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(A) In General. - In addition to other taxes imposed by this Title, there is hereby imposed for
each taxable year on the improperly accumulated taxable income of each corporation
described in Subsection B hereof, an improperly accumulated earnings tax equal to ten
percent (10%) of the improperly accumulated taxable income.
(1) In General. - The improperly accumulated earnings tax imposed in the preceding
Section shall apply to every corporation formed or availed 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) Exceptions. - The improperly accumulated earnings tax as provided for under this
Section shall not apply to:
(1) Prima Facie Evidence. - the fact that any corporation is a mere holding company
or investment company shall be prima facie evidence of a purpose to avoid the tax
upon its shareholders or members.
(D) Improperly Accumulated Taxable Income. - For purposes of this Section, the term
'improperly accumulated taxable income' means taxable income' adjusted by:
Provided, however, That for corporations using the calendar year basis, the
accumulated earnings under tax shall not apply on improperly accumulated income
as of December 31, 1997. In the case of corporations adopting the fiscal year
accounting period, the improperly accumulated income not subject to this tax, shall
be reckoned, as of the end of the month comprising the twelve (12)-month period of
fiscal year 1997-1998.
(E) Reasonable Needs of the Business. - For purposes of this Section, the term 'reasonable
needs of the business' includes the reasonably anticipated needs of the business.