## Facts

- John C. Hom used online gambling accounts with PokerStars and PartyPoker in 2006 and PokerStars in 2007, depositing and withdrawing funds through those sites.
- Hom funded the gambling activity through FirePay, an online payment service that received, held, and disbursed customer funds, using a domestic Wells Fargo account and other intermediaries (including Western Union).
- Hom admitted that in both 2006 and 2007, the combined balances in his FirePay and online poker accounts exceeded $10,000 at certain times.
- FBAR rules require reporting of foreign financial accounts when aggregate value exceeds $10,000 at any time during the year, with a filing deadline of June 30 of the following year.
- After an IRS examination, Hom filed FBARs for 2006 and 2007 on June 26, 2010; his 2006 FBAR omitted the FirePay account.
- The IRS assessed non-willful FBAR penalties under 31 U.S.C. § 5321(a)(5): $30,000 for 2006 ($10,000 per account for FirePay, PokerStars, and PartyPoker) and $10,000 for 2007 (PokerStars), plus statutory interest and related amounts.
- The United States sued to reduce the assessments to judgment and moved for summary judgment.

## Issues

1. Whether Hom’s FirePay, PokerStars, and PartyPoker accounts were “financial accounts” for FBAR purposes.
2. Whether those accounts were “in a foreign country,” making them reportable “foreign financial accounts,” and how to determine an online account’s location.
3. Whether the non-willful FBAR penalty assessments were valid and enforceable as a matter of law on summary judgment.

## Decision

- The court granted summary judgment for the United States.
- It held the FirePay and online poker accounts were “financial accounts” because the entities functioned as financial institutions by receiving, holding, and disbursing customer funds.
- It held the accounts were “in a foreign country” because the relevant situs is the location of the institution maintaining the account, not the physical location of the underlying funds.
- It concluded Hom was required to timely report the accounts for 2006 and 2007, failed to do so (and filed an incomplete 2006 FBAR), and was liable for the assessed non-willful penalties and associated interest.

## Legal Principles

- FBAR obligations apply when a person has a financial interest in, or authority over, foreign financial accounts whose aggregate value exceeds $10,000 at any time during the calendar year.
- An online account can qualify as a “financial account” when the platform or intermediary receives, holds, and disburses funds on behalf of customers in a manner comparable to traditional financial institutions.
- For FBAR purposes, an account’s “foreign” location is determined by where the institution maintaining the account is located, rather than where the funds may be held at any given time.
- When material facts are undisputed and the accounts fall within the FBAR reporting regime, the United States may enforce non-willful FBAR penalty assessments through summary judgment.

## Conclusion

The court held that online poker and payment-processor accounts maintained by foreign-based entities are reportable foreign financial accounts, rejected a funds-location test for determining account situs, and enforced the IRS’s non-willful FBAR penalties against Hom on summary judgment.


United States v. Hom, 45 F. Supp. 3d 1175 (N.D. Cal. 2014)