Income Taxes

6 Months Ended

Jun. 30, 2019

Arconic’s year-to-date tax provision is comprised of the most recent estimated annual effective tax rate applied to year-to-date pre-tax ordinary income. The tax impact of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are recorded discretely in the interim period in which they occur. In addition, the tax provision is adjusted for the interim period impact of non-benefited pre-tax losses.

For the six months ended June 30, 2019 and 2018, the estimated annual effective tax rate, before discrete items, applied to ordinary income was 35.3% and 27.0%, respectively. The rate in each period was higher than the U.S. federal statutory rate of 21% primarily due to estimated U.S. tax on Global Intangible Low-Taxed Income, the state tax impact of domestic taxable income, and foreign income taxed in higher rate jurisdictions. The rate for the six months ended June 30, 2019 was also increased by certain nondeductible costs related to the proposed separation transaction and the impairment of certain domestic and foreign long-lived assets.

For the second quarter of 2019 and 2018, the tax rate including discrete items was 37.9% and 38.1%, respectively. For the second quarter of 2019, the Company recorded a discrete benefit of $36 related to a $25 benefit to deduct prior year foreign taxes rather than claim a U.S. foreign tax credit, a $12 benefit to remeasure certain deferred tax assets as a result of a foreign tax rate change, and a net charge for a number of small items of $1. For the second quarter of 2018, the Company recorded a discrete charge of $21 primarily related to revised estimates of the then provisional impact for the Tax Cuts and Jobs Act of 2017.

The tax provisions for the second quarter and six months ended June 30, 2019 and 2018 were comprised of the following:



	Second quarter ended					Six months ended
	June 30,					June 30,
	2019			2018		2019			2018
Pre-tax income at estimated annual effective income tax rate before discrete items	$	(69	)	$	52	$	22		$	106
Impact of change in estimated annual effective tax rate on previous quarter’s pre-tax income	24			1		—			—
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized	7			—		9			1
Other discrete items	(36		)	21		(35		)	23
Provision for income taxes	$	(74	)	$	74	$	(4	)	$	130