Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

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

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


	2014			2013			2012
United States	$	(125	)	$	(1,269	)	$	394
Foreign		622			(547	)		(70	)
	$	497		$	(1,816	)	$	324

Schedule of Provision for Income Taxes on Income from Continuing Operations

The provision for income taxes consisted of the following:


	2014			2013			2012
Current:
Federal*	$	(3	)	$	14		$	85
Foreign		357			235			167
State and local		1			1			9
		355			250			261
Deferred:
Federal*		7			84			129
Foreign		(41	)		95			(227	)
State and local		(1	)		(1	)		(1	)
		(35	)		178			(99	)
Total	$	320		$	428		$	162

*	Includes U.S. 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 (the effective tax rate for both 2014 and 2012 was a provision on income and for 2013 was a provision on a loss):


	2014			2013			2012
U.S. federal statutory rate		35.0	%		35.0	%		35.0	%
Taxes on foreign operations		(2.7	)		(0.3	)		(0.1	)
Permanent differences on restructuring and other charges and asset disposals		(3.5	)		(0.8	)		10.8
Audit and other adjustments to prior years’ accruals		-			(0.9	)		3.5
Noncontrolling interests⁽¹⁾		6.8			(3.1	)		3.8
Statutory tax rate and law changes⁽²⁾		17.9			0.6			(0.4	)
Tax holidays⁽³⁾		6.1			-			-
Changes in valuation allowances		6.6			(23.2	)		15.2
Impairment of goodwill		-			(33.3	)		-
Amortization of goodwill related to intercompany stock sales/reorganizations		-			1.1			(7.7	)
Change in legal structure of investments		-			-			(4.1	)
Interest income related to income tax positions		(0.5	)		-			(1.3	)
Company-owned life insurance/split-dollar net premiums		(2.2	)		1.1			(3.9	)
Other		0.9			0.2			(0.8	)
Effective tax rate		64.4	%		(23.6	)%		50.0	%

(1)	In 2014, the noncontrolling interests’ impact on Alcoa’s effective tax rate was mostly due to the noncontrolling interest’s share of a loss on the divestiture of an ownership interest in a mining and refining joint venture in Jamaica (see Note F).

(2)	In November 2014, Spain enacted corporate tax reform that changed the corporate tax rate from 30% in 2014 to 28% in 2015 to 25% in 2016. As a result, Alcoa remeasured certain deferred tax assets related to Spanish subsidiaries.

(3)	In 2014, a tax holiday for certain Alcoa subsidiaries in Brazil became effective (see below).

Schedule of Components of Net Deferred Tax Assets and Liabilities

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


	2014					2013
December 31,	Deferred tax assets			Deferred tax liabilities		Deferred tax assets			Deferred tax liabilities
Depreciation	$	147		$	1,187	$	185		$	1,150
Employee benefits		2,413			37		2,499			36
Loss provisions		441			10		437			14
Deferred income/expense		30			230		87			188
Tax loss carryforwards		2,075			-		2,229			-
Tax credit carryforwards		625			-		567			-
Derivatives and hedging activities		5			39		74			25
Other		521			297		310			261
		6,257			1,800		6,388			1,674
Valuation allowance		(1,668	)		-		(1,804	)		-
	$	4,589		$	1,800	$	4,584		$	1,674

Schedule of Expiration Periods of Deferred Tax Assets

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


December 31, 2014	Expires within 10 years			Expires within 11-20 years			No expiration*			Other*			Total
Tax loss carryforwards	$	330		$	619		$	1,126		$	-		$	2,075
Tax credit carryforwards		428			86			111			-			625
Other		-			-			488			3,069			3,557
Valuation allowance		(341	)		(645	)		(392	)		(290	)		(1,668	)
	$	417		$	60		$	1,333		$	2,779		$	4,589

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. 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,	2014			2013			2012
Balance at beginning of year	$	1,804		$	1,400		$	1,398
Increase to allowance		117			471			45
Release of allowance		(77	)		(41	)		(31	)
Acquisitions and divestitures (F)		(37	)		—			—
U.S. state tax apportionment and tax rate changes		(80	)		(32	)		(17	)
Foreign currency translation		(59	)		6			5
Balance at end of year	$	1,668		$	1,804		$	1,400

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,	2014			2013			2012
Balance at beginning of year	$	63		$	66		$	51
Additions for tax positions of the current year		2			2			-
Additions for tax positions of prior years		5			11			39
Reductions for tax positions of prior years		(4	)		(2	)		(7	)
Settlements with tax authorities		(29	)		(8	)		(18	)
Expiration of the statute of limitations		-			(2	)		-
Foreign currency translation		(2	)		(4	)		1
Balance at end of year	$	35		$	63		$	66