Under what two conditions does empty or inert ammunition not require holes to be drilled in it?

The correct answer identifies the specific scenarios in which empty or inert ammunition is exempt from having holes drilled in it. When ammunition is on permanent display, it is typically in a controlled environment where safety protocols are already in place to prevent unauthorized access or handling. This mitigates potential hazards associated with inert ammunition. Additionally, the condition of "reducing historic value" emphasizes the importance placed on preserving artifacts for educational or historical purposes, which also supports the rationale for not altering the physical integrity of such items.

This reflects a broader understanding of how certain regulatory frameworks prioritize historical preservation while balancing safety considerations. In contrast, other options do not align with these established criteria or fail to address the specific context in which alterations to inert ammunition can be exempted.