26 USC § 532 - Corporations subject to accumulated earnings tax

---
identifier: "/us/usc/t26/s532"
source: "usc"
legal_status: "official_prima_facie"
title: "26 USC § 532 - Corporations subject to accumulated earnings tax"
title_number: 26
title_name: "INTERNAL REVENUE CODE"
section_number: "532"
section_name: "Corporations subject to accumulated earnings tax"
chapter_number: 1
chapter_name: "NORMAL TAXES AND SURTAXES"
subchapter_number: "G"
subchapter_name: "Corporations Used to Avoid Income Tax on Shareholders"
part_number: "I"
part_name: "CORPORATIONS IMPROPERLY ACCUMULATING SURPLUS"
positive_law: false
currency: "119-84"
last_updated: "2026-04-17"
format_version: "1.1.0"
generator: "[email protected]"
source_credit: "(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.)"
---


# § 532. Corporations subject to accumulated earnings tax

**(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.

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

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

**(2)** a corporation exempt from tax under subchapter 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 number of shareholders of such corporation.

---

**Source Credit**: (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).  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).  substituted “section 1297” for “section 1296”.

1986—Subsec. (b)(4).  added par. (4).

1984—Subsec. (c).  added subsec. (c).

## Statutory Notes and Related Subsidiaries

### Effective Date of 2005 Amendment

Amendment by  effective as if included in the provision of the American Jobs Creation Act of 2004, , to which such amendment relates, see , set out as a note under .

### Effective Date of 1997 Amendment

> **“(1)** taxable years of United States persons beginning after December 31, 1997, and
> 
> **“(2)** taxable years of foreign corporations ending with or within such taxable years of United States persons.”

, , , provided that:

### Effective Date of 1986 Amendment

Amendment by  applicable to taxable years of foreign corporations beginning after , see , set out as an Effective Date note under .

### Effective Date of 1984 Amendment

> “The amendments made by this section [amending this section and
> 
> ] shall apply to taxable years beginning after the date of the enactment of this Act [
> 
> ].”

, , , provided that: