ATF 41P Published in Federal Register

Caution Bureaucrats at WorkJosh Prince has the story. This starts the clock ticking, causing the regulation to take effect on July 13, 2016. He has created a website called Fight ATF 41P. At this point, it appears that Prince’s initial analysis is still valid, and we didn’t have any surprises sprung on us between the rule published by ATF and in the Federal Register. There was a lot of discussion on this topic when it originally came up the other week, and many were disappointed that Form 1s and Form 4s could no longer be e-filed for trusts and corporations.

The reason we ended up with 41P in the first place is because so many people were using trusts to get around the CLEO signoff requirement that ATF was overwhelmed with processing trusts, since trusts had to be vetted to ensure there were no problems with it, and there often were. ATF had been saying in NRA’s Firearms Law seminar for a while that they were looking carefully at the CLEO requirement, including possibly eliminating it, to cut down on the number of trusts. Unfortunately for ATF, there’s also constructive possession issues with NFA items that is likely to cause trusts to remain popular. For these reasons, it can’t really be argued that use of trusts for NFA items is a form of “malicious compliance,” but it certainly has the same features. One of the key objections to 41P is that it’s not abundantly clear who responsible persons are. It’s probably wise advice to take the broad view there. I don’t see any reason not to replace one headache at ATF with another.

10 Responses to “ATF 41P Published in Federal Register”

  1. Jim Jones says:

    So the definition of “responsible person” has not changed. That means that any trustee or co-trustee that does NOT have “the power or authority to direct the management and policies of the trust or entity” is, by definition, NOT a “responsible person.” The rule also does not change the fact that a co-trustee can be added after the items have been purchased, and they do not need prints/photos (assuming no more purchases on that trust). The ATF left plenty of wiggle room to avoid its stated goal. It doesn’t matter what they wanted the new rule to do. In legal interpretation, what matters is what the rules says on its face.

    Yes, I as the trustee now need to get prints and photos to work with a trust. However, I can still use them to avoid constructive possession issues for family members without subjecting said family members, who do not care about this stuff anyways, to prints/photos. And this allow folks who live in non-RKBA friendly locales to get NFA items if their CLEO wouldn’t sign before.

  2. Jim Jones says:

    Legal eagles, Ryan Cleckner interprets the new rule in a very odd way (to me):

    He argues the following:

    The crux of the debate is whether the language “capability to exercise such power” from the first part refers to the earlier language “direct the management and policies of the trust” or the later language from the second part, “power or authority . . . to . . possess.” If it refers to the first part, trustees aren’t responsible persons. If it refers to the second part, they are.

    My question to you is the following: How can the words “such power” be related to the later “power” of possession that comes later in the paragraph. That makes no sense to me. It would seem to violate proper sentence structure. Am I missing something?

    • Jake says:

      It does seem circular (“the people with the authority includes the people with the authority”).

    • Jim Jones says:

      I don’t want to seem too harsh on Ryan, but my discussions with him on his TTAG article left me with the impression that he felt that the ATF’s stated intent was important. He is a lawyer, and he should know better. If the ATF drafted a rule with a huge loophole left in it, that’s THEIR fault, not ours. My job as a lawyer is to exploit said loopholes. He is in the industry, so he may be more deferential to the ATF than I am inclined to be. In any event, I plan on accelerating my subscription to the NFA club because of this change, but I will make sure that my trust can use navigate the new rules to the fullest extent of the law.

  3. aerodawg says:

    Simple solution. Structure your trust like mine. I’m the main trustee. I can add or remove trustees with a single sheet. Remove the other trustees just long enough to fill out and mail the paper work. 100% Legal and a gigantic $&^% you to ATF. Indicating once again how ludicrous ATF is adding these concrete legal requirements to something that is infinitely changeable while still remaining legal.

    • Jim Jones says:

      This is correct. Either guys like Cleckner don’t want to advertise this mechanism to keep it off the ATF’s radar (I’m sure they already know, but I don’t think they can do anything about it), or he is not a very competent lawyer.

      • aerodawg says:

        What exactly could they do about it? The law lets them look at people during the transfer, not forever and ever after the fact.

        The issue with a corporation is even worse. Imagine if it was a publically traded corporation where officers can change daily. Background check the “responsible people” today and tomorrow they could all be replaced, all legal and on the up and up.

        • Jim Jones says:

          I understand this perfectly, which is why I find it so odd the way Joshua Prince and Ryan Cleckner are bending over backwards to tell people that everyone in a trust now has to get prints and photos. Yes, I will have to do that. Fine. But the folks that I only put on there to avoid any “constructive possession” issues shouldn’t even have to be on that trust in the first place if the ATF didn’t come up with these asinine “constructive possession” rules in the first place. Just because the ATF wants everyone in a trust to get photo’ed and print’ed doesn’t mean that the law actually requires it. It kind of makes me question their legal judgment.

          • Jim,

            If you question my legal judgment and competency, by all means, ask ATF. You’re out at SHOT, right? They’re here and they’re the regulatory agency that will be enforcing it. What we as the Industry want and what the rule provides and ATF’s interpretation thereof (which is generally afforded great deference by the courts and why the administrative agency’s “intent” generally matters significantly) tend to be two drastically different things. Also, you may want to inquire of whether purposely leaving those individuals off in relation to any submission will be considered making a false statement to federal authorities.

            Also, I think it bears noting that I’ve never said that everyone in a trust must submit the CLEO notification, fingerprints and photo. I have stated that based on the feedback I’ve received from ATF, if you are a trustee, whether you have the power to change or make decisions regarding the management/decisions OR the mere ability to possess, they consider you an RP under the new ruling.

            Lastly, I’m also confused by your prior post that the “definition of ‘responsible person’ has not changed.” There never was a definition of a responsible person prior to this ruling.

            • Jim Jones says:

              Josh, I am a lawyer. People who provide tax planning advice don’t go asking the IRS for permission to set up their clients’ affair in a way that pleases the IRS. They analyze the issue, and counsel their clients accordingly. I don’t have to ask the ATF’s permission for anything other than making a transfer. Are you really appealing to authority on me? You’re at SHOT having a latte with the good folks from the ATF. Big fucking deal.

              Listen, if I misspoke and you never said that everyone in a trust must submit the CLEO notification, fingerprints and photo, then I apologize. I am simply frustrated to read articles from lawyers essentially laying down for the king because of his new pronouncement. My beef is not with you. The ATF is a stooge of this administration, and they make me sick. For Christ’s sake, they knowingly allowed cartels to straw purchase guns because it would help their overlord’s play on gun control. American men are dead because of those decisions. FUCK THOSE ASSHOLES. If Republicans hadn’t wasted the good will of impeachment on a guy getting blowjobs, we might have been able to actually use it for something that is legitimately worthy of impeachment.

              Did you catch the new Orwellian re-branding of NFA items as “most dangerous weapons”? That wasn’t an accident. NFA items are gaining in popularity, and the Dems and statists don’t like it. The only reason trusts are even necessary in the first place is because of the “constructive possession” rules that the ATF can selectively choose to enforce. I certainly don’t want my family members’ liberty to be exposed to the whims of autocratic bureaucrats. This administration gladly weaponized the IRS against groups it considered “other”. I fully expect them to do the same with the ATF (what would Hillary do?).

              As it relates to the change in the definition of “responsible person”, I was talking about the language in the published summary of the rule compared to the final published rule. As far as I can tell, the only difference is that the published rule includes the example that a responsible person includes a trustee. That still leaves plenty of holes in the ATF’s grand master plan to drive a semi through.

              First, if one isn’t a trustee, and doesn’t have management power over the policies of the trust, then one is NOT a responsible person. Wouldn’t it be possible for a beneficiary to have possession rights under a trust? (I don’t know, I’m not a trust & estates lawyer). In addition, the easiest way to avoid the hassles of the new rules is to amend the trust to remove and add trustees. If there are no other trustees when a transfer is made, that solves the problem. New trustees don’t have to get ID’ed and photo’ed. They only have to do that if they are a trustee at the time of a transfer.

              I recognize that you work in the business, and I am sure it’s better for business if you don’t upset the apple cart too much. I am under no such obligation. All I have to do is to make sure that I’m in legal compliance. Whether or not that jives exactly with what the ATF’s intent is, I couldn’t care less, and nothing would make me happier to exploit a loophole in my favor to be a legal thorn in their side. I truly resent the fact that some of my fellow citizen think it’s good sport to try to make felons out of their “other” fellow law abiding citizen.