1. (a) General rule The accumulated earnings tax imposed by section 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 shareholders of any other corporation, by permitting earnings and profits to accumulate instead of being divided or distributed.

2. (b) Exceptions The accumulated earnings tax imposed by section 531 shall not apply to—

   1. (1) a personal holding company (as defined in section 542),
   2. (2) a corporation exempt from tax under subchapter F (section 501 and following), or
   3. (3) a passive foreign investment company (as defined in section 1297).
3. (c) Application determined without regard to number of shareholders The application of this part to a corporation shall be determined without regard to the number 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 personal holding company (as defined in section 552),”.

1997—Subsec. (b)(4). Pub. L. 105–34 substituted “section 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 subtitle [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 sections 1296 and 1297 of this title as sections 1297 and 1298, respectively, of this title] shall apply to—

1. “(1) taxable years of United States persons beginning after December 31, 1997, and
2. “(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].”