26 U.S.C. § 531 — Imposition of accumulated earnings tax

Page 1748 TITLE 26—INTERNAL REVENUE CODE § 531 Americans from Tax Hikes Act of 2015, div. Q of Pub. L. 114–113, to which such amendment relates, see section 101(s) of Pub. L. 115–141, set out as a note under section 24 of this title. EFFECTIVE DATE OF 2008 AMENDMENT Amendment by Pub. L. 110–245 applicable with re- spect to deaths from injuries occurring on or after June 17, 2008, with provision for application of amendment to deaths from injuries occurring on or after Oct. 7, 2001, and before June 17, 2008, see section 109(d)(1), (2) of Pub. L. 110–245, set out as a note under section 408A of this title. EFFECTIVE DATE OF 2004 AMENDMENT Amendment by section 404(a) of Pub. L. 108–311 effec- tive as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107–16, to which such amendment relates, see section 404(f) of Pub. L. 108–311, set out as a note under section 45A of this title. Amendment by section 406(b) of Pub. L. 108–311 effec- tive as if included in the provisions of the Taxpayer Re- lief Act of 1997, Pub. L. 105–34, to which such amend- ment relates, see section 406(h) of Pub. L. 108–311, set out as a note under section 55 of this title. EFFECTIVE DATE OF 2003 AMENDMENT Pub. L. 108–121, title I, § 107(b), Nov. 11, 2003, 117 Stat. 1339, provided that: ‘‘The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2002.’’ EFFECTIVE DATE OF 2002 AMENDMENT Amendment by Pub. L. 107–147 effective as if included in the provisions of the Economic Growth and Tax Re- lief Reconciliation Act of 2001, Pub. L. 107–16, to which such amendment relates, see section 411(x) of Pub. L. 107–147, set out as a note under section 25B of this title. EFFECTIVE DATE OF 2001 AMENDMENT Amendment by Pub. L. 107–22 effective July 26, 2001, see section 1(c) of Pub. L. 107–22, set out as a note under section 26 of this title. Amendment by section 401(a)(1), (b)–(g)(1), (2)(C) of Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2001, see section 401(h) of Pub. L. 107–16, set out as a note under section 25A of this title. Amendment by section 402(a)(4)(A), (C) of Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2001, see section 402(h) of Pub. L. 107–16, set out as a note under section 72 of this title. EFFECTIVE DATE OF 1998 AMENDMENT Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title. EFFECTIVE DATE Section applicable to taxable years beginning after Dec. 31, 1997, see section 213(f) of Pub. L. 105–34, set out as an Effective Date of 1997 Amendment note under sec- tion 26 of this title. SAVINGS PROVISION For provisions that nothing in amendment by section 401(b)(23) of Pub. L. 115–141 be construed to affect treat- ment of certain transactions occurring, property ac- quired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Pub. L. 115–141, set out as a note under section 23 of this title. Subchapter G—Corporations Used to Avoid Income Tax on Shareholders Part I. Corporations improperly accumulating sur- plus. II. Personal holding companies. [III. Repealed.] IV. Deduction for dividends paid. Editorial Notes AMENDMENTS 2004—Pub. L. 108–357, title IV, § 413(c)(31), Oct. 22, 2004, 118 Stat. 1509, struck out item for part III ‘‘Foreign per- sonal holding companies’’. PART I—CORPORATIONS IMPROPERLY ACCUMULATING SURPLUS Sec. 531. Imposition of accumulated earnings tax. 532. Corporations subject to accumulated earnings tax. 533. Evidence of purpose to avoid income tax. 534. Burden of proof. 535. Accumulated taxable income. 536. Income not placed on annual basis. 537. Reasonable needs of the business. § 531. Imposition of accumulated earnings tax In addition to other taxes imposed by this chapter, there is hereby imposed for each tax- able year on the accumulated taxable income (as defined in section 535) of each corporation de- scribed in section 532, an accumulated earnings tax equal to 20 percent of the accumulated tax- able income. (Aug. 16, 1954, ch. 736, 68A Stat. 179; Pub. L. 100–647, title I, § 1001(a)(2)(A), Nov. 10, 1988, 102 Stat. 3349; Pub. L. 103–66, title XIII, §§ 13201(b)(1), 13202(b), Aug. 10, 1993, 107 Stat. 459, 461; Pub. L. 107–16, title I, § 101(c)(4), June 7, 2001, 115 Stat. 43; Pub. L. 108–27, title III, § 302(e)(5), May 28, 2003, 117 Stat. 764; Pub. L. 112–240, title I, § 102(c)(1)(A), Jan. 2, 2013, 126 Stat. 2319.) Editorial Notes AMENDMENTS 2013—Pub. L. 112–240 substituted ‘‘20 percent’’ for ‘‘15 percent’’. 2003—Pub. L. 108–27 substituted ‘‘equal to 15 percent of the accumulated taxable income.’’ for ‘‘equal to the product of the highest rate of tax under section 1(c) and the accumulated taxable income.’’ 2001—Pub. L. 107–16 substituted ‘‘equal to the product of the highest rate of tax under section 1(c) and the ac- cumulated taxable income.’’ for ‘‘equal to 39.6 percent of the accumulated taxable income.’’ 1993—Pub. L. 103–66, § 13202(b), substituted ‘‘39.6 per- cent’’ for ‘‘36 percent’’. Pub. L. 103–66, § 13201(b)(1), substituted ‘‘36 percent’’ for ‘‘28 percent’’. 1988—Pub. L. 100–647 amended section generally. Prior to amendment, section read as follows: ‘‘In addition to other taxes imposed by this chapter, there is hereby imposed for each taxable year on the accumulated tax- able income (as defined in section 535) of every corpora- tion described in section 532, an accumulated earnings tax equal to the sum of— ‘‘(1) 271⁄2 percent of the accumulated taxable income not in excess of $100,000, plus ‘‘(2) 381⁄2 percent of the accumulated taxable income in excess of $100,000.’’ Page 1749 TITLE 26—INTERNAL REVENUE CODE § 534 Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2013 AMENDMENT Amendment by Pub. L. 112–240 applicable to taxable years beginning after Dec. 31, 2012, see section 102(d)(1) of Pub. L. 112–240, set out as a note under section 1 of this title. EFFECTIVE DATE OF 2003 AMENDMENT Amendment by Pub. L. 108–27 applicable, except as otherwise provided, to taxable years beginning after Dec. 31, 2002, see section 302(f) of Pub. L. 108–27, set out as an Effective and Termination Dates of 2003 Amend- ment note under section 1 of this title. EFFECTIVE DATE OF 2001 AMENDMENT Amendment by Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2000, see section 101(d)(1) of Pub. L. 107–16, set out as an Effective and Termi- nation Dates of 2001 Amendment note under section 1 of this title. EFFECTIVE DATE OF 1993 AMENDMENT Amendment by Pub. L. 103–66 applicable to taxable years beginning after Dec. 31, 1992, see sections 13201(c) and 13202(c) of Pub. L. 103–66, set out as notes under sec- tion 1 of this title. EFFECTIVE DATE OF 1988 AMENDMENT Pub. L. 100–647, title I, § 1001(a)(2)(B), Nov. 10, 1988, 102 Stat. 3349, provided that: ‘‘The amendment made by subparagraph (A) [amending this section] shall apply to taxable years beginning after December 31, 1987. Such amendment shall not be treated as a change in a rate of tax for purposes of section 15 of the 1986 Code.’’ § 532. Corporations subject to accumulated earn- ings tax (a) General rule The accumulated earnings tax imposed by sec- tion 531 shall apply to every corporation (other than those described in subsection (b)) formed or availed of for the purpose of avoiding the income tax with respect to its shareholders or the share- holders of any other corporation, by permitting earnings and profits to accumulate instead of being divided or distributed. (b) Exceptions The accumulated earnings tax imposed by sec- tion 531 shall not apply to— (1) a personal holding company (as defined in section 542), (2) a corporation exempt from tax under sub- chapter F (section 501 and following), or (3) a passive foreign investment company (as defined in section 1297). (c) Application determined without regard to number of shareholders The application of this part to a corporation shall be determined without regard to the num- ber of shareholders of such corporation. (Aug. 16, 1954, ch. 736, 68A Stat. 179; Pub. L. 98–369, div. A, title I, § 58(a), July 18, 1984, 98 Stat. 574; Pub. L. 99–514, title XII, § 1235(f)(1), Oct. 22, 1986, 100 Stat. 2575; Pub. L. 105–34, title XI, § 1122(d)(1), Aug. 5, 1997, 111 Stat. 977; Pub. L. 109–135, title IV, § 403(n)(1), Dec. 21, 2005, 119 Stat. 2626.) Editorial Notes AMENDMENTS 2005—Subsec. (b)(2) to (4). Pub. L. 109–135 redesignated pars. (3) and (4) as (2) and (3), respectively, and struck out former par. (2) which read as follow: ‘‘a foreign per- sonal holding company (as defined in section 552),’’. 1997—Subsec. (b)(4). Pub. L. 105–34 substituted ‘‘sec- tion 1297’’ for ‘‘section 1296’’. 1986—Subsec. (b)(4). Pub. L. 99–514 added par. (4). 1984—Subsec. (c). Pub. L. 98–369 added subsec. (c). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2005 AMENDMENT Amendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title. EFFECTIVE DATE OF 1997 AMENDMENT Pub. L. 105–34, title XI, § 1124, Aug. 5, 1997, 111 Stat. 978, provided that: ‘‘The amendments made by this sub- title [subtitle C (§§ 1121–1124) of title XI of Pub. L. 105–34, enacting section 1296 of this title, amending this section and sections 542, 551, 852, 1291, 1293, 1296 to 1298, and 4982 of this title, redesignating subpart C of part VI of subchapter P of this chapter as subpart D of part VI of subchapter P of this chapter, and renumbering sec- tions 1296 and 1297 of this title as sections 1297 and 1298, respectively, of this title] shall apply to— ‘‘(1) taxable years of United States persons begin- ning after December 31, 1997, and ‘‘(2) taxable years of foreign corporations ending with or within such taxable years of United States persons.’’ EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 applicable to taxable years of foreign corporations beginning after Dec. 31, 1986, see section 1235(h) of Pub. L. 99–514, set out as an Effective Date note under section 1291 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98–369, div. A, title I, § 58(c), July 18, 1984, 98 Stat. 576, provided that: ‘‘The amendments made by this section [amending this section and section 535 of this title] shall apply to taxable years beginning after the date of the enactment of this Act [July 18, 1984].’’ § 533. Evidence of purpose to avoid income tax (a) Unreasonable accumulation determinative of purpose For purposes of section 532, the fact that the earnings and profits of a corporation are per- mitted to accumulate beyond the reasonable needs of the business shall be determinative of the purpose to avoid the income tax with re- spect to shareholders, unless the corporation by the preponderance of the evidence shall prove to the contrary. (b) Holding or investment company The fact that any corporation is a mere hold- ing or investment company shall be prima facie evidence of the purpose to avoid the income tax with respect to shareholders. (Aug. 16, 1954, ch. 736, 68A Stat. 179.) § 534. Burden of proof (a) General rule In any proceeding before the Tax Court involv- ing a notice of deficiency based in whole or in part on the allegation that all or any part of the earnings and profits have been permitted to ac- cumulate beyond the reasonable needs of the business, the burden of proof with respect to such allegation shall—