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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2021

Components of Income (Loss) from Continuing Operations Before Income Taxes

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

	2021			2020			2019
Domestic	$	(663	)	$	(328	)	$	(1,000	)
Foreign		1,862			501			562
Total	$	1,199		$	173		$	(438	)

Schedule of Provision for Income Taxes on Income from Continuing Operations

Provision for income taxes consisted of the following:

	2021		2020			2019
Current:
Federal	$	8	$	2		$	(4	)
Foreign		473		211			404
State and local		1		—			—
		482		213			400
Deferred:
Federal		6		—			2
Foreign		141		(26	)		13
State and local		—		—			—
		147		(26	)		15
Total	$	629	$	187		$	415

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

Reconciliation of U.S. Federal Statutory Rate to Alcoa's Effective Tax Rate

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

	2021			2020			2019
U.S. federal statutory rate		21.0	%		21.0	%		21.0	%
Changes in valuation allowances		23.4			168.3			(70.3	)
Taxes on foreign operations—rate differential		10.8			34.5			(19.3	)
Impacts of the TCJA		2.0			(88.8	)		5.0
Tax on foreign operations—other		1.7			(0.7	)		(2.7	)
Noncontrolling interest		0.5			1.6			(6.8	)
Non-deductible losses on foreign divestitures		—			—			(23.1	)
Adjustment of prior year income taxes		—			(2.5	)		(1.1	)
Uncertain tax positions		—			(21.5	)		(0.6	)
Equity (loss) income		(2.5	)		2.0			(1.9	)
Tax holidays		(2.8	)		(1.9	)		2.0
Other		(1.6	)		(3.9	)		2.9
Effective tax rate		52.5	%		108.1	%		(94.9	)%

Schedule of Components of Net Deferred Tax Assets and Liabilities

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

	2021					2020
December 31,	Deferred tax assets			Deferred tax liabilities		Deferred tax assets			Deferred tax liabilities
Tax loss carryforwards	$	1,554		$	—	$	1,668		$	—
Employee benefits		409			—		711			—
Derivatives and hedging activities		345			—		214			—
Loss provisions		214			—		183			—
Depreciation		128			425		66			434
Investment basis differences		117			—		139			—
Interest		105			1		60			2
Lease assets and liabilities		26			22		37			36
Tax credit carryforwards		26			—		27			—
Deferred income/expense		2			135		22			116
Other		38			—		41			2
		2,964			583		3,168			590
Valuation allowance		(2,062	)		—		(2,127	)		—
Total	$	902		$	583	$	1,041		$	590

Schedule of Expiration Periods of Deferred Tax Assets

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

December 31, 2021	Expires within 10 years			Expires within 11-20 years			No expiration			Other			Total
Tax loss carryforwards	$	232		$	366		$	956		$	—		$	1,554
Tax credit carryforwards		17			9			—			—			26
Other		—			—			265			1,119			1,384
Valuation allowance		(249	)		(374	)		(958	)		(481	)		(2,062	)
Total	$	—		$	1		$	263		$	638		$	902

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.

Composition of Net Deferred Tax Asset by Jurisdiction

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, 2021 was as follows:

	Domestic			Foreign			Total
Deferred tax assets	$	1,066		$	1,898		$	2,964
Valuation allowance		(965	)		(1,097	)		(2,062	)
Deferred tax liabilities		(100	)		(483	)		(583	)
Total	$	1		$	318		$	319

Schedule of Changes in Valuation Allowance

Accordingly, management concluded that the net deferred tax assets of the Foreign Filers 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, 2021.

In December 2021, Alcoa recorded a valuation allowance of $103 against the net deferred tax assets of Alúmina Española, S.A. (Española). Management concluded that it is more likely than not that Española’s net deferred tax assets, which consist primarily of tax loss carryforwards, will not be realized as the entity’s sole operating asset, the San Ciprián refinery, is in a three-year cumulative loss position for the period ended December 31, 2021. This cumulative loss position is the result of recent operating losses due to the high energy costs in Spain and the impact of the refinery workers’ strike on the fourth quarter of 2021. Despite recent favorable increases in the sales price of alumina, management has forecasted operating losses for Española for the foreseeable future due to the high energy costs in Spain and increases in raw materials costs, resulting in a need for a full valuation allowance as of December 31, 2021.

The following table details the changes in the valuation allowance:

December 31,	2021			2020			2019
Balance at beginning of year	$	(2,127	)	$	(1,778	)	$	(1,684	)
Establishment of new allowances⁽¹⁾		(103	)		—			—
Net change to existing allowances⁽²⁾		139			(315	)		(101	)
Foreign currency translation		29			(34	)		7
Balance at end of year	$	(2,062	)	$	(2,127	)	$	(1,778	)

⁽¹⁾	This line item reflects valuation allowances initially established as a result of a change in management’s judgment regarding the realizability of deferred tax assets.

⁽²⁾

This line item 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 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.

Reconciliation of Unrecognized Tax Benefits (Excluding Interest and Penalties)

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,	2021		2020			2019
Balance at beginning of year	$	4	$	29		$	30
Reductions for tax positions of prior years		—		(26	)		—
Foreign currency translation		—		1			(1	)
Balance at end of year	$	4	$	4		$	29