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United States District Court, Central District of Illinois, Rock Island Division

June 7, 1991


The opinion of the court was delivered by: Mihm, District Judge.


Pending before the Court are Defendants' motion to dismiss the original indictment and a motion to dismiss the superseding indictment. On May 24, 1991, the United States filed a motion to dismiss the original indictment of August 23, 1990, in favor of the superseding indictment. That motion is granted. The original indictment is dismissed. The Court finds that Defendants Rock Island Armory, Inc. and David R. Reese have stated a valid challenge to certain counts of the superseding indictment. Accordingly, the Court hereby dismisses Counts 1(a) and (b), 2, and 3 of the superseding indictment.

After oral argument on the above motions, but before entry of a final order, the United States filed a motion to reconsider the Court's decision to dismiss the above counts. After careful consideration, the Court hereby denies the motion to reconsider.

The superseding indictment alleges that Defendants committed acts in respect to the making and registration of "firearms," i.e., machineguns,*fn1 in the years 1987 and 1988 which violated parts of the National Firearms Act, Chapter 53 of the Internal Revenue Code, 26 U.S.C. § 5801 et seq. Specifically, Count I alleges in part that Defendants conspired "(a) to manufacture firearms in violation of Title 26, United States Code, Sections 5822*fn2 and 5861(f)*fn3 [and] (b) to knowingly deliver into interstate commerce firearms in violation of Title 26, United States Code, Sections 5822 and 5861(j). . . ."*fn4 Count 2 alleges that in 1988, Defendants made machineguns "in violation of the registration provisions of Title 26, United States Code, Section 5822," which is alleged to have violated 26 U.S.C. § 5861(f). Count 3 alleges that Defendants delivered into interstate commerce the same machineguns as in Count 2, and that these machineguns "had not been registered as required by the provisions of Title 26, United States Code, Section 5822," in violation of 26 U.S.C. § 5861(j).

Since its passage in 1934, the registration, taxation, and other requirements of the National Firearms Act ("NFA") have been upheld by the courts under the power of Congress to raise revenue.*fn5 However, 18 U.S.C. § 922(o), which became effective on May 19, 1986, prohibits possession of machineguns, and thereby repealed or rendered unconstitutional the portions of the National Firearms Act which provided for the raising of revenue from the making, possession, and transfer of machineguns made after such date. As the government conceded at oral argument, the United States refuses to register or accept tax payments for the making or transfer of machineguns made after 1986.*fn6 Thus, § 922(o), as applied to machineguns made after May 19, 1986, left the registration and other requirements of the National Firearms Act without any constitutional basis.

P.L. 99-308, 100 Stat. 449 (May 19, 1986), codified as 18 U.S.C. § 922(o), provides:

  (1) Except as provided in paragraph (2), it shall
  be unlawful for any person to transfer or possess
  a machinegun.

  (2) This subsection does not apply with respect to

    (A) 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; or

    (B) any lawful transfer or lawful possession of
    a machinegun that was lawfully possessed before
    the date this subsection takes effect.

As interpreted and administered by the Bureau of Alcohol, Tobacco and Firearms ("BATF"), U.S. Department of the Treasury, § 922(o) prohibits the private possession of any machinegun not made and registered before May 19, 1986. Thus, since May 19, 1986, BATF has refused to approve any application to make, transfer, register, and pay the $200 tax on any machinegun made after that date.
*fn7 Before that date, BATF approved such applications pursuant to 26 U.S.C. § 5812 and 5822. Farmer v. Higgins, 907 F.2d 1041, 1042-44 (11th Cir. 1990), cert. denied, ___ U.S. ___, 111 S.Ct. 753, 112 L.Ed.2d 773 (1991) (upholding BATF's denial of an application to make and register a machinegun by a private collector under § 5822).

As applied to machineguns alleged to be possessed after May 19, 1986, prosecutions may no longer proceed under 26 U.S.C. § 5861. This is because the National Firearms Act is part of the Internal Revenue Code, and its provisions — including registration of machineguns possessed after May 19, 1986 — are valid only to the extent they aid in the collection of tax revenue. Since BATF would not register and accept tax payments for any machinegun after May 19, 1986, registration of machineguns made and possessed after that date no longer serves any revenue purpose, and such registration requirements are invalid. Since 18 U.S.C. § 922(o) is interpreted to ban registration and taxation of machineguns under the National Firearms Act, § 922(o) effectively repeals such registration and taxation provisions. Congress has no enumerated power to require registration of firearms. However, since registration of firearms may assist in the collection of revenue, Congress passed the National Firearms Act in 1934 pursuant to its power to tax. Section 922(o) destroys the constitutional basis of registration.

In the 1934 hearings, Attorney General Homer S. Cummings explained in detail how the NFA would be based on the tax power. National Firearms Act: Hearings Before the House Committee on Ways and Means, 73rd Cong., 2d Sess., 6 (1934). Cummings denied that machineguns could be banned, because "we have no inherent police power to go into certain localities and deal with local crime. It is only when we can reach those things under . . . the power of taxation, that we can act." Id. at 8.

When Congressman Harold Knutson asked "why should we permit the manufacture, that is, permit the sale of the machine guns to any one outside of the several branches of the Government," Congressman Sumners suggested "that this is a revenue measure and you have to make it possible at least in theory for these things to move in order to get internal revenue?" Id. at 13-14. Cummings agreed: "That is the answer exactly." Id. at 14. The following dialogue ensued:

  Attorney General CUMMINGS. . . . If we made a
  statute absolutely forbidding any human being to
  have a machine gun, you might say there is some
  constitutional question involved. But when you
  say, "we will tax the machine gun," . . . you are
  easily within the law.

  Mr. LEWIS. In other words, it does not amount to
  prohibition, but allows of regulation.

  Attorney General CUMMINGS. That is the idea. We
  have studied that very carefully.

Id. at 19.

The National Firearms Act was originally passed as a taxing statute under the authority of Nigro v. United States, 276 U.S. 332, 48 S.Ct. 388, 72 L.Ed. 600 (1928). See National Firearms Act: Hearings Before the Committee on Ways and Means, supra, at 101-02, 162. Upholding the Harrison Anti-Narcotic Act, Nigro noted:

  "In interpreting the act, we must assume that it
  is a taxing measure, for otherwise it would be no
  law at all. If it is a mere act for the purpose of
  regulating and restraining the purchase of the
  opiate and other drugs, it is beyond the power of
  Congress and must be regarded as invalid. . . .

276 U.S. at 341, 48 S.Ct. at 390. The Court added:

  Congress by merely calling an act a taxing act
  cannot make it a legitimate exercise of taxing
  power under § 8 of article 1 of the Federal
  Constitution, if in fact the words of the act show
  clearly its real purpose is otherwise."

Id. at 353, 48 S.Ct. at 394.

The committee reports on the National Firearms Act mention the constitutional basis of federal jurisdiction. The House Ways and Means Committee report, which the Senate Finance Committee report repeats verbatim, explained the basis of the NFA in part as follows:

  In general this bill follows the plan of the
  Harrison Anti-Narcotic Act and adopts the
  constitutional principle supporting that act in
  providing for the taxation of fire-arms and for
  procedure under which the tax is to be collected.

Rept. No. 1780, Committee on Ways and Means, U.S. House of Representatives, 73rd Cong., 2d Sess. 2 (1934); Rept. No. 1444, Committee on Finance, U.S. Senate, 73rd Cong., 2d Sess. 1 (1934).

The Seventh Circuit was the first to enunciate the rule that the National Firearms Act is solely a tax measure. In Sonzinsky v. United States, 86 F.2d 486 (7th Cir. 1936), aff'd, 300 U.S. 506, 57 S.Ct. 554, 81 L.Ed. 772 (1937), the Court of Appeals considered the validity of the requirement that a dealer in firearms register with the collector and pay a special excise tax of $200 per year. The Court found the NFA to be constitutionally valid as under the taxing power of Congress in Article I, § 8 of the Constitution. Rejecting the argument that the NFA's real purpose was suppression of crime, the Court held:

  The act . . . evidences no announced purpose
  outside the constitutional authority. [It is]
  unusually free from regulative provisions, merely
  providing for a tax in varying amount upon
  different classifications of persons and requiring
  such persons to register. . . .

Id. at 490.

The Supreme Court affirmed the Seventh Circuit in Sonzinsky, 300 U.S. 506, 57 S.Ct. 554. The defendant argued:

  that the present levy is not a true tax, but a
  penalty imposed for the purpose of suppressing
  traffic in a certain noxious type of firearms, the
  local regulation of which is reserved to the
  states because not granted to the national

Id. at 512, 57 S.Ct. at 555. In other words, the defendant contended that the Tenth Amendment power of the states to regulate firearms in their criminal codes was an exclusive power not delegated to the federal government.

The Supreme Court found the National Firearms Act on its face to be a revenue measure and nothing more. The Court noted:

  The case is not one where the statute contains
  regulatory provisions related to a purported tax
  in such a way as has enabled this Court to say in
  other cases that the latter is a penalty resorted
  to as a means of enforcing the regulations. . . .
  Nor is the subject of the tax described or treated
  as criminal by the taxing statute. . . . Here
  Section 2 contains no regulations other than the
  mere registration provisions, which are obviously
  supportable as in aid of a revenue purpose. On its
  face it is only a taxing measure. . . .

Id. at 513, 57 S.Ct. at 555.

The Court upheld its validity precisely because the National Firearms Act was a revenue measure only and did not purport to exercise any general criminal power not delegated to Congress by the Constitution. Moreover, the Court refused to speculate into any reasons why Congress might have taxed certain firearms:

  Inquiry into the hidden motives which may move
  Congress to exercise a power constitutionally
  conferred upon it is beyond the competency of the
  courts. . . . They will not undertake, by
  collateral inquiry as to the measure of the
  regulatory effect of a tax, to ascribe to Congress
  an attempt, under the guise of taxation, to
  exercise another power denied by the Federal
  Constitution. . . .

  Here the annual tax of $200 is productive of some
  revenue. We are not free to speculate as to the
  motives which moved Congress to impose it, or as
  to the extent to which it may operate to restrict
  the activities taxed. As it is not attended by an
  offensive regulation, and since it operates as a
  tax, it is within the national taxing power.

Id. at 513-14, 57 S.Ct. at 556.

Since the rule is unquestioned, the Seventh Circuit has had no occasion to consider it further, other than to cite Sonzinsky and to note that "the constitutionality of this Act has already been sustained." United States v. Lauchli, 371 F.2d 303, 313 (7th Cir. 1966).*fn8

Haynes v. United States, 390 U.S. 85, 88 S.Ct. 722, 19 L.Ed.2d 923 (1968) invalidated certain registration requirements of the Act as being in violation of the rights against self-incrimination. The court described the registration requirement as "part of the National Firearms Act, an interrelated statutory system for the taxation of certain classes of firearms." Id. at 87, 88 S.Ct. at 725. "All these taxes are supplemented by comprehensive requirements calculated to assure their collection. . . . [For example,] every person possessing such a firearm is obliged to register his possession with the Secretary. . . ." Id. at 88-89, 88 S.Ct. at 726.

In Haynes, the government argued "that the registration requirement is a valid exercise of the taxing power, in that it is calculated merely to assure notice to the Treasury of all taxable firearms." Id. at 98, 88 S.Ct. at 730. Citing Sonzinsky, the Court replied:

  We do not doubt, as we have repeatedly indicated,
  that this Court must give deference to Congress'
  taxing powers, and to measures reasonably
  incidental to their exercise; but we are no less
  obliged to heed the limitations placed upon those
  powers by the Constitution's other commands. We
  are fully cognizant of the

  Treasury's need for accurate and timely
  information, but other methods, entirely
  consistent with constitutional limitations, exist
  by which such information may be obtained.


The National Firearms Act was reenacted as Title II of the Gun Control Act of 1968. Congress rejected a proposal that would not have been based on the power to tax. Fred B. Smith, General Counsel of the Treasury Department, noted that the proposal "would make it unlawful for a person under 21 years of age to possess a National Firearms Act firearm." Federal Firearms Act: Hearings Before the Subcommittee to Investigate Juvenile Delinquency, Judiciary Committee, U.S. Senate, 90th Cong., 1st Sess., 1088 (1967). Smith stated:

  It seems doubtful that the . . . provision can be
  justified under the taxing or commerce powers, or
  under any other power enumerated in the
  Constitution, for Federal enactment. Consequently,
  the Department questions the advisability of
  including in the bill a measure which could be
  construed as an usurpation of a (police) power
  reserved to the states by Article X of the United
  States Constitutional Amendments.

Id. at 1089.

Since reenactment of the National Firearms Act, the various circuits have continued to follow the Sonzinsky rule. United States v. Ross, 458 F.2d 1144, 1145 (5th Cir. 1972), cert. denied, 409 U.S. 868, 93 S.Ct. 167, 34 L.Ed.2d 118 states:

  The test of validity is whether on its face the
  tax operates as a revenue generating measure and
  the attendant regulations are in aid of a revenue
  purpose. . . . Section 5861(d) making possession
  of an unregistered weapon unlawful is part of the
  web of regulation aiding enforcement of the
  transfer tax provision in section 5811. Having
  required payment of a transfer tax and
  registration as an aid in collection of that tax,
  Congress under the taxing power may reasonably
  impose a penalty on possession of unregistered
  weapons. Such a penalty imposed on transferees
  ultimately discourages the transferrer on whom the
  tax is levied from transferring a firearm without
  paying the tax.

The prosecution argues that the NFA is still a tax act because criminal violators only will be assessed the "tax." Response to Defendant's Motion to Dismiss the Indictment at 6. This begs the question, because the government refuses to register the making or transfer of a post-1986 machinegun on behalf of an applicant who is not being prosecuted, and will not register any firearm even when it imposes a tax assessment.*fn9 Thus, the registration requirement — which the government interprets as repealed by § 922(o) — is still left without any tax nexus.*fn10 Moreover, the "tax" assessed cannot be voluntarily paid by a would-be taxpayer, but is paid only by tax violators. This indicates that the $200 "tax" is really a fine, just as is the $10,000 for which one may be "fined" upon conviction of an NFA offense. 26 U.S.C. § 5871. Since both apply only to NFA criminal violators, both the $200 assessment and the $10,000 fine are "fines," not taxes. Criminal fines are not constitutional as encompassed under Congress' power to raise revenue, but must pass constitutional muster under an enumerated power. Under the prosecution's argument, the federal government could totally usurp all local criminal jurisdiction, under the guise that the fines imposed would really be taxes because they raise revenue.

The above use of the word "fine" was made clear in Browning-Ferris v. Kelco Disposal, 492 U.S. 257, 109 S.Ct. 2909, 106 L.Ed.2d 219 (1989). Commenting on the Eighth Amendment's proscription on "excessive fines," the Court noted that "at the time of drafting and ratification of the Amendment, the word `fine' was understood to mean a payment to a sovereign as punishment for some offense." Id. at 266, 109 S.Ct. at 2915, 106 L.Ed. at 232. Similarly, as stated in United States v. Mississippi Tax Comm'n, 421 U.S. 599, 606, 95 S.Ct. 1872, 1877, 44 L.Ed.2d 404 (1975): "An `enforced contribution to provide for the support of government,' [is] the standard definition of a tax. United States v. La Franca, 282 U.S. 568, 572 [51 S.Ct. 278, 280, 75 L.Ed. 551] . . . (1931)." The reference to La Franca, which invalidated a "tax" on alcohol made illegal by state law, explains:

  By § 35, supra, it is provided that upon evidence
  of an illegal sale under the National Prohibition
  Act, a tax shall be assessed and collected in
  double the amount now provided by law. This, in
  reality, is but to say that a person who makes an
  illegal sale shall be liable topay a "tax" in
  double the amount of the tax imposed by
  pre-existing law for making a legal sate, which
  existing law renders it impossible to make. A tax
  is an enforced contribution to provide for the
  support of government; a penalty, as the word is
  here used, is an exaction imposed by statute as
  punishment for an unlawful act. The two words are
  not interchangeable, one for the other. No mere
  exercise of the art of lexicography can alter the
  essential nature of an act or a thing; and if an
  exaction be clearly a penalty it cannot be
  converted into a tax by the simple expedient of
  calling it such.*fn11

This issue was again resolved adverse to the government in United States v. Constantine, 296 U.S. 287, 294, 56 S.Ct. 223, 226, 80 L.Ed. 233 (1935). A statute provided for a federal assessment for one who violated a state liquor law. The Court held that it would be invalid "if, in fact, its purpose is to punish rather than to tax." Id. No federal jurisdiction existed to enforce alcohol Prohibition, because the Eighteenth Amendment had been repealed. Id. Similarly, no federal jurisdiction exists to ban mere possession of machineguns, and the NFA provisions at issue are not supported by the tax power to the extent they enforce a prohibition rather than taxation.

As Constantine held, "a penalty cannot be converted into a tax by so naming it . . . [W]e hold that it is a penalty for the violation of State law, and as such beyond the limits of federal power." Id. The Court explained:

  The condition of the imposition is the commission
  of a crime. This, together with the amount of the
  tax, is again significant of penal and prohibitory
  intent rather than the gathering of revenue.
  Where, in addition to the normal

  and ordinary tax fixed by law, an additional sum
  is to be collected by reason of conduct of the
  taxpayer violative of the law, and this additional
  sum is grossly disproportionate to the amount of
  the normal tax, the conclusion must be that the
  purpose is to impose a penalty as a deterrent and
  punishment of unlawful conduct.

  We conclude that the indicia which the section
  exhibits of an intent to prohibit and to punish
  violations of State law as such are too strong to
  be disregarded, remove all semblance of a revenue
  act and stamp the sum it exacts as a penalty. In
  this view the statute is a clear invasion of the
  police power, inherent in the States, reserved
  from the grant of powers to the federal government
  by the Constitution.

Id. at 295-96, 56 S.Ct. at 227.

It is well established that Congress may tax both legal and illegal activities. Marchetti v. United States, 390 U.S. 39, 44, 88 S.Ct. 697, 700, 19 L.Ed.2d 889 (1968).*fn12 Gambling and other acts which may be illegal under state law may be taxed, and registration may be required to assist in collection of the tax as long as registration information is not shared with the police, since such sharing would violate the privilege against self-incrimination. Id. Registration is among the "ancillary provisions calculated to assure their [i.e., the taxes] collection."*fn13 Id. at 42, 88 S.Ct. at 699. In contrast with the federal taxation and registration of conduct made illegal under state law, which the courts have upheld, the case at bar involves federal taxation and registration requirements which the government interprets as repealed by a federal statute making post-1986 machineguns illegal. In short, the government registers gamblers and accepts their tax payments; it refuses to accept registrations and tax payments for the making of machineguns.

The prosecution also asserts that "machine guns may still be manufactured, and therefore taxed, under 18 U.S.C. § 922(o)(2)(A)." Response at 6. Yet the government has successfully argued that that provision allows manufacture only for official government use. Farmer v. Higgins, 907 F.2d at 1042-44. Manufacture for government use is exempt from any tax. 26 U.S.C. § 5852, 5953. Also, this argument fails to address the fact that the United States refuses to register any post-1986 machineguns, thereby severing any tax nexus for this registration requirement, with which compliance is impossible.

In its motion to reconsider, the prosecution reiterates that the government can tax an item or activity which is illegal. Yet the very framing of this proposition presupposes that the activity can and will be taxed. By contrast, in the case at bar, the government interprets 18 U.S.C. § 922(o) to prevent the registration and taxation of post-1986 machineguns made for private purposes under the National Firearms Act, 26 U.S.C. § 5801 et seq.

The prosecution relies on Marchetti v. United States, supra, 390 U.S. at 44, 88 S.Ct. at 700, which held that reporting requirements for taxation of illegal gambling may not violate the privilege against self-incrimination. Yet implicit in Marchetti is the rationale that registration provisions are constitutional if and only if they assist in collection of revenue. As Marchetti states:

  The taxes are supplemented by ancillary provisions
  calculated to assure their collection. In
  particular, § 4412 requires those liable for the
  occupational tax to register each year with the
  director of the local internal revenue district.

Id. at 42, 88 S.Ct. at 699. Illegal gamblers are allowed to register and pay the tax. Alleged makers of machineguns after 1986 are not.

The prosecution also relies on dictum in a footnote in Minor v. United States, 396 U.S. 87, 90 S.Ct. 284, 24 L.Ed.2d 283 (1969), which held that a reporting requirement by drug buyers does not violate a drug seller's privilege against self-incrimination. The prosecution, relying on a statement in the dissenting opinion (396 U.S. at 100, 90 S.Ct. at 290), claims that it was impossible to pay the drug tax in that case. The Act in question required dealers to register with the Internal Revenue Service and pay a special occupational tax, and required producers or importers to purchase stamps and affix them to the package. Registered dealers could secure order forms to transfer drugs. Id. at 94, 90 S.Ct. at 287. While the Court focused on the self-incrimination issue, it noted that "there were some 400,000 registered dealers under the Harrison Narcotics Act in 1967 and that registered dealers can readily get order forms issued in blank." Id. at 97, 90 S.Ct. at 289.

As the Court noted, a tax measure is valid even though it may deter an activity, revenue is negligible, or the activity may be illegal. 396 U.S. at 98 n. 13, 90 S.Ct. at 289 n. 13.*fn14 Indeed, since being passed in 1934, the National Firearms Act has imposed occupational taxes, making and transfer taxes of $200 per firearm, and stringent registration requirements. Yet these taxation requirements did not amount to a prohibition, and registration retained a tax nexus.

In any event, the interpretation of the constitutional basis of the specific statute in this case is governed by Sonzinsky v. United States, supra, 300 U.S. 506, 57 S.Ct. 554 and its progeny, not by dictum in a footnote in an unrelated narcotics case. Sonzinsky held that "the mere registration provisions . . . are obviously supportable as in aid of revenue purpose." Id. at 513, 57 S.Ct. at 555. Haynes v. United States, supra, 390 U.S. at 87, 88 S.Ct. at 725, repeated that the National Firearms Act is a tax measure, and that registration is "calculated to assure [tax] collection." Id. at 88-89, 88 S.Ct. at 725-26. The Act was described as a tax measure again in United States v. Freed, 401 U.S. 601, 602-03, 91 S.Ct. 1112, 1114-15, 28 L.Ed.2d 356 (1971).

The enactment of 18 U.S.C. § 922(o) in 1986 removed the constitutional legitimacy of registration as an aid to tax collection. This is because the government interprets and enforces § 922(o) to disallow registration, and refuses to collect the tax. Farmer v. Higgins, 907 F.2d 1041, 1042-44 (11th Cir. 1990), cert. denied, ___ U.S. ___, 111 S.Ct. 753, 112 L.Ed.2d 773 (1991). Thus, § 922(o) undercut the constitutional basis of registration which had been the rule since Sonzinsky.

Finally, the prosecution quotes an enactment passed in 1968 that the provisions of Title I of the Gun Control Act shall not modify or affect the National Firearms Act.*fn15 However, the 1968 Congress cannot bind the Congress of 1986, which decided to ban transfer and possession of machineguns. P.L. 99-308, 100 Stat. 453 (May 19, 1986).*fn16 Further, a Congressional declaration in 1968 does not solve a constitutional problem which arose in 1986. The ban enacted in 1986, and the government's refusal to accept registrations and tax payments, simply left the registration requirements with no constitutional basis. It is the duty of the judiciary to declare such laws unconstitutional. Marbury v. Madison, 1 Cranch. 137, 176-77, 2 L.Ed. 60 (1803).

In sum, since enactment of 18 U.S.C. § 922(o), the Secretary has refused to accept any tax payments to make or transfer a machinegun made after May 19, 1986, to approve any such making or transfer, or to register any such machinegun. As applied to machineguns made and possessed after May 19, 1986, the registration and other requirements of the National Firearms Act, Chapter 53 of the Internal Revenue Code, no longer serve any revenue purpose, and are impliedly repealed or are unconstitutional. Accordingly, Counts 1(a) and (b), 2, and 3 of the superseding indictment are DISMISSED.

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