Teryaeva-Reed v. United States of America

Elena Teryaeva-Reed, a Russian-born naturalized U.S. citizen, initiated a constitutional challenge against the United States, targeting the “exit tax” imposed under Internal Revenue Code Section 877A and the Foreign Account Tax Compliance Act (FATCA). She relinquished her citizenship and was subjected to a mark-to-market tax on her worldwide assets, which she argued amounted to an unconstitutional taking under the Fifth Amendment and an excessive fine under the Eighth Amendment. Additionally, she claimed that FATCA’s mandatory reporting of foreign financial accounts violated her Fourth Amendment privacy rights. On February 18, 2026, the U.S. Supreme Court denied certiorari, leaving in place the D.C. Circuit’s judgment which upheld the lower court’s dismissal. The Court concluded that the exit tax is a valid exercise of Congress’s taxing power and that FATCA serves the compelling government interest of combating offshore tax evasion.

The U.S. Supreme Court denied certiorari on February 18, 2026, effectively affirming the dismissal of all claims. The exit tax and FATCA provisions were upheld as constitutional.

The primary dispute centered on whether the Section 877A exit tax constitutes a taking of property without just compensation or an excessive fine, and whether FATCA reporting requirements violate constitutional privacy protections.

The case reinforced the legality of the U.S. expatriation tax regime and FATCA, solidifying the government’s ability to impose mark-to-market taxes on renunciants. It had a chilling effect on individuals considering relinquishing citizenship for tax reasons and sparked ongoing debate about the extraterritorial reach of U.S. tax laws and the privacy implications of global financial transparency.