Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

M. Income Taxes – The effective tax rate for the second quarter of 2011 and 2010 was 26.3% and 25.0%, respectively.

The rate for the 2011 second quarter differs from the U.S. federal statutory rate of 35% primarily due to foreign income taxed in lower rate jurisdictions.

The rate for the 2010 second quarter differs from the U.S. federal statutory rate of 35% primarily due to a $24 discrete income tax benefit related to a Canadian provincial tax law change permitting a tax return to be filed in U.S. dollars and a $10 favorable impact for operational losses in certain foreign jurisdictions that are excluded from the estimated annual effective tax rate calculation (impact reversed by the end of 2010), partially offset by an $18 discrete income tax charge based on settlement discussions of several matters with international taxing authorities (this amount represents a decrease to Alcoa's unrecognized tax benefits).

The effective tax rate for the 2011 and 2010 six-month periods was 26.9% and 100.7%, respectively.

The rate for the 2011 six-month period differs from the U.S. federal statutory rate of 35% primarily due to foreign income taxed in lower rate jurisdictions.

The rate for the 2010 six-month period differs from the U.S. federal statutory rate of 35% primarily due to a $79 discrete income tax charge as a result of a change in the tax treatment of federal subsidies received related to prescription drug benefits provided under certain retiree health care benefit plans that were determined to be actuarially equivalent to Medicare Part D; the $18 discrete income tax charge mentioned above; a $12 unfavorable impact for operational losses in certain foreign jurisdictions that are excluded from the estimated annual effective tax rate calculation (impact reversed by the end of 2010); a $6 discrete income tax charge for interest paid to the Internal Revenue Service on a previously deferred gain associated with the 2007 formation of the former soft alloy extrusions joint venture; and a $4 discrete income tax charge for a change in the anticipated structure of the sale of the Transportation Products Europe business (sold in April 2010); slightly offset by the $24 discrete income tax benefit mentioned above.