Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

10) INCOME TAXES

The (provision) benefit for income taxes represents federal, state and local, and foreign taxes on earnings from continuing operations before income taxes and equity in loss of investee companies. For the three months ended March 31, 2020, we recorded a provision for income taxes of $137 million, reflecting an effective income tax rate of 20.9%. Included in the provision for income taxes is a net tax benefit of $54 million for the tax impact of restructuring and other corporate matters, depreciation on abandoned technology and other discrete tax items, which had a minimal effect on the effective income tax rate for the three months ended March 31, 2020.

For the three months ended March 31, 2019, we recorded a benefit from income taxes of $376 million, reflecting an effective income tax rate of (23.6)%, which included a deferred tax benefit of $768 million resulting from the transfer of intangible assets between our subsidiaries in connection with a reorganization of our international operations, and a tax provision of $163 million on the sale of the CBS Television City property and sound stage operation (“CBS Television City”). These items, taken together with a net tax benefit of $34 million for restructuring and other corporate matters and gain on marketable securities, reduced the effective income tax rate by 45.8 percentage points for the three months ended March 31, 2019.

On March 27, 2020, the U.S. government enacted tax legislation containing provisions to support businesses during the COVID-19 pandemic (the “CARES Act”), including deferment of the employer portion of certain payroll taxes, refundable payroll tax credits, and technical amendments to tax depreciation methods for qualified improvement property. The CARES Act did not have a material impact on our consolidated financial statements for the three months ended March 31, 2020. We are currently evaluating the future impact of the CARES Act provisions on our consolidated financial statements.

In March 2020, the UK government passed a resolution increasing the UK corporate income tax rate from 17% to 19% beginning April 1, 2020. The impact of the rate increase will be recorded in our consolidated financial statements when the resolution receives Royal Assent, which is expected to occur later in 2020. We currently estimate the impact of the rate increase to result in a net tax benefit of approximately $100 million, primarily attributable to the adjustment of our UK deferred income tax balances.

ViacomCBS and its subsidiaries file income tax returns with the Internal Revenue Service (“IRS”) and various state and international jurisdictions. For periods prior to the Merger, Viacom and CBS filed separate tax returns. For CBS, the IRS commenced its examination of the 2017 tax year during the fourth quarter of 2019 and commenced its examination of the 2018 tax year in February 2020. For Viacom, the IRS began its examination of the 2014 and 2015 tax years in April 2017. Various tax years are also currently under examination by state and local and foreign tax authorities. With respect to open tax years in all jurisdictions, we currently believe that it is reasonably possible that the reserve for uncertain tax positions may decrease by $125 million within the next 12 months primarily related to potential resolutions of matters involving multiple tax periods and jurisdictions; however, it is difficult to predict the final outcome or timing of resolution of any particular tax matter and events could cause our current expectation to change in the future.