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ATF Proposes Rule Changes for
Machine Gun Transfers
On May 6 and 8, 2026, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) published the first tranche of new proposed and final rules to modernize its regulations governing firearms and ammunition. We will examine these changes in detail in a series of alerts over the next several weeks. You may also wish to consult our April 30 Alert offering a preview of the ATF regulatory reform package. Also, don't miss the F.A.I.R. Trade Group's upcoming Firearms and Ammunition Compliance Conference on July 22 and 23, 2026! Co-hosted by the Firearms Regulatory Accountability Coalition (FRAC), this conference is the first opportunity to hear directly from ATF officials on these regulatory changes. Reeves & Dola is a proud sponsor of this event, and we hope to see you there!
In today's post, we will focus on ATF's proposed rulemaking pertaining to machine gun transfers between qualified federal firearms licensees (FFLs). This Notice of Proposed Rulemaking (NPRM), published on May 6, 2026, at 91 Fed. Reg. 24485, seeks to amend 27 C.F.R. § 479.105. These are only proposed changes; comments are due on or before July 6, 2026.
This NPRM focuses on two types of machine gun transfers allowed under Section 922(o) of the Gun Control Act (GCA), presuming qualification is established to ATF's satisfaction per section 479.105. These transfers are: (1) transfers between qualified licensees for demonstration to potential government customers ("qualified" = FFL + a Special (Occupational) Tax (SOT) payer) and (2) transfers to liquidate inventory when a licensee is going out of business.
Background - GCA Machine Gun Prohibition
and the Government Exception
Since 1986, transferring and possessing machine guns is prohibited except in two instances, one of which is "a transfer to or by, or possession by or under the authority of, the United States or any department or agency thereof or a State, or a department, agency, or political subdivision thereof; ..." 18 U.S.C. § 922(o)(2)(A) (the "MG government exception"). The other exception to the prohibition is the transfer or possession of a machine gun lawfully possessed (meaning the machine gun was registered when the new law took effect, often referred to as "pre-86" machine guns).
Historically, ATF has interpreted the MG government exception as permitting FFL/SOT manufacturers to stockpile machine guns, provided subsequent transfers are to federal, state, or local government entities for official use. See ATF Rul. 2014-1. In that ruling, ATF recognized the breadth of the phrase "possession ... under the authority of" a government agency and also recognized that "permitting qualified manufacturers to maintain an inventory of weapons in anticipation of future government sales is necessary to ensure that military and law enforcement personnel have enough machineguns available during times of war or national emergency."
For subsequent transfers of machine guns, the burden is on the licensee to establish that such transfer is "under the authority of" a federal, state, or local government entity (transfers for the benefit of a foreign government are not eligible for the MG government exception). Under 27 C.F.R. § 479.105(d), ATF may approve machine gun transfer applications between qualified licensees if it is shown (1) a government entity has requested the transferee demonstrate the machine guns and (2) the transferee is able to fill any subsequent government orders for the particular machine gun. The application must include signed letters from the government entity expressing a need for the particular model or interest in seeing the particular weapon demonstrated (the so-called "law letter"). As an alternative to the law letter, the government entity may sign the ATF Form 5320.24 Description of Firearm and Information on Request for Demonstration, for inclusion with the transfer application.
In 2023, in an attempt to prevent misuse of the dealer sales sample transfer procedure, ATF issued an open letter expanding the law letter requirement to include additional details to "adequately articulate" the government entity's bona fide interest in purchasing machine guns. The open letter also announced ATF's policy to confirm each and every sample or demonstration request directly with the requesting government entity.
Proposed Rulemaking for Government Demonstrations
ATF now proposes to back off some of the qualifying specifications detailed in §479.105(d) and the 2023 open letter as they impose burdens exceeding the statutory requirements. The NPRM explains, "Section 922(o)(2)(A) simply requires that transferring or possessing in this context be 'under the authority of the United States or any department or agency thereof or a State, or department, agency, or political subdivision thereof.' ATF has determined that the plain text of the statute does not require an in-depth analysis of the government entity’s intent or reason for requesting the demonstration." NPRM at 24486.
The proposed revisions to section 479.105(d) would require only the basic information necessary in a law letter for ATF to approve a qualified dealer’s application to transfer and register post-86 machine guns. However, the revised section would also include ATF's current process for confirming the law letter is a bona fide request (i.e., checking directly with the individual signing the law letter or the Form 5320.24).
ATF will also revise paragraph (e) of section 479.105 to strike the requirement that applicants to make and register post-86 machine guns for the benefit of a government entity establish that the machine gun is "particularly suitable" for that entity. The amended provision would require only that the application establish the machine gun to be made and registered is at the request and on behalf of a government entity. It is important to note that the process covered under section 479.105(e) does not apply to FFL/SOT manufacturers, who are able to stockpile machine guns for future sales and transfers to government entities (see above).
Out of Business Transfers
The other proposed changes to section 479.105 are to paragraph (f), which allows a licensee to liquidate inventory when going out of business by transferring post-86 machine guns to another "qualified" (FFL/SOT) manufacturer or importer (or a dealer if for a government demonstration). The revision would clarify that a licensee does not have to completely discontinue all business under the GCA to avail itself of the NFA liquidation process under section 479.105(f). In other words, when discontinuing the NFA business, a licensee can use section 479.105(f) to transfer post-86 machine guns to a qualified licensee upon relinquishing the SOT, even if it is continuing to operate as a GCA-only (non-NFA) business.
Conclusion
We strongly recommend reviewing the NPRM and consider whether these proposed changes will affect your business. ATF is seeking comments on clarity and the costs or benefits of the proposed rule. Comments can certainly be positive! If providing comments on the cost/benefits, include the appropriate methodology and data for calculating. Comments must be submitted on or before July 6, 2026.
Our next alert will examine the proposed rule changes affecting firearm and ammunition imports.
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