Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Components of Income (loss) from Continuing Operations Before Income Taxes

The components of income (loss) before income taxes were as follows:


	2015			2014			2013
United States	$	(607	)	$	(125	)	$	(1,269	)
Foreign		855			622			(547	)
	$	248		$	497		$	(1,816	)

Schedule of Provision for Income Taxes on Income from Continuing Operations

The provision for income taxes consisted of the following:


	2015			2014			2013
Current:
Federal*	$	3		$	(3	)	$	14
Foreign		409			357			235
State and local		(1	)		1			1
		411			355			250
Deferred:
Federal*		(108	)		7			84
Foreign		142			(41	)		95
State and local		-			(1	)		(1	)
		34			(35	)		178
Total	$	445		$	320		$	428

*	Includes U.S. taxes related to foreign income

Reconciliation of U.S. Federal Statutory Rate to Alcoa's Effective Tax Rate

A reconciliation of the U.S. federal statutory rate to Alcoa’s effective tax rate was as follows (the effective tax rate for 2015 and 2014 was a provision on income and for 2013 was a provision on a loss):


	2015			2014			2013
U.S. federal statutory rate		35.0	%		35.0	%		35.0	%
Taxes on foreign operations		0.4			(3.2	)		0.7
Permanent differences on restructuring and other charges and asset disposals		2.7			(3.5	)		(0.8	)
Non-deductible acquisition costs		5.2			1.7			-
Equity income/loss		4.9			3.2			(0.7	)
Noncontrolling interests⁽¹⁾		11.4			6.8			(3.1	)
Statutory tax rate and law changes⁽²⁾		(0.8	)		17.9			0.6
Tax holidays⁽³⁾		(11.3	)		6.1			-
Tax credits		(3.6	)		(1.3	)		0.2
Changes in valuation allowances		135.3			3.5			(23.2	)
Impairment of goodwill		3.6			-			(33.3	)
Company-owned life insurance/split-dollar net premiums		(2.2	)		(2.2	)		1.1
Other		(1.2	)		0.4			(0.1	)
Effective tax rate		179.4	%		64.4	%		(23.6	)%

(1)	In 2014, the noncontrolling interests’ impact on Alcoa’s effective tax rate was mostly due to the noncontrolling interest’s share of a loss on the divestiture of an ownership interest in a mining and refining joint venture in Jamaica (see Note F).

(2)	In November 2014, Spain enacted corporate tax reform that changed the corporate tax rate from 30% in 2014 to 28% in 2015 to 25% in 2016. As a result, Alcoa remeasured certain deferred tax assets related to Spanish subsidiaries.

(3)	In 2014, a tax holiday for certain Alcoa subsidiaries in Brazil became effective (see below).

Schedule of Components of Net Deferred Tax Assets and Liabilities

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


	2015					2014
December 31,	Deferred tax assets			Deferred tax liabilities		Deferred tax assets			Deferred tax liabilities
Depreciation	$	194		$	1,353	$	147		$	1,187
Employee benefits		2,517			34		2,413			37
Loss provisions		486			9		441			10
Deferred income/expense		37			294		30			230
Tax loss carryforwards		1,917			-		2,075			-
Tax credit carryforwards		693			-		625			-
Derivatives and hedging activities		-			276		5			39
Other		680			339		521			297
		6,524			2,305		6,257			1,800
Valuation allowance		(2,037	)		-		(1,668	)		-
	$	4,487		$	2,305	$	4,589		$	1,800

Schedule of Expiration Periods of Deferred Tax Assets

The following table details the expiration periods of the deferred tax assets presented above:


December 31, 2015	Expires within 10 years			Expires within 11-20 years			No expiration*			Other*			Total
Tax loss carryforwards	$	361		$	694		$	862		$	-		$	1,917
Tax credit carryforwards		492			103			98			-			693
Other		-			-			473			3,441			3,914
Valuation allowance		(596	)		(704	)		(423	)		(314	)		(2,037	)
	$	257		$	93		$	1,010		$	3,127		$	4,487

Deferred tax assets with no expiration may still have annual limitations on utilization. Other represents deferred tax assets whose expiration is dependent upon the reversal of the underlying temporary difference. A substantial amount of Other relates to employee benefits that 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 retirees.

Schedule of Changes in Valuation Allowance

The following table details the changes in the valuation allowance:


December 31,	2015			2014			2013
Balance at beginning of year	$	1,668		$	1,804		$	1,400
Increase to allowance		472			117			471
Release of allowance		(42	)		(77	)		(41	)
Acquisitions and divestitures (F)		29			(37	)		-
U.S. state tax apportionment and tax rate changes		(45	)		(80	)		(32	)
Foreign currency translation		(45	)		(59	)		6
Balance at end of year	$	2,037		$	1,668		$	1,804

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,	2015			2014			2013
Balance at beginning of year	$	35		$	63		$	66
Additions for tax positions of the current year		2			2			2
Additions for tax positions of prior years		15			5			11
Reductions for tax positions of prior years		(2	)		(4	)		(2	)
Settlements with tax authorities		(2	)		(29	)		(8	)
Expiration of the statute of limitations		(1	)		-			(2	)
Foreign currency translation		(4	)		(2	)		(4	)
Balance at end of year	$	43		$	35		$	63