Provision for income taxes. The components of Income (loss) before income taxes were as follows:

Provision for income taxes consisted of the following:


	2024		2023			2022
Current:
Federal	$	—	$	—		$	—
Foreign		242		211			445
State and local		—		—			—
	$	242	$	211		$	445
Deferred:
Federal		—		—			(3	)
Foreign		23		(22	)		222
State and local		—		—			—
	$	23	$	(22	)	$	219
Total	$	265	$	189		$	664

Federal includes U.S. income taxes related to foreign income.

A reconciliation of the U.S. federal statutory rate to Alcoa’s effective tax rate was as follows:


	2024			2023			2022
U.S. federal statutory rate		21.0	%		21.0	%		21.0	%
Taxes on foreign operations—rate differential		29.8			7.1			9.9
Impacts of the U.S. Tax Cuts and Jobs Act of 2017		27.8			—			—
Changes in valuation allowances		15.5			(50.8	)		76.7
Tax rate differential		5.1			—			—
Other foreign tax effects		4.5			(6.8	)		1.7
Interest income/expense		2.8			(0.2	)		(0.1	)
Noncontrolling interest		1.3			0.2			0.8
Internal legal entity reorganizations		0.1			0.2			(9.0	)
Uncertain tax positions		(0.2	)		(0.1	)		0.4
Equity loss		(0.2	)		(5.3	)		(2.0	)
Adjustment of prior year income taxes		(1.5	)		0.3			—
Tax credits		(7.7	)		1.4			(0.2	)
Tax holidays		(9.6	)		0.1			(5.2	)
Other		3.0			0.5			0.6
Effective tax rate		91.7	%		(32.4	%)		94.6	%

During 2020, the U.S. Treasury Department finalized regulations implementing GILTI (“Global Intangible Low-Tax Income”) provisions of the U.S. Tax Cuts and Jobs Act of 2017. Included in these regulations is an annual election for an exclusion from GILTI for income subject to a high rate of foreign tax (the “high tax exception”). Although affiliates may be located in jurisdictions with a high rate of foreign tax, due to differences between local tax rules used to determine the tax liability and the U.S. tax principles used to determine GILTI, affiliates may not meet the high tax exception each year and, as such, may not qualify for this exclusion. The Company plans to make the high tax exception election for the 2024 tax year in jurisdictions where the rules are met. The jurisdictions where the Company does not meet the high tax exception exclusion for the 2024 tax year resulted in a GILTI inclusion for the year ended December 31, 2024. The GILTI inclusion was fully offset by current losses and net operating losses subject to a full valuation allowance.

Certain income earned by Alcoa World Alumina Brasil Ltda. (AWAB) is eligible for a tax holiday, which decreases the tax rate on this income from 34% to 15.25%, which will result in future cash tax savings. The holiday related to production at the Alumar refinery was originally expected to end on December 31, 2027. During 2023, it was extended to December 31, 2032. The holiday related to the operation of the Juruti (Brazil) bauxite mine will end on December 31, 2026.

In 2021, it was determined that the deferred taxes associated with income subject to the tax holiday would be fully exhausted within the holiday period and the amounts were therefore maintained on the balance sheet at the holiday tax rate. In 2022, the Company’s projection of the reversal of deferred tax assets during the holiday tax period was lowered, and as a result, the remainder was revalued at the statutory rate of 34%, resulting in a discrete income tax benefit of $33, which is included in Tax holidays above. In 2023, the Company determined that it was no longer more likely than not that the deferred tax asset at AWAB would be realized and recorded a full valuation allowance against the deferred tax asset (see below). As a result, the amount reflected in Tax holidays above is zero with respect to AWAB as of December 31, 2023. In 2024, management’s position on the realizability of these deferred tax assets remains the same as 2023, and the amount reflected in Tax holidays above is zero with respect to AWAB.

In October 2022, Alcoa completed the liquidation of a wholly-owned subsidiary, Alcoa Saudi Rolling Inversiones S.L. This liquidation resulted in a deductible loss in the Netherlands and a tax benefit of $94 was recognized in 2022, however, this tax benefit was substantially offset by a valuation allowance.

In December 2022, Alcoa commenced an internal reorganization to reduce its number of legal entities in Norway from four to one to simplify accounting and treasury functions and reduce external costs. As a result of the simplification, the Company recorded a deferred tax expense of $30 in 2022.

Deferred income taxes. The components of deferred tax assets and liabilities based on the underlying attributes without regard to jurisdiction were as follows:


	2024					2023
December 31,	Deferred tax assets			Deferred tax liabilities		Deferred tax assets			Deferred tax liabilities
Tax loss carryforwards	$	2,218		$	—	$	2,042		$	—
Employee benefits		312			—		312			—
Derivatives and hedging activities		248			5		312			10
Loss provisions		166			—		161			—
Interest		142			5		142			6
Depreciation		83			202		94			318
Lease assets and liabilities		74			73		34			33
Investment basis differences		73			—		78			—
Tax credit carryforwards		23			—		24			—
Deferred income/expense		15			119		16			131
Other		69			1		25			—
	$	3,423		$	405	$	3,240		$	498
Valuation allowance		(2,734	)		—		(2,595	)		—
Total	$	689		$	405	$	645		$	498

The following table details the expiration periods of the deferred tax assets presented above:


December 31, 2024	Expires within 10 years			Expires within 11-20 years			No expiration			Other			Total
Tax loss carryforwards	$	164		$	369		$	1,685		$	—		$	2,218
Tax credit carryforwards		23			—			—			—			23
Other		—			—			136			1,046			1,182
Valuation allowance		(187	)		(330	)		(1,760	)		(457	)		(2,734	)
Total	$	—		$	39		$	61		$	589		$	689

Deferred tax assets with no expiration may still have annual limitations on utilization. Other represents deferred tax assets whose expiration is dependent upon the reversal of the underlying temporary difference.

The total deferred tax asset (net of valuation allowance) is supported by projections of future taxable income exclusive of reversing temporary differences and taxable temporary differences that reverse within the carryforward period. The composition of Alcoa’s net deferred tax asset by jurisdiction as of December 31, 2024 was as follows:


	Domestic			Foreign			Total
Deferred tax assets	$	1,090		$	2,333		$	3,423
Valuation allowance		(1,022	)		(1,712	)		(2,734	)
Deferred tax liabilities		(68	)		(337	)		(405	)
Total	$	—		$	284		$	284

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 Alcoa of Australia Limited (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. In the fourth quarter of 2024, the Company recognized an additional deferred tax asset (and a corresponding increase to Additional capital) of $95 primarily due to the tax allocation of the fixed asset valuation to individual assets. Additionally, the Company recorded a deferred tax asset of $265 related to capital loss carryforwards, which was fully offset with a valuation allowance due to uncertain recoverability.

The Company has several income tax filers in various foreign countries. Of the $284 net deferred tax asset included under the Foreign column in the table above, approximately 100% relates to five of Alcoa’s income tax filers (the Foreign Filers) as follows: a $113 net deferred tax asset for Alcoa Canada Company in Canada; a $83 net deferred tax asset for Alcoa-Lauralco Management Company in Canada; a $33 net deferred tax asset for Alcoa Wolinbec Company in Canada; a $19 net deferred tax asset for Alcoa Islandi and a $27 net deferred tax asset for Fjarðaál, both in Iceland; and a $9 net deferred tax asset for AofA in Australia.

The future realization of the net deferred tax asset for each of the Foreign Filers was based on projections of the respective future taxable income (defined as the sum of pretax income, other comprehensive income, and permanent tax differences), exclusive of reversing temporary differences and carryforwards. The realization of the net deferred tax assets of the Foreign Filers is not dependent on any future tax planning strategies.

Accordingly, management concluded that the net deferred tax assets of the Foreign Filers referenced above will more likely than not be realized in future periods, resulting in no need for a partial or full valuation allowance as of December 31, 2024.

In December 2023, Alcoa recorded a valuation allowance of $154 against the net deferred tax assets of AWAB, of which $106 related to the balance as of December 31, 2022. The 2023 full valuation allowance for AWAB was a result of AWAB’s three-year cumulative loss position for the period ended December 31, 2023. The majority of AWAB’s net deferred tax assets relate to prior net operating losses; the loss carryforwards are not subject to an expiration period. If AWAB continues to demonstrate sustained profitability, management may conclude that AWAB’s deferred tax assets may be realized, resulting in a future reversal of the valuation allowance, generating a non-cash benefit in the period recorded. AWAB’s net deferred tax assets, excluding the valuation allowance, were $116 as of December 31, 2024.

The Company’s subsidiaries in Iceland had a full valuation allowance recorded against deferred tax assets, which was established in 2015 and 2017, as the Company believed it was more likely than not that these tax benefits would not be realized. During 2023, after considering all positive and negative evidence, including the expectation that the jurisdiction will remain in a three-year cumulative income position, the Company determined that it is more likely than not that the net deferred tax assets will be realized. Based on this conclusion, the Company reversed the valuation allowance totaling $58 during 2023, generating a non-cash benefit from income taxes.

In December 2022, Alcoa recorded a valuation allowance of $217 against the net deferred tax assets of Alcoa Alumínio (Alumínio), of which $150 related to the balance as of December 31, 2021. The 2022 full valuation allowance for Alumínio was a result of Alumínio’s three-year cumulative loss position for the period ended December 31, 2022. Although the Company entered into aluminum contracts to manage exposures associated with the Alumar smelter restart, these contracts were held by another legal entity, and the associated realized gains are not available to Alumínio to offset the restart losses. While management believes Alumínio will return to profitability in the future with the restart of the Alumar smelter, Alumínio’s recent history, including operational instability during the restart and the impact of the recent increased alumina input costs, does not provide a reliable basis for concluding that it is more likely than not that Alumínio’s net deferred tax assets, which consist primarily of tax loss carryforwards with indefinite life, will be realized. Alumar smelter profitability in future periods could prompt the Company to evaluate the realizability of the deferred tax assets and assess the possibility of a reversal of the valuation allowance, which could generate a non-cash benefit in the period the valuation allowance is reversed.

The following table details the changes in the valuation allowance:


December 31,	2024			2023			2022
Balance at beginning of year	$	(2,595	)	$	(2,333	)	$	(2,062	)
Establishment of new allowances(1)		(266	)		(106	)		(150	)
Net change to existing allowances(2)		(21	)		(113	)		(151	)
Foreign currency translation		148			(43	)		30
Balance at end of year	$	(2,734	)	$	(2,595	)	$	(2,333	)

(1)

Reflects valuation allowances initially established as a result of a change in management’s judgment regarding the realizability of deferred tax assets.

(2)

Reflects movements in previously established valuation allowances, which increase or decrease as the related deferred tax assets increase or decrease. Such movements occur as a result of a change in management’s judgment regarding previously established valuation allowances, remeasurement due to a tax rate change and changes in the underlying attributes of the deferred tax assets, including expiration of the attribute and reversal of the temporary difference that gave rise to the deferred tax asset.

Undistributed net earnings. Certain earnings of Alcoa’s foreign subsidiaries are deemed to be permanently reinvested outside the United States. The cumulative amount of Alcoa’s foreign undistributed net earnings deemed to be permanently reinvested was approximately $2,857 as of December 31, 2024. Alcoa Corporation has several commitments and obligations related to the Company’s operations in various foreign jurisdictions; therefore, management has no plans to distribute such earnings in the foreseeable future. Alcoa Corporation continuously evaluates its local and global cash needs for future business operations and anticipated debt facilities, which may influence future repatriation decisions. If these earnings were distributed in the form of dividends or otherwise, Alcoa could be subject to foreign income or withholding taxes and state income taxes. Due to the uncertainty of the manner in which the undistributed earnings would be brought back to the United States and the tax laws in effect at that time, it is not practicable to estimate the tax liability that might be incurred if such earnings were remitted to the U.S.

Unrecognized tax benefits. Alcoa and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various foreign and U.S. state jurisdictions. With few exceptions, the Company is not subject to income tax examinations by tax authorities for years prior to 2014. The U.S. federal income tax filings of the Company’s U.S. consolidated tax group have been examined through the 2018 tax year, and an examination of the 2021 tax year is ongoing. Foreign jurisdiction tax authorities are in the process of examining income tax returns of several of Alcoa’s subsidiaries for various tax years. Excluding the Australia tax matter discussed in Note S, the period under foreign examination includes the income tax years from 2014 through 2022. For U.S. state income tax purposes, the Company and its subsidiaries remain subject to income tax examinations for the 2017 tax year and forward.

In the third quarter of 2020, AofA paid approximately $74 (A$107) to the ATO related to the tax dispute described in Note S. Upon payment, AofA recorded a noncurrent prepaid tax asset, as the Company continues to believe it is more likely than not that AofA’s tax position will be sustained and therefore is not recognizing any tax expense in relation to this matter. In accordance with Australian tax laws, the initial interest assessment and additional interest are deductible against AofA’s taxable income. AofA applied this deduction beginning in the third quarter of 2020, reducing cash tax payments. Interest compounded in future years is also deductible against AofA’s income in future periods. If AofA is ultimately successful, the interest deduction would become taxable as income in the year the dispute is resolved. In addition, should the ATO decide in the interim to reduce any interest already assessed, the reduction would be taxable as income at that point in time. During 2023, AofA continued to record its tax provision and tax liability without effect of the ATO assessment, since it expects to prevail. The tax payable related to deductions of interest on the assessment will remain on AofA’s balance sheet as a noncurrent liability, increased by the tax effect of subsequent periods’ interest deductions, until dispute resolution. At December 31, 2024 and December 31, 2023, the noncurrent liability resulting from the cumulative interest deductions was approximately $206 (A$332) and $199 (A$293), respectively.

The reserve balance for unrecognized tax benefits is included in Noncurrent income taxes on the Consolidated Balance Sheet. A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) was as follows:


December 31,	2024			2023		2022
Balance at beginning of year	$	5		$	5	$	4
Additions for tax positions of prior years		—			—		2
Reductions for tax positions of prior years		(1	)		—		—
Expiration of the statute of limitations		—			—		(1	)
Balance at end of year	$	4		$	5	$	5

For all periods presented, a portion of the balance at end of year pertains to state tax liabilities, which are presented before any offset for federal tax benefits. The effect of unrecognized tax benefits, if recorded, that would impact the annual effective tax rate for 2024, 2023, and 2022 would be 2%, 1%, and 1%, respectively, of Income (loss) before income taxes. Alcoa does not anticipate that changes in its unrecognized tax benefits will have a material impact on the Statement of Consolidated Operations during 2025.

It is the Company’s policy to recognize interest and penalties related to income taxes as a component of the Provision for income taxes on the accompanying Statement of Consolidated Operations. In 2024, 2023, and 2022 Alcoa recognized $0, $1, and $1, in interest and penalties, respectively. Due to the expiration of the statute of limitations, settlements with tax authorities, and refunded overpayments, the Company also recognized interest income of $1, $1, and $1 in 2024, 2023, and 2022, respectively. As of December 31, 2024 and 2023, the amount accrued for the payment of interest and penalties was $3 and $4, respectively.

Other Matters. On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (IRA), which includes a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases after December 31, 2022, and several tax incentives to promote clean energy. As a result of the provisions of the IRA, the Company will incur an excise tax of 1% for certain common stock repurchases made subsequent to December 31, 2022, which will be reflected in the cost of purchasing the underlying shares. The minimum corporate tax did not have an impact on the Company for 2024, 2023, or 2022 and will not have an impact on the Company for 2025.

The 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 is included in the definition of aluminum eligible for the credit, which was designed to incentivize domestic production of critical materials important for the transition to clean energy. 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; however, management believes that commercial grade aluminum continues to qualify for the Section 45X credit. In the Preamble to the Final Regulations, the U.S. Treasury indicated it will finalize the definition at a later date.

In 2024 and 2023, the Company recorded benefits of $71 and $36 in Cost of goods sold, respectively, related to its Massena West smelter (New York) and its Warrick smelter (Indiana). As of December 31, 2024, benefits of $36 were included in Other receivables and $71 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.