[Federal Register Volume 88, Number 173 (Friday, September 8, 2023)]
[Proposed Rules]
[Pages 61993-62023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19177]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF JUSTICE

Bureau of Alcohol, Tobacco, Firearms, and Explosives

27 CFR Part 478

[Docket No. ATF 2022R-17; AG Order No. 5781-2023]
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: Notice of proposed rulemaking; request for comment.

-----------------------------------------------------------------------

SUMMARY: The Department of Justice (``Department'') proposes amending 
Bureau of Alcohol, Tobacco, Firearms, and Explosives (``ATF'') 
regulations to implement the provisions of the Bipartisan Safer 
Communities Act (``BSCA''), effective June 25, 2022, that broaden the 
definition of when a person is considered ``engaged in the business'' 
as a dealer in firearms other than a gunsmith or pawnbroker. This 
proposed rule incorporates the BSCA's definition of ``predominantly 
earn a profit,'' creates a stand-alone definition of ``terrorism,'' and 
amends the 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 
proposed 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,'' including how 
that term applies to auctioneers, and defines the term ``responsible 
person.'' These proposed changes would 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 proposed 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 proposed rule further addresses the lawful ways in 
which former licensees, and responsible persons acting on behalf of 
such licensees, may liquidate business inventory upon revocation or 
other termination of their license. Finally, the proposed rule 
clarifies that a licensee transferring a firearm to another licensee 
must do so by following the verification and recordkeeping procedures 
instead of using a Firearms Transaction Record, ATF Form 4473.

DATES: Written comments must be post-marked and electronic comments 
must be submitted on or before December 7, 2023. Commenters should be 
aware that the electronic Federal Docket Management System will not 
accept comments after midnight Eastern Time on the last day of the 
comment period.

ADDRESSES: You may submit comments, identified by docket number ATF 
2022R-17, by either of the following methods--
    <bullet> Federal eRulemaking Portal: www.regulations.gov. Follow 
the instructions for submitting comments.
    <bullet> Mail: Helen Koppe, Mail Stop 6N-518, Office of Regulatory 
Affairs, Enforcement Programs and Services, Bureau of Alcohol, Tobacco, 
Firearms, and Explosives, 99 New York Ave. NE, Washington, DC 20226; 
ATTN: ATF 2022R-17.
    Instructions: All submissions received must include the agency name 
and docket number (ATF 2022R-17) for this notice of proposed rulemaking 
(``NPRM'' or ``proposed rule''). All properly completed comments 
received from either of the methods described above will be posted 
without change to the Federal eRulemaking portal, www.regulations.gov. 
This includes any personal identifying information (``PII'') submitted 
in the body of the comment or as part of a related attachment. 
Commenters who submit through the Federal eRulemaking portal and who do 
not want any of their PII posted on the internet should omit PII from 
the body of their comment or in any uploaded attachments. Commenters 
who submit through mail should likewise omit their PII from the body of 
the comment and provide any PII on the cover sheet only. For detailed 
instructions on submitting comments and additional information on the 
rulemaking process, see the ``Public Participation'' heading of the 
SUPPLEMENTARY INFORMATION section of this document.

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. Background

    The Department is proposing to amend ATF regulations to implement 
the provision 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 Gun Control Act of 
1968 (``GCA'') at 18 U.S.C. 921(a)(21)(C), and to facilitate compliance 
with the statute.
    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)-(2), (c)(1); 28 
CFR 0.130(a)(1) and (2); Treasury Department Order No. 221, sec. 
(2)(a), (d), 37 FR 11696, 11696-97 (June 10, 1972). Accordingly, the 
Department and ATF have promulgated regulations necessary

[[Page 61994]]

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 and received a license to do so from the 
Attorney General (18 U.S.C. 923(a)), who has delegated that function to 
ATF (28 CFR 0.130(a)(1)). The application contains information 
necessary to determine eligibility for licensing and must include a 
photograph, fingerprints of the applicant, and a license application 
fee. 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). 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.
---------------------------------------------------------------------------

    \1\ Persons who engage in the business of manufacturing or 
importing firearms, including those that are 3D printed or assembled 
from parts, 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).
---------------------------------------------------------------------------

    Significantly, under the GCA, once licensed, firearms dealers are 
required to conduct background checks through the FBI's National 
Instant Criminal Background Check System (``NICS'') on prospective 
firearm recipients to prevent prohibited persons from receiving 
firearms, and to maintain firearms transaction records for crime gun 
tracing purposes. See 18 U.S.C. 922(t); 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. Id. 922(a)(1)(A); 924(a)(1)(D); 
3571(b)(3).

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, to mean ``any person engaged in the business of 
selling firearms at wholesale or retail.'' However, as originally 
enacted, the GCA did not define the term ``engaged in the business.'' 
\2\ Nor did ATF define the term ``engaged in the business'' in the 
original GCA implementing regulations.\3\ Although courts had 
``continually found that the current situation'' was ``adequate for 
enforcement purposes,'' ATF published an Advance Notice of Proposed 
Rulemaking (``ANPRM'') in 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 referenced the lack of a common understanding 
of that term by the courts and requested comments from the public and 
industry on how the phrase should be defined and the feasibility and 
desirability of defining it.
---------------------------------------------------------------------------

    \2\ See generally Public Law 90-617, 82 Stat. 1213 (1968).
    \3\ 33 FR 18555 (Dec. 14, 1968).
---------------------------------------------------------------------------

    ATF received 844 comments in response, of which approximately 551, 
or 65.3 percent, were in favor of ATF defining that term.\4\ This 
included approximately 324 firearms dealers in favor of defining the 
term. However, none of the proposed 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 threshold numbers proposed ranged from ``more 
than one'' to ``more than 100'' per year. ATF did not adopt that 
proposal 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, 
sought to define ``engaged in the business.'' \7\ For additional 
reasons why ATF has not adopted a minimum number of sales, see Section 
II.D of this preamble.
---------------------------------------------------------------------------

    \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) (``ATF Internal Memorandum''), attach. Summary Sheet on 
``Engaged in the Business,'' ANPRM No. 331, Published December 19, 
1979, at 1.
    \5\ Id.
    \6\ See id. at 2.
    \7\ ATF Internal Memorandum at 4.
---------------------------------------------------------------------------

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). With its passage, 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 a few months later, 
clarifying that ``proof of profit'' was not required ``as to a person 
who engages in the regular and repetitive purchase and disposition of 
firearms for criminal purposes or terrorism.'' \11\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    Consistent with their text, the definitions' purposes were to 
clarify that individuals not otherwise engaged in the business of 
dealing firearms who make only occasional firearms sales for a hobby 
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 license requirement to only persons for whom 
selling or disposing of firearms is a principal source of income or a 
principal business activity. The Committee Report stated, ``[t]hus, 
this provision would not remove the necessity for licensing from part-
time

[[Page 61995]]

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    Two years after enactment, FOPA's definition of ``engaged in the 
business'' was incorporated into ATF's implementing regulations at 27 
CFR 178.11 (now 478.11) in defining the term ``Dealer in firearms other 
than a gunsmith or a pawnbroker.'' \14\ At the same time, consistent 
with the statutory text and legislative history, ATF amended the 
regulatory term ``dealer'' to clarify that the term includes ``any 
person who engages in such business or occupation on a part-time 
basis.'' \15\
---------------------------------------------------------------------------

    \14\ 53 FR 10480, 10491 (Mar. 31, 1988).
    \15\ Id. 10490-91.
---------------------------------------------------------------------------

    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. 18 U.S.C. 923(c). 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 date of transfer. 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 at the licensee's business premises ``with 
appropriate recording.'' \16\ 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. Second, if a licensee acquires or disposes of any 
firearm for the purpose of willfully evading the restrictions placed 
upon licensees under the GCA, that firearm always legally remains part 
of the business inventory. Thus, ``circuitous transfers are not exempt 
from otherwise applicable licensee requirements.'' \17\ 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.\18\ ATF incorporated these 
provisions into its FOPA implementing regulations in 1988.\19\
---------------------------------------------------------------------------

    \16\ S. Rep. No. 98-583, at 13.
    \17\ Id.
    \18\ See Public Law 99-360, sec. 1(c), 100 Stat. at 766-67.
    \19\ See 53 FR 10480; 27 CFR 178.125a (now 478.125a).
---------------------------------------------------------------------------

    Courts interpreting the 1986 FOPA definition of ``engaged in the 
business'' found a number of factors relevant to assessing whether a 
person met that standard. 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 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). The court expanded further that, ``[a]s is 
often the case in such analyses, the importance of any one of these 
considerations is subject to the idiosyncratic nature of the fact 
pattern presented.'' Id. at 201. In a separate case, the Third Circuit 
also 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. 1994), vacated on other grounds, 513 U.S. 
957 (1994).\20\
---------------------------------------------------------------------------

    \20\ 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.'''); 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.'' (quotation marks and 
citation omitted)); 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))).
---------------------------------------------------------------------------

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. Among them was a requirement that ATF clarify, in 
a manner consistent with court rulings on the issue: (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.\21\ To provide this 
clarification, ATF published a guidance document entitled Do I Need a 
License to Buy and Sell Firearms?, ATF Publication 5310.2 (Jan. 2016), 
https://www.atf.gov/file/100871/download, which addressed these topics. 
The guidance was developed to assist unlicensed persons in 
understanding when they will likely need to obtain a license as a 
dealer in firearms. ATF is updating this guidance to conform with the 
``engaged in the business'' definition as amended by the BSCA. Further, 
once a final rule is adopted based on this NPRM, ATF intends to update 
the guidance to include additional detail as needed to conform with the 
rule.
---------------------------------------------------------------------------

    \21\ See The White House, Office of the Press Secretary, 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.
---------------------------------------------------------------------------

D. Bipartisan Safer Communities Act (2022)

    Over 35 years after FOPA's enactment, on June 25, 2022, President 
Biden signed into law the Bipartisan Safer Communities Act, Public Law 
117-159, 136 Stat. 1313. Section 12002 of the BSCA broadened the 
definition of ``engaged in the business'' under 18 U.S.C. 921(a)(21)(C) 
to all persons who intend to ``predominantly earn a profit'' from 
wholesale or retail dealing in firearms by eliminating the requirement 
that a person's ``principal objective'' of purchasing and reselling 
firearms must include both ``livelihood and profit.'' The statute now 
provides that, as applied to a dealer in firearms, the term

[[Page 61996]]

``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 does 
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 his personal collection of 
firearms.'' 18 U.S.C. 921(a)(21)(C).
    As now defined by the BSCA, the term ``to predominantly earn a 
profit'' means that the person who engages in selling or disposing of 
firearms has a predominant intent of obtaining pecuniary gain, as 
opposed to other intents, such as improving or liquidating a personal 
firearms collection. The statutory definition further provides 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. 18 U.S.C. 921(a)(22). According to the 
BSCA's sponsors, the BSCA's change to the definition was driven by 
``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.'' \22\ The sponsors ``maintain[ed] that these changes 
clarify who should be licensed, eliminating a `gray' area in the law, 
ensuring that one aspect of firearms commerce is more adequately 
regulated.'' \23\ Congress did not make the same amendment to the 
various definitions of ``engaged in the business'' in 18 U.S.C. 
921(a)(21) with respect to licensed gunsmiths, manufacturers, or 
importers.\24\
---------------------------------------------------------------------------

    \22\ William J. Krouse, Cong. Research Serv., IF12197, Firearms 
Dealers ``Engaged in the Business'' at 2 (Aug. 19, 2022).
    \23\ Id.; 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.''); see also 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 form possessing or owning a firearm under 
federal law--purchased a firearm from an unlicensed firearms 
dealer.'').
    \24\ 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 report actions taken to implement the 
BSCA and to develop and implement a plan to: (1) 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 (2) prevent former FFLs whose 
licenses have been revoked or surrendered from continuing to engage in 
the business of dealing in firearms.\25\
---------------------------------------------------------------------------

    \25\ 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).
---------------------------------------------------------------------------

    This NPRM proposes to implement the ``engaged in the business'' 
provisions of the BSCA \26\ and the Department's plan in response to 
Executive Order 14092 by making conforming changes to the new or 
amended definitions, by clarifying the updated BSCA definition of 
``engaged in the business,'' and by preventing former FFLs whose 
licenses have been revoked or surrendered from continuing to engage in 
the business of dealing in firearms. The rule proposes to accomplish 
this clarity and deterrence by setting forth specific activities 
demonstrating when an unlicensed person's buying and selling of 
firearms presumptively rises to the level of being ``engaged in the 
business,'' thus requiring that person to obtain a dealer's license, 
conduct background checks, and abide by the other requirements set 
forth in the GCA. At the same time, it 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 without the need to obtain a license.
---------------------------------------------------------------------------

    \26\ The Department is also issuing a separate rulemaking to 
amend ATF's regulations to conform with other provisions in the 
BSCA.
---------------------------------------------------------------------------

II. Proposed Rule

    As stated previously, the BSCA revised 18 U.S.C. 921(a)(21)(C) to 
change part of the definition of persons ``engaged in the business'' of 
dealing in firearms. This amendment broadened the definition to reflect 
that it applies to persons who engage in the business of purchasing and 
selling firearms at wholesale or retail with the predominant purpose of 
earning a profit, rather than just to persons whose primary purpose is 
both livelihood and profit. This 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). 
``As a result, the BSCA definitional changes could make some, but not 
all, intrastate, private firearm transfers subject to GCA recordkeeping 
and background check requirements'' that previously were not subject to 
those requirements, ``if those transfers are made by profit-oriented, 
repetitive firearms buyers and sellers.'' \27\
---------------------------------------------------------------------------

    \27\ Krouse, Cong. Research Serv., Firearms Dealers ``Engaged in 
the Business'' at 2.
---------------------------------------------------------------------------

    To implement the new statutory language, this proposed rule amends 
paragraph (c) of the regulatory definition of ``engaged in the 
business,'' in Sec.  478.11, 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.'' This proposed rule also amends 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, this rule proposes to move the regulatory 
definition of ``terrorism,'' which currently exists in the regulations 
under

[[Page 61997]]

the definition of ``principal objective of livelihood and profit,'' to 
a new stand-alone definition. This is because the BSCA 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 include the same exception to the requirement to prove 
intent to profit when a licensee engages in the firearms business for 
the purpose of terrorism.
    To further implement these statutory changes, this rule then 
proposes 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, 
or when purchasing firearms for, and selling firearms from, a personal 
collection; (d) setting forth conduct that is, in civil and 
administrative proceedings, 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; (e) adding a 
single definition for the terms ``personal collection,'' ``personal 
firearms collection,'' and ``personal collection of firearms''; (f) 
adding a definition for the term ``responsible person''; (g) clarifying 
that the intent to ``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; (h) addressing how former licensees, and 
responsible persons acting on behalf of former licensees, may lawfully 
liquidate business inventory upon revocation or other termination of 
their license; and (i) clarifying that licensees must follow the 
verification and recordkeeping procedures in 27 CFR 478.94 and subpart 
H of title 27, part 478, rather than using a Firearms Transaction 
Record, ATF Form 4473 (``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''

    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'').\28\ Due to the BSCA 
amendments, 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.
---------------------------------------------------------------------------

    \28\ 53 FR at 10481 (``The final rule retains the sentence 
[including part-time dealers] since it comports with legislative 
intent as expressed in committee reports.''); see also United States 
v. McGowan, 746 F. App'x 679, 680 (9th Cir. 2018) (``Selling 
firearms need not have been McGowan's primary source of income.''); 
United States v. Focia, 869 F.3d 1269, 1281 (11th Cir. 2017) 
(``[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.''); United States 
v. Valdes, 681 F. App'x 874, 877 (11th Cir. 2017) (``The government 
must prove the defendant's activity rose above `the occasional sale 
of a hobbyist,' but does not need to show `the defendant's primary 
business was dealing in firearms or that [she] necessarily made a 
profit from dealing.' ''); United States v. Ibarra, 581 F. App'x 
687, 690 (9th Cir. 2014) (``The statute requires that the defendant 
have a `principal objective of livelihood and profit,' . . . but 
nowhere requires a principal objective that that profit be one's 
primary source of income.''); United States v. Shipley, 546 F. App'x 
450, 454 (5th Cir. 2013) (upholding conviction for dealing in 
firearms as a regular side business to supplement lawful income); 
United States v. Gray, 470 F. App'x 468, 472 (6th Cir. 2012) (``[A] 
defendant need not deal in firearms as his primary business for 
conviction.''); Nadirashvili, 655 F.3d at 119 (quoting Carter, 801 
F.2d at 81-81, as holding that ``[t]he government need not prove 
that dealing in firearms was the defendant's primary business''); 
United States v. Manthey, 92 F. App'x 291, 297 (6th Cir. 2004) 
(``[A] defendant need not deal in firearms as his primary business 
for conviction.''); United States v. Allah, 130 F.3d 33, 43-44 (2d 
Cir. 1997) (``[I]t is not a necessary element of the crime [of 
dealing without a license] that a defendants' only business be that 
of selling firearms''); United States v. Beecham, Nos. 92-5147, 92-
5399, 1993 WL 188295, at *3 (4th Cir. June 2, 1993) (``The 
government need not prove that a defendant's primary business was 
dealing in firearms or that he necessarily made a profit from it.'' 
(internal quotation marks omitted)).
---------------------------------------------------------------------------

    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 increased the ways in which individuals shop for firearms, 
and therefore have created a need for further clarity in the regulatory 
definition of ``dealer.'' \29\ The proliferation of new communications 
technologies and e-commerce has made it simple for persons 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, other similar events, and online has also altered the 
marketplace since the GCA was enacted in 1968.
---------------------------------------------------------------------------

    \29\ 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, to provide additional guidance on what it means to be 
engaged in the business as a ``dealer'' within the diverse modern 
marketplace, this rule first proposes 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 may be conducted. This includes at any domestic or 
international public or private marketplace or premises. The revised 
definition provides nonexclusive examples of such marketplaces: a gun 
show \30\ or event,\31\ flea market,\32\ auction house,\33\ or gun 
range or club; at one's home; by mail order; \34\ over the internet; 
\35\ through the use of other electronic means (e.g., an

[[Page 61998]]

online broker,\36\ online auction,\37\ text messaging service,\38\ 
social media raffle,\39\ or website \40\); or at any other domestic or 
international public or private marketplace or premises. These examples 
are provided to clarify for unlicensed persons 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.\41\ However, 
regardless of the medium 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.\42\ 18 U.S.C. 923(d)(1)(E)-(F).
---------------------------------------------------------------------------

    \30\ See ATF FFL Newsletter, July 2017, at 9 (gun show 
guidelines); Important Notice to Dealers and Other Participants at 
This Gun Show, ATF Information 5300.23A (Sept. 2010); ATF Ruling 69-
59.
    \31\ See ATF Q&A, 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 (May 22, 2020); ATF FFL Newsletter, June 
2021, at 8-9 (addressing conduct of business at firearm raffles); 
Letter to Pheasants Forever, from Acting Chief, Firearms Programs 
Division, ATF at 1-2 (July 9, 1999) (addressing nonprofit 
fundraising banquets); 1 ATF FFL Newsletter, Feb. 1999, at 4-5 
(addressing dinner banquets).
    \32\ See ATF FFL Newsletter, June 2010, at 5-6 (flea market 
guidelines).
    \33\ See Selling firearms--legally: A Q&A with the ATF, 
Auctioneer, at 22-27 (June 2010).
    \34\ See, e.g., United States v. Buss, 461 F. Supp. 1016 (W.D. 
Pa. 1978) (holding that mail order sales by unlicensed defendant 
violated statute proscribing illegally engaging in business of 
dealing in firearms, even though defendant acted in concert with 
licensed firearms dealers who recorded the transfers).
    \35\ See ATF FFL Newsletter, June 2021, at 8 (addressing 
internet sales of firearms); ATF Intelligence Assessment, Firearms 
and Internet Transactions (Feb. 9, 2016); Felon Seeks Firearm, No 
Strings Attached: How Dangerous People Evade Background Checks and 
Buy Illegal Guns Online, City of New York (Sept. 2013), https://www.nyc.gov/html/om/pdf/2013/felon_seeks_firearm.pdf; Point, Click, 
Fire: An Investigation of Illegal Online Gun Sales, City of New York 
(Dec. 2011); Focia, 869 F.3d at 1274 (affirming defendant's 
conviction for engaging in the business without a license by dealing 
firearms through the ``Dark Web'').
    \36\ See, e.g., 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 through an online broker and 
granting summary judgement to the government). Although some 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 
valuable consideration (i.e., take or transfer title to them). 
Rather, they typically only collect a commission or fee for 
providing contracted services to market and process the transaction 
for the seller. This is distinguished from a broker who, for 
example, purchases the firearms from a manufacturer, importer, or 
other distributor, sells the firearms to the buyer, and has them 
shipped directly to the buyer from the distributor. Such persons 
must be licensed as dealers since they are purchasing and selling 
the firearms with the predominant intent to earn a profit. See, 
e.g., ATF FFL Newsletter, Sept. 2016, at 3; 2 ATF FFL Newsletter, 
Mar. 2023, at 6-7.
    \37\ See, e.g., Press Release, Department of Justice Office of 
Public Affairs (``OPA''), 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).
    \38\ See, e.g., Press Release, OPA, Odenton, Maryland Man Exiled 
to 8 Years in Prison for Firearms Trafficking Conspiracy, DOJ/OPA 
(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).
    \39\ See ATF FFL Newsletter, June 2021, at 9 (``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.'').
    \40\ See, e.g., Press Release, Department of Justice United 
States Attorney's Office (``USAO''), 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, USAO, 
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.
    \41\ 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''); ATF FFL Newsletter, June 2010, at 
5 (Unless there is a permanent business premises from which to 
conduct firearms business (e.g., an identified rented space that can 
securely hold required records), ``[t]he GCA prohibits any person 
from engaging in the business of selling, dealing, or trading in 
firearms at flea markets. The only exceptions would be an unlicensed 
individual making an occasional firearm sale or for a Federal 
firearms licensee to display firearms and take orders of 
firearms.''); Letter for Sen. Dan Coats, from Deputy Director, ATF 
(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); United States v. Allman, 119 Fed. 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).
    \42\ See Abramski v. United States, 573 U.S. 169, 172, 181 
(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 v. 
Brady, 914 F. 2d 475, 480 (4th Cir. 1990) (holding that FOPA did not 
eliminate the requirement that a licensee have a business premises 
from which to conduct business ``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 lacked a means of accessing the premises).
---------------------------------------------------------------------------

    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,\43\ 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).
---------------------------------------------------------------------------

    \43\ 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, 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).
---------------------------------------------------------------------------

    Further, 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 would still 
be engaging in unlawful dealing in firearms without a license, among 
other violations of United States law. Accordingly, this rule proposes 
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, this rule also proposes 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''). This should 
help clarify, through examples, how those terms apply to dealing in 
firearms. Specifically, this rule proposes to define ``purchase'' (and 
derivative terms thereof) as ``the act of obtaining a firearm in 
exchange for something of

[[Page 61999]]

value,'' \44\ and the term ``sale'' (and derivative terms thereof, 
including ``resale'') as ``the act of providing a firearm in exchange 
for something of value.'' \45\ The term ``something of value'' includes 
money, credit, personal property (e.g., another firearm \46\ or 
ammunition \47\), a service,\48\ a controlled substance,\49\ or any 
other medium of exchange \50\ or valuable consideration.'' \51\
---------------------------------------------------------------------------

    \44\ 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 Black's Law Dictionary 1491 (11th Ed. 2019) 
(The term ``purchase'' means ``[t]he acquisition of an interest in 
real or personal property by sale, discount, negotiation, mortgage, 
pledge, lien, issue, reissue, gift, or any other voluntary 
transaction.'').
    \45\ 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 New International Dictionary 2003 (1971). The 
related term ``resale'' is ``the act of selling again.'' Id. at 
1929.
    \46\ See, e.g., United States v. Gross, 451 F.2d 1355, 1360 (7th 
Cir. 1971) (defendant ``had traded firearms [for other firearms] 
with the object of profit in mind'').
    \47\ See, e.g., United States v. Huffman, 518 F.2d 80 (4th Cir. 
1975) (defendant traded large quantities of ammunition in exchange 
for firearms).
    \48\ 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).
    \49\ See, e.g., Johnson v. Johns, No. 10-CV-904(SJF), 2013 WL 
504446 (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).
    \50\ See, e.g., Focia, 869 F.3d at 1274 (defendant sold pistol 
online to undercover ATF agent for 15 bitcoins).
    \51\ The term ``medium of exchange'' generally means ``something 
commonly accepted in exchange for goods and services and recognized 
as representing a standard of value,'' 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.'' Webster's Third New International Dictionary 1403, 
2530 (1971). 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 licensing 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 requires 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 this rule, the Department 
further proposes 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 a personal collection of 
firearms at an ``estate-type'' auction.\52\ The new definition in the 
BSCA does not affect that determination. The Department is proposing to 
incorporate this longstanding interpretation into the regulations while 
otherwise clarifying the regulatory definition.
---------------------------------------------------------------------------

    \52\ See ATF Q&A, 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 
(July 10, 2020); ATF Federal Firearms Regulations Reference Guide, P 
5300.4, Q&A L1, at 207 (2014); ATF FFL Newsletter, May 2001, at 3; 
ATF Ruling 96-2, Engaging in the Business of Dealing in Firearms 
(Auctioneers); 1 ATF FFL Newsletter, 1990, at 7; Letter for Editor, 
CarPac Publishing Company, from Acting Assistant Director 
(Regulatory Enforcement), ATF, CC-28,953 (July 26, 1979).
---------------------------------------------------------------------------

    In this context, the auctioneer is generally providing services 
only as an agent of the owner or executor of an estate who is 
liquidating a personal collection. The firearms are within the estate's 
control and the sales made on the estate's behalf. This limited 
exclusion from the definition of ``dealer'' is conditioned on the 
auctioneer not purchasing the firearms, taking possession of the 
firearms prior to the auction, or consigning the firearms for sale. If 
the auctioneer were to 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 a personal collection of 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.\53\ Therefore, under ``consignment-type'' auctions, an 
auctioneer would generally need to be licensed.
---------------------------------------------------------------------------

    \53\ Id.
---------------------------------------------------------------------------

D. Presumptions That a Person Is ``Engaged in the Business''

    The Department has observed through its enforcement efforts and 
subject-matter expertise that persons who are engaged in certain 
firearms purchase-and-sale activities are highly likely 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, to include: (1) ATF inspections of prospective and existing 
wholesale and retail dealers of firearms who are engaged, or intend to 
engage in the business; \54\ (2) criminal investigations and 
prosecutions of persons who engaged in the business of dealing in 
firearms without a license; \55\ (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; \56\ (4) ATF 
cease and desist letters issued to prevent section 922(a)(1)(A) 
violations; \57\ 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

[[Page 62000]]

licenses held by licensees who aided and abetted that misconduct.\58\ 
In addition, numerous courts have identified certain activities or 
factors they deemed relevant to determining whether a person is 
``engaged in the business'' even prior to Congress's decision to expand 
the definition in the BSCA.\59\ This rule, therefore, proposes to 
establish rebuttable presumptions in certain contexts to help 
unlicensed persons, industry operations personnel, and others determine 
when a person is presumed to be ``engaged in the business'' requiring a 
dealer's license.
---------------------------------------------------------------------------

    \54\ 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.
    \55\ See footnotes 62 through 72, infra.
    \56\ See, e.g., United States v. Four Hundred Seventy Seven 
(477) Firearms, 698 F. Supp. 2d 890 (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. 
5:06-CV-156 (WDO), 2006 WL 3497899 (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 (W.D. 
Tex. Oct. 13, 2005) (civil forfeiture of firearms intended to be 
sold at gun shows without a license).
    \57\ 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 a ``cease and 
desist'' letter. 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).
    \58\ 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 S.E.L.L. 
Antiques, Application No. 9-87-035-01-PA-00725 (Phoenix Field 
Division, Feb. 21, 2006) (denied applicant who repetitively sold 
modern firearms from unlicensed storefront).
    \59\ See footnote 20, supra, and accompanying text.
---------------------------------------------------------------------------

    These rebuttable presumptions would apply in civil and 
administrative proceedings. While the criteria set forth in the 
proposed rule may be useful to a court in a criminal case--for example, 
to inform appropriate jury instructions regarding permissible 
inferences \60\--the regulatory text makes clear that the presumptions 
shall not apply to criminal cases.\61\
---------------------------------------------------------------------------

    \60\ 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 (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 (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 (9th Cir. 1987) (same); Lannon v. Hogan, 719 F.2d 518 
(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) (district court relied on permissive 
inference of current drug use in ATF's definition of ``unlawful 
user'' in 27 CFR 478.11 to conclude that the defendant's drug use 
was ``contemporaneous and ongoing'' sufficient to apply the 2K2.1 
sentencing guideline); 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) (upholding arrest under 18 U.S.C. 
922(g)(3) relying, in part, on ATF's regulatory definition of 
``unlawful user'').
    \61\ See generally 2 Handbook of Fed. Evid. Sec.  303:4 (9th ed. 
2020) (explaining Federal Rule of Evidence Standard 303(c), which 
``provides that whenever the existence of a presumed fact against 
the accused is submitted to the jury, the court should instruct the 
jury that it may regard the basic facts as sufficient evidence of 
the presumed fact but is not required to do so. In addition, if the 
presumed fact establishes guilt, is an element of the offense, or 
negatives a defense, the court should instruct the jury that its 
existence on all the evidence must be proved beyond a reasonable 
doubt. . . . The applicability and constitutionality of Standard 
303(b) must be evaluated in light of the Supreme Court decisions in 
County Court of Ulster v. Allen, Sandstrom v. Montana, and Francis 
v. Franklin. As a result of these decisions it is clear, if it 
wasn't before, that it is never permissible to shift to the 
defendant the burden of persuasion to disprove an element of a crime 
charged by means of a presumption, and of course, that a conclusive 
or irrebuttable presumption operating against the criminal defendant 
is also unconstitutional.'').
---------------------------------------------------------------------------

    The Department has considered, but not proposed in the NPRM, an 
alternative that would have set a minimum numerical threshold of 
firearms sold by a person within a certain period of time. That 
approach has not been 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 has 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. Instead, the established approach for determining whether 
an individual is ``engaged in the business'' is to look at the totality 
of circumstances. Thus, 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, 
provided 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'').\62\ 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 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.''
---------------------------------------------------------------------------

    \62\ See Do I Need a License to Buy and Sell Firearms?, ATF 
Publication 5310.2 (Jan. 2016). See also Nadirashvili, 655 F.3d at 
120-21 (despite defendants' knowledge of only a single firearms 
transaction, there was sufficient evidence to prove they had 
``engaged in the business'' because they knew co-defendant held 
himself out generally as a source of firearms, and was ready to 
procure them for customers); United States v. Shan, 361 F. App'x 182 
(2d Cir. 2010) (defendant sold two firearms within roughly a month 
and acknowledged he had a source of supply for other weapons); 
United States v. Shan, 80 F. App'x 31 (9th Cir. 2003) (sale of 
weapons in one transaction where the defendant was willing and able 
to find more weapons for resale); 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.''); 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, this rule proposes to clarify that, absent reliable 
evidence to the contrary, a person will 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; \63\
---------------------------------------------------------------------------

    \63\ See 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).
---------------------------------------------------------------------------

    (2) spends more money or its equivalent on purchases of firearms 
for the purpose of resale than the person's reported taxable gross 
inome during the applicable period of time; \64\
---------------------------------------------------------------------------

    \64\ 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.'').
---------------------------------------------------------------------------

    (3) repetitively purchases for the purpose of resale, or sells or 
offers for sale firearms--

[[Page 62001]]

    (A) through straw or sham businesses,\65\ or individual straw 
purchasers or sellers; \66\ or
---------------------------------------------------------------------------

    \65\ See, e.g., 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.''); 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 
(D. Ariz. Dec. 19, 2008), aff'd, 365 F. App'x 747 (9th Cir. 2010) 
(straw ownership of corporate pawn shops); 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 (W.D. Mich. Mar. 28, 2008) (corporate 
form disregarded where a substantial purpose for the formation of 
the company was to circumvent the statute restricting issuance of 
firearms licenses to convicted felons); Press Release, OPA, 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).
    \66\ See, e.g., Bryan v. United States, 524 U.S. 184, 189 (1998) 
(defendant used straw purchasers to buy pistols in Ohio for resale 
in New York); United States v. Ochoa, 726 F. App'x 651, 652 (9th 
Cir. 2018) (``[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); 
United States v. Paye, 129 F. App'x 567, 570 (11th Cir. 2005) 
(defendant paid straw purchaser to buy firearms for him to sell); 
United States v. Bryan, 122 F.3d 90, 92 (2d Cir. 1997) (defendant 
enlisted the aid of two straw purchasers to buy guns for resale in 
another state).
---------------------------------------------------------------------------

    (B) that cannot lawfully be purchased or possessed, including:
    (i) stolen firearms (18 U.S.C. 922(j)); \67\
---------------------------------------------------------------------------

    \67\ See, e.g., United States v. Simmons, 485 F.3d 951 (7th Cir. 
2007); United States v. Perkins, 633 F.2d 856 (8th Cir. 1981).
---------------------------------------------------------------------------

    (ii) firearms with the licensee's serial number removed, 
obliterated, or altered (18 U.S.C. 922(k); 26 U.S.C. 5861(i)); \68\
---------------------------------------------------------------------------

    \68\ See, e.g., United States v. Ilarraza, 963 F.3d 1 (1st Cir. 
2020); United States v. Fields, 608 F. App'x 806 (11th Cir. 2015); 
United States v. Barrero, 578 F. App'x 884 (11th Cir. 2014); United 
States v. Teleguz, 492 F.3d 80 (1st Cir. 2007); United States v. 
Bostic, 371 F.3d 865 (6th Cir. 2004); United States v. Kitchen, 87 
F. App'x 244 (3d Cir. 2004); United States v. Ortiz, 318 F.3d 1030 
(11th Cir. 2003); United States v. Jackson, No. 97-6756, 1997 WL 
618902 (4th Cir. Oct. 8, 1997); United States v. Rosa, 123 F.3d 94 
(2d Cir. 1997); United States v. Twitty, 72 F.3d 228 (1st Cir. 
1995); United States v. Collins, 957 F.2d 72 (2d Cir. 1992).
---------------------------------------------------------------------------

    (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)); \69\
---------------------------------------------------------------------------

    \69\ See, e.g., United States v. Fridley, 43 F. App'x 830 (6th 
Cir. 2002) (defendant purchased and sold unregistered machineguns); 
United States v. Idarecis, No. 97-1629, 1998 WL 716568 (2d Cir. Oct. 
9, 1998) (defendant converted rifles to automatic weapons and 
obliterated the serial numbers on the firearms he sold).
---------------------------------------------------------------------------

    (4) repetitively sells or offers for sale firearms--
    (A) within 30 days after they were purchased; \70\
---------------------------------------------------------------------------

    \70\ See, e.g., Press Release, OPA, 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#:~:text=U.S.%20Attorney%20Andrew%20M.,least%20nine%20firearms
%20transaction%20records (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, USAO, 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 (E.D. Mich. Jan. 20, 2011) (some of the weapons 
defendant sold at gun shows were purchased ``a short time 
earlier'').
---------------------------------------------------------------------------

    (B) that are new, or like new in their original packaging; \71\ or
---------------------------------------------------------------------------

    \71\ See, e.g., United States v. Carter, 203 F.3d 187, 189 n.1 
(2d Cir. 2000) (defendant admitted to willfully shipping and 
transporting interstate eleven handguns in the course of engaging in 
the business of dealing in firearms without a license that were 
contained in their original boxes); 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 (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).
---------------------------------------------------------------------------

    (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); \72\
---------------------------------------------------------------------------

    \72\ See, e.g., Press Release, USAO, 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).
---------------------------------------------------------------------------

    (5) who, 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) who, 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.
    Any one or a combination of the circumstances above gives rise to a 
presumption in civil and administrative proceedings that the person is 
engaged in the business of dealing in firearms and must be licensed 
under the GCA. The activities set forth in these rebuttable 
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. Further, as noted above, while the 
criteria may be useful to courts in criminal cases when instructing 
juries regarding permissible inferences, the presumptions outlined 
above shall not apply to criminal cases.
    At the same time, the Department recognizes that certain 
transactions are 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 includes examples of when a person 
is not presumed to be engaged in the business of dealing in firearms. 
Specifically, under this proposed rule, 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

[[Page 62002]]

gifts,\73\ or occasionally \74\ 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.
---------------------------------------------------------------------------

    \73\ 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, 
June 2021, at 2 (same).
    \74\ While the GCA does not define the term ``occasional,'' that 
term is commonly understood to mean ``of irregular occurrence; 
happening now and then, infrequent.'' Letter for Borderview LLC, 
from Chief, Firearms Industry Programs Branch, ATF (Oct. 14, 2015) 
(citing Collins American English Dictionary (2015)) (addressing 
persons engaged in the business of importing firearms).
---------------------------------------------------------------------------

    The rebuttable presumptions set forth above are supported by the 
Department's investigative and regulatory enforcement experience,\75\ 
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 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 even under the 
pre-BSCA definition. The fundamental purpose 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 simply because the effort needed to 
conduct commerce in general has dramatically diminished. 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, 
without limiting or regulating activity truly for the purposes of a 
hobby or enhancing a personal collection.
---------------------------------------------------------------------------

    \75\ See the discussion at the beginning of Section II.D of this 
preamble. ``Presumptions that a Person is `Engaged in the Business.' 
''
---------------------------------------------------------------------------

    The first presumption stated above--that a person will 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 to 
be sold by a person so long as the person is holding themself out as a 
dealer. This is because, under the definition of ``engaged in the 
business'' in 18 U.S.C. 921(a)(21)(C), the ``repetitive purchase and 
resale of firearms'' is the means through which the person intends to 
engage in the business even if those firearms are not actually 
repetitively purchased and resold.
    The second presumption above--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 earning 
livelihood from those sales, which is even stronger evidence of an 
intent to profit than merely supplementing one's income.\76\ 
Alternatively, the funds the person used to purchase the firearms may 
have been derived from criminal activities, for example, if they were 
provided by a co-conspirator to repetitively purchase and resell the 
firearms without a license or for other criminal purposes, or the funds 
were laundered from past illicit firearms transactions. Such illicit 
and repetitive firearm purchase and sale activities do not require 
proof of profit 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.
---------------------------------------------------------------------------

    \76\ Webster's Online Dictionary defines the term ``livelihood'' 
as ``means of support or subsistence.'' Livelihood, Merriam-Webster.com, https://www.merriam-webster.com/dictionary/livelihood 
(last visited Aug. 25, 2023).
---------------------------------------------------------------------------

    The first presumption underlying the third category listed above--
that a person is 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 willfully engage in the business of dealing without a 
license often do so to conceal their transactions by setting up straw 
or sham businesses or hiring ``middlemen'' to conduct transactions on 
their behalf.\77\ The second presumption under that category--that a 
person is 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. Such dealers will often 
buy and sell stolen firearms and firearms with obliterated serial 
numbers because such firearms are preferred by both sellers and buyers 
to avoid background checks and crime gun tracing.\78\ They sometimes 
sell unregistered National Firearms Act (``NFA'') weapons \79\ 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. Although 
these presumptions do not directly address an individual's intent to 
profit, they are 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. 
This includes willfully engaging in the business of dealing in 
contraband firearms. 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.

[[Page 62003]]

923(g)(1)-(2)) through which firearms involved in crime can be traced.
---------------------------------------------------------------------------

    \77\ See footnotes 65 and 6666, supra; 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.)'').
    \78\ See footnote 68, supra; Twitty, 72 F.3d at 234 n.2 
(defendant resold firearms with obliterated serial numbers, which 
was ``probably designed in part to increase the selling price of the 
weapons''); United States v. Hannah, No. CRIM.A.05-86, 2005 WL 
1532534, at *3 (E.D. Pa. 2005) (defendant told buyers to obliterate 
the serial numbers on the firearms so he would not ``get in 
trouble'').
    \79\ The National Firearms Act of 1934, 26 U.S.C. 7801 et seq., 
restricts certain firearms that Congress determined were 
particularly dangerous ``gangster-type'' weapons, to include 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, 
for ease of reference, this final rule refers to the Attorney 
General throughout.
---------------------------------------------------------------------------

    The first presumption under the fourth category listed above--
repetitive sales or offers for sale of firearms within 30 days from 
purchase--reflect that firearms for a personal collection are not 
likely to be repetitively sold within such a short period of time from 
purchase.\80\ Likewise, under the second and third presumptions under 
this category, persons who repetitively sell firearms in new condition 
or in like-new condition in their original packaging, or firearms of 
the same kind and type, are not likely to be selling such firearms from 
a personal collection. Individuals 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 that hold special interest. In 
contrast, persons engaged in the business 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 (i.e., of the same 
kind and type) that their customers want the most and would generate 
the greatest profit.
---------------------------------------------------------------------------

    \80\ 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 
incurring the time, effort, and expense to resell them within that 
period of time. See, e.g., Cabela's Return Policy: Here's How it 
Actually Works, rather-be-shopping.com, https://www.rather-be-shopping.com/blog/cabelas-return-policy/ (Jan. 31, 2023) (``[I]f 
they sell you a fully functioning gun, and you take it to the range, 
and it will not eject a shell or casing or will not perform basic 
functions, THEY TYPICALLY WILL exchange it. . . . Make sure you 
fully test the firearm within 30 days of purchase as it will be MUCH 
more difficult to exchange the gun after 30 days.''); LEARN ABOUT 
THE 30 DAY MONEY BACK GUARANTEE! HOW TO RETURN YOUR FIREARM!, 
Waltherarms.com, https://waltherarms.com/
guarantee#:~:text=Walther%20understands%20this%20and%20that,it%20is%2
0right%20for%20you/(last visited Aug. 10, 2023); Retail Policies, 
centertargetsports.com, https://centertargetsports.com/retail-range/ 
(last visited Aug. 10, 2023) (``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 
Aug. 10. 2023) (``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 Aug. 10, 2023) (``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.'').
---------------------------------------------------------------------------

    The presumption 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 the business inventory upon license termination--
recognizes the fact 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.'' 
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 considered to be 
``engaging in the business'' after termination of their license. The 
GCA does not provide exceptions to the definition of ``engaged in the 
business'' based on one's prior license status, even if the firearms 
were purchased while the person had that license.\81\
---------------------------------------------------------------------------

    \81\ The Department is aware of non-binding dicta in United 
States v. Shumann, 861 F.2d 1234, 1238 (11th Cir. 1988), in which 
the court expressed its view that had the FOPA definition of 
``engaged in the business'' been applicable (which the court ruled 
it was not) it would have absolved the petitioner of liability in a 
forfeiture action if, as he claimed, he was merely closing out his 
gun business and liquidating his inventory, saying ``[w]hile the 
government presented evidence of firearms sales by Schumann to 
undercover BATF agents . . . there was no proof of firearms 
purchases, much less a proven pattern of `repetitive purchase and 
resale.' '' However, none of the amendments to the GCA made by FOPA 
defined the terms ``collection'' or ``personal collection.'' The 
fact remains that the firearms to be liquidated were repetitively 
purchased for resale by the same person while licensed. And whether 
a person is ``engaged in the business'' under post-BSCA section 
921(a)(21)(C) is not dependent on the license status of the person 
so engaged.
---------------------------------------------------------------------------

    The final presumption above--that the personal inventory of a 
former licensee (or responsible person acting on behalf of the former 
licensee) remains business inventory until one year has passed from 
license termination or transfer to their personal collection--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 as business inventory until one year after the transfer.\82\
---------------------------------------------------------------------------

    \82\ Even if one year has passed from the date of transfer, 
business inventory transferred to a personal collection 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 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.
---------------------------------------------------------------------------

    The Department notes 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.\83\ If, for example, where there is reliable evidence that a 
few collectible firearms were purchased from a licensed dealer where 
``all sales are final'' and resold back to the licensee within 30 days 
because the purchaser was not satisfied, the presumption that the 
unlicensed reseller is engaged in the business may be rebutted. 
Similarly, the 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. 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 an immediate family member, such as for 
their use in hunting, without the intent to earn a profit or to 
circumvent the requirements placed on licensees.\84\
---------------------------------------------------------------------------

    \83\ 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 rulemaking 
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, 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 the business without a license under 
this rulemaking.
    \84\ See, e.g., Clark v. Scouffas, No. 99-C-4863, 2000 WL 91411 
(N.D. Ill. 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 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

[[Page 62004]]

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, this 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 in accordance with 27 CFR 478.125a.
    Specifically, this rule proposes 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.'' \85\ 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. Also expressly excluded from the definition 
of ``personal collection'' is ``any firearm purchased for resale or 
made with the predominant intent to earn a profit'' because of their 
inherently commercial nature. 18 U.S.C. 921(a)(21)(C).
---------------------------------------------------------------------------

    \85\ See Webster's Third New International Dictionary 444, 1075, 
1686 (1971) (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''); Webster's Online 
Dictionary (2023) (defining the term ``personal'' to include ``of, 
relating to, or affecting a particular person,'' ``collection'' to 
include ``an accumulation of objects gathered for study, comparison, 
or exhibition or as a hobby'', and ``hobby'' as a ``pursuit outside 
one's regular occupation engaged in especially for relaxation''); 
see also United States v. Idarecis, 164 F.3d 620 (2d Cir. 1998) 
(Table) (``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.'').
---------------------------------------------------------------------------

    Under the GCA, 18 U.S.C. 923(c), and 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 such a ``personal collection.'' 
\86\ Accordingly, the proposed rule further explains 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; \87\ (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); \88\ (3) recorded as a 
disposition from the licensee's business inventory to the person's 
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; \89\ 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.\90\ 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 CFR 478.122(a), 478.123(a), 478.125(e), and 478.125a.\91\ To 
implement these changes, the rule also would 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.
---------------------------------------------------------------------------

    \86\ The GCA, 18 U.S.C. 923(c), and 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).
    \87\ See ATF Q&A, 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 
(July 15, 2020).
    \88\ See ATF Q&A, 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 (July 15, 2020); 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, Feb. 2011, at 7 
(``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, Mar. 2006, at 7 (``[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.'').
    \89\ See ATF Q&A, May a licensee store personal firearms at the 
business premises?, https://www.atf.gov/firearms/qa/may-licensee-store-personal-firearms-business-premises (July 15, 2020); ATF FFL 
Newsletter, Feb. 2011, at 7; ATF FFL Newsletter, Mar. 2006, at 6; 
ATF Industry Circular 72-30, Identification of Personal Firearms on 
Licensed Premises Not Offered for Sale (Oct. 10, 1972).
    \90\ See ATF Q&A, 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 (July 15, 2020).
    \91\ 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 v. Brady, 914 F.2d 475, 482-83 (4th Cir. 
1990) (``The regulations ensure that firearms kept in the personal 
collection are bona fide personal firearms, and they minimize the 
opportunity for licensees to evade the statute's recordkeeping 
requirements for business firearms by simply designating those 
firearms `personal firearms' immediately prior to their disposition. 
. . . In addition, the record-keeping requirements contained in the 
regulations provide a means for the [Attorney General] to verify 
that personal firearms were actually held for a year by a licensee 
prior to sale. Thus, we think the regulations at issue here are both 
`rational and consistent with the statute.' ''). See also United 
States v. Twelve Firearms, 16 F. Supp. 2d 738, 742 n.4 (S.D. Tex. 
1998) (``[T]he United States appears to be correct that Claimant was 
required to keep records of the firearms no matter whether they were 
part of his business inventory, under Sec.  923(g)(1)(A), or whether 
they were his own personal property, under Sec.  923(c).).''
---------------------------------------------------------------------------

F. Definition of ``Responsible Person''

    To accompany these changes, this rule also proposes 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, policies, 
and business practices of a corporation, 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.\92\ As

[[Page 62005]]

examples, this definition would not include 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 clerical duties include buying or 
selling firearms for the business.
---------------------------------------------------------------------------

    \92\ See 18 U.S.C. 841(s); Application for Federal Firearms 
License, ATF Form 7, Instructions at 6 (5300.12); Gilbert v. ATF, 
306 F. Supp. 3d 776, 781 (D. Md. 2018); Gossard v. Fronczak, 206 F. 
Supp. 3d 1053, 1065 (D. Md. 2016), aff'd, 701 F. App'x 266 (4th Cir. 
2017); ATF FFL Newsletter, Sept. 2011, at 6; ATF Letter to Dunham's 
Sports (May 30, 2003).
---------------------------------------------------------------------------

G. Definition of ``Predominantly Earn a Profit''

    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). This rule is proposing to incorporate 
those statutory changes, as discussed above.
    This rule proposes to further implement these amendments by: (1) 
clarifying that the ``proof of profit'' proviso also excludes ``the 
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'' require 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.'').\93\
---------------------------------------------------------------------------

    \93\ 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'') (citing United States v. Wilmoth, 636 F.2d 123, 125 (5th 
Cir. 1981)); King, 735 F.3d at 1107 n.8 (Section 922(a)(1)(A) does 
not require an actual sale of firearms); Allah, 130 F.3d at 43-44 
(upholding jury instruction that selling firearms need not ``be a 
significant source of income''); United States v. Mastro, 570 
F.Supp. 1388 (E.D. Pa. 1983) (the 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.'').
---------------------------------------------------------------------------

    ATF's experience also establishes that certain conduct related to 
the sale or disposition of firearms presumptively demonstrates that 
primary motivation. 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 
provides that, absent reliable evidence to the contrary, a person is 
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; \94\ (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; 
\95\ (3) makes or maintains records, in any form, to document, track, 
or calculate profits and losses from firearms purchases and sales; \96\ 
(4) purchases or otherwise secures merchant services as a business 
(e.g., credit card transaction services, digital wallet for business) 
through which the person makes or offers to make payments for firearms 
transactions; \97\ (5) formally or informally purchases, hires, or 
otherwise secures business security services (e.g., a central station-
monitored security system registered to a business,\98\ or guards for 
security \99\) to

[[Page 62006]]

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; \100\ (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.\101\ Any of these nonexclusive, 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.
---------------------------------------------------------------------------

    \94\ 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, 
238 F.3d 424, at *2 (6th Cir. 2000) (Table) (``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).
    \95\ 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 which were not curios or relics); Press Release USAO, 
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).
    \96\ 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, 238 F.3d 424, 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).
    \97\ See, e.g., King, 735 F.3d at 1106-07 (defendant 
incorporated and funded firearms business ``on behalf'' of friend 
whose American citizenship enabled business to obtain Federal 
firearms license. He then misappropriated company's business 
account, using falsified documentation to set up credit accounts); 
Dettra, 238 F.3d 424, at *2 (defendant accepted credit card 
payments).
    \98\ 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; Cincinnati (Ohio) City 
Ord. Ch. 807-1-A4 (2); City of Coronado (California) Code Sec.  
40.42.050)(A); Irvine (California) Code Sec.  4-19-105; Kansas City 
(Missouri) Code Sec.  50-333(a); Larimer County (Colorado) Ord. 
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; 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 Title 11 Sec.  8-18. 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. See generally What 
is a Central Station Alarm Monitoring System?, agmonitoring.com 
(July 10, 2019), https://www.agmonitoring.com/blog/industry-news/what-is-a-central-station-monitoring-system; Central Station Service 
Certification, UL.com, https://www.ul.com/resources/central-station-
service-certification#:~:text=Station%20Service%20Certification-
,Overview,and%20initiates%20the%20appropriate%20response.
    \99\ See, e.g., United States v. De La Paz-Rentas, 613 F.3d 18, 
22-23 (1st Cir. 2010) (defendant hired as bodyguard for protection 
in an unlawful firearms transaction).
    \100\ 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).
    \101\ 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).
---------------------------------------------------------------------------

    This set of rebuttable presumptions that establishes an intent ``to 
predominantly earn a profit''--one of the elements of the definition of 
``engaged in the business''--is separate from the set of presumptions 
that establishes a person meets the definition of ``engaged in the 
business.'' This second set of presumptions that addresses only intent 
``to predominantly earn a profit'' may 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 are not 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 do not fall within the specific 
conduct that presumptively requires a license under this proposed rule 
(e.g., firearms that were repetitively resold after 30 days from 
purchase, or that were not in a like-new condition), but that reveal 
one or more preparatory steps that presumptively demonstrate a 
predominant intent to earn a profit from firearms transactions. Again, 
none of these presumptions apply to criminal cases, but could be useful 
to courts in criminal cases, for example, to inform appropriate jury 
instructions regarding permissible inferences. These presumptions are 
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

    One public safety issue that ATF has encountered over the years 
relates to former licensees who have improperly liquidated their 
business inventory of firearms without performing required background 
checks or maintaining required records after the license was revoked, 
denied renewal, or otherwise terminated (e.g., license expiration or 
surrender of license).\102\ Sometimes former licensees even continue to 
acquire more firearms for resale (``restocking'') after license 
termination, a practice that is clearly inconsistent with the concept 
of ``liquidation.'' These activities, in turn, have resulted in 
numerous firearms being sold by former licensees (including those whose 
licenses have been revoked or denied due to willful GCA violations) to 
potentially prohibited persons without any ability to trace those 
firearms if later used in crime.\103\
---------------------------------------------------------------------------

    \102\ The problem of licensees liquidating a former licensee's 
business 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 (Jan. 12, 2011), https://www.politico.com/blogs/on-congress/2011/01/ackerman-proposes-gun-control-bill-to-close-firesale-loophole-032289; Annie Linskey, 
Closed store is a source of guns, The 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).
    \103\ See, e.g., Dettra, 238 F.3d 424, at *2 (defendant 
continued to deal in firearms after license revocation); Press 
Release OPA, 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).
---------------------------------------------------------------------------

    For this reason, the proposed rule also would revise the 
regulation's sections on discontinuing business, 27 CFR 478.57 and 
478.78, to clarify statutory requirements regarding firearms that 
remain in the possession of a former licensee (or a responsible person 
of the former licensee) at the time the license is terminated. Again, 
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 by the former licensee as business inventory and were 
not accumulated by that person for study, comparison, exhibition, or 
for a hobby.
    Also, firearms that were transferred by a former licensee to a 
personal collection prior to the time the license was terminated cannot 
be considered part of a personal collection unless one year has passed 
from the date the firearm was transferred into the personal collection 
before the license was terminated. This gives 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 firearms.
    Under amended 27 CFR 478.57 (discontinuance of business) and 27 CFR 
478.78 (operations by licensee after notice), as proposed, once a 
license has been terminated (i.e., license revocation, denial of 
license renewal, license expiration, or surrender of license), the 
former licensee will 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 this part; or (2) 
transfer the remaining business inventory to a personal collection 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. 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)

[[Page 62007]]

who resells any such inventory, including business inventory 
transferred to a personal collection, 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.
    The 30-day period from license termination for a former licensee to 
transfer the firearms to either another licensee or to a personal 
collection is derived from the disposition of records requirement in 
the GCA, 18 U.S.C. 923(g)(4), which is a reasonable period for that 
person to wind down operations after discontinuance of business without 
acquiring new firearms.\104\ That period of liquidation may be extended 
by the Director for good cause, such as to allow pawn redemptions if 
required by State, local, or Tribal law. However, former licensees (or 
responsible persons of such licensees) who choose not to sell the 
remaining business inventory to a licensee within the 30-day period (or 
designated additional period), and who continue to sell those firearms, 
are not permitted under the GCA to engage in the business of dealing in 
firearms without a license. Former licensees (or responsible person) 
who sell business inventory after that period (or within that period to 
unlicensed persons), or within one year from transfer to a personal 
collection, have no special legal exemptions that give them greater 
privileges to conduct business than a licensee.
---------------------------------------------------------------------------

    \104\ 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), and 478.127 (requiring 
discontinued businesses to turn in records within 30 days).
---------------------------------------------------------------------------

    Moreover, a former licensee is not 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) is 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 
ATF 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 proposed rule would 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 a curio or relic to a licensed collector, including 
a sole proprietor licensee who transfers the firearm to their personal 
collection in accordance with 27 CFR 478.125a.\105\ 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.
---------------------------------------------------------------------------

    \105\ See ATF FFL Newsletter, Mar. 2006, at 7 (``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, 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 must record the receipt as an acquisition in their 
bound book record. See 27 CFR 478, subpart H. 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, LLC, or partnership, to the personal collection 
of a responsible person of such an entity. This is because when an 
individual responsible person does not acquire a firearm as an employee 
on behalf of the business entity, it results in a change in dominion or 
control, or ``transfer,'' subject to all GCA requirements.\106\ Such an 
entity, including a corporation or partnership, must therefore 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) for their personal use.\107\
---------------------------------------------------------------------------

    \106\ See ATF Ruling 2010-1 (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).
    \107\ See ATF Q&A, 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://ww.atf.gov/firearms/qa/does-officer-or-employee-entity-holds-federal-firearms-license-such-cororation-have 
(May 22, 2020); 2 ATF FFL Newsletter, Sept. 2013, at 4.
---------------------------------------------------------------------------

III. Statutory and Executive Order Review

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.
    The Office of Management and Budget (``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 section 3(f)(1) significant action. Accordingly, the proposed 
rule has been reviewed by OMB. While portions of this proposed rule 
merely incorporate the BSCA's statutory definitions into ATF's 
regulations, this rulemaking, if finalized, may result in additional 
unlicensed persons becoming FFLs if the unlicensed persons intend to 
regularly purchase and resell firearms to predominantly earn a profit.
1. Need for Federal Regulation
    This proposed rule would implement 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 on being engaged in the business as 
a wholesale or retail dealer; to clarify prior regulatory provisions 
that relate to that topic; and to codify 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

[[Page 62008]]

business,'' the rule also would recognize 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.
2. Population
    This proposed rule implements a statutory requirement that affects 
persons who repetitively purchase and resell (including bartering) 
firearms and are required to be, but are not currently, licensed. As 
described in the preamble of this NPRM, 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; through the use of other electronic means (e.g., an 
online broker, online auction, text messaging service, social media 
raffle, or website); 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.
    The GCA prohibits ATF from prescribing regulations that establish 
any ``system of registration'' of firearms, firearms owners, or 
firearms transactions or dispositions.\108\ 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 ATF to precisely estimate the population. Therefore, for purposes 
of this analysis, ATF 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.\109\ ATF 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.\110\ Out of a total listing of 30,806 entries 
in the ``private party'' category (unlicensed users) on ArmsList, ATF 
viewed a sample of 379 listings, and found that a given seller on 
ArmsList had an average of three listings per seller.\111\ Based on 
approximately 30,806 ``private party'' (unlicensed) sales listings on 
ArmsList, ATF estimates that there are approximately 12,270 unlicensed 
persons who sell on that website alone, selling an average of three 
firearms per user.\112\ ATF estimates that ArmsList may hold 
approximately 50 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 half, and the estimated 
number of unlicensed sellers on all such websites would be 
approximately 24,540 nationwide. The estimate of ArmsList's market 
share is based on ATF Firearms Industry Programs Branch (``FIPB'') 
subject matter expert (``SME'') opinion, news reports,\113\ and public 
web traffic lists.\114\
---------------------------------------------------------------------------

    \108\ 18 U.S.C. 926(a).
    \109\ See www.Armslist.com.
    \110\ 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-Automatics 
Without A Background Check Can Be A Click Away, NPR (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.'').
    \111\ A sample of 379 listings from an estimated population of 
30,806 listings (viewed between Mar. 1 and 2, 2023), using a 95 
percent confidence level and a confidence interval of 5. See Sample 
Size Calculator- Confidence Level, Confidence Interval, Sample Size, 
Population Size, Relevant Population, https://www.surveysystem.com/sscalc.htm.
    \112\ 12,270 unlicensed individuals = 30,806 ``private party'' 
unlicensed listings on ArmsList/2.51 average listings per user.
    \113\ See footnote 110, supra.
    \114\ Similar web profile and market share lists are available 
at https://www.similarweb.com/website/armslist.com/#overview.
---------------------------------------------------------------------------

    To better estimate both online and offline sales, ATF assumed, 
based on best professional judgment of FIPB SMEs and with limited 
available information, that the national online marketplace estimate 
above may represent 25 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 websites 
within each of the 50 States.
    While this would bring the total estimated market to approximately 
98,160 unlicensed sellers,\115\ this figure would need to 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). Also, 
based on limited available information, ATF's best, very conservative 
assessment from FIPB SMEs is that at least 25 percent of the estimated 
total number of unlicensed sellers may be considered engaged in the 
business and would subsequently need to become an FFL in order to 
continue making their repetitive sales of firearms. The actual number 
may be higher, but ATF does not have data to support a higher number. 
Using the information gleaned from ArmsList, this means that 24,540 is 
the estimated number of unlicensed persons that may be considered 
engaged in the business and affected by this proposed rule.
---------------------------------------------------------------------------

    \115\ The online estimate of 24,540 = at least 25 percent of 
national firearms market. So, 100 percent of the firearms market 
would be 4 * 24,540 = 98,160.
---------------------------------------------------------------------------

    Because there is no definitive information, the actual number of 
total unlicensed sellers may be higher. Therefore, ATF also calculated 
a second possible estimate using information from a published survey by 
the Russell Sage Foundation regarding a similar, but differently 
sourced estimated population of private sellers of firearms.\116\ Based 
on the 2020 U.S. Census, there are 258.3 million adults (over 18).\117\ 
ATF used the U.S. Census as a basis for the population and also 
percentages from ``The Stock and Flow of U.S. Firearms: Results from 
the 2015 National Firearms Survey,'' published by the Russell Sage 
Foundation.\118\ This survey showed that 22 percent of the U.S. adult 
population owns at least one firearm (56.84 million adults), and of 
this, five percent transferred firearms (2.84 million). Of the five 
percent that transferred, 71 percent sold a firearm (2.02 million). Of 
those that sold a firearm, 51 percent (1.03 million) 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 rulemaking).\119\ Of the five percent

[[Page 62009]]

that transferred a firearm, ten percent traded or bartered (284,178). 
Thus, taking the 51 percent that sold (1.03 million) and the ten 
percent (284,178) that transferred by trading or bartering, the total 
number of unlicensed persons that may transfer a firearm, based on this 
survey, in any given timeframe is 1.31 million. Of the 1.31 million 
unlicensed persons selling, trading, or bartering firearms, ATF 
continues to assume, based on the best, very conservative assessment 
from SME experts, that 25 percent (or 328,296 unlicensed individuals) 
may be engaged in the business with an intent to profit. In sum, based 
on these limited sources of information, ATF estimates either 24,540 or 
328,296 could represent an estimate of unlicensed persons that may be 
engaged in the business and affected by this proposed rule.
---------------------------------------------------------------------------

    \116\ 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), pp 38-57 (pp. 39 and 51). https://www.jstor.org/stable/10.7758/rsf.2017.3.5.02?seq=1.
    \117\ U.S. Census, Stella U. Ogunwole, et al., U.S. Adult 
Population Grew Faster Than Nation's Total Population From 2010 to 
2020, U.S. Census (Aug. 12, 2021), https://www.census.gov/library/stories/2021/08/united-states-adult-population-grew-faster-than-nations-total-population-from-2010-to-2020.html.
    \118\ 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), pp 38-57 (pp. 39 and 51). https://www.jstor.org/stable/10.7758/rsf.2017.3.5.02?seq=1.
    \119\ The Russell Sage Foundation Survey did not divide those 
who sold to family or friends on a recurring basis from those who 
made an occasional sale, or between those who did so with intent to 
earn a profit and 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 Russell Sage 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, ATF was not 
in a position to make that determination from the Survey. Therefore, 
ATF erred on the side of assuming, for the purpose of this analysis, 
that the Russell Sage Foundation data on transfers to family and 
friends would likely not be affected by this rulemaking, since, in 
general, such transfers are less likely to be recurring or for 
profit.
---------------------------------------------------------------------------

    ATF requests public comments on what sources ATF should look to for 
accurate estimates of the percentage of the population that would need 
to obtain a license because they are ``engaged in the business'' of 
dealing in firearms, compared to those who make occasional sales of 
firearms (e.g., enhancement of a personal collection or for a hobby) 
and would not need to obtain a license.
3. Costs for Unlicensed Persons Becoming FFLs
    As stated earlier, consistent with the statutory changes in the 
BSCA, this proposed rule implements a new statutory provision that 
requires individuals to become licensed dealers if they intend 
predominantly to earn a profit through the repetitive purchase and 
resale of firearms (which includes benefits from bartering). Costs to 
become an FFL include an initial application on a Form 7, along with 
fingerprints and photographs, and a qualification inspection. This 
application would require fingerprints and photographs, not only from 
the person applying, but also, 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, ATF assumes that most, if not all 
unlicensed persons may be operating alone as sole proprietors because 
this new requirement would likely affect persons who have other sources 
of income and do not currently view licensing as a requirement. Besides 
the initial cost of becoming an FFL, there are recurring costs to 
maintain 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.
    The proposed rule, which further implements the statutory changes 
in the BSCA, would affect 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 
would now need a license to continue to purchase and resell firearms, 
ATF estimates that the opportunity costs of acquiring a license would 
be based on their free time or ``leisure time.'' Based on the 
Department of Transportation's (``DOT's'') guidance on the costs for 
leisure time, ATF attempted to update the leisure wage below based on 
the methodology outlined in the guidance.\120\ The DOT uses median 
household income as the base for income from the U.S. Census. ATF used 
the latest median income of a household from the U.S. Census, published 
September 2021.\121\ Table 1 outlines the leisure wage.
---------------------------------------------------------------------------

    \120\ Department of Transportation, The Value of Travel Time 
Savings: Departmental Guidance for Conducting Economic Evaluations 
Revision 2 (2016 Update), https://www.transportation.gov/sites/dot.gov/files/docs/2016%20Revised%20Value%20of%20Travel%20Time%20Guidance.pdf.
    \121\ U.S. Census, Income and Poverty in the United States: 
2020, https://www.census.gov/library/publications/2021/demo/p60-273.html.

               Table 1--Leisure Wage Rate for Individuals
------------------------------------------------------------------------
       Inputs for leisure wage rate               Numerical inputs
------------------------------------------------------------------------
Median Household Income...................  $67,521.
DOT Travel Time...........................  2080.
DOT's Value of Travel Time Savings........  50 percent.
Leisure Wage Rate.........................  $16.23.
Rounded Leisure Wage Rate.................  $16.
------------------------------------------------------------------------

    Based on DOT's methodology for leisure time, ATF attributes a 
rounded value of $16 per hour for time spent buying and reselling 
(including bartering) firearms on a repetitive basis. The same hourly 
cost applies to persons who would now become licensed as a firearms 
dealer who would not have become licensed without the clarifications 
provided by this proposed 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 would 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 costs to maintain a license.

[[Page 62010]]



      Table 2--Cost Inputs To Become an FFL and Maintain a License
------------------------------------------------------------------------
              Item                  Cost item             Source
------------------------------------------------------------------------
Form 7 Application Accompanying         $200.00  Application for Federal
 Licensing Fees.                                  Firearms License, ATF,
                                                  https://www.atf.gov/firearms/docs/form/form-7-7-cr-application-federal-firearms-license-atf-form-531012531016/download download.
Fingerprint Cards..............            0.00  Distribution Center
                                                  Order Form, ATF,
                                                  https://www.atf.gov/distribution-center-order-form (Apr. 20,
                                                  2023).
Fingerprint Cards (Commercial).           23.70  Various Sources.
Average Cost for Fingerprint                 12  See above.
 Cards.
Postage........................            0.63  Mailing and Shipping
                                                  Prices, USPS, https://www.usps.com/business/prices.htm (last
                                                  visited Aug. 17,
                                                  2023).
Photograph.....................           16.99  Passport Photos, CVS,
                                                  https://www.cvs.com/photo/passport-photos
                                                  (last visited Aug. 17,
                                                  2023).
FFL Renewal Application                   90.00  Federal Firearms
 Licensing Fees (Form 8) every                    Licensing Center
 three years.                                     (``FFLC'').
------------------------------------------------------------------------

    For purposes of this proposed rule, ATF assumes that unlicensed 
persons applying for a license as a result of this rulemaking are 
likely to file for a Type 01 Dealer license.\122\ This license costs 
$200 and uses a Form 7 application (and every three years thereafter, 
costs $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 ATF 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).
---------------------------------------------------------------------------

    \122\ The cost for a Type 01 Dealer is used because this 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 ATF and go to a local law enforcement 
office that provides fingerprinting services or use commercial services 
both 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 
passports. The 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. ATF rounds the first-
class stamp rate of $0.63 to $1 for calculating the estimated mailing 
cost.
    In addition to costs associated with compiling documentation for a 
Form 7 application, ATF estimates time burdens related to obtaining and 
maintaining a Federal firearms license. Table 3 outlines the hourly 
burdens to apply, obtain, and maintain a license.

    Table 3--Hourly Burdens To Apply, Obtain, and Maintain a License
------------------------------------------------------------------------
         Activity type            Hourly burden           Source
------------------------------------------------------------------------
Form 7 Application.............               1  Application for Federal
                                                  Firearms License, ATF,
                                                  https://www.atf.gov/firearms/docs/form/form-7-7-cr-application-federal-firearms-license-atf-form-531012531016/download download.
Time to Travel to and Obtain                0.5  N/A.
 Photograph.
Time to Travel to and Obtain                  1  N/A.
 Fingerprints.
A&D Records....................            0.05  OMB 1140-0032.
Form 4473......................             0.5  OMB 1140-0020.
Inspection Times (Qualification               3  Field Operations and
 or Compliance).                                  OMB 1140-0032.
------------------------------------------------------------------------

    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, ATF assumes that places 
that offer passport photograph services are more readily available than 
places that provide fingerprinting services; therefore, ATF estimates 
that it may take 30 minutes (0.5 hours) to travel to and obtain a 
passport photograph and estimates up to one hour to travel to and 
obtain fingerprinting services. Other time burdens may range from 0.05 
hours (three minutes) to enter and maintain A&D records for each 
firearm transaction and 0.5 hours for maintaining a Form 4473, to three 
hours for an inspection (qualification or compliance).
    ATF then multiplied the hourly burdens by the $16 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.

[[Page 62011]]



                                Table 4--First-Year Costs To Obtain a Type 01 FFL
----------------------------------------------------------------------------------------------------------------
                                                                                                   Rounded cost
            Cost item              Hourly burden    Hourly wage     Hourly cost      Cost item       for each
                                                       rate                                          activity
----------------------------------------------------------------------------------------------------------------
Form 7..........................               1             $16             $16            $200            $216
Fingerprints....................               1              16              16              12              28
Passport Photograph.............             0.5              16               8              17              25
Postage.........................             N/A              16             N/A            0.63               1
Qualification Inspection........               3              16              48             N/A              48
                                 -------------------------------------------------------------------------------
    Initial Cost................  ..............  ..............  ..............  ..............             318
----------------------------------------------------------------------------------------------------------------

    Overall, ATF estimates that it would cost an unlicensed person $318 
in terms of time spent and fees paid to apply under a Form 7 to become 
a Type 01 FFL. ATF considers the $318 as an unlicensed person's initial 
cost. In addition to their initial cost, the newly created FFL would 
need to maintain a Form 4473 (for each firearm sale), 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.

                                   Table 5--Recurring Costs To Maintain an FFL
----------------------------------------------------------------------------------------------------------------
                                                                                                        Rounded
                                   Number of entries    Hourly      Hourly      Hourly                 cost for
              Item                  or applications     burden     wage rate   cost per    Cost item     each
                                                                               activity                activity
----------------------------------------------------------------------------------------------------------------
Form 8 Renewal Application......  1 (every three             0.5      $16.00       $8.00         $90         $98
                                   years).
Form 4473.......................  3 (firearm sales           0.5       16.00       24.00         N/A          24
                                   every year).
A&D Records.....................  6 (two entries per        0.05       16.00        4.80         N/A           5
                                   firearm every
                                   year).
Compliance Inspections..........  1 (periodically)..           3       16.00       48.00         N/A          48
----------------------------------------------------------------------------------------------------------------

    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. ATF notes that the 
actual number of firearms sales may range from zero sales to more than 
three per year, but for purposes of this economic analysis only, ATF 
uses three firearms (six A&D entries) per year to illustrate the 
potential costs that a person may incur based on information gleaned 
from ArmsList. Although a person might not resell a given firearm in 
the same year they purchase it, for the purposes of these estimates, 
this analysis includes both ends of the firearm transaction because 
they 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, ATF estimates that it inspects 
approximately eight percent of all existing FFLs in any given year. 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 the FFL would not necessarily incur 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 would be inspected in any given year.
    In summary, ATF estimates that it would cost an individual $318 in 
the first year to become licensed. Furthermore, this individual would 
incur annually recurring costs that could range from $29 a year to 
complete Forms 4473 and maintain A&D records to $175 to include Form 8 
renewal costs and compliance inspections.\123\ In addition, ATF 
estimates that annual costs would range from $805,884 to $7.8 million, 
with the $7.8 million being the highest annual cost, occurring in the 
first year, using the SME estimates. Using the alternative inputs from 
the Russell Sage Foundation Survey results in annual costs ranging from 
$10.8 million to $104.4 million. Tables 6 and 7 illustrate the 10-year 
period of analysis.
---------------------------------------------------------------------------

    \123\ ATF notes that the high $175 may be higher than actual 
costs since this high cost 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 occurs 
periodically.

                     Table 6--10-Year Private Costs to the Proposed Rule Using SME Estimate
----------------------------------------------------------------------------------------------------------------
                                                                               Discounted at 3   Discounted at 7
                           Year                               Undiscounted         percent           percent
----------------------------------------------------------------------------------------------------------------
1.........................................................        $7,803,720        $7,576,427        $7,293,196
2.........................................................           805,884           759,623           703,890
3.........................................................           805,884           737,498           657,841
4.........................................................         3,210,804         2,852,758         2,449,507
5.........................................................           805,884           695,163           574,584
6.........................................................           805,884           674,915           536,995

[[Page 62012]]

 
7.........................................................         3,210,804         2,610,677         1,999,527
8.........................................................           805,884           636,172           469,032
9.........................................................           805,884           617,643           438,348
10........................................................         3,210,804         2,389,140         1,632,210
                                                           -----------------------------------------------------
    Total.................................................        22,271,436        19,550,016        16,755,130
    Annualized............................................  ................         2,291,858         2,385,554
----------------------------------------------------------------------------------------------------------------

    Overall, the annualized private cost of this proposed rule using 
SME estimates is $2.3 million at three percent and $2.4 million at 
seven percent.

          Table 7--10-Year Private Costs to the Proposed Rule Using the Russell Sage Foundation Survey
----------------------------------------------------------------------------------------------------------------
                                                                               Discounted at 3   Discounted at 7
                           Year                               Undiscounted         percent           percent
----------------------------------------------------------------------------------------------------------------
1.........................................................      $104,398,128      $101,357,406       $97,568,344
2.........................................................        10,781,256        10,162,368         9,416,767
3.........................................................        10,781,256         9,866,377         8,800,716
4.........................................................        42,954,264        38,164,307        32,769,602
5.........................................................        10,781,256         9,300,006         7,686,887
6.........................................................        10,781,256         9,029,132         7,184,006
7.........................................................        42,954,264        34,925,747        26,749,757
8.........................................................        10,781,256         8,510,823         6,274,789
9.........................................................        10,781,256         8,262,935         5,864,289
10........................................................        42,954,264        31,962,006        21,835,770
                                                           -----------------------------------------------------
    Total.................................................       297,948,456       261,541,108       224,150,926
    Annualized............................................  ................        30,660,597        31,914,049
----------------------------------------------------------------------------------------------------------------

    Overall, the annualized private cost of this proposed rule, based 
on alternate inputs from the Russell Sage Foundation Survey, is $30.7 
million at three percent and $31.9 million at seven percent.
4. Costs for FFLs After Termination of License
    The proposed 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. Such 
persons sometimes, under existing standards, 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. The proposed 
rule would clarify that such former licensees must sell to other 
licenses or transfer their personal collection within 30 days, but they 
may not treat a business firearm that they have transferred to their 
personal collection as a personal firearm until the firearm has been in 
their personal collection for a period of one year. Former FFLs who 
sell any such firearm within one year of the transfer date as a 
personal firearm may be in violation of existing statutory and 
regulatory restrictions (18 U.S.C. 922(a)(1)(A) and 923(a),(c)) on 
unlicensed dealers, and may be deemed to be ``engaged in the 
business.''
    ATF license revocation, denial of license renewal, license 
expiration, or surrender of license realistically present two 
categories of affected populations. Group 1, comprising license 
revocations and denial of license renewals, could be described as 
former FFLs who have failed to comply with existing regulations and 
requirements to a degree which resulted in the revocation or denial of 
their licenses. The proposed 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, the number of such FFL license revocations 
are rare, with an average of 37 licenses revoked by ATF over the past 5 
years (with a range between 8 and 79), or a de minimis percentage of 
0.05 percent of all active FFLs. 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 proposed rule's requirements. 
Additional factors surrounding the potential cost of no longer being 
able to transfer one's inventory to oneself are also unknown and 
presumed to similarly be de minimis. Therefore, ATF believes there are 
no quantitative impacts associated with this population. However, ATF 
welcomes public comments on these assumptions in general and on the 
potential impacts on former FFLs with revoked licenses.
    Group 2, comprising license expiration or surrender of license, 
captures those who no longer have a license for discretionary or lawful 
reasons. This group comprises former FFLs that choose to close or to 
sell the business to another party. They are similarly excluded from 
expected impacts attributable to the proposed rule because of the 
likelihood that, because the closure is planned, 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, ATF assumes that the

[[Page 62013]]

options of transfer to the licensee's personal collection or sale to 
another FFL that exist under current standards would similarly be 
freely available to Group 2 FFLs over their expected course of action 
under the proposed 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 would 
incur additional work due to the increase in Form 7 and Form 8 
applications for unlicensed persons who become an FFL which would be 
offset by the fees incurred with FFL applications ($200) and renewals 
($90). Based on information gathered from 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 FFLC, the average hourly rate for 
contracting staff, to include benefits, is $13.29.\124\ To determine 
the wage rates for Federal employees, ATF used the wage rates according 
to the General Schedule (``GS'') level, step 5 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.\125\ To 
account for fringe benefits such as insurance, ATF estimated a Federal 
load rate. ATF estimated the Federal load rate using the methodology 
outlined in the Congressional Budget Office's report comparing Federal 
benefits to private sector benefits. It states that Federal benefits 
are 17 percent more than private sector benefits (or a multiplier 
factor of 1.17).\126\ ATF calculated private sector benefits from the 
Bureau of Labor Statistics (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).\127\ Table 8 
outlines the government costs to process a Form 7 application to become 
an FFL.
---------------------------------------------------------------------------

    \124\ ATF notes that because the contracting salary is a loaded 
wage rate, a base wage rate (not including benefits) was not 
included in table 8 below.
    \125\ Office of Personnel Management, Salary Table 2023-DCB, 
https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2023/DCB_h.pdf.
    \126\ Congressional Budget Office, Comparing the Compensation of 
Federal and Private-Sector Employees, 2011 to 2015, https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/52637-federalprivatepay.pdf.
    \127\ 1.66 Federal load rate = 1.419 private industry load rate 
* 1.17 multiplier factor. BLS Series ID 
CMU2010000000000D,CMU2010000000000P (Private Industry Compensation = 
$39.34)/BLS Series ID CMU2020000000000D,CMU2020000000000P (Private 
Industry Wages and Salaries = $27.73) = 1.419. BLS average 2022. 
U.S. Bureau of Labor Statistics, Database for Employee Compensation, 
https://data.bls.gov/cgi-bin/srgate.

                     Table 8--Hourly Burden and Cost To Process a New Application for an FFL
----------------------------------------------------------------------------------------------------------------
                                                                                            Loaded
  Government cost to process new     Hourly            Staffing level           Hourly      hourly      Rounded
         FFL applications            burden                                      wage        wage        cost
----------------------------------------------------------------------------------------------------------------
Average Contracting Time to               0.5  Contracting Staff............      $13.29      $13.29          $7
 Prepare and Enter Application.
Processing Time for New                     1  GS 10........................       38.85       64.49          64
 Applications.
Processing Time for Fingerprint             2  GS 12........................       51.15       84.91         170
 Cards.
Qualification Inspection Time               5  GS 5/7 to GS 13..............       37.65       62.50         312
 (Includes Travel).
                                  ------------------------------------------------------------------------------
    Subtotal.....................  ..........  .............................  ..........  ..........         553
    Fees Incurred from New         ..........  .............................  ..........  ..........        -200
     Application.
                                  ------------------------------------------------------------------------------
        Total....................  ..........  .............................  ..........  ..........         353
----------------------------------------------------------------------------------------------------------------

    Based on the hourly burdens and the hourly wage rates for various 
contract and Federal employees, ATF estimates that it would take on 
average 8.5 hours to process a Form 7 application, at a cost of $553 
per application, offset by the new application fee (Form 7) of $200, 
for an overall net cost to the government for this rulemaking of $353. 
Form 8 application renewals are estimated to cost $71 every three years 
(or $553 less the $312 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, making the net cost or overall savings to 
government for this rulemaking -$19 per FFL renewal.
    In addition to processing Form 7 applications, ATF Industry 
Operations Investigators (``IOIs'') would 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 either the qualification or 
compliance inspection, ATF notes that the estimated five-hour 
inspection time for the government is more than the inspection time for 
the private sector, as discussed above, because ATF is including travel 
time for an IOI to travel to the person's location. Table 9 outlines 
the recurring government cost to inspect an FFL.

                              Table 9--Recurring Government Costs To Inspect an FFL
----------------------------------------------------------------------------------------------------------------
                                                                                            Loaded
             Activity                Hourly            Staffing level           Hourly      hourly      Rounded
                                     burden                                      wage        wage        cost
----------------------------------------------------------------------------------------------------------------
Compliance Inspection (Includes             5  GS 5/7 to GS 13..............      $37.65      $62.50        $312
 Travel).
----------------------------------------------------------------------------------------------------------------

    Based on the hourly burdens and wage rates of IOIs, ATF anticipates 
that it costs ATF $312 to perform a compliance inspection. To summarize 
the overall government costs, table 10 outlines the government costs to 
process

[[Page 62014]]

Form 7 applications, process Form 8 renewal applications, and conduct 
FFL compliance inspections.

         Table 10--Summary of Government Cost per Listed Action
------------------------------------------------------------------------
          Government cost per unlicensed person                Cost
------------------------------------------------------------------------
Per Application Cost (including qualification                       $353
 inspection)............................................
Per Renewal Cost........................................             -19
Per Compliance Inspection Cost..........................             312
------------------------------------------------------------------------

    ATF estimates that the government costs of this proposed rule 
include the initial application cost that occurs in the first year 
(including the qualification inspection), renewal costs that 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 
eight percent of FFLs per year). Table 11 illustrates the 10-year 
government costs this proposed rule.

                                Table 11--Total Government Costs of Proposed Rule
----------------------------------------------------------------------------------------------------------------
                           Year                               Undiscounted        3 Percent         7 Percent
-----------------------------------------------------------------------------   discount rate     discount rate
                                                                             -----------------------------------
                           Year                               Undiscounted           3%                7%
----------------------------------------------------------------------------------------------------------------
1.........................................................        $8,662,620        $8,662,620        $8,662,620
2.........................................................           612,456           612,456           612,456
3.........................................................           612,456           612,456           612,456
4.........................................................           146,196           146,196           146,196
5.........................................................           612,456           612,456           612,456
6.........................................................           612,456           612,456           612,456
7.........................................................           146,196           146,196           146,196
8.........................................................           612,456           612,456           612,456
9.........................................................           612,456           612,456           612,456
10........................................................           146,196           146,196           146,196
                                                           -----------------------------------------------------
    Total.................................................        12,775,944        12,775,944        12,775,944
    Annualized............................................  ................         1,497,730         1,819,007
----------------------------------------------------------------------------------------------------------------

    Overall, the annualized government cost of this proposed rule is 
$1.5 million at three percent and $1.8 million at seven percent.
6. Total Cost
    The total costs, therefore, take into account the private and 
government costs of the proposed rule, as described in sections 3 and 5 
above. ATF estimates that the initial application cost (Form 7 and 
initial inspection) occurs in the first year, renewal costs (Form 8 
renewals) occur every three years after the first year, and completion 
and maintenance of Forms 4473 and A&D records, and compliance 
inspection costs (for a subset of FFLs affected by this rulemaking), 
occur annually. Tables 12 and 13 illustrate the 10-year private and 
government costs of this proposed rule.
---------------------------------------------------------------------------

    \128\ The ``Undiscounted'' column represents totals from the 
underlying private and government cost tables. 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.

           Table 12--Total Private and Government Costs of Proposed Rule Based on SME Estimates \128\
----------------------------------------------------------------------------------------------------------------
                                                                                  3 Percent         7 Percent
                           Year                               Undiscounted      discount rate     discount rate
----------------------------------------------------------------------------------------------------------------
1.........................................................       $16,466,340       $15,986,738       $15,389,103
2.........................................................         1,418,340         1,336,921         1,238,833
3.........................................................         1,418,340         1,297,982         1,157,788
4.........................................................         3,357,000         2,982,651         2,561,039
5.........................................................         1,418,340         1,223,473         1,011,257
6.........................................................         1,418,340         1,187,837           945,100
7.........................................................         3,357,000         2,729,548         2,090,571
8.........................................................         1,418,340         1,119,651           825,487
9.........................................................         1,418,340         1,087,040           771,483
10........................................................         3,357,000         2,497,923         1,706,529
    Total.................................................        35,047,380        31,449,764        27,697,189
    Annualized............................................  ................         3,686,872         3,943,457
----------------------------------------------------------------------------------------------------------------


[[Page 62015]]

    Overall, the total annualized cost of this proposed rule is $3.7 
million at three percent and $3.9 million at seven percent using 
information based off of SME estimates.

  Table 13--Total Private and Government Costs of Proposed Rule Based on Russell Sage Foundation Survey and SME
                                                 Estimates \129\
----------------------------------------------------------------------------------------------------------------
                                                                               Discounted at 3   Discounted at 7
                           Year                               Undiscounted         percent           percent
----------------------------------------------------------------------------------------------------------------
1.........................................................      $113,060,748      $109,767,717      $105,664,250
2.........................................................        11,393,712        10,739,666         9,951,709
3.........................................................        11,393,712        10,426,861         9,300,663
4.........................................................        43,100,460        38,294,200        32,881,135
5.........................................................        11,393,712         9,828,316         8,123,559
6.........................................................        11,393,712         9,542,054         7,592,111
7.........................................................        43,100,460        35,044,618        26,840,800
8.........................................................        11,393,712         8,994,301         6,631,244
9.........................................................        11,393,712         8,732,332         6,197,424
10........................................................        43,100,460        32,070,790        21,910,088
                                                           -----------------------------------------------------
    Total.................................................       310,724,400       273,440,855       235,092,985
    Annualized............................................  ................        32,055,610        33,471,952
----------------------------------------------------------------------------------------------------------------

    Overall, using the information from the Russell Sage Foundation 
Survey and FIPB SME estimates, table 13 represents the upper bound 
estimate in which the total annualized cost of this proposed rule is 
$32 million at three percent and $33.4 million at seven percent.
---------------------------------------------------------------------------

    \129\ The ``Undiscounted'' column represents totals from the 
underlying private and government cost tables. 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
    These proposed revisions will have significant public safety 
benefits by ensuring that ATF's regulatory definitions conform to the 
BSCA's statutory changes and can be relied upon by the public, and by 
clarifying 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 and must be licensed, even if they make 
few or no sales, or if they are conducting such transactions on the 
internet or through other mediums or forums. As part of the license 
application, those dealers will undergo a background check. This 
increases the ability to ensure that persons purchasing and selling 
(including bartering) firearms with the intent to earn a profit are 
lawfully able to do so and reduces the risk that they could pose a 
danger to others by trafficking in illicit firearm sales or otherwise 
engaging in criminal activities. Additionally, these licensed dealers 
must take steps to help determine that they are not selling firearms to 
persons prohibited from receiving or possessing such firearms under 
Federal, State, local, or Tribal law.
    The U.S. Sentencing Commission reports that ``88.8 percent of 
firearm offenders sentenced under Sec.  2K2.1 \130\ [of the United 
States Sentencing Commission Guidelines Manual (Nov. 2021)] 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, would have therefore been prohibited from buying a firearm from 
a licensed dealer after their first offense, and would not have been 
able to commit the subsequent firearms offense(s) if their seller had 
been licensed. In addition, the Commission reports that such offenders 
``have criminal histories that are more extensive and more serious than 
other offenders'' \131\ and that they are ``more than twice as likely 
to have a prior conviction for a violent offense compared to all other 
offenders.'' \132\
---------------------------------------------------------------------------

    \130\ Section 2K2.1 provides sentencing guidelines for 
``Unlawful Receipt, Possessions, or Transportation of Firearms or 
Ammunition; Prohibited Transactions Involving Firearms or 
Ammunition.''
    \131\ What do Federal Firearms Offenses Really Look Like?, 
United States Sentencing Commission Report at 2 (July 14, 2022), 
https://www.ussc.gov/research/research-reports/what-do-federal-firearms-offenses-really-look.
    \132\ Id.
---------------------------------------------------------------------------

    In another report, on ``armed career criminals'' (those who have 
three or more convictions for violent offenses, serious drug offenses, 
or both), the Commission reports that a substantial share of ``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 includes ``57.7 percent who had 
three or more [prior violent] convictions.'' \133\ In other words, 
persons who prohibited by law from possessing firearms, as well as the 
more serious ``armed career criminals'' who are also prohibited, 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.
---------------------------------------------------------------------------

    \133\ Federal Armed Career Criminals: Prevalence, Patterns, and 
Pathways, United States Sentencing Commission, at 9 (March 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. 
Because licensed dealers are required to conduct background checks on 
unlicensed transferees, another benefit of this rulemaking is to aid in 
preventing firearms being sold to felons or other prohibited persons, 
who may 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 proposed rule. This 
guidance was particularly directed at unlicensed persons who sell 
firearms as a secondary source of income to allow

[[Page 62016]]

them to continue to sell firearms, but as licensed dealers. Based on 
the FFLC, ATF found that there was an increase of approximately 567 ATF 
Form 7 applications to account for these unlicensed persons selling at 
gun shows. This prior outcome demonstrates the market response to 
clarifying licensing requirements and that such a response both 
increases the likelihood that persons engaged in the business comply 
with Federal licensing requirements and enhance public safety by 
denying persons prohibited from purchasing firearms through completion 
of ATF Forms 4473 and running background checks on prospective 
purchasers.
    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 proposed rule, ATF 
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 
ATF that a rulemaking should set a specific threshold or number of 
sales per year to define ``engaged in the business.'' ATF considered 
this alternative in the past and again as part of developing this 
proposed rulemaking.\134\ However, ATF chose not to adopt this 
alternative for a number of reasons stated in detail above. In summary: 
courts have held even before the passage of the BCSA that the sale of 
or attempt to sell 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, the Department does not believe there is 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.''
---------------------------------------------------------------------------

    \134\ See discussion supra under Section I.A. ``Advance Notice 
of Proposed Rulemaking (1979)'' and in more detail in Section II.D. 
``Presumptions that a Person is ``Engaged in the Business.''
---------------------------------------------------------------------------

    The costs of implementing a specific threshold would be lower than 
in the primary analysis proposed in this rule. However, the Department 
believes it would not appropriately address the language regarding the 
requisite intent predominantly to earn a profit (which can include 
bartering) and would have unintended effects such as those summarized 
in the previous paragraph that 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,'' ATF would publish only 
guidance documents to clarify the topics included in this proposed 
rule. Although ATF has determined that in addition to revising its 
regulations, it will also update existing guidance documents to answer 
any questions that the firearms industry may have, the Department has 
determined that issuing only guidance would be insufficient to address 
the issues discussed above. ATF did not select the alternative to 
publish only guidance documents in lieu of regulations because guidance 
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 legal effect and applicability 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, ATF can incorporate existing 
guidance in a proposed rule based on its experience or in response to 
comments. When an agency establishes or revises legally binding 
requirements, it must do so through a regulation issued under the 
Administrative Procedure Act and Executive order provisions flowing 
from it. 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, 
ATF 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, as 
the various enforcement actions and court decisions cited above 
demonstrate, ATF has observed a significant level of noncompliance with 
the GCA's licensing requirements even prior to the BSCA. Second, 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 rulemaking,'' and prevent former FFLs whose licenses have 
been revoked or surrendered from continuing to engage in the business 
of dealing in firearms.\135\ Third, 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 ATF 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 and 
now would have to have a license. The change to the definition removed 
any intent to obtain ``livelihood,'' and it is reasonable to expect 
that those who transact in firearms would have questions about how to 
interpret and apply this change. This would include 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 this was not 
a viable alternative.
---------------------------------------------------------------------------

    \135\ 88 FR at 16528.
---------------------------------------------------------------------------

    Although the Department considered this alternative, it does not 
generate direct monetary costs because it leaves the regulatory 
situation as it is. Because the costs and benefits of this alternative 
arise from the statute itself, ATF did not include an assessment of 
them in this proposed rulemaking.

B. Executive Order 13132

    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

[[Page 62017]]

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

    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 (``RFA'')

    ATF performed an initial regulatory flexibility analysis of the 
impacts on small businesses and other entities on this proposed rule. 
Based on the information from this analysis, ATF has determined that 
this proposed rule would impact unlicensed persons who would now have 
to become licensed dealers to lawfully operate as a small business. 
Because some of these unlicensed persons may transact in low-volume 
firearms sales to predominantly earn a profit, the costs to become an 
FFL could have an impact on their overall profit from firearms 
transactions.
Initial Regulatory Flexibility Analysis
    The 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, 1165 (1980) (codified at 5 
U.S.C. 601, et seq.).
    Under the RFA, the agency is required to consider whether this rule 
would have a significant economic impact on a substantial number of 
small entities. Agencies must perform a review to determine whether a 
rule would have such an impact. If the agency determines that it would, 
the agency must prepare a regulatory flexibility analysis as described 
in the RFA.
    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). ATF determined that the rulemaking affects 
a variety of large and small businesses (see the ``Description of the 
Potential Number of Small Entities'' section below). Based on the 
requirements above, ATF prepared the following initial regulatory 
flexibility analysis assessing the impact on small entities from the 
rulemaking.
    1. A description of the reasons why action by the agency is being 
considered.
    Congress passed the BSCA, which amended the definition of engaged 
in the business from a person seeking to transact in firearms for 
livelihood and profit to a person intending predominantly to earn a 
profit. Moreover, on March 14, 2023, the President ordered the Attorney 
General to report on efforts to implement the BSCA and to develop and 
implement a plan to clarify the definition of ``engaged in the 
business'' of dealing in firearms and prevent FFLs from continuing to 
deal after license revocation or surrender.
    2. A succinct statement of the objectives of, and legal basis for, 
the proposed rule.
    The Attorney General is responsible for enforcing, among other 
statutes, the GCA, as amended. The BSCA redefined who is a regulated 
dealer under the GCA. This proposed rule updates the regulations to 
ensure the language conforms with the amended statutory provisions, and 
clarifies for the public how to understand and implement the statutory 
change and also implements Executive Order 14092.
    3. A description of and, where feasible, an estimate of the number 
of small entities to which the proposed rule will apply.
    This proposed rule implements a statutory requirement that affects 
unlicensed persons who purchase and sell firearms, with the intent to 
profit (including barter), on a recurring basis. As persons who engage 
in higher-frequency firearms transactions meeting these requirements 
are typically already licensed as dealers, the persons impacted by this 
proposed rule will primarily be those who transact in low volume 
repetitive firearms sales. These persons likely either already are, or 
would become, small entities.
    4. A description of the projected reporting, recordkeeping and 
other compliance requirements of the proposed 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.
    ATF estimates that this proposed rule would affect at least 24,540 
unlicensed persons who, as a result of changes enacted in the BSCA, are 
now required to obtain a Federal firearms license. Such persons would 
need to file a Form 7 application, pay a licensing fee, undergo a 
qualification inspection, maintain Form 4473 and A&D records for every 
firearm transaction, and undergo periodic compliance inspections. If 
they continue in business after three years, they would need to file a 
Form 8 renewal application and pay a renewal licensing fee. No 
professional skills are necessary to prepare or perform application or 
recordkeeping activities.
    5. An identification, to the extent practicable, of all relevant 
Federal rules which may duplicate, overlap or conflict with the 
proposed rule.
    This proposed rule does not duplicate or conflict with other 
Federal rules.
    6. Descriptions of any significant alternatives to the proposed 
rule which accomplish the stated objectives of applicable statutes and 
which minimize any significant economic impact of the proposed rule on 
small entities.
    ATF did not find any suitable alternatives that would meet the 
objectives of this proposed rule that would minimize the economic 
impact that this rulemaking would have on small entities.

E. Small Business Regulatory Enforcement Fairness Act of 1996

    This rulemaking is likely to have a significant economic impact on 
a substantial number of small entities under the Small Business 
Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 601 et seq. 
Accordingly, the Department prepared an initial regulatory flexibility 
analysis.

F. Unfunded Mandates Reform Act of 1995

    This 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. Therefore, no 
actions were deemed necessary under the provisions of the Unfunded 
Mandates Reform Act of 1995, Public Law 104-4, 109 Stat. 48. See 2 
U.S.C. 1532(a).

G. Paperwork Reduction Act of 1995

    Under the Paperwork Reduction Act of 1995 (``PRA''), 44 U.S.C. 
3501-21, and its implementing regulations, 5 CFR part 1320, 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 proposed rule are collections of information which 
have been reviewed and approved by OMB in accordance with

[[Page 62018]]

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 actions. The collections of information in this 
rulemaking are mandatory. The title and description of the 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)3.
    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 cease to be unlawful when 
persons are licensed under the provisions of 18 U.S.C. 923. Some 
examples of activities that are no longer unlawful once a person 
becomes licensed include: engaging in the business of selling, 
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 18 U.S.C. 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 selling, 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 F 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 F 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 
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, 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 FBI's NICS system 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

[[Page 62019]]

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 in 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.

IV. Public Participation

A. Comments Sought

    ATF requests comments on the proposed rule from all interested 
persons. ATF specifically requests comments on:
    (1) The clarity of this proposed rule, and how easy it is to 
understand;
    (2) The various definitions and rebuttable presumptions relevant to 
determining when a person is ``engaged in the business'' of dealing in 
firearms at wholesale or retail, as described in Section II.D of this 
preamble, and when a person acts with the intent to ``predominantly 
earn a profit'' from the sale or disposition of firearms, as described 
in Section II.G of this preamble.
    (3) Whether the rule should use inferences, factors, or some other 
method of determining when a person is ``engaged in the business'' of 
dealing in firearms or acting with the intent to ``predominantly earn a 
profit'', instead of, or in addition to, using presumptions of any 
kind, including (a) whether the criteria should function as rebuttable 
presumptions or permissive inferences in the administrative and civil 
contexts, and (b) whether and how the criteria should function 
differently in different types of proceedings;
    (4) Whether there is additional specific conduct that would provide 
indicia of whether or when a person is or is not ``engaged in the 
business'' of dealing in firearms, or acts with the intent to 
``predominantly to earn a profit'' from the sale or disposition of 
firearms;
    (5) When and how any presumptions, inferences, or factors can or 
should be rebutted;
    (6) Whether the rule should define ``occasional'' as that term is 
used in the definition of ``engaged in the business'' under 18 U.S.C. 
921(a)(21)(C), and if so, how the term should be defined; and
    (7) The costs or benefits of the proposed rule, and appropriate 
methodology and data for calculating those costs and benefits, 
including what sources ATF should look to, beyond ATF's own expertise, 
for accurate estimates of the percentage of this population that would 
need to obtain a license because they are ``engaged in the business'' 
of dealing in firearms compared to those who make occasional sales of 
firearms (e.g., enhancement of a personal collection or for a hobby) 
and would not need to obtain a license.
    All comments must reference this document's docket number, ATF 
2022R-17, and be legible. Commenters must also include the commenter's 
complete first and last name and contact information. If submitting a 
comment through the Federal eRulemaking portal, as described in Section 
IV.C of this preamble, commenters should carefully review and follow 
the website's instructions on submitting comments. If submitting as an 
individual, any information provided for city, state, zip code, and 
phone will not be publicly viewable when ATF publishes the comment on 
regulations.gov. If submitting a comment by mail, commenters should 
review Section IV.B of this preamble regarding proper submission of 
PII. ATF may not consider, or respond to, comments that do not meet 
these requirements or comments containing profanity or threatening or 
abusive language. ATF will retain anonymous comments and those 
containing excessive profanity as part of this rulemaking's 
administrative record but will not publish such documents on 
www.regulations.gov. ATF will treat all comments as originals and will 
not acknowledge receipt of comments. In addition, if your comment 
cannot be read due to technical difficulties and ATF cannot contact you 
for clarification, ATF may not be able to consider your comment.
    ATF will carefully consider all comments, as appropriate, received 
on or before the closing date, and will give comments after that date 
the same consideration if practical to do so, but assurance of 
consideration cannot be given except as to comments received on or 
before the closing date.

B. Confidentiality

    ATF will make all comments meeting the requirements of this 
section, whether submitted electronically or on paper, available for 
public viewing at www.ATF.gov, on the internet through the Federal 
eRulemaking Portal, and through the Freedom of Information Act (5 
U.S.C. 552). Commenters who submit by mail and who do not want their 
name or other PII posted on the internet should submit their comments 
by mail along with a separate cover sheet containing their PII. Both 
the cover sheet and comment must reference this docket number (ATF 
2022R-17). For comments submitted by mail, information contained on the 
cover sheet will not appear when posted on the internet, but any PII 
that appears within the body of a comment will not be redacted by ATF 
and it will appear on the internet. Commenters who submit through the 
Federal eRulemaking portal and who do not want any of their PII posted 
on the internet should omit such PII from the body of their comment or 
in any uploaded attachments.

[[Page 62020]]

    A commenter may submit to ATF information identified as proprietary 
or confidential business information. The commenter must place any 
portion of a comment that is proprietary or confidential business 
information under law on pages that are separated from the balance of 
the comment, with each page prominently marked ``PROPRIETARY OR 
CONFIDENTIAL BUSINESS INFORMATION'' at the top of each page.
    ATF will not make proprietary or confidential business information 
submitted in compliance with these instructions available when 
disclosing the comments that it received, but will disclose that the 
commenter provided proprietary or confidential business information 
that ATF is holding in a separate file to which the public does not 
have access. If ATF receives a request to examine or copy this 
information, it will treat it as any other request under the Freedom of 
Information Act (5 U.S.C. 552). In addition, ATF will disclose such 
proprietary or confidential business information to the extent required 
by other legal process.

C. Submitting Comments

    Submit comments using either of the two methods described below 
(but do not submit the same comment multiple times or by more than one 
method). Hand-delivered comments will not be accepted.
    <bullet> Federal eRulemaking Portal: ATF recommends that you submit 
your comments to ATF via the Federal eRulemaking portal at 
www.regulations.gov and follow the instructions. Comments will be 
posted within a few days of being submitted. However, if large volumes 
of comments are being processed simultaneously, your comment may not be 
viewable for up to several weeks. Please keep the comment tracking 
number that is provided after you have successfully uploaded your 
comment.
    <bullet> Mail: Send written comments to the address listed in the 
ADDRESSES section of this document. Written comments must appear in 
minimum 12-point font size (.17 inches), include the commenter's first 
and last name and full mailing address, be signed, and may be of any 
length. See also Section IV.B of this preamble.

D. Request for Hearing

    In accordance with 18 U.S.C. 926(b), any interested person who 
desires an opportunity to comment orally at a public hearing should 
submit a request, in writing, to the Director of ATF within the notice 
period. The Director, however, reserves the right to determine, in 
light of all circumstances, whether a public hearing is necessary.

Disclosure

    Copies of this proposed rule and the comments received in response 
to it will be 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.

Severability

    Consistent with the Administrative Procedure Act, the issues raised 
in this proposed rule may be finalized, or not, independently of each 
other, after consideration of comments received. The Department intends 
separate aspects of any final rule that results from this proposed rule 
to be severable from each other, as demonstrated by the rule's 
structure. In the event any provision of this rule as finalized is held 
to be invalid or unenforceable by its terms, the remainder shall not be 
affected and shall be construed so as to give remaining provisions the 
maximum effect permitted by law.

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 proposes 
to amend 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. Revising paragraph (c) of the definition of ``Engaged in the 
business'';
0
c. Adding the definitions of ``Personal collection, 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
f. Adding the 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 may be 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; through the use of other 
electronic means (e.g., an online broker, online auction, 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--
* * * * *
    (c) Dealer in firearms other than a gunsmith or a pawnbroker. (1) 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, but such 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. The term shall not include an auctioneer who 
provides only auction services on commission by assisting in 
liquidating a personal collection of firearms at an estate-type 
auction, provided the auctioneer does not purchase the firearms, take 
possession of the firearms prior to the auction, or consign the 
firearms for sale.
    (2) For purposes of this definition--
    (i) The term ``purchase'' (and derivative terms thereof) means the 
act of obtaining a firearm in exchange for something of value;
    (ii) The term ``sale'' (and derivative terms thereof, including 
``resale'') means the act of providing a firearm in exchange for 
something of value; and
    (iii) The term ``something of value'' includes money, credit, 
personal property (e.g., another firearm or ammunition), a service, a 
controlled

[[Page 62021]]

substance, or any other medium of exchange or valuable consideration.
    (3) Whether a person is engaged in the business of dealing in 
firearms requiring a license 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 to acquire more firearms for resale or offers more firearms 
for sale), may require a license. A person shall be presumed to be 
engaged in the business of dealing in firearms in civil and 
administrative proceedings, absent reliable evidence to the contrary, 
when the person--
    (i) 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;
    (ii) Spends more money or its equivalent on purchases of firearms 
for the purpose of resale than the person's reported gross taxable 
income during the applicable period of time;
    (iii) 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:
    (1) Stolen firearms (18 U.S.C. 922(j));
    (2) Firearms with the licensee's serial number removed, 
obliterated, or altered (18 U.S.C. 922(k), 26 U.S.C. 5861(i));
    (3) 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
    (4) Machineguns or other weapons defined as firearms under 26 
U.S.C. 5845(b) 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));
    (iv) Repetitively sells or offers for sale firearms--
    (A) Within 30 days after the person purchased the firearms;
    (B) That are new, or like new in their original packaging; or
    (C) Of the same or similar kind (i.e., make/manufacturer, model, 
caliber/gauge, and action) and type (i.e., rifle, shotgun, revolver, 
pistol, frame, receiver, machinegun, silencer, destructive device, or 
`other' firearm);
    (v) Who, 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 inventory in accordance with 18 U.S.C. 923(c) and 27 CFR 
478.125a; or
    (vi) Who, as a former licensee (or responsible person acting on 
behalf of the former licensee) sells or offers 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:
    (A) The firearms were received and transferred without any intent 
to willfully evade the restrictions placed on licensees by chapter 44, 
title 18, United States Code; and
    (B) One year has passed from the date of transfer to the personal 
collection.
    (4) Where a person's conduct does not otherwise demonstrate a 
predominant intent to earn a profit, the person shall not be presumed 
to be engaged in the business of dealing in firearms when the person 
transfers firearms only as bona fide gifts, or occasionally sells 
firearms only to obtain more valuable, desirable, or useful firearms 
for the person's personal collection or hobby.
    (5) The activities set forth in the rebuttable presumptions in 
paragraphs (c)(3)(i) through (vi) of this definition 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.
    (6) The rebuttable presumptions in paragraphs (c)(3)(i) through 
(vi) of this definition 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.
* * * * *
    Personal collection, personal collection of firearms, or personal 
firearms collection. (1) 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). The term shall not include any 
firearm purchased for the purpose of resale or made with the 
predominant intent to earn a profit.
    (2) 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 chapter 44, title 18, 
United States Code;
    (ii) Recorded by the licensee as an acquisition in the licensee's 
acquisition and disposition record in accordance with Sec.  478.122(a), 
478.123(a), or 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 individual's personal collection in accordance with 
Sec.  478.122(a), 478.123(a), or 478.125(e);
    (iv) 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; and
    (v) 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.
* * * * *
    Predominantly earn a profit. (1) 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 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.
    (2) The intent to predominantly earn a profit is a fact-specific 
inquiry. A person shall be presumed to have the intent to predominantly 
earn a profit from the sale or disposition of firearms in civil and 
administrative proceedings, absent reliable evidence to the contrary, 
when the person--
    (i) Advertises, 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;
    (ii) Purchases, rents, or otherwise secures or sets aside permanent 
or

[[Page 62022]]

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;
    (iii) Makes or maintains records, in any form, to document, track, 
or calculate profits and losses from firearms purchases and sales;
    (iv) Purchases or otherwise secures merchant services as a business 
(e.g., credit card transaction services, digital wallet for business) 
through which the person makes or offers to make 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 
business assets or transactions that include firearms;
    (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 firearms transactions;
    (vii) Secures or applies for a State or local business license to 
purchase for resale or to sell merchandise that includes firearms; or
    (viii) Purchases a business insurance policy, including any riders 
that cover firearms inventory.
    (3) The activities set forth in the rebuttable presumptions in 
paragraphs (2)(i) through (viii) of this definition are not exhaustive 
of the conduct that may show that, or be considered in determining 
whether, a person has the intent to predominantly earn a profit from 
the sale or disposition of firearms.
    (4) The rebuttable presumptions in paragraphs (2)(i) through (viii) 
of this definition 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.
* * * * *
    Responsible person. Any individual possessing, directly or 
indirectly, the power to direct or cause the direction of the 
management, policies, and business practices of a corporation, 
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. In Sec.  478.57, designate the introductory text as paragraph (a) 
and add paragraph (b) 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 
designated by the Director for good cause:
    (1) Liquidate the 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 this part; or
    (2) Transfer the remaining business inventory to a 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. 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 a personal inventory, is subject to the presumptions in 
Sec.  478.11 (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. In 
addition, 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
4. In Sec.  478.78, designate the introductory text as paragraph (a) 
and add paragraph (b) 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 
designated by the Director for good cause, either:
    (1) Liquidate the 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 this part; or
    (2) Transfer the remaining business inventory to a 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. 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 former licensee, who 
resells any such inventory, including business inventory transferred to 
a personal inventory, is subject to the presumptions in Sec.  478.11 
(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. In 
addition, 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. In Sec.  478.124, revise 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 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 in 
accordance with Sec.  478.125a. When a licensee transfers a

[[Page 62023]]

firearm to another licensee, the licensee shall comply with the 
verification and recordkeeping requirements in Sec.  478.94 and subpart 
H of part 478.
* * * * *
0
6. In Sec.  478.125a, in paragraphs (a)(2) and (3), remove the citation 
``Sec.  478.125(e)'' and add in its place ``Sec. Sec.  478.122(a), 
478.123(a), or 478.125(e)''.

    Dated: August 30, 2023.
Merrick B. Garland,
Attorney General.
[FR Doc. 2023-19177 Filed 9-7-23; 8:45 am]
BILLING CODE 4410-FY-P