# 26 U.S.C. § 532: Corporations subject to accumulated earnings tax

Source: OLRC release point 119-134 <https://uscode.house.gov/us/usc/119-134/t26/s532>. Cite pinpoints as 26 U.S.C. § 532(a)(1).

## § 532(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.

## § 532(b) Exceptions

The accumulated earnings tax imposed by section 531 shall not apply to—

**§ 532(b)(1)** a personal holding company (as defined in section 542),

**§ 532(b)(2)** a corporation exempt from tax under subchapter F (section 501 and following), or

**§ 532(b)(3)** a passive foreign investment company (as defined in section 1297).

## § 532(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.

## Regulations

- [Treas. Reg. § 1.532-1](/26/reg/1.532-1.md): Corporations subject to accumulated earnings tax. (interprets § 532)

## Leading cases

- [United States v. Donruss Co., 393 U.S. 297 (1969)](https://www.courtlistener.com/opinion/107816/united-states-v-donruss-co/)

## Connections

Cites: § 501 Exemption from tax on corporations, certain trusts, etc.; § 531 Imposition of accumulated earnings tax; § 542 Definition of personal holding company; § 1297 Passive foreign investment company

Cited by: § 531 Imposition of accumulated earnings tax; § 533 Evidence of purpose to avoid income tax

Derived from: 1939 § 102(a)

## Amendments

- 1954-08-16: [Act Aug. 16, 1954, ch. 736](/26/act/1954-ch736.md), 68A Stat. 179
- 1984-07-18: [Pub. L. 98-369](/26/act/98-369.md), 98 Stat. 574
- 1986-10-22: [Pub. L. 99-514](/26/act/99-514.md), 100 Stat. 2575
- 1997-08-05: [Pub. L. 105-34](/26/act/105-34.md), 111 Stat. 977
- 2005-12-21: [Pub. L. 109-135](/26/act/109-135.md), 119 Stat. 2626