By Chris Thomas
Our office has recently received informal information regarding some Federal firearms licensees (FFL), special occupational taxpayers (SOT) who may have been misinformed regarding the transfer requirements imposed on machine guns that were manufactured or imported on or after May 19, 1986, which are sometimes known in the industry as “Post May” or “Post Sample” machine guns. In summary, it seems that the rumored advice is basically that a manufacturer or importer FFL/SOT may transfer any number of Post Sample machine guns to another manufacturer or importer FFL/SOT as if ATF Rul. 2002-5 (with its inclusion and application of the evidentiary requirements as imposed by 27 C.F.R. § 479.105(d) in support of a transfer of Post Sample machine guns) did not apply to such transfers.
27 C.F.R. § 479.105(d) as you may recall, is the regulation that implements the transfer requirements for Post Sample machine guns to dealer FFL/SOTs and it provides:
• Dealer sales samples. Subject to compliance with the provisions of this part, applications to transfer and register a machine gun manufactured or imported on or after May 19, 1986, to dealers qualified under this part will be approved if it is established by specific information the expected governmental customers who would require a demonstration of the weapon, information as to the availability of the machine gun to fill subsequent orders, and letters from governmental entities expressing a need for a particular model or interest in seeing a demonstration of a particular weapon. Applications to transfer more than one machine gun of a particular model to a dealer must also establish the dealer’s need for the quantity of samples sought to be transferred.
In applying 27 C.F.R. § 479.105(d), ATF Rul. 2002-5 holds that “...applications to transfer two (2) machine guns of a particular model to a Federal firearms licensee as sales samples will be approved if the dealer provides documentation that the dealer needs to demonstrate the machine gun to all the officers of a police department or the department’s SWAT team or special operations team. An FFL who offers other bona fide reasons for their need for two (2) or more machine guns may get more than two (2) with specific documentation.” Accordingly, ATF will approve the transfer of a Post Sample machine gun between FFL/SOTs if the required supporting documentation, executed by the law enforcement entity at issue, is provided in support of the transfer.
Although ATF Rul. 2002-5 specifically refers to “dealers” of machine guns in its analysis, ATF Rul. 2002-5 also advised that, “The dealer sales sample regulation in section 179.105(d) (editor’s note: now known as Section 479.105(d)) is a narrow exemption to the general prohibition on possession of post-1986 machine guns imposed by section 922(o).” Accordingly, as described above, ATF requires that the transfer of Post Sample machine guns between FFL/SOTs, including between manufacturer and/or importer FFL/SOTs, be supported by the same law enforcement demonstration (“LE Demo”) letter requirements as for dealer FFL/SOTs seeking such transfers. There has been no “loosening” of the rules for such transfers.
Perhaps, the recent confusion arises from a mistaken interpretation or unwarranted extension of the scope of 27 C.F.R. § 479.105(f) which governs the disposal of Post Sample machine guns by FFL/SOTs who are discontinuing their business operations. 27 C.F.R. § 479.105(f) provides:
• Discontinuance of business. Since section 922(o), Title 18, U.S.C., makes it unlawful to transfer or possess a machine gun except as provided in the law, any qualified manufacturer, importer, or dealer intending to discontinue business shall, prior to going out of business, transfer in compliance with the provisions of this part any machine gun manufactured or imported after May 19, 1986, to a Federal, State or local governmental entity, qualified manufacturer, qualified importer, or, subject to the provisions of paragraph (d) of this section, dealer qualified to possess such, machine gun.
Thus in “going out of business” situations, 27 C.F.R. § 479.105(f) dispenses with the LE Demo letter requirements imposed by 27 C.F.R. § 479.105(d) with regard to the transfer of Post Sample machine guns to a manufacturer or importer FFL/SOT but not to a dealer FFL/SOT which must at all times, still comply with the LE Demo letter requirements when seeking to be the transferee of a Post Sample machine gun.
In summary then, it is important to remember that 26 U.S.C. § 922(o) imposes a general and broad prohibition of the possession of Post Sample machine guns, and that the 27 C.F.R. § 479.105(d) dealer sale sample regulation is a very narrow exception to this general prohibition. As a result, it is important to keep in mind that the transfers of Post Sample machine guns between manufacturer and/or importer FFL/SOTs are still subject to this narrow dealer sales sample regulation and the associated LE Demo letter requirements, except that is, in the case of the even narrower sub-exception of 27 C.F.R. § 479.105(f) whereby a manufacturer or importer FFL/SOT may, without resort to the LE Demo letter process, receive the Post Sample machine gun inventory from any FFL/SOT that is going out of business (i.e. ceasing all firearms operations, or at least ceasing all SOT related operations). We trust that going forward, this clarification may serve to alleviate the aforementioned regulatory confusion that may or may not be, circulating in some sectors of the industry.
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