H.R. 1478: The Federal Firearm Licensee Act (2023)

People engaged in the business of selling firearms must become federal firearm licensees (“FFLs”¹There are 9 types of FFLs covering three main categories of business activity: sales, manufacturing, and importing. As of October 12, 2021, there were 59,860 Type 01 and 02 FFLs (firearm dealers and pawnbrokers) in the U.S., representing 44.6% of all FFLs. ATF, https://www.atf.gov/firearms/listing-federal-firearms-licensees.). While many are law-abiding, the very laws governing the business of gun selling, including what “engaged in the business” means, are outdated and have not been amended since 1968. The deficiencies in the existing laws frustrate law enforcement efforts to curb gun violence by not providing the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the law enforcement agency responsible for regulating the gun industry, with the modern tools necessary to crack down on gun trafficking and rogue gun dealers that perpetuate it.

In an effort to bring firearm dealer laws into the 21st Century, Congresswoman Robin L. Kelly (D-IL) introduced the “Federal Firearm Licensee Act” (the “Act”), H.R. 1478, a data-driven blueprint for clarifying the responsibilities of gun dealers that also provides tools with which ATF can readily identify rogue firearm dealers and address dangerous licensee misconduct that facilitates gun violence. While the Biden-Harris Administration has announced a comprehensive strategy to combat gun violence utilizing existing law, statutory amendments that fully empower the ATF remain long overdue.

Existing law provides ATF with a limited array of means by which to discipline firearm dealers who fail to comply with the law. Further, the lack of specific statutory explanation on the penalties appropriate for particular circumstances results in the disparate treatment of licensees by different ATF field offices.²See Brian Freskos, Daniel Nass and Alain Stephens, The Trace; Nick Penzenstadler, USA TODAY, “After repeated ATF warnings, gun dealers can count on the agency to back off; sometimes firearms flow to criminals”, USA Today, updated May 27, 2021, https://www.usatoday.com/in-depth/news/investigations/2021/05/26/gun-dealers-let-off-hook-when-atf-inspections-find-violations /7210266002/. To standardize and further detail the enforcement options at the ATF’s disposal, the Act permits the agency to temporarily suspend licenses in all circumstances in which it is currently permitted to revoke permits, providing an intermediate step for conduct that may not rise to the level of an administrative hearing and license revocation; enumerates specific penalties that increase for repeat offenses; and permits the ATF, for the first time, to deny issuing or renewing an FFL license on the basis of public safety.

The statutory definition of “engaged in the business” of dealing firearms also continues to be vague, hampering law enforcement’s ability to investigate and prosecute individuals who sell firearms without obtaining an FFL³Everytown Research & Policy, “Business As Usual: How High-Volume Gun Sellers Fuel the Criminal Market and How the President Can Stop Them,” November 12, 2015, https://everytownresearch.org/report/business-as-usual/#history-of-a-loophole. and frustrating well-meaning individuals’ attempts to faithfully comply with the law. The Act adds clarity to the definition, which exempts from its scope individuals “who make occasional sales, exchange or purchase of firearms,” by defining “occasional” as fewer than 5 transactions within a 12-month period. The Act also expands the applicability of federal firearms laws to “facilitators” of firearm sales, such as operators of gun shows and online marketplaces like Armlist.com, which, in several states, are currently permitted to host large commercial marketplaces in which firearms are transferred to purchasers without first initiating a background check to determine whether the buyers are prohibited under applicable state and/or federal law.

Federal law lacks any requirement that FFLs provide warnings to purchasers regarding suicide prevention or preventing access to the firearm by a minor or prohibited person, video record transactions to both promote good sales practices and aid in prosecuting violations, or implement security measures to protect their highly valuable and lethal inventory from theft. This is particularly troubling as the number of firearms reported stolen from licensees in burglaries and robberies in 2020 increased by approximately 33 percent and 53 percent, respectively, over the 2019 figures.⁴Bureau of Alcohol, Tobacco, Firearms, and Explosives. Data and Statistics: Federal Firearms Licensee Burglary and Robbery Statistics. https://bit.ly/2nigapL. In 2020, a total of 5,961 firearms were reported stolen by licensees in burglaries and 308 firearms were reported stolen in robberies. In 2019, a total of 4,490 firearms were reported stolen by licensees in burglaries and 201 firearms were reported stolen in robberies. The Act requires the ATF to promulgate rules regarding security features necessary to protect licensees’ business premises from theft; obliges dealers, manufacturers and importers to obtain written approval of a plan to secure their physical premises; requires FFLs to provide warnings to purchasers; and retain video surveillance of transactions for 90 days.

Finally, ATF’s ability to trace guns utilized in crimes is a time consuming process as the result of longstanding riders in bills appropriating funding to the agency that prohibit it from consolidating or centralizing dealer transaction records. To enable faster crime gun tracing and bring ATF’s recordkeeping into the modern age, the Act repeals those riders, and allows individual dealers and states with dealer licensing and/or firearm transaction record systems to provide ATF with remote access to these systems for purposes of obtaining information related to criminal investigations.

Additional provisions:

• Notification of Default Transfers. Requires licensees who transfer firearms to a seller when no NICS response is received within 3 business days to notify AG of the transfer on the same day.
• Multiple Firearms Sales. Expands requirement that licensees report sales of 2+ pistols or revolvers to non-licensee over 5 consecutive days to include certain rifles and shotguns.
• Indicted Dealer Loophole. Prohibits licensees from receiving new firearms or transferring any firearms in their business inventory to anyone other than a licensee or law enforcement agency immediately upon being indicted for a crime punishable by imprisonment of one year or more.
• Inspections Prioritized by Dealer Risk of Violations. Requires annual inspections of high risk gun dealers and inspections every five years for all others.
• Recurring Dealer Background Checks. Requires dealer-applicants and employees trusted with the possession of firearms to undergo background checks for FFL issuance and renewal.
• Increases Licensing Fees by 100%. FFL fees have not changed since 1993.