May I abbreviate my trust name when I engrave an SBR?

Posted on February 6, 2014 by John Pierce

EngravingRecently a client called me to ask if he could abbreviate his trust name when he engraved an SBR.

As one might expect in the Google age, prior to calling me he had searched on the internet and, based upon what he had found there, was already convinced that it would be acceptable.

The only problem is that it’s definitely not acceptable to the ATF.

Let me reiterate that … you can not abbreviate your trust name when engraving an SBR (or any other personally manufactured NFA item).  You must engrave the full and exact name of the trust.

I believe that the confusion arises from the wording of 27 CFR § 479.102(a)(2)(iii) which requires that

(a) You, as a manufacturer, importer, or maker of a firearm, must legibly identify the firearm as follows:
…
(2) By engraving, casting, stamping (impressing), or otherwise conspicuously placing or causing to be engraved, cast, stamped (impressed), or placed on the frame, receiver, or barrel thereof certain additional information.
…
(iii) Your name (or recognized abbreviation) …

That makes perfect sense when applied to an individual applicant.  For example, ‘Jr’ is a ‘recognized abbreviation‘ for Junior when used in the context of a name.  The use of the abbreviation does not change the legal person which is being referenced.

However, the same is not true where a trust is concerned.  A trust, by definition, is a legal entity with a specific name.  In that context, the ‘John Pierce Junior Trust’ is absolutely not the same thing as the ‘John Pierce Jr Trust’.

The ATF has actually rejected Form 1 applications when the proposed engraving did not match the full legal name of the trust.  See the following rejection letter which has been widely distributed amongst the NFA community.

Engraving Error_Document

These types of issues can be avoided by working with an experienced attorney to draft your NFA trust.  Picking a name that is suitable for engraving is the first step in putting together a trust that will serve you both today and in the years to come.

After all, just because you are only buying a suppressor today doesn’t mean that you won’t be building an SBR tomorrow. If there is one thing that we all know about building an NFA collection it’s this … you can’t stop at just one.

Posted in ATF, BATFE, Engraving, Form 1, Manufacturing, NFA Trusts, SBR, Short Barreled Rifles, Short Barreled Shotguns | Comments Off on May I abbreviate my trust name when I engrave an SBR?

Currently machine guns cannot be registered to trusts in Virginia

Posted on February 2, 2014 by John Pierce

VA_MG_Opinion** There is an update to this article **

In December of last year, I received several calls from NFA dealers who had been told by ATF employees that there was a change upcoming regarding the use of trusts to own NFA items in Virginia.

Following on the heels of the disastrous 41p proposed rulemaking by the ATF, this news had these dealers understandably concerned. They were fearful that the incoming Governor of Virginia might be planning some sort of administrative attack on NFA ownership in the Commonwealth.

The actual issue as it turns out only involves the use of a trust to register machine guns.

Let’s start with a little background.

While allowing ownership of all NFA items save one (assuming compliance with all federal laws), the Commonwealth of Virginia additionally requires that machine guns (and only machine guns) be registered with the state.

This registration is governed by the Uniform Machine Gun Act as codified at § 18.2-295 et seq.  of the code of Virginia.  However, in this act at § 18.2-299, the definition of a ‘person’ who may register a machine gun in overly narrow.  The statute states that a ‘Person’ “applies to and includes firm, partnership, association or corporation.”

This definition is substantially narrower than the general definition of ‘Person’ in the Code of Virginia which is codified at § 1-230 and defines a ‘Person’ as “any individual, corporation, partnership, association, cooperative, limited liability company, trust, joint venture, government, political subdivision, or any other legal or commercial entity and any successor, representative, agent, agency, or instrumentality thereof.”

Based upon this difference, sometime last year, Colonel Flaherty, Superintendent of the Virginia State Police wrote to then-Attorney General Cuccinelli and posed the question of “whether a trust may register a machine gun in Virginia under the Uniform Machine Gun Act.”

In an opinion dated November 27th, 2013, Attorney General Cuccinelli opined that “a trust may not register a machine gun pursuant to the Uniform Machine Gun Act as enacted by the Virginia General Assembly.”

His reasoning was that “When the legislature omits language from one statute that it has included in another, courts may not construe the former statute to include that language, as doing so would ignore ‘an unambiguous manifestation of a contrary intention’ of the legislature.”

In other words, the term ‘Person’ is already defined in the Code of Virginia and includes trusts.  In specifically adding a section to the Uniform Machine Gun Act defining the term more narrowly, one has to assume the omission was intentional on the part of the legislature.

So … where does this leave us?  The ‘change’ that the dealers were told was upcoming is this … Machine guns may no longer be registered to trusts in Virginia.

We are still awaiting clarification of what will happen to those machine guns that are already registered to trusts.  In addition, I am awaiting clarification from the ATF on how applicants who submitted Form 4 or Form 5 transfers which are still in process should proceed.

In the meantime, Virginia Delegate Dave Larock has introduced HB 1266 to correct this issue.  This bill is currently before the House Militia, Police, and Public Safety Committee.

Given these changes, what should you as an NFA collector do?

1)  If you currently own a machine gun in a trust you should immediately contact the attorney who formed your NFA trust and work with him or her to protect your assets.

2) If you support Delegate LaRock’s bill to add trusts to the list of entities which may register machine guns in the Commonwealth then might I suggest you use the ‘Write Your Legislators’ tool provided by VCDL to email the House Militia, Police, and Public Safety Committee.  The tool will send your message to every single member of the committee.

** There is an update to this article **

Posted in AG Opinions, Estate Planning, Form 4, Form 5, Machine Guns, NFA Trusts, Virginia Law | Comments Off on Currently machine guns cannot be registered to trusts in Virginia

Will my beneficiaries have to pay a transfer tax when my NFA trust distributes my assets?

Posted on January 23, 2014 by John Pierce

inheritanceThe short answer is “No. At least not currently.”  But that qualifier is an important part of the answer.

Currently the ATF allows transfers of NFA items to devisees, heirs, or specified beneficiaries to be tax-free via a Form 5.

The reason that such transfers are tax-free is because the ATF considers such transfers to not be “voluntary transfers” but rather “transfers by operation of law.”

However, this is a policy only and is not backed up by a promulgated regulation. Therefore, there is the possibility that they may change their position at some time in the future.

If they were to make such a policy change, it would not only affect items owned by NFA trusts but also those owned by individuals and would certainly face stiff opposition from both NFA collectors and industry groups.

My personal prediction is that we will not see a change in this policy unless it is politically motivated and part of a larger attack on NFA ownership.

Posted in ATF, BATFE, Estate Planning, Form 5, NFA Trusts | Comments Off on Will my beneficiaries have to pay a transfer tax when my NFA trust distributes my assets?

We have an update on the ATF’s proposed NFA trust rule changes

Posted on January 21, 2014 by John Pierce

ASA_LogoLast week, the board of the American Silencer Association (ASA) met with the NFA branch to get an update on the status of the proposed rule change regarding the use of trusts to acquire NFA items.

As you may recall, the comment period for the proposed rule change (known as 41p)  ended on December 9th of 2013 and since then we have all been waiting anxiously for the ATF to provide information about the number of valid comments submitted.

This is important because, as part of the federal administrative rulemaking process, the ATF must respond to all valid comments in writing prior to moving on to the final rulemaking process.

The ATF told the ASA that there were an astonishing 9,504 comments received.  However, approximately 1,000 of these were disqualified for vulgarity, anonymity, or non-applicability.  That still leaves around 8,500 comments, almost all of which were opposed to one or more aspects of the rulemaking.

Because of the extraordinary number of comments in opposition to the proposed rule, the ATF stated that they anticipate it will take at least a year before they will be able to move on to the final rulemaking process.

At that time, we will see what effect our comments have had on the text of the rule.  If the CLEO sign off remains as part of the final rule, or if the defects in the ‘responsible persons’ language is not addressed then there will almost certainly be legal challenges to the rulemaking process.

In the meantime, the NFA trust remains hands-down the best vehicle for NFA ownership.

Posted in 41P, ATF, BATFE, Form 1, Form 4, Machine Guns, NFA Trusts, Regulatory Rulemaking, SBR, Short Barreled Rifles, Short Barreled Shotguns | Comments Off on We have an update on the ATF’s proposed NFA trust rule changes

Can I change the name of my NFA trust?

Posted on January 17, 2014 by John Pierce

Name_ChangeRecently I was contacted by a client who had, in years past, used a software package to make his own NFA trust.

He had successfully registered several suppressors using the trust but had run into trouble when he decided that he wanted to build an SBR.

If you are familiar with the process of building an SBR, I suspect that you can guess what the problem was.  When you ‘manufacture’ an NFA item using a Form 1, you are required to engrave the name of the ‘manufacturer’ on the resulting NFA item (usually the lower if you are building an SBR).

When it is a trust that is ‘manufacturing’ the item then it is the trust name that is considered the ‘manufacturer.’  The problem this created is that the software package had, by default, named his trust something along the lines of ‘The John Andrew Pierce Revocable Living Trust of August 2011.’

That was not going to fit on his lower.

He contacted me to ask the question “Can I change the name of my trust?”

Unfortunately the answer is “No. At least not after you have already registered at least one other item in the National Firearms Registration and Transfer Record (NFRTR) with the existing trust name.”

In the end we simply formed a new trust to hold his future NFA items.  But there are two lessons to be learned here:

  1. Choose the name of your trust carefully because it will be with you a long time.
  2. Think long and hard before using a software package or prepackaged forms to create a trust for ownership of items that can literally have criminal consequences if handled improperly.
Posted in ATF, BATFE, Form 1, NFA Trusts, SBR | Comments Off on Can I change the name of my NFA trust?