Is a background check required when picking up NFA items from a dealer for a trust?

Posted on March 24, 2015 by John Pierce

Yes-No-MaybeOver the last two days I have been asked this question multiple times.  It seems that there is a great deal of confusion over this issue among both NFA owners and dealers.

However, I do not say this to disparage those who are confused.  Many of those who believe that a background check is not required base that belief upon information provided by the ATF themselves.  For example, they clearly stated that background checks were not required in a 2008 FFL Newsletter.

08_FFL_Newsletter

However, since the publication of that newsletter, the ATF has drawn a nuanced legal distinction between an individual owner picking up an NFA item subsequent to an approved tax stamp and a trustee of a trust doing the same.

In March of 2014 the ATF explained the statutory and regulatory basis for this new distinction in the following letter to Dakota Silencer.  Pay specific attention to the first two paragraphs on the second page.

Download (PDF, 128KB)

In September of 2014 the Virginia State Police followed up with their own guidance to dealers.  While poorly worded it does reiterate and support the ATF’s logic from the Dakota Silencer letter.

VA_Trust_SP65

So … the answer is “Yes” … if the tax stamp for the NFA item you purchased using an NFA trust has been approved and you are heading down to the dealer to pick it up, you will have to complete both a 4473 and a SP-65 and undergo a background check.

Posted in 4473, ATF, ATF Guidance Letters, Background Checks, BATFE, Federal Law, FFL 03, FFL Issues, NFA Transfers, NFA Trusts, SP-65, Virginia State Police | Comments Off on Is a background check required when picking up NFA items from a dealer for a trust?

Delegate Webert introduces bill to recognize other state’s gun rights restorations

Posted on January 26, 2015 by John Pierce

50_States_PuzzleBack in September of 2014 I wrote an article entitled Gun rights restoration is a state-by-state process.

In that article I demonstrated that generally, “a gun-rights restoration in a given state only allows you to purchase, possess, and transport firearms in that state.”

I believe it is safe to say that article generated more phone calls from concerned clients than any other single article I have ever written.

The most common conversation went something like this:

Client: “I had my rights restored in Virginia 15 years ago.”

Me:  “Ok.  That removes both your Virginia and federal prohibitions.”

Client: “And I have a Virginia concealed handgun permit.”

Me:  “Good.”

Client: “And the Virginia permit is recognized in North Carolina.”

Me:  “Yes it is.”

Client: “And I assumed I could carry in North Carolina.”

Me: “Ummm …. no you cannot!”

While  legislation inVirginia cannot do anything about making other states recognize our rights restoration process, we can take steps to codify the requirements for rights restorations from other states to be recognized in the Commonwealth.

Delegate Webert’s bill HB 2286 does just that.  It removes Virginia’s prohibition on firearms ownership for those felons “whose right to possess firearms or ammunition has been restored under the law of another state or political subdivision thereof.”

Posted in Gun Rights Restoration, Interstate Travel, Non Resident Issues, Virginia Law | Comments Off on Delegate Webert introduces bill to recognize other state’s gun rights restorations

Is the $200 tax on an NFA item deductible on your federal return?

Posted on January 25, 2015 by John Pierce

TaxesIt is the start of a new year, and many of us are reluctantly turning our attention to the filing of taxes.

That was certainly the case for the client who emailed me this morning and asked whether or not the $200 excise tax that is paid pursuant to the manufacture or transfer of an NFA item is deductible on his federal return.

It is definitely a valid question.  After all, certain other taxes represent deductions from your federal return.  Why not the NFA transfer tax?

Let’s take a closer look at the tax statutes.

26 U.S. Code § 164 tells us which taxes are deductions for purposes of your federal return. These include

(1) State and local, and foreign, real property taxes.
(2) State and local personal property taxes.
(3) State and local, and foreign, income, war profits, and excess profits taxes.
(4) The GST tax imposed on income distributions.
(5) The environmental tax imposed by section 59A.
(6) Qualified motor vehicle taxes.

This code section goes on to note that “any tax (not described in the first sentence of this subsection) which is paid or accrued by the taxpayer in connection with an acquisition or disposition of property shall be treated as part of the cost of the acquired property.”

In addition,the IRS specifically mentions ‘stamp taxes’ in their Tax Topics page on deductible taxes .

“Some taxes and fees you cannot deduct on Schedule A include federal income taxes, Social Security taxes, transfer taxes (or stamp taxes)”

So … while I always encourage my clients to take all deductions and exemptions for which they are legally eligible, that stack of canceled checks to the BATFE isn’t one of them.

Posted in ATF, BATFE, Federal Law, IRS, NFA Transfers, Tax Stamp | Comments Off on Is the $200 tax on an NFA item deductible on your federal return?

What are the requirements for engraving an item you are building on a Form 1?

Posted on January 25, 2015 by John Pierce

Engraving

This is one of those questions that gets asked over and over again and I should have written about it long before now.

But today I correct that omission.

Let’s walk through this in 10 easy steps.

1)  When you build an NFA item subsequent to a Form 1 approval, you are legally the ‘manufacturer’ of the resulting NFA item even if it is built upon an existing serialized lower.

2)  27 CFR 478.92 and 27 CFR 479.102 both lay out the requirements for placing identifying markings on items you ‘manufacture’.

3)  These regulations require that you engrave a serial number, model (if applicable), caliber or gauge, manufacturer’s name, and the city and state where the item was ‘manufactured’.

4)  If you are using an NFA trust to hold your NFA items then the trust name is the manufacturer’s name you will need to engrave.  If not, you will need to engrave your full legal name as the manufacturer.

5)  When you ‘manufacture’ an SBR or SBS using an existing lower the ATF allows you to ‘adopt’ the serial number, caliber/gauge, and/or model already identified on the lower if the lower meets or exceeds the marking requirements.  See ATF Ruling 2013-3 embedded below.

6)  The marking may be engraved, cast, or stamped.

7)  All markings must be to a minimum depth of .003 of an inch as measured from the flat metal surface.

8)  The serial number must be in a print size no smaller than 1/16th of an inch.

9)  There is no specific statutory or regulatory height requirement for the remaining information other than it be ‘legible’.  However, most NFA collectors choose to engrave the manufacturer’s name, city, and state in a 1/16th print size as well.

10)  Laser engraving is an amazing process and can result in beautiful work on your firearm but make sure that any laser engraving shop you select is capable of meeting the depth requirements above.

ATF Ruling 2013-3 allows for the ‘adoption’ of existing markings

Posted in 80% Lower, ATF, BATFE, Engraving, Form 1, Manufacturing, NFA Trusts, SBR, Short Barreled Rifles, Short Barreled Shotguns | Comments Off on What are the requirements for engraving an item you are building on a Form 1?

Trust names must be exact when completing ATF forms

Posted on January 23, 2015 by John Pierce

ImportantA flustered client called me earlier today from the parking lot of his local gun dealer / range with a rather startling question.

He wanted to know whether it was acceptable to change the name of his trust on a Form 4 from ‘Example Arms Trust‘, which is the actual name on the instrument to ‘Example Revocable Trust‘.

When I assured him that it was definitely not acceptable to do so, he explained that the manager of the gun store had just done that very thing on the Form 4s for the suppressor he was attempting to purchase.

Apparently, when he questioned her, she said that it “was fine and that they do it all the time.”  I informed him that if they truly did it “all the time” then those other applicants were in for a rude surprise.  Namely a letter that looks like this:

Must_Match

After our call, he returned to the store and asked that it be changed whereupon the manager became angry and things went downhill from there.  Ultimately though, no incorrect Form 4s were filed.

But what would have happened if the Form 4s had been sent in with the name being incorrect?

The most likely result would have been a denial letter such as the one shown above.

I have to say that I am absolutely amazed that a gun store manager would not understand the need for exactitude. After all, this is the ATF we are talking about.

Let me state their position for you clearly:

The name of the trust is not negotiable.

It is a legal name and must match exactly between the instrument and what is placed on the Form 4 (or any other ATF form).  The slightest deviation is a problem.  A friend of mine who is an FFL has had Form 4s rejected when the word ‘The‘ was erroneously added in front of the name of the trust.

But a denial is the best possible result.  If the ATF somehow erred and approved the Form 4 then you would have an item registered in the NFRTR under the name of a trust that you are not affiliated with.  This could have serious legal consequences for the owner.

So how do you protect yourself from similar issues?

1)  If your dealer is assisting you with the completion of your Form 4, make sure that the name entered on the form matches your trust name exactly.

2)  If you receive a denial from the ATF because the name does not match, contact me and I will assist you in submitting a corrected application.

3)  If you receive an approved tax stamp in a name different than that of your trust, contact me and I will assist you in either renaming your existing trust (if you have no other items registered in the original name of the trust) or in drafting a new trust to match the incorrect name.

Remember … you are ultimately the one attesting to the validity of the information you provide on the Form 4.

Posted in ATF, BATFE, FFL Issues, Form 4, NFA Transfers, NFA Trusts | Comments Off on Trust names must be exact when completing ATF forms