Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

M. Income Taxes – Alcoa Corporation’s estimated annualized effective tax rate (AETR) for 2022 as of September 30, 2022 differs from the U.S. federal statutory rate of 21% primarily due to foreign jurisdictions with higher statutory tax rates and from losses in certain jurisdictions that provide no tax benefit due to full valuation allowances being recorded.

	Nine months ended September 30,
	2022				2021
Income before income taxes	$	942			$	1,270
Estimated annualized effective tax rate		54.0		%		26.7		%
Income tax expense	$	509			$	339
Favorable tax impact related to losses in jurisdictions with no tax benefit		(27	)			(7	)
Discrete tax expense (benefit)		2				(1	)
Provision for income taxes	$	484			$	331

The Company’s subsidiaries in Iceland have 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. Strong market conditions in the first half of 2022 prompted management to reevaluate the realizability of the deferred tax asset and assess the possibility of a reversal of the valuation allowance. However, after weighing all available positive and negative evidence as of September 30, 2022, management’s position continues to be that it is more likely than not that Alcoa Corporation would not realize the benefit of these deferred tax assets and continues to have a full valuation allowance recorded against Iceland deferred tax assets.

Iceland’s net deferred tax assets, excluding the valuation allowance, were $106 as of September 30, 2022.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, 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. Based on the Company’s current analysis of the provisions, the Company does not believe this legislation will have a material impact on the Company’s Consolidated Financial Statements.