[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





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Bureau of Alcohol, Tobacco, Firearms, and Explosives





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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  

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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.

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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.
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    \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).
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    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.
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    \2\ See generally Public Law 90-618, 82 Stat. 1213 (1968).
    \3\ 33 FR 18555 (Dec. 14, 1968).
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    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.
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    \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.
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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\
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    \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).
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    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\
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    \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.
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    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\
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    \15\ 27 CFR 178.11 (1988).
    \16\ Id.
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    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).
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    \17\ 27 CFR 478.125a(a); see also S. Rep. No. 98-583, at 13.
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    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\
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    \18\ S. Rep. No. 98-583, at 13.

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[[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\
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    \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).
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    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\
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    \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))).
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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\
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    \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.
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    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.
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    \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.
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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).
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    \25\ Public Law 103-159, 107 Stat. 1536 (1993). The Brady Act 
created NICS, which became operational on November 30, 1998.
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    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\
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    \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.
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    \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.
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    \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).
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    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\
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    \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/index.html.
---------------------------------------------------------------------------

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\
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    \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).
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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.
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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.
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    \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.'').
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    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\
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    \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).
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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).
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    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).

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[[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\
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    \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.
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    \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.
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    \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.
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    \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.).
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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.
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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\
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    \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\
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    \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.
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    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