What is the purpose of the Accumulated Earnings Tax?

The purpose of the Accumulated Earnings Tax is to encourage corporations to distribute their earnings to shareholders rather than keep them in the form of retained earnings. When a corporation accrues significant profits but chooses not to pay them out as dividends, it can create a situation where shareholders are not receiving their fair share of returns on their investment. The Accumulated Earnings Tax serves as a deterrent against this practice by imposing an additional tax on corporate earnings that are retained instead of distributed, thereby incentivizing companies to return excess profits to their shareholders.

The other options do not accurately reflect the primary objective of the tax. For instance, it does not specifically penalize personal savings in corporate accounts or motivate employees to invest in corporate stocks. Instead, its focus is squarely on addressing the issue of excessive accumulation of earnings within corporations and ensuring that profits are fairly shared with shareholders.