From Bankruptcy to Reboot: Tax Issues When a Media Company Reorganizes (Lessons from Vice Media)

Facing a post‑bankruptcy reboot? The tax risks are real — and urgent.

When a media company like Vice Media rebuilds its C‑suite and pursues a strategic relaunch in 2026, stakeholders should not treat the corporate restart as only an operational or branding exercise. The way debt is discharged, equity is reallocated and assets are revalued in a bankruptcy reorganization triggers a web of tax rules that determine whether the reorganized company can use historic losses, whether the discharge of debt creates taxable income, and how tax attributes will be reduced — all of which attract intense IRS scrutiny. If you are an investor, CFO, tax director or tax attorney advising a reorganizing company, these are high‑stakes issues that must be handled proactively.

Top‑line takeaways (most important first)

• Cancellation of debt (COD) income can be excluded under IRC 108 when the discharge occurs in bankruptcy or when the debtor is insolvent — but exclusions usually trigger mandatory reductions of tax attributes such as NOL carryforwards and tax basis.
• Net operating loss (NOL) carryforwards are powerful but fragile: they are subject to the post‑TCJA 80% taxable‑income limitation, state constraints, and draconian limits under Section 382 when ownership changes.
• Change‑of‑ownership rules (Section 382 and related provisions) can reduce expected NOL utility to a fraction of pre‑reorganization forecasts — in some cases turning a multi‑year tax asset into a paper gain with minimal near‑term relief.
• Documentation and valuation matter. File Form 982 when you exclude COD income; maintain contemporaneous valuations and plan language that supports tax treatment; expect IRS examiners to demand this evidence (including independent reports and process notes from advisors like valuation experts).
• 2026 trend: The IRS increased audit focus on bankruptcy reorganizations and Section 382 planning in late 2025. Early engagement with specialized counsel and valuation experts is now essential.

Why Vice Media’s C‑suite reboot matters as a tax case study

Vice Media’s high‑profile post‑bankruptcy hiring spree in early 2026 (including a new CFO and strategy executives) illustrates a common pattern: new management seeks growth, but legacy tax attributes and debt arrangements from the pre‑bankruptcy era control future cash taxes. That rebooting leadership — whether a production push, studio pivot or monetization strategy — will inherit the tax consequences of the bankruptcy plan. The key question becomes: how many pre‑bankruptcy tax benefits survive, and how quickly can they be used?

Real‑world pain point

Executives believe NOLs give them runway to invest and grow without immediate cash taxes. Creditors assume debt restructuring wipes out liabilities but not future tax capacity. Both can be wrong if Section 382 limits NOL usage, if COD exclusions force attribute reductions, or if the IRS disallows the structure in an audit. That mismatch of expectations is why we see surprise tax bills, strained post‑reorg cash flows and litigation.

Cancellation of debt (COD) income: the starting tax event

When debt is canceled or discharged in a reorganization, the debtor generally realizes cancellation of debt (COD) income. For corporations in Chapter 11 reorganizations, two core exclusions in IRC Section 108 are most important:

• Bankruptcy exclusion (IRC 108(a)(1)(A)): If the discharge occurs in a Title 11 case, discharged indebtedness is excluded from gross income.
• Insolvency exclusion (IRC 108(a)(1)(B)): If the taxpayer is insolvent immediately before the discharge, COD income to the extent of insolvency is excluded.

But these exclusions are not a free pass. They generally require the taxpayer to reduce certain tax attributes under IRC 108(b), which often reduces actual future tax savings.

Form 982 and the mechanics

Taxpayers claiming an exclusion under IRC 108 must report it on Form 982 and follow the attribute reduction order (e.g., reduce NOLs, general business credits, capital loss carryovers, and tax basis as required). For corporations, reductions often hit NOL carryforwards first, meaning a nominally large NOL balance can be materially eroded by attribute reductions.

Practical rule: excluding COD income under 108 typically converts a visible balance sheet write‑down into invisible tax damage — fewer NOLs, reduced basis and lost future deductions.

Section 382: the NOL kill‑switch after ownership change

Even if NOLs survive IRC 108 reductions, their use can be limited by Section 382 when there is an ownership change. A corporate ownership change is triggered when more than 50 percentage points of ownership shift among five‑percent shareholders over a three‑year testing period.

How the Section 382 limit is calculated

1. Determine the pre‑change value of the loss corporation (generally the fair market value of equity).
2. Multiply that value by the long‑term tax‑exempt interest rate published by the IRS for the month of the ownership change (the Section 382 rate).
3. The product is the annual ceiling on pre‑change NOL use (subject to adjustments for built‑in gains).

Example: a reorganized company worth $200 million facing a 4% Section 382 rate has an annual NOL allowance of only $8 million — even if it carries $500 million of pre‑change NOLs. At that pace, the NOLs may take decades to absorb, which drastically shifts valuation and cash‑tax expectations.

Bankruptcy exceptions and traps

Bankruptcy reorganizations have specialized rules (see IRC 382(l)(5) and related provisions) that can affect how limits apply, but these rules are highly technical and fact‑dependent. Some bankruptcy plans can preserve more NOL value if they satisfy statutory safe‑harbors and the plan treatment of creditors and equity meets required standards. Conversely, poorly drafted plan provisions or failure to isolate ownership interests can accelerate an ownership change and trigger a harsher limit.

Navigating tax attributes after restructuring

Post‑reorganization, a company will typically need to:

• Inventory all tax attributes (NOLs, capital loss carryforwards, tax credits, built‑in losses) with dates, origins and applicable limitations.
• Apply IRC 108(b) reductions when COD income is excluded — document every step and the order of reductions.
• Run Section 382 models that account for pre‑ and post‑reorg equity structures, valuation uncertainties and potential future transfers that could further limit usage.
• Adjust tax bases for any required reductions and analyze state tax divergence (states often treat COD and NOLs differently).

Special issues for media and IP‑heavy companies

Media companies frequently reorganize around intellectual property (brand, content libraries, production contracts). Asset vs. stock transactions, Section 338 elections, and recognition of built‑in gain (BIG) rules can dramatically change post‑reorg amortization, depreciation and step‑up benefits. Buyers may push for an asset sale to acquire step‑up, but sellers must weigh the loss of tax attributes.

Audit risk: why the IRS is watching reorganizations harder in 2026

In late 2025 and into 2026 the IRS signaled heightened scrutiny of corporate restructurings and bankruptcy plans that materially affect tax attributes. Enforcement priorities include:

• Valuation disputes over the pre‑change value used in Section 382 computations.
• Misapplication of IRC 108 attribute reduction rules.
• Plan‑language inconsistencies that contradict reported tax treatment.
• Related‑party transactions that shift value or create artificial tax benefits.

For companies emerging from Chapter 11, audits frequently target the valuation of equity issued to new owners, creditor equity exchanges, timing of ownership shifts and the correctness of Form 982 disclosures.

Documentary evidence that reduces audit exposure

• Independent valuation reports dated contemporaneously with the ownership change.
• Copies of the plan of reorganization showing who received what and when.
• Board minutes and valuation methodologies used to support pre‑change values.
• Copies of Form 982 and supporting attribute reduction calculations.

Practical planning steps — what a tax team should do now

Below is an actionable checklist for executives and advisors working on a reorganization or advising post‑bankruptcy leadership teams like Vice’s new finance suite:

1. Map tax attributes immediately. Create a single attribute worksheet that lists NOLs (by year and character), credits, capital losses, tax basis in assets and carryforward expirations.
2. Run Section 382 scenarios. Model multiple valuation outcomes and ownership permutations. Small valuation changes can multiply the usable NOL allowance or eviscerate it.
3. Plan Form 982 reporting in advance. If you will exclude COD income, draft the attribute reduction sequence and the numbers to be reported. Waiting until the return deadline invites mistakes and IRS attention.
4. Engage valuation experts early. Use independent valuation reports and cross‑check valuation approaches against market transactions — the IRS often challenges aggressive valuations.
5. Include tax protective language in the plan. Draft plan provisions that preserve the tax positions you intend to take and provide transparency for auditors. For bankruptcy reorganizations, plan language can be decisive in later disputes.
6. Coordinate state tax planning. States vary widely; some do not conform to IRC 108 or limit NOLs differently. Early coordination prevents unexpected state tax bills.
7. Test liquidity and cash tax forecasts. Recompute cash‑tax projections under conservative NOL usage assumptions post‑382 and post‑108 attribute reductions.
8. Prepare for audit triggers. Build a file that anticipates Section 382, Form 982 and valuation questions so you can respond quickly if the IRS comes knocking.

Example: simplified numeric illustration

Assume the pre‑bankruptcy company has $400 million of NOLs. Under a confirmed plan the company emerges with new owners that value the company at $150 million. The Section 382 rate that month is 3.5%:

• Annual Section 382 limit = $150M × 3.5% = $5.25M per year.
• At that rate, the $400M NOLs would take roughly 76 years to use — effectively worthless for near‑term tax planning.
• If IRC 108 exclusions also reduced NOLs by $100M through attribute reductions, the effective NOL balance is down to $300M, but the Section 382 limit still caps annual usage at $5.25M.

This illustrates why the headline NOL number is rarely the number that matters — the post‑reorg usable amount and the timing govern cash‑tax outcomes.

Advanced strategies and future predictions for 2026+

As tax, capital markets and restructuring practices converge, sophisticated players are using a mix of legal, accounting and financial structuring to preserve and monetize tax attributes. Active strategies we expect to be prominent in 2026 include:

• Value‑enhancing pre‑petition steps: Where possible, steps that increase the pre‑change value of the debtor (and therefore the Section 382 limit) can be negotiated with creditors — for example, targeted settlements or interim financing that supports operating improvements prior to confirmation (and in some cases pre‑petition deal structuring similar to operational playbooks used in other sectors like consumer scaling).
• Creditor equity structuring: Careful drafting of creditor equity allocations to avoid triggering ownership shifts that accelerate Section 382 tests.
• Targeted asset sales with step‑up elections: Buyers may pay premiums for tax step‑ups; sellers must weigh the tradeoff between cash proceeds and the loss of NOL utility.
• Use of tax equity and hybrid instruments: In some deals, creative instruments can move value in ways that preserve attribute function without violating anti‑abuse rules — a high‑risk, high‑reward path that requires top‑tier counsel and robust documentation (including contemporaneous valuation reports and process notes).

Predicting the future: expect the IRS to continue prioritizing audits of reorganizations and to refine guidance around valuation and attribute reductions. Tax teams that treat reorganizations as a single cross‑discipline problem (legal, tax, valuation, restructuring) will succeed; siloed teams will face surprises.

Common mistakes that lead to audits and lost value

• Failing to file Form 982 or filing it with incorrect attribute reductions.
• Relying on headline NOL balances without running Section 382 tests.
• Skipping an independent valuation of equity or assets used in Section 382 calculations.
• Overlooking state tax treatment of COD income and NOLs.
• Poor plan drafting that contradicts the tax positions taken on returns.

How tax attorneys and advisors should position themselves

For tax attorneys advising reorganizations — or for CFOs hiring counsel — the value is in concrete deliverables and audit defenses:

• Attribute inventory and reduction tables prepared contemporaneously with the plan.
• Section 382 modeling under a range of valuation outcomes and ownership assumptions.
• Drafting of plan provisions that support intended tax outcomes and mitigate IRS challenges.
• Preparation of Form 982 with backup schedules and valuation reports.
• Pre‑year‑end tax accounting memos reconciling financial statements with tax positions, to minimize book‑tax differences that alert auditors.

Final checklist for post‑bankruptcy leadership (CFOs, CEOs, and board tax committees)

1. Demand a complete, dated tax attribute map on day one after emergence.
2. Require independent fair‑market‑value support for any valuation used in Section 382 calculations.
3. Build conservative cash‑tax forecasts that assume limited near‑term NOL utility.
4. Review plan language and creditor agreements for unintended ownership shifts.
5. Coordinate federal and state filings with counsel early; do not wait for the tax return deadline.
6. Prepare an audit response playbook: who will defend valuations, who will produce the plan documents and who will negotiate with the IRS.

Closing: The reorganization is a business restart — treat tax like strategy

Vice Media’s post‑bankruptcy C‑suite rebuild is a timely reminder: reorganizations are not just about canceling debt and appointing a new CFO. They are complex tax events that determine whether historical losses convert into future cash savings or evaporate under attribute reductions and Section 382 limits. In 2026, with heightened IRS attention and evolving enforcement priorities, early, integrated tax planning and rigorous documentation are non‑negotiable.

If your company is emerging from bankruptcy or planning a major ownership shift, the right time to act is now — before plan confirmation, not after an adverse audit notice.

Act now — practical next step

Start with three immediate actions: 1) order an independent valuation dated to the ownership change, 2) prepare a detailed tax attribute inventory and 3) engage counsel to draft plan language that preserves intended tax results. These steps materially reduce audit risk and preserve the value shareholders and creditors expect.

Need help? Our tax controversy team specializes in bankruptcy reorganizations, Section 382 planning and IRS audits of complex restructurings. Contact us to set up a rapid‑response review of your plan documents, attribute maps and audit exposure — so your reboot becomes a durable business comeback.

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