Income Taxes

9 Months Ended

Sep. 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 nine-month period, the estimated annual effective tax rate, before discrete items, applied to ordinary loss was 11.7% (benefit on a loss). This rate differs by 9.3 percentage points from the U.S. federal statutory rate of 21.0% primarily due to nondeductible costs in the United States, U.S. tax on foreign earnings, foreign losses taxed in lower rate jurisdictions, and losses in foreign jurisdictions subject to existing valuation allowances.

For the 2019 nine-month period, the estimated annual effective tax rate, before discrete items, applied to ordinary income was 80.0% (provision on income). This rate differs by 59.0 percentage points from the U.S. federal statutory rate of 21.0% primarily due to foreign income taxed in higher rate jurisdictions, losses in foreign jurisdictions subject to existing valuation allowances, certain nondeductible costs related to the Separation, estimated U.S. tax on Global Intangible Low-Taxed Income, and the state tax impact of domestic taxable income.

For the third quarter of 2020 and 2019, the effective tax rate, including discrete items, was 66.7% (provision on income) and 242.9% (provision on a loss), respectively.

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


	Third quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Pretax income at estimated annual effective income tax rate before discrete items	$	2	$	(5)	$	(5)	$	45
Impact of change in estimated annual effective tax rate on previous quarter’s pretax income	51		22		—		—
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized*	(48)		—		1		—
Other discrete items	5		—		9		1
Provision for income taxes	$	10	$	17	$	5	$	46

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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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