others in a
trafficking distribution network utilized one or more straw purchasers
to acquire firearms. Table 14 shows the share of traced guns attributed
to these potential purchaser and possessor relationships.
---------------------------------------------------------------------------
\292\ ATF, National Firearms Commerce and Trafficking Assessment
(NFCTA): Crime Gun Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the United States and Its
Territories 26 (Mar. 27, 2024), https://www.atf.gov/firearms/docs/report/nfcta-volume-ii-part-iii-crime-guns-recovered-and-traced-us/download.
[GRAPHIC] [TIFF OMITTED] TR19AP24.083
In Table 14 above, in most traces, the purchaser of the traced
crime gun was different from the possessor or the purchaser of the
traced crime gun is known but the possessor is unknown. These two
categories amount to a total of 87.8 percent of successfully traced
crime guns.
Finally, the Department notes that, when a firearm is recovered in
a criminal investigation and submitted for tracing, transactions in
which the purchaser of the firearm was subject to a background check
tend to have a longer time-to-crime. As stated in the NFCTA, ``a short
[time-to-crime] can be an indicator of illegal firearms trafficking.''
\293\ A time-to-crime recovery of three years or less is generally
considered a ``short'' time-to-crime,\294\ indicating that at time the
firearm was purchased, the purchase was more likely to be associated
with firearm trafficking, straw-purchasing, or other intended criminal
use. Again, by clarifying when a Federal firearms license is required,
the rule will facilitate increased licensure of those engaged in the
business of dealing in firearms. This, in turn, will result in those
newly licensed dealers conducting more purchaser background checks,
which, the longer time-to-crime data indicates, will deter violent
felons, traffickers, and other prohibited persons from obtaining
firearms from those dealers.\295\ FFLs who have a large number of
traced firearms with short time-to-crime statistics may undergo more
inspections, because certain FFL practices might be making them more
susceptible to straw purchasing activities.
---------------------------------------------------------------------------
\293\ ATF, National Firearms Commerce and Trafficking Assessment
(NFCTA): Crime Gun Intelligence and Analysis, Volume Two, Part III:
Crime Guns Recovered and Traced Within the United States and Its
Territories 23 (Mar. 27, 2024), https://www.atf.gov/firearms/docs/report/nfcta-volume-ii-part-iii-crime-guns-recovered-and-traced-us/download.
\294\ See generally id. at 35 (A ``[s]hort TTC suggests that
traced crime guns were rapidly diverted from lawful firearms
commerce into criminal hands and represents a key indicator of
firearm trafficking. Between 2017 and 2021, half of traced crime
guns were purchased and recovered within three years of the last
known sale.'').
\295\ See id. at 41.
---------------------------------------------------------------------------
The longer time-to-crime for recovered crime guns in which the
purchaser was subject to a background check is demonstrated by a review
of state laws and geographic recovery data by city. Table 15 provides
time-to-crime statistics by State.
[GRAPHIC] [TIFF OMITTED] TR19AP24.084
Table 16 provides time-to-crime statistics by city of recovery.
[[Page 29085]]
[GRAPHIC] [TIFF OMITTED] TR19AP24.085
As explained by one public commenter, of the States and cities that
have shorter time-to-crime statistics, only Virginia and Michigan also
currently require background checks for all private party
transactions.\296\ The commenter further stated that all of the States
and cities with longer time-to-crime statistics already require
background checks for private party transactions. Consistent with the
findings of the NFCTA, this data suggests that background checks tend
to inhibit or otherwise deter prohibited persons from purchasing
firearms and then subsequently using them in crime. In addition to
making more records of transactions occurring on the secondary market
readily available for tracing purposes, this rule--by increasing the
number of properly licensed dealers who conduct background checks
before selling a firearm--also helps ensure that prohibited persons are
denied access to firearms, as suggested above. Based on FBI
information, there were 131,865 prohibited persons in 2022 and 153,565
prohibited persons in 2021 who were denied the ability to purchase a
firearm after a NICS background check.\297\ The Department notes that
these numbers are under-reported since there are a number of States
that do not rely on the FBI to perform their background checks.
Nonetheless, this data suggests that requiring firearms to be sold on
the regulated market has a preventative effect, as the process to
obtain a firearm sold on the regulated market can deter or prevent
prohibited persons from acquiring and possessing firearms.
---------------------------------------------------------------------------
\296\ According to the commenter, which provided information
current as of 2022, the following States require background checks
for all private party firearms transactions: CA, CO, CT, DC, DE, HI,
IL, MA, MD, MI, MN, NE, NJ, NM, NV, NY, OR, PA, RI, VA, VT, WA. See
https://www.regulations.gov/comment/ATF-2023-0002-354412.
\297\ FBI, Crim. Just. Info. Servs. Div., National Instant
Criminal Background Check System 2022 Operational Report 32 (Nov.
2022), https://www.fbi.gov/file-repository/nics-2022-operations-report.pdf/view.
---------------------------------------------------------------------------
The U.S. Sentencing Commission has reported that ``88.8 percent of
firearm offenders sentenced under Sec. 2K2.1 \298\ [of the November
2021 United States Sentencing Commission Guidelines Manual] were
[already] prohibited from possessing a firearm'' under 18 U.S.C.
922(g). These individuals would thus have been flagged in a background
check, and therefore would have been prohibited from buying a firearm
from a licensed dealer after their first offense. As a result, they
would not have been able to commit the subsequent firearms offense(s)
with those firearms if the seller had been licensed. In addition, the
U.S. Sentencing Commission reported that firearms offenders sentenced
under section 2K2.1 ``have criminal histories that are more extensive
and more serious than other offenders,'' and that they are ``more than
twice as likely to have a prior conviction for a violent offense
compared to all other offenders.'' \299\
---------------------------------------------------------------------------
\298\ Section 2K2.1 provides sentencing guidelines for
``Unlawful Receipt, Possession, or Transportation of Firearms or
Ammunition; Prohibited Transactions Involving Firearms or
Ammunition.''
\299\ U.S. Sent'g Comm'n, What Do Federal Firearms Offenses
Really Look Like? 2 (July 2022), https://www.ussc.gov/sites/default/files/pdf/research-and-publications/research-publications/2022/20220714_Firearms.pdf.
---------------------------------------------------------------------------
In another report on ``armed career criminals'' (those who, at the
time of sentencing, have three or more prior convictions for violent
offenses, serious drug offenses, or both), the Commission found that a
substantial share of such ``armed career criminals'' (83 percent in
fiscal year 2019) had prior convictions for at least one violent
offense, as opposed to solely serious drug offense convictions. This
included ``57.7 percent who had three or more [prior violent]
convictions.'' \300\ In other words, many persons who are prohibited by
law from possessing firearms, including the more serious ``armed career
criminals,'' were able to obtain guns and continued to commit more
violent offenses after they would have been flagged by a background
check and denied a firearm if purchasing from a licensed dealer.
---------------------------------------------------------------------------
\300\ U.S. Sent'g Comm'n, Federal Armed Career Criminals:
Prevalence, Patterns, and Pathways 9 (Mar. 2021), https://www.ussc.gov/sites/default/files/pdf/research-and-publications/research-publications/2021/20210303_ACCA-Report.pdf.
---------------------------------------------------------------------------
Such violence has a significant adverse effect on public safety. By
increasing the number of licensed dealers who are required to conduct
background checks on unlicensed transferees, this rule helps prevent
firearms from being sold to felons or other prohibited persons, who may
then use those firearms to commit crimes and acts of violence, or
themselves become sources of firearms trafficking. Furthermore, these
licensed dealers must also maintain firearms transaction records, which
will help with criminal investigations and tracing firearms
subsequently used in crimes.
In 2016, ATF distributed and discussed the above-mentioned
``engaged in the business'' guidance at gun shows to ensure that
unlicensed dealers operating at gun shows became licensed, and portions
of that previous guidance are incorporated in this rule. The 2016
guidance was particularly directed at encouraging unlicensed persons
who sell firearms for a supplemental source of income to continue
selling firearms, but as licensed dealers. Based on data from the FFLC,
ATF found that, within one year after releasing the guidance, there was
an increase of approximately 567 Form 7 applications to account for
unlicensed persons selling at gun shows. This previous experience
demonstrates that, when ATF clarified the licensing requirements, some
unlicensed market participants immediately recognized the need to
obtain a license to avoid enforcement action. Although the
[[Page 29086]]
guidance alone did not achieve the full effects that would result from
having these requirements in a regulation, the response illustrated
that persons engaged in the business of dealing in firearms will comply
with Federal licensing requirements and that there will be an increase
in dealers as awareness of those licensing requirements increases. This
both enhances public safety by increasing sellers' ability to identify
prohibited persons and keep them from purchasing firearms and increases
the likelihood that more prohibited persons will be deterred from
attempting to purchase firearms.
Finally, providing a clear option for FFLs to transfer their
business inventory to another FFL when their license is terminated
helps to ensure that these business inventories of firearms are
traceable and do not become sources of trafficked firearms.
8. Alternatives
In addition to the requirements outlined in this rule, the
Department considered the following alternative approaches:
Alternative 1. A rulemaking that focuses on a bright-line numerical
threshold of what constitutes being engaged in the business as a dealer
in firearms. As discussed above, in the past, it has been proposed to
the Department that a rulemaking should set a specific threshold or
number of sales per year to define ``engaged in the business.'' The
Department considered this alternative in the past and again as part of
developing this rulemaking. However, the Department chose not to adopt
this alternative for a number of reasons stated in detail above.\301\
In summary: courts have held even before the passage of the BSCA that
the sale or attempted sale of even one firearm is sufficient to show
that a person is ``engaged in the business'' if that person represents
to others that they are willing and able to purchase more firearms for
resale; a person could structure their transactions to avoid the
minimum threshold by spreading out sales over time; and firearms could
be sold by unlicensed persons below the threshold number without
records, making those firearms unable to be traced when they are
subsequently used in a crime. Finally, at this time, the Department
does not believe there is a sufficient evidentiary basis to support
setting a specific minimum number of firearms bought or sold that,
without consideration of additional factors, would establish that a
person is ``engaged in the business.''
---------------------------------------------------------------------------
\301\ The relevant discussion is set forth in Section II.A,
``Advance Notice of Proposed Rulemaking (1979),'' and in more detail
in Section III.D, ``Presumptions that a Person is `Engaged in the
Business,' '' of this preamble.
---------------------------------------------------------------------------
The Department believes replacing this rule with a simple numerical
threshold would not appropriately address the statutory language
regarding the requisite intent predominantly to earn a profit and would
have unintended effects, such as those summarized in the previous
paragraph, which would impact personal firearms transactions and
decrease public safety and law enforcement's ability to trace firearms
used in crimes.
Alternative 2. Publishing guidance instead of revising the
regulations. Under this alternative, rather than publishing regulations
further defining ``engaged in the business,'' the Department would
publish only guidance documents to clarify the topics included in this
rule. Although the Department has determined that it will also update
existing guidance documents to answer any questions that the firearms
industry may have, the Department has also determined that issuing only
guidance would be insufficient to address the issues discussed above. A
regulation is much more effective at achieving compliance with the GCA,
as amended by the BSCA, than guidance, which is both voluntary and
distributed by ATF at gun shows or other venues when the agency is
present, or found online if people search for it. People recognize that
a regulation sets the requirements they must follow and affects all
those participating in the topic area, and they also know where to look
for a regulation. Now that the BSCA has redefined the term ``engaged in
the business,'' there is even more of a need to ensure that unlicensed
people who meet the definition of that term understand that they are
violating the law if they do not obtain a license. And if the
Department does not update its regulations, they would not accurately
reflect the statutory text and would thus create confusion.
As a result, the Department did not select the alternative to
publish only guidance documents in lieu of regulations. Guidance alone
would be insufficient as a means to inform the public in general,
rather than solely the currently regulated community; it would not have
the same reach and attention as a regulation; it would not benefit from
the input of public review and comment to aid in accounting for
possible unintended impacts or interpretations; and it would not be
able to change existing regulatory provisions on the subject of
``engaged in the business'' or impact intersecting regulatory
provisions. In addition, the Department can incorporate existing
guidance in a rule based on its experience or in response to comments.
When an agency establishes or revises requirements that were previously
established pursuant to a rulemaking process, it must do so through a
regulation issued in compliance with the requirements of the
Administrative Procedure Act and certain executive orders. Guidance
does not meet these requirements. Therefore, although the Department
considered this alternative, it determined it was not in the best
interest of the public.
Alternative 3. No action. Rather than promulgating a regulation,
the Department could instead take no action to further clarify the
BSCA's amendments to the GCA. However, the Department considered this
alternative and decided against it for a number of reasons. First,
Congress, through the BSCA, determined that there was a need to revise
the definition of ``engaged in the business'' for the first time in
almost 40 years. While that by itself does not preclude the Department
from using its discretion not to promulgate a formal rule, it indicates
an important change to the landscape of who must have a license to deal
in firearms and warrants consideration of what that means to persons
who have been operating under the previous definition. It has potential
effects on those who have not considered themselves to fall under the
definition before but now would need to obtain a license. The change to
the definition removed any consideration of an individual's intent to
obtain ``livelihood'' from the ``engaged in the business'' analysis,
and it is reasonable to expect that those who transact in firearms have
questions about how to interpret and apply this change. This includes
how it affects other aspects of existing laws and regulatory provisions
that govern such transactions, as well as how other BSCA amendments,
such as the new international trafficking provisions, might apply to
the dealer requirements. For these reasons, the Department determined
that taking no action was not a viable alternative.
Second, as the various enforcement actions and court decisions
cited above demonstrate, ATF observed a significant level of
noncompliance with the GCA's licensing requirements even prior to the
BSCA. And third, on March 14, 2023, President Biden issued Executive
Order 14092, requiring the Attorney General to report on agency efforts
to implement the BSCA, develop and implement a plan to clarify the
definition of who is engaged in the business of dealing in firearms,
``including by considering a
[[Page 29087]]
rulemaking,'' and prevent former FFLs whose licenses have been revoked
or surrendered from continuing to engage in the business of dealing in
firearms.\302\
---------------------------------------------------------------------------
\302\ 88 FR 16528.
---------------------------------------------------------------------------
The alternative of taking no action would not generate direct
monetary costs because it would leave the regulatory situation as it
is. Because the costs and benefits of this alternative arise from the
statute itself, the Department did not include an assessment of them in
this rulemaking.
B. Executive Order 13132 (Federalism)
This regulation will not have substantial direct effects on the
States, the relationship between the Federal Government and the States,
or the distribution of power and responsibilities among the various
levels of government. Therefore, in accordance with section 6 of
Executive Order 13132 (Federalism), the Attorney General has determined
that this regulation does not have sufficient federalism implications
to warrant the preparation of a federalism summary impact statement.
C. Executive Order 12988 (Civil Justice Reform)
This regulation meets the applicable standards set forth in
sections 3(a) and 3(b)(2) of Executive Order 12988 (Civil Justice
Reform).
D. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') establishes as a principle
of regulatory issuance that agencies shall endeavor, consistent with
the objectives of the rule and of applicable statutes, to fit
regulatory and informational requirements to the scale of the
businesses, organizations, and governmental jurisdictions subject to
regulation. To achieve this principle, agencies are required to solicit
and consider flexible regulatory proposals and to explain the rationale
for their actions to assure that such proposals are given serious
consideration. Public Law 96-354, section 2(b), 94 Stat. 1164 (1980).
Under the RFA, the agency is required to consider whether this rule
will have a significant economic impact on a substantial number of
small entities. Agencies must perform a review to determine whether a
rule will have such an impact. If the agency determines that it will,
the agency must prepare a regulatory flexibility analysis as described
in the RFA.
Pursuant to 5 U.S.C. 604(a), the final regulatory flexibility
analysis must contain:
A statement of the need for, and objectives of, the rule;
A statement of the significant issues raised by the public
comments in response to the initial regulatory flexibility analysis, a
statement of the assessment of the agency of such issues, and a
statement of any changes made in the proposed rule as a result of such
comments;
The response of the agency to any comments filed by the
Chief Counsel for Advocacy of the SBA in response to the proposed rule,
and a detailed statement of any change made to the proposed rule in the
final rule as a result of the comments;
A description of and an estimate of the number of small
entities to which the rule will apply or an explanation of why no such
estimate is available;
A description of the projected reporting, recordkeeping,
and other compliance requirements of the rule, including an estimate of
the classes of small entities that will be subject to the requirement
and the type of professional skills necessary for preparation of the
report or record; and
A description of the steps the agency has taken to
minimize the significant economic impact on small entities consistent
with the stated objectives of applicable statutes, including a
statement of the factual, policy, and legal reasons for selecting the
alternative adopted in the final rule and why each one of the other
significant alternatives to the rule considered by the agency that
affect the impact on small entities was rejected.
The RFA covers a wide range of small entities. The term ``small
entities'' comprises small businesses, not-for-profit organizations
that are independently owned and operated and are not dominant in their
fields, and governmental jurisdictions with populations of less than
50,000. 5 U.S.C. 601(3)-(6). The Department determined that the rule
affects a variety of currently unlicensed persons engaged in the
business of selling firearms, and assumed that all of these sellers
would become small businesses upon the licensure required by this rule
(see the section below titled ``A description of and an estimate of the
number of small entities to which the rule will apply or an explanation
of why no such estimate is available''). Based on the requirements
above, the Department prepared the following regulatory flexibility
analysis assessing the impact on small entities from the rule.
A statement of the need for, and objectives of, the rule.
See Section VI.A.1 of this preamble for discussion on the need for
this regulation and the objectives of this rule.
A statement of the significant issues raised by the public comments
in response to the initial regulatory flexibility analysis, a statement
of the assessment of the agency of such issues, and a statement of any
changes made in the proposed rule as a result of such comments.
See Section IV.D.13 of this preamble for public comments regarding
the RFA. Responses to those public comments are included with each
topic.
The response of the agency to any comments filed by the Chief
Counsel for Advocacy of the SBA in response to the proposed rule, and a
detailed statement of any change made to the proposed rule in the final
rule as a result of the comments.
There were no comments filed by the Chief Counsel for Advocacy of
the SBA in response to the proposed rule. Therefore, no changes were
made in the final rule as a result of such comments.
A description of and an estimate of the number of small entities to
which the rule will apply or an explanation of why no such estimate is
available.
Persons affected by this rule are not currently considered small
businesses or small entities but will become small businesses upon
implementation of this rule if they obtain licenses and continue
selling firearms as dealers. However, the Department assumes that,
should an individual be considered ``engaged in the business'' due to
factors related to their sale of firearms and not simply to enhance
their personal collection, there may be an impact on their revenue. Due
to limitations on data, the Department is unable to determine the
extent to which the licensing costs will impact their firearms sales
revenue. As discussed in the primary analysis (Section VI.A.2 of this
preamble), the Department estimated 10 percent of those affected by
this rule would cease dealing in firearms for various reasons. To the
extent such individuals are currently functioning as small businesses,
even though not licensed, this could be deemed to represent an adverse
regulatory impact on small businesses and their ability to operate as
dealers.
A description of the projected reporting, recordkeeping and other
compliance requirements of the rule, including an estimate of the
classes of small entities which will be subject to the requirement and
the type of professional skills necessary for preparation of the report
or record.
Persons affected by this rule will need to apply for a license
using Form 7, undergo an initial inspection, undergo background checks,
maintain Form 4473
[[Page 29088]]
records of firearms transactions, and periodically undergo a compliance
inspection. No professional skills are required to fulfill these tasks.
A description of the steps the agency has taken to minimize the
significant economic impact on small entities consistent with the
stated objectives of applicable statutes, including a statement of the
factual, policy, and legal reasons for selecting the alternative
adopted in the final rule and why each one of the other significant
alternatives to the rule considered by the agency which affect the
impact on small entities was rejected.
See Sections IV.D.13 and VI.A.8 of this preamble. No separate
distinction was made in alternatives for small businesses,
specifically, because the Department determined that all unlicensed
sellers affected by this rule will become small businesses once they
are licensed.
E. Small Business Regulatory Enforcement Fairness Act of 1996
This rule is likely to have a significant economic impact on a
substantial number of small entities under SBREFA, 5 U.S.C. 601 et seq.
Accordingly, the Department prepared an initial regulatory flexibility
analysis for the proposed rule and prepared an FRFA for the final rule.
5 U.S.C. 603-04. Furthermore, a small business compliance guide will be
published as required by SBREFA.
F. Congressional Review Act
Pursuant to the Congressional Review Act, 5 U.S.C. 801 et seq.,
OMB's Office of Information and Regulatory Affairs has determined this
rule does not meet the criteria in 5 U.S.C. 804(2). This rule will not
result in an annual effect on the economy of $100 million or more; a
major increase in costs or prices; or significant adverse effects on
competition, employment, investment, productivity, innovation, or on
the ability of United States-based enterprises to compete with foreign-
based enterprises in domestic and export markets. While there may be
impacts on employment, investment, productivity, or innovation, these
impacts will not have a significant impact on the overall economy.
G. Unfunded Mandates Reform Act of 1995
This rule would not result in the expenditure by State, local, and
Tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year, and it will not significantly or
uniquely affect small governments. Twenty-two States already require
background checks for private party sales, and of the 28 States that do
not, only three states (Florida, Tennessee, and Utah) do not rely on
Federal law enforcement for their background checks. While these three
States may be affected by this rule to the extent they have to conduct
increased background checks, the Department did not determine that this
rule will have an impact of $100 million or more in any year to any of
these States. Therefore, no actions were deemed necessary under the
provisions of the Unfunded Mandates Reform Act of 1995, Public Law 104-
4, 109 Stat. 48.
H. Paperwork Reduction Act of 1995
Under the Paperwork Reduction Act of 1995 (``PRA''), 44 U.S.C.
3501-21, agencies are required to submit to OMB, for review and
approval, any reporting requirements inherent in a rule. The
collections of information contained in this rule are collections of
information which have been reviewed and approved by OMB in accordance
with the requirements of the PRA and have been assigned an OMB Control
Number.
As defined in 5 CFR 1320.3(c), ``collection of information''
comprises reporting, recordkeeping, monitoring, posting, labeling, and
other similar requirements. The collections of information in this rule
are mandatory. The title and description of each information
collection, a description of those who must collect the information,
and an estimate of the total annual burden follow. The estimate covers
the time for reviewing instructions, searching existing sources of
data, gathering and maintaining the data needed, and completing and
reviewing the collection.
Title: Application for a Federal Firearms License--ATF Form
7(5310.12)/7CR (5310.16).
OMB Control Number: OMB 1140-0018.
Summary of the Collection of Information: 18 U.S.C. 922 specifies a
number of unlawful activities involving firearms in interstate and
foreign commerce. Some of these activities are not unlawful if the
persons taking the actions are licensed under the provisions of section
923. Some examples of activities that are not unlawful if a person has
a license include: engaging in the business of dealing, shipping,
receiving, and transporting firearms in interstate or foreign commerce,
including the acquisition of curio or relic firearms acquired by
collectors from out-of-State for personal collections. This collection
of information is necessary to ensure that anyone who wishes to be
licensed as required by section 923 meets the requirements to obtain
the desired license.
Need for Information: Less frequent collection of this information
would pose a threat to public safety. Without this information
collection, ATF would not be able to issue licenses to persons required
by law to have a license to engage in the business of dealing in
firearms or shipping or transporting firearms in interstate or foreign
commerce in support of that business, or acquire curio and relic
firearms from out of State.
Proposed Use of Information: ATF personnel will analyze the
submitted application to determine the applicant's eligibility to
receive the requested license.
Description of the Respondents: Individuals or entities wishing to
engage in the business of dealing, shipping, receiving, and
transporting firearms in interstate or foreign commerce, as well as
acquiring firearms classified as curios and relics for personal
collections.
Number of Respondents: 13,000 existing. New respondents due to the
rule: 24,540.
Frequency of Response: one time.
Burden of Response: one hour.
Estimate of Total Annual Burden: 24,540 hours (incremental change).
Title: Application for a Federal Firearms License--Renewal
Application ATF Form 8 (5310.11).
OMB Control Number: OMB 1140-0019.
Summary of the Collection of Information: 18 U.S.C. chapter 44
provides that no person may engage in the business of importing,
manufacturing, or dealing in either firearms, or ammunition, without
first obtaining a license to do so. These activities are licensed for a
specific period. The benefit of a collector's license is also provided
for in the statute. In order to continue to engage in the
aforementioned firearms activities without interruption, licensees must
renew their FFL by filing Federal Firearms License (``FFL'') RENEWAL
Application-ATF Form 8 (5310.11) Part II, prior to its expiration.
Need for Information: Less frequent use of this information
collection would pose a threat to public safety, since the collected
information helps ATF to ensure that the applicants remain eligible to
renew their licenses.
Proposed Use of Information: ATF Form 8 (5310.11) Part II, is used
to identify the applicant and determine their eligibility to retain the
license.
Description of the Respondents: Respondents desiring to update the
[[Page 29089]]
responsible person (RP) information on an existing license must submit
a letter in this regard, along with the completed FFL renewal
application to ATF.
Number of Respondents: 34,000 existing. New respondents due to the
rule: 24,540.
Frequency of Response: every three years and periodically.
Burden of Response: 0.5 hours.
Estimate of Total Annual Burden: 12,270 hours (incremental change).
Title: Firearms Transaction Record--ATF Form 4473 (5300.9) and
Firearms Transaction Record Continuation Sheet.
OMB Control Number: OMB 1140-0020.
Summary of the Collection of Information: The subject form is
required under the authority of 18 U.S.C. 922 and 923 and 27 CFR
478.124. These sections of the GCA prohibit certain persons from
shipping, transporting, receiving, or possessing firearms. All persons,
including FFLs, are prohibited from transferring firearms to such
persons. FFLs are also subject to additional restrictions regarding the
disposition of a firearm to an unlicensed person under the GCA. For
example, age and State of residence also determine whether a person may
lawfully receive a firearm. The information and certification on the
Form 4473 are designed so that a person licensed under 18 U.S.C. 923
may determine if the licensee may lawfully sell or deliver a firearm to
the person identified in section B of the Form 4473, and to alert the
transferee/buyer of certain restrictions on the receipt and possession
of firearms. The Form 4473 should only be used for sales or transfers
of firearms where the seller is licensed under 18 U.S.C. 923. The
seller of a firearm must determine the lawfulness of the transaction
and maintain proper records of the transaction.
Need for Information: The consequences of not conducting this
collection of information, or conducting it less frequently, are that
the licensee might transfer a firearm to a person who is prohibited
from possessing firearms under Federal law. The collection of this
information is necessary for compliance with the statutory requirements
to verify the eligibility of a person receiving or possessing firearms
under the GCA. There is no discretionary authority on the part of ATF
to waive these requirements. Respondents are required to supply this
information as often as necessary to comply with statutory provisions.
The form is critical to the prevention of criminal diversion of
firearms and enhances law enforcement's ability to trace firearms that
are recovered in crimes.
Proposed Use of Information: A person purchasing a firearm from an
FFL must complete section B of the Form 4473. The buyer's answers to
the questions determine if the potential transferee is eligible to
receive the firearm. If those answers indicate that the buyer is not
prohibited from receiving a firearm, the licensee completes section C
of the Form 4473 and contacts the NICS or the State point of contact to
determine if the firearm can legally be transferred to the purchaser.
Description of the Respondents: Unlicensed persons wishing to
purchase a firearm.
Number of Respondents: 17,189,101 existing. New respondents due to
the rule: 24,540.
Frequency of Response: periodically.
Burden of Response: 0.5 hours.
Estimate of Total Annual Burden: 12,270 hours (incremental change).
Title: Records of Acquisition and Disposition, Dealers of Type 01/
02 Firearms, and Collectors of Type 03 Firearms [Records of Acquisition
and Disposition, Collectors of Firearms].
OMB Control Number: OMB 1140-0032.
Summary of the Collection of Information: The recordkeeping
requirements as authorized by the GCA, 18 U.S.C. 923, are for the
purpose of allowing ATF to inquire into the disposition of any firearm
received by a licensee in the course of a criminal investigation.
Need for Information: Less frequent collection of this information
would pose a threat to public safety as the information is routinely
used to assist law enforcement by allowing them to trace firearms in
criminal investigations.
Proposed Use of Information: This collection of information grants
ATF officers the authority to examine a collector's records for
firearms traces or compliance inspections, per 27 CFR 478.23(c)(1),
(2).
Description of the Respondents: Federal Firearms Licensees.
Number of Respondents: 60,790 existing. New respondents due to the
rule: 24,540.
Frequency of Response: annually recurring.
Burden of Response: three minutes to maintain A&D records and one
hour to perform an inspection.
Estimate of Total Annual Burden: 24,540 hours in inspection time
(incremental change) and 3,681 hours maintaining A&D records
(incremental change).
ATF asks for public comment on the proposed collection of
information to help determine how useful the information is; whether
the public can help perform ATF's functions better; whether the
information is readily available elsewhere; how accurate ATF's estimate
of the burden of collection is; how valid the methods for determining
burden are; how to improve the quality, usefulness, and clarity of the
information; and how to minimize the burden of collection.
If you submit comments on the collection of information, submit
them following the ``Public Participation'' section under the
SUPPLEMENTARY INFORMATION heading. You need not respond to a collection
of information unless it displays a currently valid control number from
OMB. Before the requirements for this collection of information become
effective, ATF will publish a notice in the Federal Register of OMB's
decision to approve, modify, or disapprove the proposed collection.
Disclosure
Copies of the proposed rule, the comments received in response to
it, and this final rule are available through the Federal eRulemaking
portal, at www.regulations.gov (search for RIN 1140-58), and for public
inspection by appointment during normal business hours at: ATF Reading
Room, Room 1E-063, 99 New York Ave. NE, Washington, DC 20226;
telephone: (202) 648-8740.
List of Subjects in 27 CFR Part 478
Administrative practice and procedure, Arms and munitions, Exports,
Freight, Imports, Intergovernmental relations, Law enforcement
officers, Military personnel, Penalties, Reporting and recordkeeping
requirements, Research, Seizures and forfeitures, Transportation.
Authority and Issuance
For the reasons discussed in the preamble, the Department amends 27
CFR part 478 as follows:
PART 478--COMMERCE IN FIREARMS AND AMMUNITION
0
1. The authority citation for 27 CFR part 478 continues to read as
follows:
Authority: 5 U.S.C. 552(a); 18 U.S.C. 847, 921-931; 44 U.S.C.
3504(h).
0
2. Amend Sec. 478.11 by:
0
a. Revising the definition of ``Dealer'';
0
b. In the definition of ``Engaged in the business'':
0
i. Redesignating paragraphs (a) through (f) as paragraphs (1) through
(6);
0
ii. Revising newly redesignated paragraph (3); and
[[Page 29090]]
0
iii. Adding paragraph (7);
0
c. Adding definitions of ``Former licensee inventory'', ``Personal
collection (or personal collection of firearms, or personal firearms
collection)'', and ``Predominantly earn a profit'' in alphabetical
order;
0
d. Revising the definition of ``Principal objective of livelihood and
profit''; and
0
e. Adding definitions of ``Responsible person'' and ``Terrorism'' in
alphabetical order.
The revisions and additions read as follows:
Sec. 478.11 Meaning of terms.
* * * * *
Dealer. Any person engaged in the business of selling firearms at
wholesale or retail; any person engaged in the business of repairing
firearms or of making or fitting special barrels, stocks, or trigger
mechanisms to firearms; or any person who is a pawnbroker. The term
shall include any person who engages in such business or occupation on
a part-time basis. The term shall include such activities wherever, or
through whatever medium, they are conducted, such as at a gun show or
event, flea market, auction house, or gun range or club; at one's home;
by mail order; over the internet (e.g., online broker or auction);
through the use of other electronic means (e.g., text messaging
service, social media raffle, or website); or at any other domestic or
international public or private marketplace or premises.
* * * * *
Engaged in the business--* * *
(3) Dealer in firearms other than a gunsmith or a pawnbroker. The
term ``engaged in the business as a dealer in firearms other than a
gunsmith or a pawnbroker'' shall have the same meaning as in Sec.
478.13.
* * * * *
(7) Related definitions. For purposes of this definition--
(i) The term ``purchase'' (and derivative terms thereof) means the
act of obtaining a firearm in an agreed exchange for something of
value;
(ii) The term ``sale'' (and derivative terms thereof) means the act
of disposing of a firearm in an agreed exchange for something of value,
and the term ``resale'' means selling a firearm, including a stolen
firearm, after it was previously sold by the original manufacturer or
any other person; and
(iii) The term ``something of value'' includes money, credit,
personal property (e.g., another firearm or ammunition), a service, a
controlled substance, or any other medium of exchange or valuable
consideration, legal or illegal.
* * * * *
Former licensee inventory. Firearms that were in the business
inventory of a licensee at the time the license was terminated. Such
firearms differ from a personal collection and other personal firearms
in that they were purchased repetitively before the license was
terminated as part of a licensee's business inventory with the
predominant intent to earn a profit.
* * * * *
Personal collection (or personal collection of firearms, or
personal firearms collection)--(1) General definition. Personal
firearms that a person accumulates for study, comparison, exhibition
(e.g., collecting curios or relics, or collecting unique firearms to
exhibit at gun club events), or for a hobby (e.g., noncommercial,
recreational activities for personal enjoyment, such as hunting, skeet,
target, or competition shooting, historical re-enactment, or
noncommercial firearms safety instruction). The term shall not include
any firearm purchased for the purpose of resale with the predominant
intent to earn a profit (e.g., primarily for a commercial purpose or
financial gain, as distinguished from personal firearms a person
accumulates for study, comparison, exhibition, or for a hobby, but
which the person may also intend to increase in value). In addition,
the term shall not include firearms accumulated primarily for personal
protection: Provided, that nothing in this definition shall be
construed as precluding a person from lawfully acquiring firearms for
self-protection or other lawful personal use.
(2) Personal collection of licensee. In the case of a firearm
imported, manufactured, or otherwise acquired by a licensed
manufacturer, licensed importer, or licensed dealer, the term shall
include only a firearm described in paragraph (1) of this definition
that was--
(i) Acquired or transferred without the intent to willfully evade
the restrictions placed upon licensees under 18 U.S.C. chapter 44;
(ii) Recorded by the licensee as an acquisition in the licensee's
acquisition and disposition record in accordance with Sec. 478.122(a),
Sec. 478.123(a), or Sec. 478.125(e) (unless acquired prior to
licensure and not intended for sale);
(iii) Recorded as a disposition from the licensee's business
inventory to the licensee's personal collection or otherwise as a
personal firearm in accordance with Sec. 478.122(a), Sec. 478.123(a),
or Sec. 478.125(e) (unless acquired prior to licensure and not
intended for sale);
(iv) Maintained in such personal collection or otherwise as a
personal firearm (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; and
(v) Stored separately from, and not commingled with the business
inventory. When stored or displayed on the business premises, the
personal collection and other personal firearms shall be appropriately
identified as ``not for sale'' (e.g., by attaching a tag).
* * * * *
Predominantly earn a profit. The term ``predominantly earn a
profit'' shall have the same meaning as in Sec. 478.13.
Principal objective of livelihood and profit. 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: Provided, 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.
* * * * *
Responsible person. Any 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.
* * * * *
Terrorism. For purposes of the definitions ``predominantly earn a
profit'' and ``principal objective of livelihood and profit,'' the term
``terrorism'' means activity, directed against United States persons,
which--
(1) Is committed by an individual who is not a national or
permanent resident alien of the United States;
(2) Involves violent acts or acts dangerous to human life which
would be a criminal violation if committed within the jurisdiction of
the United States; and
(3) Is intended--
(i) To intimidate or coerce a civilian population;
(ii) To influence the policy of a government by intimidation or
coercion; or
(iii) To affect the conduct of a government by assassination or
kidnapping.
* * * * *
0
3. Add Sec. 478.13 to subpart B to read as follows:
[[Page 29091]]
Sec. 478.13 Definition of ``engaged in the business as a dealer in
firearms other than a gunsmith or a pawnbroker.''
(a) Definition. 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. The term shall not include 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 the
person's personal collection of firearms. In addition, the term shall
not include an auctioneer who provides only auction services on
commission to assist in liquidating firearms at an estate-type auction;
provided, that the auctioneer does not purchase the firearms, or take
possession of the firearms for sale on consignment.
(b) Fact-specific inquiry. Whether a person is engaged in the
business as a dealer under paragraph (a) of this section is a fact-
specific inquiry. Selling large numbers of firearms or engaging or
offering to engage in frequent transactions may be highly indicative of
business activity. However, there is no minimum threshold number of
firearms purchased or sold 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.
For example, even a single firearm transaction or offer to engage in a
transaction, when combined with other evidence (e.g., where a person
represents to others a willingness and ability to purchase more
firearms for resale), may require a license; whereas, a single isolated
firearm transaction without such evidence would not require a license.
At all times, the determination of whether a person is engaged in the
business of dealing in firearms is based on the totality of the
circumstances.
(c) Presumptions that a person is engaged in the business as a
dealer. In civil and administrative proceedings, a person shall be
presumed to be engaged in the business of dealing in firearms as
defined in paragraph (a) of this section, absent reliable evidence to
the contrary, when it is shown that the person--
(1) Resells or offers for resale firearms, and also represents to
potential buyers or otherwise demonstrates a willingness and ability to
purchase and resell additional firearms (i.e., to be a source of
additional firearms for resale);
(2) Repetitively purchases for the purpose of resale, or
repetitively resells or offers for resale, firearms--
(i) Through straw or sham businesses, or individual straw
purchasers or sellers; or
(ii) That cannot lawfully be purchased, received, or possessed
under Federal, State, local, or Tribal law, including:
(A) Stolen firearms (e.g., 18 U.S.C. 922(j));
(B) Firearms with the licensee's serial number removed,
obliterated, or altered, or not identified as required by law (e.g., 18
U.S.C. 922(k) or 26 U.S.C. 5861(i));
(C) Firearms imported in violation of law (e.g., 18 U.S.C. 922(l),
22 U.S.C. 2778, or 26 U.S.C. 5844, 5861(k)); or
(D) Machineguns or other weapons defined as firearms under 26
U.S.C. 5845(b) that cannot lawfully be possessed (e.g., 18 U.S.C.
922(o); 26 U.S.C. 5861(d));
(3) Repetitively resells or offers for resale firearms--
(i) Within 30 days after the person purchased the firearms; or
(ii) Within one year after the person purchased the firearms if
they are--
(A) New, or like new in their original packaging; or
(B) The same make and model, or variants thereof;
(4) As a former licensee (or responsible person acting on behalf of
the former licensee), resells or offers for resale to a person (other
than a licensee in accordance with Sec. 478.57 or Sec. 478.78)
firearms that were in the business inventory of the former licensee at
the time the license was terminated (i.e., license revocation, denial
of license renewal, license expiration, or surrender of license),
whether or not such firearms were transferred to a responsible person
of the former licensee after the license was terminated in accordance
with Sec. 478.57(b)(2) or Sec. 478.78(b)(2); or
(5) As a former licensee (or responsible person acting on behalf of
the former licensee), resells or offers for resale firearms that were
transferred to the licensee's personal collection or otherwise as
personal firearms in accordance with 18 U.S.C. 923(c) and 27 CFR
478.125a(a) prior to the time the license was terminated, unless:
(i) The firearms were received and transferred without any intent
to willfully evade the restrictions placed on licensees by 18 U.S.C.
chapter 44; and
(ii) One year has passed from the date of transfer to the
licensee's personal collection or otherwise as personal firearms.
(d) Predominantly earn a profit--(1) Definition. 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: Provided, that
proof of profit, including the intent to 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. For
purposes of this section, a person may have the intent to profit even
if the person does not actually obtain the intended pecuniary gain from
the sale or disposition of firearms.
(2) Presumptions that a person has intent to predominantly earn a
profit. In civil and administrative proceedings, a person shall be
presumed to have the intent to predominantly earn a profit through the
repetitive purchase and resale of firearms as defined in paragraph
(d)(1) of this section, absent reliable evidence to the contrary, when
it is shown that the person--
(i) Repetitively or continuously advertises, markets, or otherwise
promotes a firearms business (e.g., advertises or posts firearms for
resale, including through the internet or other digital means,
establishes a website to offer their firearms for resale, makes
available business cards, or tags firearms with sales prices),
regardless of whether the person incurs expenses or only promotes the
business informally;
(ii) Repetitively or continuously purchases, rents, or otherwise
exchanges (directly or indirectly) something of value to secure
permanent or temporary physical space to display firearms they offer
for resale, including part or all of a business premises, a table or
space at a gun show, or a display case;
(iii) Makes and maintains records to document, track, or calculate
profits and losses from firearms repetitively purchased for resale;
(iv) Purchases or otherwise secures merchant services as a business
(e.g., credit card transaction services, digital wallet for business)
through which the person intends to repetitively accept payments for
firearms transactions;
(v) Formally or informally purchases, hires, or otherwise secures
business security services (e.g., a central station-monitored security
system registered to a business, or guards for security) to protect
firearms assets and repetitive firearms transactions;
(vi) 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, repetitive firearms transactions; or
(vii) Secures or applies for a State or local business license to
purchase for
[[Page 29092]]
resale or to resell merchandise that includes firearms.
(e) Conduct that does not support a presumption. A person shall not
be presumed to be engaged in the business of dealing in firearms when
reliable evidence shows that the person is only reselling or otherwise
transferring firearms--
(1) As bona fide gifts;
(2) Occasionally to obtain more valuable, desirable, or useful
firearms for the person's personal collection;
(3) Occasionally to a licensee or to a family member for lawful
purposes;
(4) To liquidate (without restocking) all or part of the person's
personal collection; or
(5) To liquidate firearms--
(i) That are inherited; or
(ii) Pursuant to a court order; or
(6) To assist in liquidating firearms as an auctioneer when
providing auction services on commission at an estate-type auction.
(f) Rebuttal evidence. Reliable evidence of the conduct set forth
in paragraph (e) of this section may be used to rebut any presumption
in paragraph (c) or (d)(2) of this section that a person is engaged in
the business of dealing in firearms, or intends to predominantly earn a
profit through the repetitive purchase and resale of firearms.
(g) Presumptions, conduct, and rebuttal evidence not exhaustive.
The activities set forth in the rebuttable presumptions in paragraphs
(c) and (d)(2) of this section, and the activities and rebuttal
evidence set forth in paragraphs (e) and (f) of this section, are not
exhaustive of the conduct or evidence that may be considered in
determining whether a person is engaged in the business of dealing in
firearms, or has the intent to predominantly earn a profit through the
repetitive purchase and resale of firearms.
(h) Criminal proceedings. The rebuttable presumptions in paragraphs
(c) and (d)(2) of this section shall not apply to any criminal case,
although they may be useful to courts in criminal cases, for example,
when instructing juries regarding permissible inferences.
0
4. Amend Sec. 478.57 by designating the undesignated paragraph as
paragraph (a) and adding paragraphs (b) through (d) to read as follows:
Sec. 478.57 Discontinuance of business.
* * * * *
(b) Upon termination of a license (i.e., license revocation, denial
of license renewal, license expiration, or surrender of license), the
former licensee shall within 30 days, or such additional period
approved by the Director for good cause, either:
(1) Liquidate the former licensee 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 this part; or
(2) Transfer the former licensee inventory to a responsible person
of the former licensee to whom the receipt, possession, sale, or other
disposition is not prohibited by law. Any such transfer, however, does
not negate the fact that the firearms were repetitively purchased, and
were purchased with the predominant intent to earn a profit by
repetitive purchase and resale.
(c) Transfers of former licensee inventory to a licensee or
responsible person in accordance with paragraph (b)(1) or (2) of this
section shall be appropriately recorded as dispositions, in accordance
with Sec. 478.122(b), Sec. 478.123(b), or Sec. 478.125(e), prior to
delivering the records after discontinuing business consistent with
Sec. 478.127. Except for liquidation of former licensee inventory to a
licensee within 30 days (or approved period) in accordance with
paragraph (b)(1) of this section, or occasional sale of a firearm from
such inventory thereafter to a licensee, a former licensee (or
responsible person of such licensee) who resells any such inventory,
including former licensee inventory transferred in accordance with
paragraph (b)(2) of this section, is subject to the presumptions in
Sec. 478.13 (definition of ``engaged in the business as a dealer in
firearms other than a gunsmith or pawnbroker'') that apply to a person
who repetitively purchased those firearms for the purpose of resale.
(d) The former licensee shall not 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'').
0
5. Amend Sec. 478.78 by designating the undesignated paragraph as
paragraph (a) and adding paragraphs (b) through (d) to read as follows:
Sec. 478.78 Operations by licensee after notice.
* * * * *
(b) Upon final disposition of license proceedings to disapprove or
terminate a license (i.e., by revocation or denial of renewal), the
former licensee shall within 30 days, or such additional period
approved by the Director for good cause, either:
(1) Liquidate the former licensee 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 this part; or
(2) Transfer the former licensee inventory to a responsible person
of the former licensee to whom the receipt, possession, sale, or other
disposition is not prohibited by law. Any such transfer, however, does
not negate the fact that the firearms were repetitively purchased, and
were purchased with the predominant intent to earn a profit by
repetitive purchase and resale.
(c) Transfers of former licensee inventory to a licensee or
responsible person in accordance with paragraph (b)(1) or (2) of this
section shall be appropriately recorded as dispositions, in accordance
with Sec. 478.122(b), Sec. 478.123(b), or Sec. 478.125(e), prior to
delivering the records after discontinuing business consistent with
Sec. 478.127. Except for the sale of former licensee inventory to a
licensee within 30 days (or approved period) in accordance with
paragraph (b)(1) of this section, or occasional sale of a firearm from
such inventory thereafter to a licensee, a former licensee (or
responsible person of such former licensee) who resells any such
inventory, including former licensee inventory transferred in
accordance with paragraph (b)(2) of this section, is subject to the
presumptions in Sec. 478.13 (definition of ``engaged in the business
as a dealer in firearms other than a gunsmith or pawnbroker'') that
apply to a person who repetitively purchased those firearms for the
purpose of resale.
(d) The former licensee shall not 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'').
0
6. Amend Sec. 478.124 by revising paragraph (a) to read as follows:
Sec. 478.124 Firearms transaction record.
(a) A licensed importer, licensed manufacturer, or licensed dealer
shall not sell or otherwise dispose, temporarily or permanently, of any
firearm to any person, other than another licensee, unless the licensee
records the transaction on a firearm transaction record, Form 4473:
Provided, that a firearms transaction record, Form 4473, shall not be
required to record the disposition made of a firearm delivered to a
licensee for the sole purpose of repair or customizing when such
firearm or a replacement
[[Page 29093]]
firearm is returned to the person from whom received; provided further,
that a firearms transaction record, Form 4473, shall not be used if the
sale or other disposition is being made to another licensed importer,
licensed manufacturer, or licensed dealer, or a curio or relic to a
licensed collector, including a sole proprietor who transfers a firearm
to their personal collection or otherwise as a personal firearm in
accordance with Sec. 478.125a. When a licensee transfers a firearm to
another licensee, the licensee shall comply with the verification and
recordkeeping requirements in Sec. 478.94 and this subpart.
* * * * *
Sec. 478.125a [Amended]
0
7. Amend Sec. 478.125a in paragraphs (a)(2) and (3) by removing the
citation ``Sec. 478.125(e)'' and adding in its place ``Sec.
478.122(a), Sec. 478.123(a), or Sec. 478.125(e)''.
Dated: April 8, 2024.
Merrick B. Garland,
Attorney General.
[FR Doc. 2024-07838 Filed 4-18-24; 8:45 am]
BILLING CODE 4410-FY-P
