A penalty tax imposed on a corporation's accumulated earnings and profits in excess of $250,000 or, if greater, the reasonable needs of the business. The accumulated earnings and profits for certain personal service corporations is limited to $150,000, unless the accumulated earnings and profits are for the reasonable needs of the personal service corporation.
A federal tax imposed on earnings accumulated inside a corporation above specified levels. Purpose is to discourage such accumulations as a device to avoid distributions of (taxable) dividends to stockholders.
A tax penalty which is imposed on corporate earnings which are retained by the corporation for non-business related needs. (G)
A tax on earnings retained by a business to avoid paying the higher income taxes that would be due if the earnings were paid out to the owners as dividends. Also known as an accumulated profits tax.