S. 1294 — Federal Firearm Licensee Act

This section establishes the short title of the Act as the "Federal Firearm Licensee Act" and sets forth the table of contents.

This section states congressional findings, including that (1) firearm dealers’ sales practices affect the diversion of firearms to criminals and that accountability policies can reduce such diversion; (2) federal firearm dealer laws have not been updated in more than 30 years, contain safeguards protecting dealers engaging in illegal practices, frustrate law enforcement efforts to curb firearm trafficking and violence, and are inadequate for current realities; (3) the Tiahrt Amendments limit Bureau of Alcohol, Tobacco, Firearms, and Explosives disclosure of crime gun trace data, prevent data collection and effective policies against illegal firearms, and impede enforcement by requiring destruction of most background check records within 24 hours and prohibiting government-required annual inventory audits of firearm dealers; and (4) federal law imposes no physical security requirements on dealer inventory, with firearms stolen from dealers in burglaries more than doubling and in robberies tripling between 2013 and 2017.

This section adds definitions to 18 U.S.C. §921(a) for the following terms: (1) *facilitator*, generally any person hosting a commercial marketplace for firearm sales, purchases, or transfers, excluding compliant websites or apps with good-faith enforcement of terms of service prohibiting such transactions (including quarterly audits); (2) *occasional*, meaning fewer than 5 transactions in a 12-month period; (3) *personal collection*, meaning firearms obtained solely for personal use (not sale or trade), excluding inherited firearms until possessed for 1 year; (4) *business inventory firearm*, meaning a firearm required to be recorded in a firearms business's acquisition and disposition logs; (5) *frame* (for handguns or variants) and *receiver* (for rifles, shotguns, or other projectile weapons or variants), meaning the part housing or structuring the primary component that holds back the firing mechanism (e.g., hammer, striker, bolt, breechblock, or sear) prior to firing; and (6) *semiautomatic shotgun*, meaning a repeating shotgun using a fired shell's energy to extract the casing and chamber the next round, requiring a separate trigger pull for each shell.

This section repeals the temporary Brady provision at 18 U.S.C. 922(s), which required federally licensed firearms dealers to notify the chief law enforcement officer of a prospective handgun transferee's identity and either obtain a confirmation that receipt would not violate law or wait three business days before completing the transfer (i.e., pending full implementation of the National Instant Criminal Background Check System under 922(t)). The section also makes conforming amendments to 18 U.S.C. 922(t) and 922(y)(2), 924(a)(5), and 925A to remove cross-references to 922(s) and define "chief law enforcement officer" in 922(t).

This section requires applicants for federal firearms licenses (FFLs) to submit with their application a security plan describing how they will secure business premises from theft in accordance with forthcoming regulations (including during emergencies) and to certify future compliance with the plan. For dealer license renewals, it further requires that the license not be suspended, no prior license revoked, and the Attorney General (AG) inspect the premises and approve the security plan in writing. This section also requires each licensed manufacturer, importer, and dealer to annually certify to the AG premises compliance with the new regulations, with dealers additionally reporting inventory reconciliations of resale firearms, all dispositions and acquisitions, and any missing firearms; non-compliance incurs a civil penalty of up to $5,000 and possible license suspension. This section directs the AG to prescribe regulations ensuring premises security from theft, including security plans, locked metal cabinets and fireproof safes, security systems, video monitoring, anti-theft alarms, security gates, strong locks, site hardening, concrete bollards, access controls, and other features as appropriate. Existing FFL holders have one year after regulation issuance to comply with the security plan, annual certification, and regulations. (Thus, the changes apply primarily to firearms dealers, who hold the majority of FFLs and maintain physical inventories accessible to the public.)

This section revises federal firearms license (FFL) requirements under 18 U.S.C. 923 by (1) authorizing licensed manufacturers, importers, and dealers to maintain personal firearm collections separate from business inventory, while requiring that any firearm disposed of by such a licensee come from business inventory; and (2) requiring each FFL to conduct quarterly physical checks of business firearms inventory, report any lost, stolen, or unaccounted-for firearms to the Attorney General and appropriate local authorities, and maintain records including each firearm's receipt date and source, manufacturer and importer details, model/serial number/type/caliber/gauge, and sale or disposition date. The section further repeals appropriations riders in effect from FY2004 through FY2013 that prohibited the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) from requiring FFLs to conduct physical inventory checks beyond certain limits. (Thus, ATF may now enforce the new quarterly inventory requirements and demand record submissions at any time.)

This section revises firearms recordkeeping requirements for federal firearms licensees (FFLs) under the Gun Control Act (chapter 44 of title 18, U.S. Code), which enable tracing of crime guns, as follows: (1) requires retention of sales and disposition records, including ATF Forms 4473, at business premises until the business is discontinued, effective 1 year after enactment (strikes prior provision allowing earlier disposition or transfer); (2) authorizes electronic submission of records specified in 18 U.S.C. 923(g)(5)(A) and electronic reporting under 923(g)(7); (3) directs the ATF National Tracing Center, within 3 years of enactment, to establish searchable electronic databases of submitted FFL records accessible remotely only for criminal investigations (not by individual PII without a warrant) and permits querying state firearms registration databases with permission; (4) requires licensed dealers selling to nonlicensees to maintain 90-day video surveillance of sales areas with posted notices; and (5) increases criminal penalties for recordkeeping violations to 5 years imprisonment (from 1 year) and to 10 years if linked to firearms trafficking under 18 U.S.C. 922(a)(6) or (d). This section further eliminates the prohibition in 18 U.S.C. 926(a) on ATF rules requiring FFL records to be centralized at federal or state facilities or establishing firearms registration systems (thus enabling the databases required above) and directs the Attorney General to facilitate and incentivize FFL adoption of electronic recordkeeping, including digital conversion of paper records for law enforcement access in violent crime and trace investigations.

This section requires the licensee, in the case of a transfer conducted pursuant to subparagraph (B)(ii) or clause (ii) or (iii) of subparagraph (C), to notify the Attorney General not later than the close of business on the day on which the firearm is transferred that the firearm has been transferred to the person.

This section expands federal firearms reporting requirements and modifies records retention periods related to multiple sales and background checks as follows: (1) expands multiple sales reporting by federal firearms licensees (FFLs) under 18 U.S.C. §923(g)(3)(A) to include semiautomatic rifles or shotguns and rifles or shotguns capable of accepting a high-capacity magazine (i.e., more than 10 rounds of ammunition, including those readily convertible), in addition to pistols and revolvers; (2) requires FFLs to retain National Instant Criminal Background Check System (NICS) records for not less than 90 business days (previously, destroy immediately except identifying number and date assigned), solely for purposes of discovering misuse or avoidance of NICS or ensuring its proper operation; (3) requires the Attorney General to prepare and forward reports of multiple dispositions (two or more in any five consecutive business days) to non-licensees, based on retained NICS records, using a form similar to that for FFL multiple sales reports and including licensee information, to the designated Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) office and relevant state or local law enforcement by close of business on the date of the most recent disposition; and (4) requires retention of multiple sales reports involving a firearm involved in a crime for not less than 180 days (from no more than 20 days).

This section revises secure gun storage or safety device requirements under 18 U.S.C. 922(z) to apply to firearms (from handguns) and adds requirements for warnings to purchasers by—(1) updating the subsection heading to include “and warnings to purchasers”; (2) requiring licensed dealers at physical retail locations to post conspicuously all state and local warnings required for firearms purchasers; and (3) directing the Attorney General to develop and distribute to licensed dealers materials on suicide prevention, securing firearms from loss, theft, or access by a minor or prohibited person, and straw purchasing, which dealers must disseminate to non-licensed transferees.

This section revises federal firearms licensee (FFL) inspection requirements under the Gun Control Act of 1968. **(a)** It requires the Attorney General to (1) inspect annually the inventory, records, and premises of high-risk FFL dealers—defined as those who, in the past five years, reported a lost or stolen firearm; in the past 10 years, received a report of violation, warning letter, or warning conference; or in the past year, sold multiple firearms later used in crimes within three years of sale—and conduct follow-up inspections within 180 days of any violation; (2) inspect every five years the inventory, records, and premises of non-high-risk FFL dealers; and (3) for high-risk dealers, appoint an attorney, as needed, to monitor compliance through in-store observation, record monitoring, sales integrity tests, and employee training until three consecutive years of full compliance with firearms sales laws. **(b)** It eliminates prior limits on FFL record inspections, which previously applied only to records of firearms traced to criminal investigations. **(c)** It requires the Attorney General, upon an FFL's report of a lost or stolen firearm, to inspect the premises' security measures (including any required security plan) and provide the FFL with notice of violations and security improvement recommendations. **(d)** It eliminates prior limits on inspections of FFL premises other than places of business.

This section amends federal firearms licensing requirements under 18 USC 923 (i.e., Federal Firearms Licenses (FFLs) required for businesses importing, manufacturing, or dealing in firearms or importing or manufacturing ammunition) as follows: (1) requires the Attorney General to deny initial or renewal applications if issuing a license would pose a danger to public safety or if the applicant is not likely to comply with the law or is otherwise unsuitable; (2) revises the denial standard for prior regulatory violations from "not willfully violated" to "no uncured violations"; (3) requires, for license approval, that each employee in the business meet the local minimum age to possess a firearm and not be prohibited from firearms transfer, transport, shipping, or receipt under 18 USC 922(d), (g), or (n) or state, local, or tribal law; (4) authorizes the Attorney General to suspend FFLs in addition to revoking them; (5) removes limitations on the Attorney General's rulemaking authority under 18 USC 926(a); and (6) repeals FY2012 and FY2013 appropriations riders that prohibited using funds to deny FFLs due to lack of business activity. (Thus, the Bureau of Alcohol, Tobacco, Firearms and Explosives gains broader discretion over FFL issuance, renewal, suspension, and revocation.)

This section doubles specified licensing fees under 18 U.S.C. 923(a) for licensed importers, manufacturers, and dealers in firearms and importers and manufacturers of ammunition— - the $1,000 fee (in three locations) to $2,000; - the $50 fee (in two locations) to $100; - the $10 fee to $20; - the $200 fee to $400; and - the $90 fee to $180. This section doubles the licensing fee for collectors under 18 U.S.C. 923(b) to $20 (from $10). (Federal firearms licenses are required for persons engaged in the business of importing, manufacturing, or dealing in firearms or ammunition.)

This section eliminates the automatic stay of a federal firearms license revocation pending judicial review upon the licensee's request and instead authorizes courts to grant a discretionary stay upon a showing of good cause by the licensee. (Thus, revoked licensees must demonstrate good cause—previously not required—to continue operations during appeal.)

This section eliminates the relief available under 18 U.S.C. §925(b) to federal firearms licensees under indictment for a crime punishable by imprisonment for a term exceeding one year, which previously allowed continued dealing in firearms or ammunition if the indictment was dismissed, the licensee was acquitted, or the charges were dropped. It redesignates subsections (c) through (f) of that section as subsections (b) through (e), respectively, and makes conforming amendments to cross-references in 18 U.S.C. §§922 and 925, the Foreign Military Sales Act, the NICS Improvement Amendments Act of 2007, and the Atomic Energy Act of 1954.

This section eliminates the prior authorization for firearms licensees to continue operations while an application for relief from federal firearms disabilities is pending under 18 U.S.C. 925(b), instead authorizing the Attorney General to permit such continued operations upon a showing of good cause by the licensee. (As background, §925(b) allows certain persons prohibited from firearms possession or dealing under the Gun Control Act—e.g., felons—to apply to the Attorney General for relief from those disabilities.)

This section increases civil penalties under 18 U.S.C. 922(t)(5) for a licensed importer, manufacturer, or dealer who knowingly transfers a firearm to a non-licensee without conducting a required National Instant Criminal Background Check System (NICS) background check. It specifies that for a first violation the existing civil fine of not more than $5,000 applies and, for a subsequent violation, requires immediate suspension or revocation of the licensee's federal firearms license under 18 U.S.C. 923 along with a $20,000 civil fine.

This section prohibits a licensed importer, manufacturer, dealer, collector, or facilitator under the Gun Control Act of 1968 who incurs a federal firearms disability (i.e., prohibition on acquiring, receiving, transferring, shipping, transporting, or possessing firearms or ammunition) during a license term or pending renewal, or who receives notice of license suspension, revocation, or denied renewal, from (1) transferring a business inventory firearm (i.e., firearm held for sale) to the licensee's personal collection or to any person other than another licensee or a federal, state, or local law enforcement agency, or (2) receiving a business inventory firearm. (Thus, such licensees must transfer business inventory only to other licensees or law enforcement.) It authorizes the Attorney General to waive these restrictions for good cause if the licensee consents to records and inventory inspections; imposes criminal penalties of a fine under title 18, imprisonment for not more than one year, or both for knowing violations; and requires license revocation or denial notices to specify these restrictions and prohibitions on unlicensed firearms dealing.

This section establishes a new Federal Firearms License category for facilitators of firearm sales, purchases, or other transfers via a commercial marketplace (e.g., online platforms), requiring a $1,000 annual fee per business location. The section further requires licensed facilitators (1) to inform prospective sellers that transfers must be completed only through a licensed importer, manufacturer, or dealer who takes possession of the firearm for compliance with background check requirements under 18 USC 922(t); (2) to mandate such compliance for all transfers; (3) to maintain records of offers including date, offeror name, receiving licensee number, and firearm details (model, serial number, type, caliber/gauge); and (4) optionally to require advance identification of the receiving licensee. Upon receipt, the licensee must comply with all chapter requirements as if transferring from its inventory. The section imposes criminal penalties on persons who, after using a licensed facilitator's marketplace, knowingly transfer a firearm without such intermediary: a fine, imprisonment for not more than 1 year, or both; or, if the transfer violates 18 USC 922(d), (g), or (n) or the firearm is used in a crime of violence or drug trafficking crime, a fine, imprisonment for not more than 10 years, or both. The section makes conforming amendments to 18 USC 922, 923, and 924 to exempt licensed facilitators from certain prohibitions; include them in recordkeeping, reporting, and inspection requirements; and recognize their role in licensed activities.

This section requires the Attorney General to conduct national instant criminal background check system (NICS) checks on firearms dealer license applicants and any employees identified as trusted with firearm possession or receipt before issuing or renewing a license, confirming no violation of 18 U.S.C. §922(d), (g), or (n) or applicable State, local, or Tribal law. It further prohibits licensed firearms dealers from allowing employees to possess a firearm at licensed premises unless the employee meets State or local minimum age requirements and clears a NICS check confirming no violation of 18 U.S.C. §922(d), (g), or (n) or applicable State, local, or Tribal law. The section converts NICS employment background checks from voluntary to compulsory (i.e., strikes "voluntarily" from 34 U.S.C. §40901(b)(2)(A) and revises the heading from "Voluntary background checks" to "Compulsory background checks"); and directs NICS to search the National Data Exchange database for all background checks (adds new subparagraph (L) to 34 U.S.C. §40901(e)(1)).

This section revises liability standards applicable to federal firearms licensees by replacing "willfully" with "knowingly" (i.e., lowering the required mental state from specific intent to general intent) in (1) 18 U.S.C. 923(d)(1)(D) and (e), governing grounds for license denial and revocation, and (2) 18 U.S.C. 924(a)(1)(D) and (d)(1), governing criminal penalties and forfeiture. (Thus, it facilitates ATF enforcement actions against licensees who are aware of their violative conduct.)

This section establishes civil enforcement for unlicensed firearms dealing and a tiered penalty system for licensed firearms dealers violating regulations prescribed under section 926 (i.e., ATF regulations implementing the Gun Control Act of 1968). (1) It amends section 924(n)—previously providing only criminal penalties of a fine or up to five years imprisonment for violations of section 922(a)(1)(A) (prohibiting engaging in the firearms business without a license)—to require the Attorney General to issue a written notice of violation and impose a civil penalty of $2,500 to $20,000. (2) It adds a new section 924(q) directing the Attorney General, upon finding such a violation, to apply escalating penalties not resulting from gross negligence—(i) first violation: written notice; (ii) second: civil penalty of $2,500 to $20,000; (iii) third: license suspension until violation ceases; (iv) fourth: license revocation—or, for gross negligence—(i) first: civil penalty of $2,500 to $20,000; (ii) second: $20,000 civil penalty plus license suspension until violation ceases; (iii) third: license revocation; with prior gross negligence violations accelerating non-gross negligence penalties by one level. (Thus, if public safety is imminently threatened, the Attorney General must immediately suspend or revoke the license and secure the dealer's firearms inventory.)

This section repeals or limits to specified past fiscal years (FY2005, FY2006, FY2008, FY2009, FY2010, FY2012, and FY2023) congressional restrictions on the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) as follows: (1) prohibitions on using funds for certain activities related to firearms trace data (i.e., information on the manufacture, distribution, and possession of crime guns used to support law enforcement investigations); (2) prohibitions on consolidating and centralizing Federal Firearms Licensee (FFL) records (i.e., dealer acquisition and disposition records); and (3) modifies the requirement to destroy National Instant Criminal Background Check System (NICS) records within 24 hours by striking exceptions and subsequent clauses.

This section authorizes the Attorney General to hire 650 additional industry operations investigators for the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), to be distributed among field divisions to match the number and distribution of persons licensed under chapter 44 of title 18, United States Code (i.e., federal firearms licensees), in addition to personnel needed for this Act and its amendments or authorized by other law.

This section directs the Attorney General to submit to Congress, and publish on the Department of Justice website, a report on the implementation of this Act and its amendments not later than two years after the date of enactment. The report must identify steps needed to complete implementation and additional resources required to (1) conduct regular inspections of federally licensed firearms dealers, and (2) enforce the Act against noncompliant federally licensed firearms dealers in a timely manner.

This section directs the Attorney General to submit to Congress, and publish on the Department of Justice website, a report on Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) inspections of Type 01, Type 02, and Type 07 federal firearms licensees (FFLs; i.e., dealers, pawnbrokers, and manufacturers, respectively)—not later than two years after enactment (covering the preceding two-year period) and annually thereafter (covering the preceding year)—that states, for the applicable period: (1) the number of inspections or examinations conducted by each ATF field division, including of high-risk dealers (as defined in new 18 U.S.C. §923(g)(1)(B)(ii)) and non-high-risk dealers; (2) the number of security inspections prompted by FFL reports of lost or stolen firearms (under new 18 U.S.C. §923(g)(6)(A)) and follow-up security inspections conducted within six months of a violation-revealing inspection (under §923(g)(6)(B)); (3) the average time spent on inspections or examinations of high-risk dealers, non-high-risk dealers, security inspections, and follow-up security inspections; and (4) an analysis of the most frequently cited violations and corrective actions or penalties imposed, including licenses recommended or noticed for suspension or revocation, hearings requested or ongoing, and decisions rendered by the ATF Director.