"New" ATF Regs on NFA Title II Firearms - Machine Guns, Destructive Devices, Etc"
When firearms enthusiasts refer to the “new ATF regs” on National Firearms Act (NFA) Title II firearms, they mean the federal regulations found in 27 CFR Part 479 that took effect on July 13, 2016. These regulations covered for the first-time trusts and other legal entities that wish to make or receive NFA Title II firearms. Prior thereto, the regs only covered individual manufacturers or transferees of NFA Title II firearms. So, attorneys like me who draft NFA gun trusts for their clients are glad to have these new regs drafted and approved because they add clarity and rules.
By way of background, no NFA Title II firearm may be transferred unless an application has been filed with and approved by the ATF and the transfer tax is paid. Both the transferor and the transferee provide certain information with the application. Here are some of the major provisions of these new regs that apply to transferring NFA Title II firearms. By the way, Title II firearms are machine guns, suppressors and other “destructive devices;” they’re not your typical hunting rifles or handguns used for self-protection. (This blog does not address “making or manufacturing” Title II firearms).
First, the regs define the term “responsible person,” as an individual in the trust or other legal entity, excluding estates, who has the power and authority to direct the management and policies of the entity insofar as they pertain to firearms. Typically, this means the settlors (i.e. those who set up the trust) and trustees (i.e. those who govern the trust) and can mean beneficiaries (i.e. those who benefit from the trust) depending upon how the trust is drafted.
Responsible persons will also have to submit ATF Form 5320.23, the NFA Responsible Person Questionnaire, fingerprint cards and other identifying information to the ATF and undergo a background check with each new application. The ATF needs this information to ensure that each “responsible person” is permitted to possess a firearm.
The new regs do away with the need for the chief law enforcement officer (CLEO) to certify each new application; the regs replace CLEO certification with CLEO notification. So now, CLEOs will need only be notified that a new application to receive an NFA firearm is being made. The notification must include a copy of the application and supporting materials. The notification must be made before the transferee is permitted to receive the firearm. This closes what some referred to as a loophole because under the prior regs no certification or notification was required when transferring an NFA to a trust or legal entity.
The new regs also clarify that an executor, administrator, personal representative, or other person authorized under state law may possess a firearm registered to a decedent during the term of probate without this possession being treated as a transfer under the NFA; further this person may transfer the firearm to a lawful heir and such transfer is exempt from the transfer tax.
What are some of the benefits of a well-drafted gun trust?
Expanded Usability of NFA Items:
• The creator of a trust may name any number of joint trustees.
• Any trustee may make unlimited use of trust assets.
• Any trustee may allow shooting acquaintances to shoot trust assets in their presence.
Estate Planning Benefits:
• Trust assets avoid probate and the time and expenses associated with it.
• Trust assets pass tax‐free to named beneficiaries thereby avoiding the Pennsylvania Inheritance Tax. Without the Trust, the Inheritance Tax would apply as follows:
- 4.5% to direct descendants and other lineal heirs like children and grandchildren;
- 12% to siblings
- 15% to nieces and nephews and any other heir
• Trust assets may be held for underage beneficiaries
• If the Trust is drafted properly, successor trustees are given detailed instructions on how to handle NFA items
Asset Protection Benefits:
• Trust assets do not become contraband and possibly subject to seizure by the government when trustees become disqualified.
• Trustees who become disqualified are automatically removed from the trust.
• The trust retains ownership of trust assets for the benefit of beneficiaries.
If you have any questions about setting up or administering a gun trust, please do not hesitate to call Scaringi Law’s gun trust attorney at 717-657-7770.