Paramount’s new owners inherited a $400mn tax argument from Viacom

When David Ellison’s Skydance bought Paramount for $8bn in August 2025, it got a Hollywood studio and the CBS network. It also got Viacom’s old tax returns.

The Internal Revenue Service has now put a price on three of them. On 10 July it sent notices of proposed adjustment for legacy Viacom’s 2017, 2018 and 2019 tax years, Paramount Skydance said in its quarterly report for the three months to June.

The changes “could increase taxes, including the one-time transition tax on cumulative foreign earnings, by up to approximately $400 million,” before penalties and interest, the company said.

The disclosure sits in a note to the accounts, below a table of restructuring charges. Apart from automated filing summaries, it has drawn almost no coverage.

An old audit

The notices concern “the tax treatment of certain transactions between our subsidiaries”. Paramount did not say which.

The transition tax dates from the 2017 Tax Cuts and Jobs Act. It charged American companies on profits piled up in foreign subsidiaries, as if the money had come home.

Viacom and CBS filed separate returns until they merged in 2019. Paramount’s annual report for 2025 said Viacom was “currently under examination by the IRS for the 2016 through 2019 tax years”. CBS settled its own audits for 2017 and 2018 in 2023.

Paramount said it disagrees and may contest the notices “through all available administrative and, if necessary, judicial proceedings.” A notice of proposed adjustment is not a final bill. Companies often fight them for years.

Small change for the Ellisons

The family has had bigger numbers to think about this year. To win Warner Bros Discovery, Paramount paid Netflix a $2.8bn break fee on Warner’s behalf in the first quarter. The IRS claim is about a seventh of that.

The filing says the fee will ultimately be funded from $46.7bn coming from what it calls the Ellison Parties. At its maximum, the Viacom claim is less than 1 per cent of that sum.

The Warner deal closed on 6 October at about $110bn, Bloomberg reported. Larry Ellison, David’s father and Oracle’s co-founder, personally guaranteed funding. Paramount sold $52bn of loans and bonds in a single week.

Who pays

Some of the money may already be set aside. Paramount ended 2025 with a $431mn reserve for uncertain tax positions. That covers every such position in the group, and the filings do not say how much of it relates to Viacom.

Because the notices arrived after the quarter closed, any change “will be accounted for in the third quarter of 2026”. Those results, for the three months to September, are due in the coming weeks.

If the IRS won in full, interest would take the bill above $400mn. The returns were filed by Viacom, a company that has not existed under that name since 2019. Any bill will go to David Ellison’s Paramount.

Sources

• Paramount Skydance: Form 10-Q for the quarter to 30 June 2026 (SEC)
• Paramount Skydance: Form 10-K for 2025 (SEC)
• Variety: Skydance closes $8bn Paramount acquisition (Aug 2025)
• The National, via Bloomberg: Paramount completes Warner Bros merger (6 Oct 2026)
• IRS: questions and answers on the section 965 transition tax

Cover image: Chris Brown (zoonabar), Wikimedia Commons, CC BY 2.0. Cropped.