v3.22.4

Income Taxes​ (Tables) | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Components of (Loss) Income Before Income Taxes | The components of loss before income taxes were as follows:
For the year ended December 31, |  | 2022 |  | 2021 |  | 2020
Domestic - United States |  | $ | (65) |  |  | $ | (611) |  |  | $ | (126) |
Foreign |  | (127) |  |  | 152 |  |  | 18 |
|  | $ | (192) |  |  | $ | (459) |  |  | $ | (108) |
Components of Provision (Benefit) for Income Taxes | (Benefit) Provision for income taxes consisted of the following:
For the year ended December 31, |  | 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |  |
U.S. federal* |  | $ | 8 |  |  | $ | — |  |  | $ | — |
Foreign |  | 23 |  |  | 36 |  |  | 13 |
U.S. state and local |  | 3 |  |  | 2 |  |  | 4 |
|  | 34 |  |  | 38 |  |  | 17 |
Deferred: |  |  |  |  |  |
U.S. federal* |  | (18) |  |  | (86) |  |  | (12) |
Foreign |  | (1) |  |  | (2) |  |  | 4 |
U.S. state and local |  | (26) |  |  | (12) |  |  | (8) |
|  | (45) |  |  | (100) |  |  | (16) |
Total |  | $ | (11) |  |  | $ | (62) |  |  | $ | 1 |
__________________ * Includes U.S. income taxes related to foreign income. Also, in 2020, the Deferred amount includes a $21 charge related to income generated by the Company prior to the Separation Date that was included in ParentCo’s 2020 tax return.
Reconciliation of U.S. Federal Statutory Rate to Effective Tax Rate | A reconciliation of the U.S. federal statutory rate to Arconic’s effective tax rate was as follows (the effective tax rate was a benefit on loss in 2022, a benefit on loss in 2021, and a provision on loss in 2020):
For the year ended December 31, |  | 2022 |  | 2021 |  | 2020
U.S. federal statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Taxes on foreign operations - rate differential |  | 14.4 |  |  | 0.1 |  |  | (4.8) |
Other taxes related to foreign operations(1) |  | (2.4) |  |  | (5.0) |  |  | (9.4) |
U.S. state and local taxes, including federal benefit |  | 0.1 |  |  | 2.6 |  |  | 3.3 |
Statutory tax rate and law changes |  | (2.8) |  |  | — |  |  | (2.1) |
Changes in valuation allowances |  | 13.1 |  |  | (0.9) |  |  | (7.3) |
Non-taxable income - indemnification liability(2) |  | 0.4 |  |  | 0.4 |  |  | 3.8 |
Subsidiary recapitalizations and reorganizations |  | — |  |  | (1.1) |  |  | (3.9) |
Impairment of goodwill |  | — |  |  | (3.0) |  |  | — |
Non-deductible loss related to sale of Russian operations (S) |  | (37.9) |  |  | — |  |  | — |
Changes in uncertain tax positions |  | 11.2 |  |  | (0.1) |  |  | — |
Stock-based compensation |  | 3.1 |  |  | 0.8 |  |  | 0.9 |
Non-deductible costs related to the Separation (A) |  | — |  |  | — |  |  | (2.2) |
Write-off of deferred tax assets due to remote utilization(3) |  | (13.0) |  |  | — |  |  | — |
Non-deductible officer compensation |  | (1.3) |  |  | (0.2) |  |  | — |
Other |  | (0.2) |  |  | (1.1) |  |  | (0.2) |
Effective tax rate |  | 5.7 | % |  | 13.5 | % |  | (0.9) | %
_____________________ (1)In 2021, this line item includes the impact of incremental income tax expense of $11 related to foreign operations that generated income subject to the global intangible low-taxed income inclusion under the U.S. Internal Revenue Code. (2)In 2020, this line item reflects the impact of the absence of income tax expense for non-taxable income generated by the reversal of a liability previously established at the Separation Date related to a potential indemnification to Howmet by Arconic for an outstanding income tax matter in Spain (see Note G). (3)In 2022, this line item reflects the write-off of a foreign subsidiary’s deferred tax assets on the basis of remote likelihood of utilization. The deferred tax assets were previously fully offset by a reserve for an uncertain tax position (see Uncertain tax positions below) and a valuation allowance (see Deferred income taxes below). The Changes in valuation allowances and Changes in uncertain tax positions line items include 1.8% and 11.2%, respectively, related to the foreign subsidiary deferred tax write-off.
Schedule of Deferred Tax Assets and Liabilities | The components of deferred tax assets and liabilities based on the underlying attributes without regard to jurisdiction were as follows:
|  | 2022 |  | 2021
December 31, |  | Deferred tax assets |  | Deferred tax liabilities |  | Deferred tax assets |  | Deferred tax liabilities
Employee benefits |  | $ | 264 |  |  | $ | — |  |  | $ | 331 |  |  | $ | — |
Tax loss carryforwards |  | 181 |  |  | — |  |  | 206 |  |  | — |
Deferred income/expense* |  | 45 |  |  | — |  |  | 47 |  |  | — |
Interest |  | 42 |  |  | — |  |  | 44 |  |  | — |
Operating lease right-of-use assets and liabilities |  | 25 |  |  | 25 |  |  | 30 |  |  | 30 |
Loss provisions |  | 27 |  |  | — |  |  | 24 |  |  | — |
Inventory accounting method change* |  | — |  |  | 63 |  |  | — |  |  | 97 |
Depreciation |  | 13 |  |  | 245 |  |  | 13 |  |  | 267 |
Other |  | 4 |  |  | 13 |  |  | 17 |  |  | 11 |
|  | $ | 601 |  |  | $ | 346 |  |  | $ | 712 |  |  | $ | 405 |
Valuation allowance |  | (70) |  |  | — |  |  | (90) |  |  | — |
|  | $ | 531 |  |  | $ | 346 |  |  | $ | 622 |  |  | $ | 405 |
_____________________ * In 2021, an accounting method change was filed to revoke the U.S. tax LIFO election. In 2022, an accounting method change was filed related to inventory cost capitalization. The following table details the expiration periods of the deferred tax assets presented above:
December 31, 2022 |  | Expires within 10 years |  | Expires within 11-20 years |  | No expiration(1) |  | Other(2) |  | Total
Tax loss carryforwards |  | $ | 42 |  |  | $ | 31 |  |  | $ | 108 |  |  | $ | — |  |  | $ | 181 |
Employee benefits |  | — |  |  | — |  |  | — |  |  | 264 |  |  | 264 |
Other |  | — |  |  | 1 |  |  | 42 |  |  | 113 |  |  | 156 |
Valuation allowance |  | (42) |  |  | — |  |  | (7) |  |  | (21) |  |  | (70) |
|  | $ | — |  |  | $ | 32 |  |  | $ | 143 |  |  | $ | 356 |  |  | $ | 531 |
_____________________ (1)Deferred tax assets with no expiration may still have annual limitations on utilization. (2)Employee benefits 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 participants. Other represents deferred tax assets whose expiration is dependent upon the reversal of the underlying temporary difference.
Changes in Valuation Allowance | The following table details the changes in the valuation allowance:
December 31, |  | 2022 |  | 2021 |  | 2020
Balance at beginning of year |  | $ | 90 |  |  | $ | 91 |  |  | $ | 113 |
Establishment of new allowances(1) |  | 2 |  |  | 3 |  |  | — |
Net change to existing allowances(2) |  | 11 |  |  | (3) |  |  | (16) |
Separation-related adjustments |  | — |  |  | — |  |  | 22 |
Acquisitions and divestitures |  | (7) |  |  | — |  |  | (31) |
Release of allowances(3) |  | (21) |  |  | — |  |  | — |
Foreign currency translation |  | (5) |  |  | (1) |  |  | 3 |
Balance at end of year |  | $ | 70 |  |  | $ | 90 |  |  | $ | 91 |
_____________________ (1)This line item reflects valuation allowances initially established as a result of a change in management’s judgement regarding the realizability of deferred tax assets. (2)This line item reflects movements in previously established valuation allowances, which increase or decrease as the related deferred tax assets increase or decrease. Such movements occur as a result of remeasurement due to a tax rate change and changes in the underlying attributes of the deferred tax assets, including expiration of the attribute and reversal of the temporary difference that gave rise to the deferred tax assets. (3)This line item reflects valuation allowances released as a result of a change in management’s judgement regarding the realizability of deferred tax assets. In 2022, Arconic released a U.S. state valuation allowance ($18) after completing a legal entity reorganization, which resulted in management concluding it is now more likely than not the Company will realize the benefits of the tax attributes. Additionally, in 2022, the Company released a foreign valuation allowance in connection with the write-off of the related deferred tax assets ($3 – see footnote 3 to the reconciliation of the U.S. federal statutory rate to Arconic’s effective tax rate above).
Reconciliation of Beginning and Ending Amount 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, |  | 2022 |  | 2021 |  | 2020
Balance at beginning of year |  | $ | 22 |  |  | $ | 23 |  |  | $ | 21 |
Additions for tax positions of prior years |  | — |  |  | 1 |  |  | — |
Reductions for tax positions of prior years* |  | (20) |  |  | — |  |  | — |
Settlements with tax authorities |  | (1) |  |  | — |  |  | — |
Foreign currency translation |  | (1) |  |  | (2) |  |  | 2 |
Balance at end of year |  | $ | — |  |  | $ | 22 |  |  | $ | 23 |

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- Definition Tabular disclosure of the components of income tax expense attributable to continuing operations for each year presented including, but not limited to: current tax expense (benefit), deferred tax expense (benefit), investment tax credits, government grants, the benefits of operating loss carryforwards, tax expense that results from allocating certain tax benefits either directly to contributed capital or to reduce goodwill or other noncurrent intangible assets of an acquired entity, adjustments of a deferred tax liability or asset for enacted changes in tax laws or rates or a change in the tax status of the entity, and adjustments of the beginning-of-the-year balances of a valuation allowance because of a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset in future years. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32639-109319 + Details
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