Paramount Skydance CorpPSKY
Paramount Skydance Corp Income Taxes Disclosure
INCOME TAXES
The U.S. and foreign components of earnings (loss) from continuing operations before income taxes and equity in loss of investee companies were as follows:
| Successor | Predecessor | |||||||||||||||||||||||||||||||||||||
| Period From August 7 - December 31, | Period From January 1 - August 6, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
| 2025 | 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| United States | $ | (652) | $ | 157 | $ | (5,862) | $ | (2,039) | ||||||||||||||||||||||||||||||
| Foreign | 176 | 347 | (315) | 786 | ||||||||||||||||||||||||||||||||||
| Total | $ | (476) | $ | 504 | $ | (6,177) | $ | (1,253) | ||||||||||||||||||||||||||||||
The components of the (benefit from) provision for income taxes were as follows:
| Successor | Predecessor | |||||||||||||||||||||||||||||||||||||
| Period From August 7 - December 31, | Period From January 1 - August 6, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
| 2025 | 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| Current: | ||||||||||||||||||||||||||||||||||||||
| Federal | $ | (11) | $ | 144 | $ | 121 | $ | 70 | ||||||||||||||||||||||||||||||
| State and local | (5) | 74 | 56 | 84 | ||||||||||||||||||||||||||||||||||
| Foreign | 91 | 104 | 148 | 135 | ||||||||||||||||||||||||||||||||||
| Total current | 75 | 322 | 325 | 289 | ||||||||||||||||||||||||||||||||||
| Deferred: | ||||||||||||||||||||||||||||||||||||||
| Federal | $ | (139) | $ | (341) | $ | (538) | $ | (556) | ||||||||||||||||||||||||||||||
| State and local | 21 | (73) | (116) | (110) | ||||||||||||||||||||||||||||||||||
| Foreign | 3 | 13 | 24 | 16 | ||||||||||||||||||||||||||||||||||
| Total deferred | (115) | (401) | (630) | (650) | ||||||||||||||||||||||||||||||||||
| Benefit from income taxes | $ | (40) | $ | (79) | $ | (305) | $ | (361) | ||||||||||||||||||||||||||||||
In addition, for the Predecessor periods, net earnings from discontinued operations included income tax provisions of $5 million and $249 million for the years ended 2024 and 2023, respectively.
The equity in loss of investee companies is shown net of tax on the Consolidated Statements of Operations. The tax provision relating to losses from equity investments was $1 million for the period from August 7 - December 31, 2025 (Successor) and $2 million for the period from January 1 - August 6, 2025 (Predecessor), and the tax benefit was $1 million in 2024 and $10 million in 2023, which represented an effective tax rate of 1.0%, 1.2%, 0.3%, and 2.7% for the respective periods.
The difference between income taxes expected at the U.S. federal statutory income tax rate of 21% and the (benefit from) provision for income taxes is summarized as follows:
| Successor | Predecessor | |||||||||||||||||||||||||
| Period From August 7 - December 31, | Period From January 1 - August 6, | |||||||||||||||||||||||||
| 2025 | 2025 | |||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||||||||||||
| Taxes on income at U.S. federal statutory rate | $ | (100) | 21.0 | % | $ | 106 | 21.0 | % | ||||||||||||||||||
State and local taxes, net of federal tax benefit (a) | 6 | (1.3) | % | (17) | (3.4) | % | ||||||||||||||||||||
| Effect of foreign operations: | ||||||||||||||||||||||||||
| United Kingdom | ||||||||||||||||||||||||||
| Statutory tax rate difference | 6 | (1.3) | % | 7 | 1.4 | % | ||||||||||||||||||||
| UK consortium group relief | (29) | 6.1 | % | (37) | (7.3) | % | ||||||||||||||||||||
| Withholding taxes | (4) | 0.8 | % | (5) | (1.0) | % | ||||||||||||||||||||
| Provision to return | (13) | 2.7 | % | — | — | % | ||||||||||||||||||||
| Other | 2 | (0.4) | % | 7 | 1.4 | % | ||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||
| Withholding taxes | 28 | (5.9) | % | 28 | 5.5 | % | ||||||||||||||||||||
| Other | 5 | (1.0) | % | 1 | 0.2 | % | ||||||||||||||||||||
| Netherlands | ||||||||||||||||||||||||||
| Provision to return | 16 | (3.4) | % | — | — | % | ||||||||||||||||||||
| Other | — | — | % | 3 | 0.6 | % | ||||||||||||||||||||
| Australia | ||||||||||||||||||||||||||
| Statutory tax rate difference | (3) | 0.6 | % | (6) | (1.2) | % | ||||||||||||||||||||
| Changes in valuation allowances | 5 | (1.0) | % | 25 | 5.0 | % | ||||||||||||||||||||
| Other | 5 | (1.0) | % | 3 | 0.6 | % | ||||||||||||||||||||
| Germany | ||||||||||||||||||||||||||
| Provision to return | 6 | (1.3) | % | 1 | 0.2 | % | ||||||||||||||||||||
| Other | — | — | % | 1 | 0.2 | % | ||||||||||||||||||||
| Chile | ||||||||||||||||||||||||||
| Changes in valuation allowances | 7 | (1.5) | % | — | — | % | ||||||||||||||||||||
| Other | (2) | 0.4 | % | (1) | (0.2) | % | ||||||||||||||||||||
| Barbados | ||||||||||||||||||||||||||
| Statutory tax rate difference | (11) | 2.3 | % | (16) | (3.2) | % | ||||||||||||||||||||
| Pillar Two | 14 | (2.9) | % | — | — | % | ||||||||||||||||||||
| Italy | 8 | (1.7) | % | 5 | 1.0 | % | ||||||||||||||||||||
| Other foreign jurisdictions | 17 | (3.6) | % | 21 | 4.2 | % | ||||||||||||||||||||
| Effect of cross-border tax laws: | ||||||||||||||||||||||||||
| Foreign tax credits | (62) | 13.0 | % | (51) | (10.1) | % | ||||||||||||||||||||
| Foreign-derived intangible income | — | — | % | (48) | (9.5) | % | ||||||||||||||||||||
| U.S. tax on foreign entities | — | — | % | 8 | 1.6 | % | ||||||||||||||||||||
| Subpart F income | 23 | (4.8) | % | — | — | % | ||||||||||||||||||||
| Tax credits | — | — | % | (4) | (0.8) | % | ||||||||||||||||||||
| Changes in valuation allowances | 5 | (1.0) | % | (94) | (18.7) | % | ||||||||||||||||||||
| Nontaxable and nondeductible items | ||||||||||||||||||||||||||
| Compensation | 25 | (5.2) | % | 5 | 1.0 | % | ||||||||||||||||||||
| Noncontrolling interests | (9) | 1.9 | % | (93) | (18.5) | % | ||||||||||||||||||||
| Transaction-related items | 1 | (0.2) | % | 14 | 2.8 | % | ||||||||||||||||||||
| Excess tax (benefit) deficiency from stock-based compensation | (2) | 0.4 | % | 9 | 1.8 | % | ||||||||||||||||||||
| Other | 4 | (0.8) | % | (4) | (0.8) | % | ||||||||||||||||||||
| Changes in reserve for uncertain tax positions | 11 | (2.3) | % | 57 | 11.3 | % | ||||||||||||||||||||
| Other, net | 1 | (0.2) | % | (4) | (0.8) | % | ||||||||||||||||||||
| Benefit from income taxes | $ | (40) | 8.4 | % | $ | (79) | (15.7) | % | ||||||||||||||||||
(a) State taxes in Pennsylvania, New York, California, New Jersey, Ohio, and Oregon comprise the majority of the tax effect in this category.
| Predecessor | |||||||||||
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Taxes on income at U.S. federal statutory rate | $ | (1,297) | $ | (263) | |||||||
| State and local taxes, net of federal tax benefit | (56) | (13) | |||||||||
| Effect of foreign operations | 74 | (97) | |||||||||
| Noncontrolling interests | (7) | (6) | |||||||||
| Goodwill impairment | 819 | — | |||||||||
| Interest limitation carryforward valuation allowance | 101 | — | |||||||||
| Non-deductible expenses | 55 | 9 | |||||||||
| Reorganization of foreign operations | — | (4) | |||||||||
| Tax deficiency from stock-based compensation | 18 | 18 | |||||||||
Other, net | (12) | (5) | |||||||||
| Benefit from income taxes | $ | (305) | $ | (361) | |||||||
The following table summarizes the components of deferred income tax assets and liabilities.
| Successor | Predecessor | |||||||||||||||||||||||||
| At | At | |||||||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Deferred income tax assets: | ||||||||||||||||||||||||||
| Reserves and other accrued liabilities | $ | 606 | $ | 354 | ||||||||||||||||||||||
| Pension, postretirement and other employee benefits | 437 | 460 | ||||||||||||||||||||||||
| Lease liability | 348 | 409 | ||||||||||||||||||||||||
| Tax credit and loss carryforwards | 893 | 538 | ||||||||||||||||||||||||
| Interest limitation carryforward | 13 | 114 | ||||||||||||||||||||||||
| Capitalized costs | 383 | 180 | ||||||||||||||||||||||||
| Intangible assets | — | 428 | ||||||||||||||||||||||||
| Investments | 406 | 25 | ||||||||||||||||||||||||
| Other | 5 | 10 | ||||||||||||||||||||||||
| Total deferred income tax assets | 3,091 | 2,518 | ||||||||||||||||||||||||
| Valuation allowance | (625) | (655) | ||||||||||||||||||||||||
| Deferred income tax assets, net of valuation allowance | 2,466 | 1,863 | ||||||||||||||||||||||||
| Deferred income tax liabilities: | ||||||||||||||||||||||||||
| Intangible assets | (395) | — | ||||||||||||||||||||||||
| Lease asset | (308) | (340) | ||||||||||||||||||||||||
| Property, equipment and other assets | (267) | (89) | ||||||||||||||||||||||||
| Financing obligations | (285) | (66) | ||||||||||||||||||||||||
| Other | (14) | (16) | ||||||||||||||||||||||||
| Total deferred income tax liabilities | (1,269) | (511) | ||||||||||||||||||||||||
| Deferred income tax assets, net | $ | 1,197 | $ | 1,352 | ||||||||||||||||||||||
At December 31, 2025 (Successor), we had deferred income tax assets for federal foreign tax credit carryforwards of $111 million and net operating loss carryforwards for federal, state and local, and foreign jurisdictions of $657 million, the majority of which expire in various years from 2026 through 2040. The deferred tax asset for the U.S. interest limitation carryforward of $13 million at December 31, 2025 (Successor) has an indefinite carryforward period.
The 2025 (Successor) and 2024 (Predecessor) deferred income tax assets were reduced by a valuation allowance of $625 million and $655 million, respectively, principally relating to income tax benefits from capital losses and net operating losses in foreign jurisdictions, which are not expected to be realized. On July 4, 2025, the U.S. government enacted tax legislation, which includes the extension of certain expired or expiring tax provisions, including a favorable change to the interest deduction limitation, and modifications to certain international tax provisions. The legislation has multiple effective dates with certain provisions effective in 2025. The favorable change to the interest deduction limitation resulted in the reversal of the valuation allowance of $114 million on our interest limitation carryforward deferred tax asset.
Generally, the future remittance of foreign undistributed earnings will not be subject to U.S. federal income taxes and as a result, for substantially all of our foreign subsidiaries, we do not intend to assert indefinite reinvestment of both cash held outside of the U.S. and future cash earnings. However, a future repatriation of cash could be subject to state and local income taxes, foreign income taxes, tax on foreign currency translation gains and losses, and withholding taxes. Accordingly, as of December 31, 2025 (Successor), we recorded deferred income tax liabilities associated with future repatriations of $10 million on the Consolidated Balance Sheet. Additional income taxes have not been provided for outside basis differences inherent in these entities, which could be recognized upon sale or other transaction, as these amounts continue to be indefinitely invested in foreign operations. The determination of the U.S. federal deferred income tax liability for such outside basis difference is not practicable.
The income taxes paid (net of refunds) were as follows:
| Successor | Predecessor | |||||||||||||||||||||||||
| Period From August 7 - December 31, | Period From January 1 - August 6, | |||||||||||||||||||||||||
| 2025 | 2025 | |||||||||||||||||||||||||
| Federal | $ | — | $ | 196 | ||||||||||||||||||||||
| State and local: | ||||||||||||||||||||||||||
| Hawaii | — | (49) | ||||||||||||||||||||||||
| Other | 19 | 9 | ||||||||||||||||||||||||
| Foreign: | ||||||||||||||||||||||||||
| Canada | 14 | (21) | ||||||||||||||||||||||||
| Italy | 12 | 5 | ||||||||||||||||||||||||
| United Kingdom | 2 | 17 | ||||||||||||||||||||||||
| Other | 23 | 44 | ||||||||||||||||||||||||
| Total | $ | 70 | $ | 201 | ||||||||||||||||||||||
The following table sets forth the change in the reserve for uncertain tax positions, excluding related accrued interest and penalties.
| At 1/1/2023 (Predecessor) | $ | 303 | |||
| Additions for current year tax positions | 15 | ||||
| Additions for prior year tax positions | 20 | ||||
| Reductions for prior year tax positions | (46) | ||||
| Cash settlements | (2) | ||||
| Statute of limitations lapses | (4) | ||||
| At December 31, 2023 (Predecessor) | 286 | ||||
| Additions for current year tax positions | 12 | ||||
| Additions for prior year tax positions | 3 | ||||
| Reductions for prior year tax positions | (14) | ||||
| Cash settlements | (3) | ||||
| Statute of limitations lapses | (4) | ||||
| At December 31, 2024 (Predecessor) | 280 | ||||
| Additions for current year tax positions | 6 | ||||
| Additions for prior year tax positions | 154 | ||||
| Reductions for prior year tax positions | (8) | ||||
| Statute of limitations lapses | (1) | ||||
| At August 6, 2025 (Predecessor) | 431 | ||||
| Additions for current year tax positions | 3 | ||||
| Additions for prior year tax positions | 2 | ||||
| Reductions for prior year tax positions | (3) | ||||
| Cash settlements | (1) | ||||
| Statute of limitations lapses | (1) | ||||
| At December 31, 2025 (Successor) | $ | 431 | |||
The reserve for uncertain tax positions of $431 million at December 31, 2025 (Successor) includes $360 million which would affect our effective income tax rate, if and when recognized in future years. We recognized interest and penalties of $13 million for the Successor period from August 7 - December 31, 2025, and $33 million, $28 million, and $26 million for the Predecessor periods from January 1 - August 6, 2025 and the years ended December 31, 2024 and 2023, respectively, in the Consolidated Statements of Operations. Liabilities for accrued interest and penalties totaling $144 million as of December 31, 2025 (Successor) and $104 million as of December 31, 2024 (Predecessor), respectively, are included within “Other current liabilities” and “Other liabilities” on the Consolidated Balance Sheets.
The Company and its subsidiaries file income tax returns with the Internal Revenue Service (“IRS”) and various state and local and foreign jurisdictions. For periods prior to the 2019 merger of Viacom and CBS, Viacom and CBS filed separate tax returns. For Viacom, we are currently under examination by the IRS for the 2016 through 2019 tax years. The Company and the IRS settled CBS’ income tax audits for the 2017 and 2018 tax years in 2023 and, during the Predecessor period from January 1 - August 6, 2025, settled the merged company’s 2019 income tax audit. In both audits, one item remains open and is currently being resolved through the Mutual Agreement Procedure process. Various tax years are also currently under examination by state and local and foreign tax authorities.About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.