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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

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,	2022		2021		2020
United States	$	287	$	28	$	84
Foreign	319		296		87
Total	$	606	$	324	$	171

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,	2022		2021		2020
Current:
Federal(1)	$	3	$	(9)	$	(2)
Foreign	53		39		2
State and local	—		(2)		(2)
	56		28		(2)
Deferred:
Federal	71		22		(67)
Foreign	5		11		11
State and local	5		5		18
	81		38		(38)
Total	$	137	$	66	$	(40)

(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 2022 and 2021 was a provision on income and for 2020 was a benefit on income):


For the year ended December 31,	2022		2021		2020
U.S. federal statutory rate	21.0	%	21.0	%	21.0	%
Foreign tax rate differential	0.1		(0.7)		(1.2)
U.S. and residual tax on foreign earnings(1)	1.2		6.5		5.6
U.S. state and local taxes	0.7		1.0		2.2
Federal cost of state tax	(0.2)		(0.3)		(2.0)
Permanent differences related to asset disposals and items included in restructuring and other charges	—		(0.3)		6.8

Non-deductible officer compensation	1.2		1.6		3.5
Statutory tax rate and law changes(2)	0.1		1.0		(15.9)
Tax holidays	(0.5)		(0.4)		(0.4)
Tax credits(3)	(0.9)		(10.4)		(0.4)
Changes in valuation allowances(4)	1.4		5.1		74.8

Changes in uncertain tax positions(5)	—		—		(116.9)
Excess benefit for stock compensation	(0.8)		(0.3)		(0.7)
Prior year tax adjustments	(0.1)		(3.7)		(1.7)
Other	(0.6)		0.3		1.9
Effective tax rate	22.6	%	20.4	%	(23.4)	%

(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.

(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.

Schedule of Components of Net Deferred Tax Assets and Liabilities

The components of net deferred tax assets and liabilities were as follows:


	2022				2021
December 31,	Deferred tax assets		Deferred tax liabilities		Deferred tax assets		Deferred tax liabilities
Depreciation	$	11	$	492	$	8	$	538
Employee benefits	232		1		300		3
Loss provisions	26		1		20		1
Deferred income/expense	62		1,161		50		1,098
Interest	99		—		105		—
Tax loss carryforwards	2,955		—		3,226		—
Tax credit carryforwards	268		—		358		—
Other	6		6		10		7
	$	3,659	$	1,661	$	4,077	$	1,647
Valuation allowance	(1,965)		—		(2,279)		—
	$	1,694	$	1,661	$	1,798	$	1,647

Schedule of Expiration Periods of Deferred Tax Assets

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	$	362	$	533	$	2,060	$	—	$	2,955
Tax credit carryforwards	196		59		13		—		268
Other(3)	—		—		380		56		436
Valuation allowance	(522)		(234)		(1,204)		(5)		(1,965)
	$	36	$	358	$	1,249	$	51	$	1,694

(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,	2022		2021		2020
Balance at beginning of year	$	2,279	$	2,307	$	2,121
Increase to allowance	40		113		136
Release of allowance	(154)		(94)		(50)

Tax apportionment, tax rate and tax law changes	(110)		63		(23)
Foreign currency translation	(90)		(110)		123
Balance at end of year	$	1,965	$	2,279	$	2,307

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,	2022		2021		2020
Balance at beginning of year	$	2	$	2	$	176


Reductions for tax positions of prior years	—		—		(182)
Settlements with tax authorities	—		—		(1)

Foreign currency translation	—		—		9
Balance at end of year	$	2	$	2	$	2