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Income Taxes (Tables) | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
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, | 2021 |  | 2020 |  | 2019
United States | $ | 28 |  |  | $ | 84 |  |  | $ | 128 |
Foreign | 296 |  |  | 87 |  |  | 82 |
Total | $ | 324 |  |  | $ | 171 |  |  | $ | 210 |
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, | 2021 |  | 2020 |  | 2019
Current: |  |  |  |  |
Federal(1) | $ | (9) |  |  | $ | (2) |  |  | $ | — |
Foreign | 39 |  |  | 2 |  |  | 86 |
State and local | (2) |  |  | (2) |  |  | — |
| 28 |  |  | (2) |  |  | 86 |
Deferred: |  |  |  |  |
Federal | 22 |  |  | (67) |  |  | 33 |
Foreign | 11 |  |  | 11 |  |  | (41) |
State and local | 5 |  |  | 18 |  |  | 6 |
| 38 |  |  | (38) |  |  | (2) |
Total | $ | 66 |  |  | $ | (40) |  |  | $ | 84 |
(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 Howmet’s effective tax rate was as follows (the effective tax rate for 2021 and 2019 was a provision on income and 2020 was a benefit on income):
For the year ended December 31, | 2021 |  | 2020 |  | 2019
U.S. federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Foreign tax rate differential | (0.7) |  |  | (1.2) |  |  | 10.9 |
U.S. and residual tax on foreign earnings(1) | 6.5 |  |  | 5.6 |  |  | 15.3 |
U.S. State and local taxes | 1.0 |  |  | 2.2 |  |  | 0.8 |
Federal (cost) benefit of state tax | (0.3) |  |  | (2.0) |  |  | 1.2 |
Permanent differences related to asset disposals and items included in restructuring and other charges | (0.3) |  |  | 6.8 |  |  | (1.3) |
Non-deductible officer compensation | 1.6 |  |  | 3.5 |  |  | 4.9 |
Statutory tax rate and law changes(2) | 1.0 |  |  | (15.9) |  |  | (0.6) |
Tax holidays | (0.4) |  |  | (0.4) |  |  | (8.2) |
Tax credits(3) | (10.4) |  |  | (0.4) |  |  | (1.3) |
Changes in valuation allowances(4) | 5.1 |  |  | 74.8 |  |  | (52.2) |
Changes in uncertain tax positions(5) | — |  |  | (116.9) |  |  | 0.3 |
Prior year tax adjustments(6) | (3.7) |  |  | (1.7) |  |  | 44.3 |
Other | — |  |  | 1.2 |  |  | 4.9 |
Effective tax rate | 20.4 | % |  | (23.4) | % |  | 40.0 | %
(1)It is Howmet’s policy to treat taxes due from future inclusions in U.S. taxable income related to GILTI as a current period expense when incurred. (2)In 2020, final regulations were issued that provided an election to exclude from GILTI any foreign earnings subject to a local country tax rate of at least 90% of the U.S. tax rate. The Company recorded a $30 benefit related to this tax law change. (3)In 2021, a $32 benefit for income tax credits related to development incentives in Hungary was recognized. (4)In 2020, a $104 valuation allowance was recorded related to deferred tax assets that were previously subject to a reserve that was otherwise released in 2020 as a result of a favorable Spanish tax case decision. In 2019, the Company released a $112 valuation allowance related to 2015 and 2016 foreign tax credits, subsequent to filing U.S. amended tax returns to deduct, rather than credit, foreign taxes. (5)In 2020, the Company released a $64 reserve liability and a $104 reserve recorded as a contra balance against deferred tax assets as a result of a favorable Spanish tax case decision. A $30 benefit related to a previously uncertain U.S. tax position was also recognized in 2020. (6)In 2019, the Company filed U.S. amended tax returns to deduct, rather than credit, 2015 and 2016 foreign taxes resulting in a $112 tax cost associated with the write-off of the deferred tax asset for the credit, partially offset by a $24 tax benefit for the deduction.
Schedule of Components of Net Deferred Tax Assets and Liabilities | The components of net deferred tax assets and liabilities were as follows:
| 2021 |  | 2020
December 31, | Deferred tax assets |  | Deferred tax liabilities |  | Deferred tax assets |  | Deferred tax liabilities
Depreciation | $ | 8 |  |  | $ | 538 |  |  | $ | 21 |  |  | $ | 506 |
Employee benefits | 300 |  |  | 3 |  |  | 364 |  |  | — |
Loss provisions | 20 |  |  | 1 |  |  | 24 |  |  | 1 |
Deferred income/expense | 50 |  |  | 1,098 |  |  | 41 |  |  | 1,033 |
Interest | 105 |  |  | — |  |  | 3 |  |  | — |
Tax loss carryforwards | 3,226 |  |  | — |  |  | 3,267 |  |  | — |
Tax credit carryforwards | 358 |  |  | — |  |  | 378 |  |  | — |
Other | 10 |  |  | 7 |  |  | 7 |  |  | 13 |
| $ | 4,077 |  |  | $ | 1,647 |  |  | $ | 4,105 |  |  | $ | 1,553 |
Valuation allowance | (2,279) |  |  | — |  |  | (2,307) |  |  | — |
| $ | 1,798 |  |  | $ | 1,647 |  |  | $ | 1,798 |  |  | $ | 1,553 |
Schedule of Expiration Periods of Deferred Tax Assets | The following table details the expiration periods of the deferred tax assets presented above:
December 31, 2021 | Expires within 10 years |  | Expires within 11-20 years |  | No Expiration(1) |  | Other(2) |  | Total
Tax loss carryforwards | $ | 422 |  |  | $ | 580 |  |  | $ | 2,224 |  |  | $ | — |  |  | $ | 3,226 |
Tax credit carryforwards | 278 |  |  | 66 |  |  | 14 |  |  | — |  |  | 358 |
Other(3) | — |  |  | — |  |  | 424 |  |  | 69 |  |  | 493 |
Valuation allowance | (637) |  |  | (293) |  |  | (1,329) |  |  | (20) |  |  | (2,279) |
| $ | 63 |  |  | $ | 353 |  |  | $ | 1,333 |  |  | $ | 49 |  |  | $ | 1,798 |
(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. (3)A substantial amount of Other deferred tax assets relates to employee benefits that will become deductible for tax purposes in jurisdictions with unlimited expiration 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, | 2021 |  | 2020 |  | 2019
Balance at beginning of year | $ | 2,307 |  |  | $ | 2,121 |  |  | $ | 2,357 |
Increase to allowance | 113 |  |  | 136 |  |  | 19 |
Release of allowance | (94) |  |  | (50) |  |  | (211) |
Acquisitions and divestitures | — |  |  | — |  |  | (2) |
Tax apportionment, tax rate and tax law changes | 63 |  |  | (23) |  |  | (13) |
Foreign currency translation | (110) |  |  | 123 |  |  | (29) |
Balance at end of year | $ | 2,279 |  |  | $ | 2,307 |  |  | $ | 2,121 |
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, | 2021 |  | 2020 |  | 2019
Balance at beginning of year | $ | 2 |  |  | $ | 176 |  |  | $ | 148 |
Additions for tax positions of the current year | — |  |  | — |  |  | 34 |
Additions for tax positions of prior years | — |  |  | — |  |  | — |
Reductions for tax positions of prior years | — |  |  | (182) |  |  | (1) |
Settlements with tax authorities | — |  |  | (1) |  |  | — |
Expiration of the statute of limitations | — |  |  | — |  |  | (2) |
Foreign currency translation | — |  |  | 9 |  |  | (3) |
Balance at end of year | $ | 2 |  |  | $ | 2 |  |  | $ | 176 |

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