52 STAT.] 7 5TH CONG., 3D SESS.-CH. 289-MAY 28, 1938 SEC. 102. SURTAX ON CORPORATIONS IMPROPERLY ACCUMULATING SURPLUS. (a) IMPOSITION OF TAx. -T here shall be levied, collected, and paid for each taxable year (in addition to other taxes imposed by this title) upon the net income of every corporation (other than a per- sonal holding company as defined in Title IA or a foreign personal holding company as defined in Supplement P) if such corporation, however created or organized, is formed or availed of for the purpose of preventing the imposition of the surtax upon its shareholders or the shareholders of any other corporation, through the medium of permitting earnings or profits to accumulate instead of being divided or distributed, a surtax equal to the sum of the following: 25 per centum of the amount of the undistributed section 102 net income not in excess of $100,000, plus 35 per centum of the undistributed section 102 net income in excess of $100,000. (b) PRIMA FACIE EVIDENCE. -T he fact that any corporation is a mere holding or investment company shall be prima facie evidence of a purpose to avoid surtax upon shareholders. (c) EVIDENCE DETERMINATIVE OF PURPOSE. -The fact that the earn- ings or profits of a corporation are permitted to accumulate bevond the reasonable needs of the business shall be determinative of the purpose to avoid surtax upon shareholders unless the corporation by the clear preponderance of the evidence shall prove to the con- trary. (d) DEFINrTONs. -As used in this title- (1) SECTION 102 NET INCOME. - T he term "section 102 net income" means the net income minus the sum of- (A) TAxEs. -Federal income, war-profits, and excess- profits taxes paid or accrued during the taxable year, to the extent not allowed as a deduction by section 23, but not including the tax imposed by this section or a corresponding section of a prior income-tax law. (B) DISALLOWED CHARITABLE, ETC., CONTRIBUTIONs.-Con- tributions or gifts payment of which is made within the tax- able year, not otherwise allowed as a deduction, to or for the use of donees described in section 23 (o), for the purposes therein specified. (C) DIsALLOWED LOSSEs.-Losses from sales or exchanges of capital assets which are disallowed as a deduction by section 117 (d). (2) UNDISTRIBUTED SECTION 102 NET INCOME. - The term "undis- tributed section 102 net income" means the section 102 net income minus the basic surtax credit provided in section 27 (b), but the computation of such credit under section 27 (b) (1) shall be made without its reduction by the amount of the credit provided in section 26 (a), relating to interest on certain obliga- tions of the United States and Government corporations. (e) TAX ON PERSONAL HOLDING COMPANIES. -For surtax on per- sonal holding companies, see Title IA. SEC. 103. RATES OF TAX ON CITIZENS AND CORPORATIONS OF CER- TAIN FOREIGN COUNTRIES. Whenever the President finds that, under the laws of any foreign country, citizens or corporations of the United States are being subjected to discriminatory or extraterritorial taxes, the President shall so proclaim and the rates of tax imposed by sections 11, 12, 13, 14, 201 (b), 204 (a), 207, 211 (a), 231 (a), and 362 shall, for the taxable year during which such proclamation is made and for each taxable year thereafter, be doubled in the case of each citizen and corporation of such foreign country; but the tax at such doubled rate 483 Surtax on corpora- tions improperly ac- cumulating surplus. Imposition of tax. Post, p. 557 . Post, p. 545 . Rates. Evidence of purpose to avoid surtax upon shareholders. Evidence determi- native of purpose. Definitions. "Section 102 net in- come." Taxes. Ante, p. 460. Disallowed chari- table, etc., contribu- tions. Ante, p. 463 . Disallowed losses. Pot, p. 602. "Undistributed sec- tion 102 net income." Ante, p. 468. Ante, p. 467. Personal holding companies. Post, p. 557. Discriminatory or extraterritorial taxes. Rates when citizens are subjected to, by foreign countries. Ante, p. 452; post, pp. 22, 524, 526, 527, 530, 553.
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