Income Taxes

6 Months Ended

Jun. 30, 2020

Arconic Corporation’s year-to-date tax provision is comprised of the most recent estimated annual effective tax rate applied to year-to-date pretax ordinary income. The tax impacts 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 pretax losses.

For the 2020 and 2019 six-month periods, the estimated annual effective tax rate, before discrete items, applied to ordinary income was 60.2% and 40.5%, respectively. The rate for the 2020 six-month period was higher than the U.S. federal statutory rate of 21.0% primarily due to foreign losses taxed in lower rate jurisdictions and losses in foreign jurisdictions subject to existing valuation allowances, as well as the state tax impact of domestic taxable income and nondeductible costs related to the Separation. The rate for the 2019 six-month period was higher than the U.S. federal statutory rate of 21.0% primarily due to certain nondeductible costs related to the separation and the state tax impact of domestic taxable income, partially offset by foreign income taxed in higher jurisdictions.

For the second quarter of 2020 and 2019, the effective tax rate including discrete items was 25.2% and 61.5%, respectively.

The tax provisions for the second quarter of 2020 and 2019 were comprised of the following components:


	Second quarter ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Pretax income at estimated annual effective income tax rate before discrete items	$	(74)	$	5	$	(19)	$	32
Impact of change in estimated annual effective tax rate on previous quarter’s pretax income	29		3		—		—
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized*	14		1		15		—
Other discrete items	—		(1)		4		1
(Benefit) Provision for income taxes	$	(31)	$	8	$	—	$	33

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* The interim period impact related to operational losses in foreign jurisdictions for which no tax benefit is recognized will reverse by the end of the calendar year.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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