Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

11) 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 and nine months ended September 30, 2020, we recorded a provision for income taxes of $38 million and $377 million, reflecting effective income tax rates of 5.7% and 16.6%, respectively. Included in the provision for income taxes for the three and nine months ended September 30, 2020, are discrete tax benefits of $117 million and $120 million, respectively, primarily consisting of a benefit of $100 million to remeasure our UK net deferred income tax asset as a result of an increase in the UK corporate income tax rate from 17% to 19% enacted during the third quarter, as well as a benefit of $22 million realized in connection with the preparation of the fiscal 2019 tax return for Viacom. These items, together with a net tax benefit of $18 million and $153 million for the three and nine months ended September 30, 2020, respectively, which relate principally to restructuring and other corporate matters, losses on the extinguishment of debt and programming charges, reduced our effective income tax rate by 17.5 percentage points and 5.4 percentage points, respectively.

For the three and nine months ended September 30, 2019, we recorded a provision for income taxes of $126 million and a tax benefit of $9 million, reflecting effective income tax rates of 16.1% and (.2)%, respectively. Included in the provision for income taxes for the third quarter of 2019 is a discrete tax benefit of $58 million primarily realized in connection with the preparation of the 2018 federal tax return, based on further clarity provided by the U.S. government on tax positions relating to federal tax legislation enacted in December 2017 (the “Tax Reform Act”). This item, taken together with a net provision of $2 million for restructuring and other corporate matters and gains from investments, reduced our effective income tax rate by 4.3 percentage points. The tax benefit for the nine months ended September 30, 2019 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, the aforementioned tax benefit of $58 million primarily realized in connection with the preparation of the 2018 federal tax return, a tax benefit of $32 million principally related to the bankruptcy of an investee, and a tax provision of $163 million on the gain from 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 $27 million for restructuring and other corporate matters and gains from investments, reduced the effective income tax rate by 21.9 percentage points for the nine months ended September 30, 2019.

In March 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 and nine months ended September 30, 2020. We do not expect the future impact of the CARES Act provisions to be material.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 approximately $65 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.