Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

N. Income Taxes – Alcoa Corporation’s estimated annualized effective tax rate (AETR) for 2024 as of September 30, 2024 differs from the U.S. federal statutory rate of 21% primarily due to losses in certain jurisdictions with full valuation allowances resulting in no tax benefit. In addition, income in foreign jurisdictions with higher statutory tax rates contribute to the variance from 21%.

	Nine months ended September 30,
	2024				2023
Loss before income taxes	$	(49	)		$	(507	)
Estimated annualized effective tax rate		133.4		%		(18.9	)	%
Income tax (benefit) expense	$	(65	)		$	96
Unfavorable tax impact related to losses in jurisdictions with no tax benefit		197				—
Discrete tax benefit		(3	)			(57	)
Provision for income taxes	$	129			$	39

Alcoa Australia Holdings Pty Ltd (AAH), a wholly-owned indirect subsidiary of Alcoa, made an election prior to July 31, 2024 that resulted in Alcoa’s other wholly-owned Australian subsidiaries joining AAH’s tax consolidated group (the AAH Tax Consolidated Group). As a result of the acquisition of Alumina Limited, Alumina Limited and all of its Australian subsidiaries, as well as AofA and all of its subsidiaries, joined the AAH Tax Consolidated Group on August 1, 2024. Upon acquisition, Alcoa recognized a deferred tax asset (and a corresponding increase to Additional capital) of $121 primarily related to the portion of Alumina Limited’s Australian net operating loss carryforwards that the Company has determined are more likely than not to be realized as a result of the consolidated return election.

The Inflation Reduction Act of 2022 (IRA) contains a number of tax credits and other incentives for investments in renewable energy production, carbon capture, and other climate-related actions, as well as the production of critical minerals. In December 2023, the U.S. Treasury issued guidance on Section 45X of the Advanced Manufacturing Tax Credit. The Notice of Proposed Rulemaking (the Proposed Regulations) clarified that commercial grade aluminum could qualify for the credit, which was designed to incentivize domestic production of critical materials important for the global transition to renewable energy. In the third quarter and nine-month period of 2024, the Company recorded benefits of $11 and $30 in Cost of goods sold, respectively, related to its Massena West smelter (New York) and its Warrick smelter (Indiana). As of September 30, 2024, benefits of $36 were included in Other receivables and $30 were included in Other noncurrent assets on the Consolidated Balance Sheet. As of December 31, 2023, benefits of $36 were included in Other receivables on the Consolidated Balance Sheet.

On October 24, 2024, the U.S. Treasury finalized the Proposed Regulations under Section 45X with important modifications including the ability to include the cost of certain direct and indirect materials in the cost base of the credit. The Proposed Regulation on the definition of aluminum was not finalized; the U.S. Treasury has indicated it will finalize the definition at a later date. Alcoa is currently evaluating the impacts to the Company’s results of operations.