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

	2022			2021		2020
Current:
Federal	$	—		$	8	$	2
Foreign		445			473		211
State and local		—			1		—
	$	445		$	482	$	213
Deferred:
Federal		(3	)		6		—
Foreign		222			141		(26	)
State and local		—			—		—
	$	219		$	147	$	(26	)
Total	$	664		$	629	$	187

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

	2022			2021			2020
U.S. federal statutory rate		21.0	%		21.0	%		21.0	%
Changes in valuation allowances		76.7			23.4			168.3
Taxes on foreign operations—rate differential		9.9			10.8			34.5
Tax on foreign operations—other		1.3			1.7			(0.7	)
Noncontrolling interest		0.8			0.5			1.6
Uncertain tax positions		0.4			—			(21.5	)
Impacts of the TCJA		—			2.0			(88.8	)
Adjustment of prior year income taxes		—			—			(2.5	)
Equity (loss) income		(2.0	)		(2.5	)		2.0
Tax holidays		(5.2	)		(2.8	)		(1.9	)
Internal legal entity reorganizations		(9.0	)		—			—
Other		0.7			(1.6	)		(3.9	)
Effective tax rate		94.6	%		52.5	%		108.1	%

In the fourth quarter of 2020, the Supreme Court of Spain ruled in favor of Alcoa regarding the 2006 through 2009 tax year assessment. As a result, the reserve for Uncertain tax positions that was established in 2018 was released in 2020.

On December 22, 2017, U.S. tax legislation known as the U.S. Tax Cuts and Jobs Act of 2017 (the TCJA) was enacted. In 2018, the Company made an accounting policy election to include as a period cost the tax impact generated by including Global Intangible Low-Taxed Income provisions (GILTI) in U.S. taxable income. During 2020, the U.S. Treasury Department finalized regulations implementing the GILTI provisions of the TCJA. Included in these regulations is an exclusion from GILTI for income subject to a high rate of foreign tax, which permits taxpayers to elect to apply the exception to previously filed tax returns. During 2020, an amended tax return was filed for 2018 to make this election. As a result, the Company recorded a tax benefit of ($138) in 2020 to reflect the re-establishment of certain U.S. Federal net operating loss carryforwards and a corresponding tax charge of $138 to record a full valuation allowance against the increased deferred tax asset.

Certain income earned by 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 will end on December 31, 2027, and the holiday related to the operation of the Juruti (Brazil) bauxite mine will end on December 31, 2026. In 2020, deferred tax assets expected to reverse in the holiday period were revalued at the holiday rate. This resulted in a discrete income tax charge of $15 in 2020. In 2021, it was determined that the deferred taxes associated with 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 October 2022, Alcoa completed the liquidation of Alcoa Saudi Rolling Inversiones S.L. (ASRI), a wholly owned subsidiary that previously held the Company’s investment in the Ma’aden Rolling Company. 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:

	2022					2021
December 31,	Deferred tax assets			Deferred tax liabilities		Deferred tax assets			Deferred tax liabilities
Tax loss carryforwards	$	1,781		$	—	$	1,554		$	—
Employee benefits		297			—		409			—
Derivatives and hedging activities		283			24		345			—
Loss provisions		174			—		214			—
Depreciation		128			336		128			425
Interest		127			2		105			1
Investment basis differences		75			—		117			—
Lease assets and liabilities		24			23		26			22
Tax credit carryforwards		23			—		26			—
Deferred income/expense		10			153		2			135
Other		36			—		38			—
	$	2,958		$	538	$	2,964		$	583
Valuation allowance		(2,333	)		—		(2,062	)		—
Total	$	625		$	538	$	902		$	583

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

December 31, 2022	Expires within 10 years			Expires within 11-20 years			No expiration			Other			Total
Tax loss carryforwards	$	298		$	364		$	1,119		$	—		$	1,781
Tax credit carryforwards		23			—			—			—			23
Other		—			—			142			1,012			1,154
Valuation allowance		(321	)		(363	)		(1,141	)		(508	)		(2,333	)
Total	$	—		$	1		$	120		$	504		$	625

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, 2022 was as follows:

	Domestic			Foreign			Total
Deferred tax assets	$	964		$	1,994		$	2,958
Valuation allowance		(897	)		(1,436	)		(2,333	)
Deferred tax liabilities		(67	)		(471	)		(538	)
Total	$	—		$	87		$	87

The Company has several income tax filers in various foreign countries. Of the $87 net deferred tax asset included under the Foreign column in the table above, approximately 85% relates to five of Alcoa’s income tax filers (the “Foreign Filers”) as follows: a $108 net deferred tax asset for Alcoa Canada Company in Canada; a $96 net deferred tax asset for AWAB in Brazil; a $43 net deferred tax asset for Alcoa Lauralco Management Company in Canada; a $33 net deferred tax asset for Alcoa Wolinbec Company in Canada; and, a $207 net deferred tax liability 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.

The Foreign Filers do not have a history of tax loss carryforwards expiring unused. Additionally, tax loss carryforwards have an infinite life under the income tax code in Brazil. However, utilization of an existing tax loss carryforward is limited to 30% of taxable income in a particular year in Brazil.

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, 2022.

In December 2022, Alcoa recorded a valuation allowance of $217 against the net deferred tax assets of 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 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, current volatility in the market 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 asset and assess the possibility of a reversal of the valuation allowance, which could have a significant impact on net income in the quarter the valuation allowance is reversed.

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 December 31, 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.

In 2021, Alcoa recorded a valuation allowance of $103 against the net deferred tax assets of Alúmina Española, S.A. (Española). Management concluded that it was more likely than not that Española’s net deferred tax assets, which consisted primarily of tax loss carryforwards, would not be realized as the entity’s sole operating asset, the San Ciprián refinery, was in a three-year cumulative loss position for the period ended December 31, 2021. This cumulative loss position was 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. After weighing all available positive and negative evidence as of December 31, 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 the deferred tax assets.

December 31,	2022			2021			2020
Balance at beginning of year	$	(2,062	)	$	(2,127	)	$	(1,778	)
Establishment of new allowances⁽¹⁾		(150	)		(103	)		—
Net change to existing allowances⁽²⁾		(151	)		139			(315	)
Foreign currency translation		30			29			(34	)
Balance at end of year	$	(2,333	)	$	(2,062	)	$	(2,127	)

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 $2,794 as of December 31, 2022. 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, we 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. 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 2012 through 2021. 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 resulting in approximately $169 (A$219) in 2020, $14 (A$19) in 2021, and $15 (A$22) in 2022 in lower cash tax payments. Interest compounded in future years is also deductible against AofA’s income in the respective 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 2022, AofA continued to record its tax provision and tax liability without effect of the ATO assessment, since it expects to prevail. The tax payable will remain on AofA’s balance sheet as a noncurrent liability, increased by the tax effect of subsequent periods’ interest deductions, until dispute resolution, which is expected to take several years. The noncurrent liability resulting from the cumulative interest deductions was approximately $174 (A$260) and $174 (A$238) at December 31, 2022 and 2021, 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,	2022			2021		2020
Balance at beginning of year	$	4		$	4	$	29
Additions for tax positions of prior years		2			—		—
Reductions for tax positions of prior years		—			—		(26	)
Expiration of the statute of limitations		(1	)		—		—
Foreign currency translation		—			—		1
Balance at end of year	$	5		$	4	$	4

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 2022, 2021, and 2020 would be 1%, 0%, and 3%, respectively, of Income before income taxes. In 2018, the Company recorded a charge of $30 (€26), including $10 (€9) for interest, in Provision for income taxes on the accompanying Statement of Consolidated Operations to establish a liability for its 49% share of the estimated loss on a disputed income tax matter (see Spain in the Tax section of Note S). In 2020, the Company received a favorable final ruling in the Supreme Court of Spain on the Spain tax matter and recorded income of $32 (€26) from the reversal of the 2018 entry and the interest expense accrued through 2019. This change is reflected in the above table as Reductions for tax positions of prior years in the amount of $21 (€17), which is exclusive of interest previously charged to expense. The remainder of the change in Reductions for tax positions of prior years is primarily related to changes in Brazil income tax positions. There were no material changes in Reductions for tax positions of prior years in 2021 or 2022. Alcoa does not anticipate that changes in its unrecognized tax benefits will have a material impact on the Statement of Consolidated Operations during 2023.

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 2022, 2021, and 2020 Alcoa recognized $1, $0, and $0, 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, $0, and $13 in 2022, 2021, and 2020, respectively. As of December 31, 2022 and 2021, the amount accrued for the payment of interest and penalties was $3 and $2, respectively.

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. This legislation did not have a material impact on the Company’s Consolidated Financial Statements as of December 31, 2022.