Back in 2014 the US District Court for the Northern District of California held that online gambling accounts are reportable foreign financial accounts for the FBAR. Mr. Hom appealed that decision. Today, the Ninth Circuit Court of Appeals reversed the decision in regards to online poker accounts. (Hat Tip: http://federaltaxcrimes.blogspot.com/2016/07/ninth-circuit-rejects-).
I’m not sure of how much this decision changes things. (Once the decision is published, I will post further on the decision.) From Jack Townend’s analysis:
FirePay was a financial institution, the Ninth Circuit held, because it met the definition of money transmitter. The other two were not money transmitters or otherwise financial institutions as defined. The Ninth Circuit rejected the Government’s argument that they should be treated as banks (a type of financial institution requiring an FBAR) because they functioned as banks, applying the plain meaning of the term bank to exclude these services.
Two caveats about the opinion. First, the panel described it as nonprecedential under Ninth Circuit rules. Second, the Government made an argument — which the Court declined to consider because too late (see p. 4 fn. 1) — that PokerStars and PartyPoker were casinos, another category of financial institution which, if foreign, requires FBARs for accounts.
The casino argument could be valid for the future. And as I said before, I want to read the decision before I tell people you don’t have to file an FBAR for online gambling accounts. Thus, I still recommend (for the moment) including online gambling accounts as reportable foreign financial accounts.
Tags: FBAR
Russ, I having reading your articles for years and found them enlightening. Although the decision did not say so, the District Court applied the legal principle of Chevron Deference to sustain the penalties of the IRS. You should look up onsite on how the Supreme Court ruled that in that case the EPA, a federal agency interpreted the term of an ambiguous term, stationary source, and the court should defer to that interpretation. In my case, the IRS agent interpreted that online poker was like a bank and then assessed the penalty. Step 1 before the Agency can interpret the term of bank or financial institution, these terms must be unclear and undefined. The ruling followed that thinking. Money transmitter is defined in the code and bank is clear.
By the way I was represented by Joe DiRuzzo in the Ninth Circuit
Also FinCen published a ruling on Card Room reporting requirements