Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Components of Income from Continuing Operations Before Income Taxes

The components of income from continuing operations before income taxes were as follows:



For the year ended December 31,	2018		2017			2016
United States	$	518	$	500		$	84
Foreign	350		(30		)	330
	$	868	$	470		$	414

Schedule of Provision for Income Taxes on Income from Continuing Operations

The provision for income taxes consisted of the following:



For the year ended December 31,	2018			2017			2016
Current:
Federal⁽¹⁾	$	45		$	—		$	—
Foreign	138			98			133
State and local	4			(2		)	1
	187			96			134
Deferred:
Federal	146			489			1,208
Foreign	(94		)	37			136
State and local	(13		)	(78		)	(2		)
	39			448			1,342
Total	$	226		$	544		$	1,476


⁽¹⁾	Includes U.S. taxes related to foreign income

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

A reconciliation of the U.S. federal statutory rate to Arconic’s effective tax rate was as follows (the effective tax rate for all periods was a provision on income):



For the year ended December 31,	2018		2017		2016
U.S. federal statutory rate	21.0	%	35.0	%	35.0	%
Taxes on foreign operations	4.0		(8.8	)	(11.5	)
U.S. State and local taxes	1.5		0.7		(0.4	)
Federal benefit of state tax	(0.3	)	3.7		0.4
Permanent differences on restructuring and other charges and asset disposals⁽¹⁾	(16.9	)	(167.4	)	(107.8	)
Non-deductible acquisition costs	—		0.3		8.4
Statutory tax rate and law changes⁽²⁾	6.5		52.5		(15.7	)
Tax holidays	(1.6	)	(3.0	)	(0.8	)
Changes in valuation allowances	0.9		137.9		426.8
Impairment of goodwill	—		53.5		—
Company-owned life insurance/split-dollar net premiums	—		—		23.0
Changes in uncertain tax positions	12.8		10.1		2.1
Prior year tax adjustments	(2.6	)	(0.9	)	(1.7	)
Other	0.7		2.1		(1.3	)
Effective tax rate	26.0	%	115.7	%	356.5	%


⁽¹⁾	Additional losses were reported in Spain's 2017 tax return related to the Separation Transaction which are offset by an increased valuation allowance.

⁽²⁾

In 2018, the Company finalized its accounting for the Tax Cuts and Jobs Act of 2017 ("the 2017 Act”) and recorded an additional $59 charge. In December 2017, an estimated $272 tax charge was recorded with respect to the enactment of the 2017 Act. In December 2016, Spain and the United States enacted tax law changes which resulted in the remeasurement of certain deferred tax liabilities recorded by Arconic.

Schedule of Components of Net Deferred Tax Assets and Liabilities

The components of net deferred tax assets and liabilities were as follows:



	2018					2017
December 31,	Deferred tax assets			Deferred tax liabilities		Deferred tax assets			Deferred tax liabilities
Depreciation	$	38		$	694	$	31		$	693
Employee benefits	836			27		936			23
Loss provisions	94			—		134			14
Deferred income/expense	22			1,102		19			1,144
Tax loss carryforwards	3,159			—		3,305			—
Tax credit carryforwards	579			—		638			—
Other	94			20		24			33
	$	4,822		$	1,843	$	5,087		$	1,907
Valuation allowance	(2,486		)	—		(2,584		)	—
	$	2,336		$	1,843	$	2,503		$	1,907

Schedule of Expiration Periods of Deferred Tax Assets

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



December 31, 2018	Expires within 10 years			Expires within 11-20 years			No expiration⁽¹⁾			Other⁽²⁾			Total
Tax loss carryforwards	$	300		$	461		$	2,398		$	—		$	3,159
Tax credit carryforwards	497			70			12			—			579
Other	—			—			64			1,020			1,084
Valuation allowance	(752		)	(287		)	(1,390		)	(57		)	(2,486		)
	$	45		$	244		$	1,084		$	963		$	2,336


⁽¹⁾	Deferred tax assets with no expiration may still have annual limitations on utilization.


⁽²⁾	Other represents deferred tax assets whose expiration is dependent upon the reversal of the underlying temporary difference. A substantial amount of Other relates to employee benefits that will become deductible for tax purposes over an extended period of time as contributions are made to employee benefit plans and payments are made to retirees.

Schedule of Changes in Valuation Allowance

The following table details the changes in the valuation allowance:



December 31,	2018			2017			2016
Balance at beginning of year	$	2,584		$	1,940		$	1,291
Increase to allowance	136			831			772
Release of allowance	(154		)	(246		)	(209		)
Acquisitions and divestitures	—			(1		)	(1		)
Tax apportionment, tax rate and tax law changes	(14		)	(24		)	106
Foreign currency translation	(66		)	84			(19		)
Balance at end of year	$	2,486		$	2,584		$	1,940

Reconciliation of Unrecognized Tax Benefits (Excluding Interest and Penalties)

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) was as follows:



December 31,	2018			2017			2016
Balance at beginning of year	$	73		$	28		$	18
Additions for tax positions of the current year	—			23			12
Additions for tax positions of prior years	143			27			—
Reductions for tax positions of prior years	(42		)	—			—
Settlements with tax authorities	—			—			(1		)
Expiration of the statute of limitations	(6		)	(5		)	(1		)
Foreign currency translation	(2		)	—			—
Balance at end of year	$	166		$	73		$	28