HomeUSANew ATF “Engaged In The Business” Rule (Kinda) Blocked By Judge

New ATF “Engaged In The Business” Rule (Kinda) Blocked By Judge

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The ATF published (yet another) new administrative rule that impacts many American gun owners. We previously covered the “engaged in the business” rule when it was proposed last year. The final version of that rule is now published, but it has already been stayed by a judge. Let’s look at what this rule says, and who it applies to.

Legislation & Regulation @ TFB:

Disclaimer: This article is not legal advice. If you are making decisions about what you should do to comply with this rule, you should speak with an attorney licensed in your state. I do not represent you and will not do so if you ask. Don’t make any big decisions based on this article.

Background

The Bipartisan Safer Communities Act passed in 2022. Among other things, it changed some definitions of what constitutes engaging in business as a gun dealer. The Bureau of Alcohol, Tobacco, Firearms, and Explosives drafted some new rules, using those definitions, that greatly expanded the types of conduct that are viewed as gun dealing. 

ATF’s first version of those rules came out last year and received numerous comments from the public, both against and in support. In fairness, we have all seen that one guy who shows up to every gun show and purports to be selling his “personal collection” of only brand-new guns. But this draft rule went much further and would probably have swept up anyone who sells more than one gun once in a while. 

ATF took that feedback and re-drafted the rule, and published it as a final rule in 2024. The revised rule has some changes from the original draft. Let’s dig into those and see what the rule does and does not do. 

Presumptions

For any of this to make sense we need some background on what a presumption means in the legal context, and we need to also discuss standards of proof. In a civil lawsuit, the party with the “preponderance of evidence” wins. Stated simply, the side with more proof wins. However, in some situations, the parties do not start on an equal footing. The law sometimes presumes that one party has met the standard if some fact is proved. However, those presumptions can often be rebutted if the party the presumption is against can show some other evidence.

The new “engaged in the business” rule includes a rebuttable presumption. If the ATF can show that someone did any of the things listed in the rule, like repeated selling of “new in box” guns, then that person is presumed to be dealing guns. But someone facing that presumption can rebut it by showing the transfer was any of the following:

(1) As bona fide gifts;

(2) Occasionally to obtain more valuable, desirable, or useful firearms for the

person’s personal collection;

(3) Occasionally to a licensee or to a family member for lawful purposes;

(4) To liquidate (without restocking) all or part of the person’s personal

collection; or

(5) To liquidate firearms—

(i) That are inherited; or

(ii) Pursuant to a court order; or

(6) To assist in liquidating firearms as an auctioneer when providing auction

services on commission at an estate-type auction.

Having to rebut a presumption does entail a real burden on the ATF’s target, but the acknowledged ways to fight that presumption make at least some sense.

“Personal Collection”

A major issue with the new “engaged in the business” rule is the definition of a “personal collection” contained in the rule. If you are reading this post you probably have what you would call a collection, but that common language use of the word is not what ATF has in mind. Most notably, guns owned for self-defense or personal protection are not part of a collection under this definition. The executive summary of the rule states:

firearms accumulated primarily for personal protection are not included in the definition of ‘‘personal collection,’

Because ATF says that personal protection firearms are not part of a collection, selling them to enhance a collection would not fit into the rule’s exceptions. How would the ATF decide which guns are collectible and which are defensive in nature? No one knows. What about a collector of Glock handguns? No idea. But the decision to exclude the types of guns most clearly protected by the Second Amendment from being part of a “collection” is a very questionable piece of legal drafting.

So How Bad Is It?

One of the biggest issues with the rule is that it is open-ended. Unfortunately, after it sets out the lists of naughty conduct that can get someone in trouble, it drops this bombshell: those violations “are not exhaustive of the conduct or evidence that may be considered in determining whether a person is engaged in the business of dealing in firearms…” Who knows what other conduct or evidence the ATF may decide meets that standard. The ATF clearly doesn’t know either, or they would have included it in this rule.

Despite that concern, there have been at least a few overreactions to this rule online, with some commentators making dire proclamations about the criminalization of all private gun sales coming from this rule. That is not exactly what this rule does. Many of these changes apply to administrative and civil actions by ATF, rather than criminal actions. Being sued by the ATF and facing civil or administrative fines would not be pleasant, but it would be less terrible than being in federal prison. 

This is not to say that this rule is good for gun owners. I am highly suspect of any regulatory action by the ATF, due to their track record of very questionable administrative rule-making. This rule could be worse, but that does not mean it won’t be used to target regular gun owners who have absolutely no criminal intent in selling their guns.

Why Comments Matter

As a brief aside, this latest rule is yet another example of the value of commenting on proposed rulemaking. Many comments from the gun-owning public raised issues with the proposed rule that ATF changed in the final rule. The new version of the rule added “repetitively or continuously” in a few places. This helps clarify the sale of a single gun is less likely to trigger the new rule. The comments that flagged this issue made the final rule a little less unreasonable.  

So What Did The Court Say?

The final rule was due to take effect on May 20, 2024. However, a lawsuit was filed by Gun Owners of America, state gun rights groups, an individual, and several states. These plaintiffs sought a temporary restraining order against the ATF that would prohibit ATF from enforcing the rule. 

The judge granted that restraining order on May 19th, just before the rule took effect. But (and this is a big but) it does not cover all of the plaintiffs. Texas, GOA, and the state gun rights groups (the Virginia Citizens Defense League and Tennessee Firearms Association) are all protected by the TRO. The other states involved in the lawsuit, Utah, Louisiana, and Mississippi did not get the protection of this TRO.

Why would a judge grant this protection to one state but not others? That comes down to standing, which is a legal term for the right to be involved in a lawsuit. Texas laid out specific harms against the state if the rule became effective, such as financial harm because the rule restricts trade. The other states did not explain how their rights were harmed by this rule, so the court can’t grant a temporary order that only exists to protect those parties from immediate harm if the court fails to act. There are probably several lawyers from those states drafting motions right now to address that failure.

This TRO is also a major signal as to the direction this case will take in the future. In order to grant this order, the judge had to find that the plaintiffs were “substantially likely” to win the case. The judge pointed to the Administrative Procedures Act as one reason the plaintiffs are likely to win. In particular, there are several places where the rule takes liberties with the underlying statutory language, or claims to interpret that statute language by doing something very different than what the statute says.

Another area of concern for the judge was the exclusion of defensive firearms from the definition of personal collection. The judge notes that two-thirds of guns owned by Americans are used for defense, and only applying the so-called safe harbor protections of the rule for the remaining third of guns makes little sense. He also points out that the ATF’s decision to exclude the most common class of guns from being part of a collection does not fit with the common meaning of “collection.”

Conclusion

The ATF’s final rule around being “engaged in the business” as a gun dealer is a mess. It is convoluted and will likely sweep up a lot of regular, law-abiding gun owners along with the bad actors the rule targets. Thankfully, at least one judge has seen the issues with the rule and blocked it for some people. We will keep an eye on this case as it develops.

 

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