v3.22.4

Income Taxes​ | 12 Months Ended
--- | ---
Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes (Benefit) Provision for 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) |
(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. 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. Deferred income taxes. 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. The total deferred tax asset (net of valuation allowance) is supported by projections of future taxable income exclusive of reversing temporary differences (35%) and taxable temporary differences that reverse within the carryforward period (65%). 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). Undistributed net earnings. Foreign undistributed net earnings that have not otherwise previously been subject to U.S. tax are generally exempt from U.S. tax if repatriated in the future. Such future distributions, as well as distributions of previously taxed foreign earnings, may be subject to U.S. state and/or foreign withholding taxes in certain jurisdictions. Also, foreign currency gains/losses related to the translation of previously taxed foreign earnings from the functional currency to the U.S. dollar may be subject to U.S. tax if such earnings were to be distributed in the future. At this time, management has no plans to repatriate such earnings in the foreseeable future, unless it is tax efficient to do so. Management continuously evaluates the Company’s local and global cash needs for future business operations and anticipated debt facilities, which may influence future repatriation decisions. If such earnings were to be distributed in the future, management does not expect the potential U.S. state and/or foreign withholding taxes to be material to the Company’s Consolidated Financial Statements. The undistributed earnings of the Company’s Canadian subsidiary are expected to be repatriated to the U.S. in a future period. The associated withholding tax and other costs are immaterial. Uncertain tax positions. Arconic and its subsidiaries file income tax returns in various U.S. federal, U.S. state, and foreign jurisdictions. For U.S. federal income tax purposes, Arconic’s U.S. operations were included in the income tax filings of ParentCo’s U.S. consolidated tax group through March 31, 2020. ParentCo’s U.S. federal income tax filings have been examined for all periods through 2020. In 2021, the Company’s U.S. consolidated tax group filed a nine-month U.S. federal income tax return (April 1, 2020 through December 31, 2020). The Company’s U.S. federal income tax filings for 2020 and 2021 are subject to income tax examination. For U.S. state income tax purposes, Arconic and its subsidiaries remain open to examination for the 2019 tax year and forward. For foreign income tax purposes, Arconic and its subsidiaries remain subject to income tax examinations for the 2014 tax year and forward. 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 |
_____________________ *See footnote 3 to the reconciliation of the U.S. federal statutory rate to Arconic’s effective tax rate above. Unrecognized tax benefits, if recognized, would not impact the annual effective tax rate for 2022, 2021, and 2020. Management does not anticipate that changes in the Company's unrecognized tax benefits will have a material impact on the Statement of Consolidated Operations during 2023. It is Arconic’s policy to recognize interest and penalties related to income taxes as a component of the (Benefit) Provision for income taxes on the accompanying Statement of Consolidated Operations. In 2022, 2021, and 2020, Arconic did not recognize any interest or penalties. As of December 31, 2022 and 2021, no interest and penalties were accrued.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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