Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Components of Income from Continuing Operations Before Income Taxes

The components of income from continuing operations before income taxes were as follows:


	2016		2015		2014
United States	$	84	$	124	$	207
Foreign		330		59		(94	)
	$	414	$	183	$	113

Schedule of Provision for Income Taxes on Income from Continuing Operations

The provision for income taxes consisted of the following:


	2016			2015			2014
Current:
Federal*	$	-		$	-		$	-
Foreign		133			115			70
State and local		1			(1	)		1
		134			114			71
Deferred:
Federal*		1,208			196			67
Foreign		136			29			37
State and local		(2	)		-			(1	)
		1,342			225			103
Total	$	1,476		$	339		$	174

*	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 Arconic’s effective tax rate was as follows (the effective tax rate for all periods was a provision on income):


	2016			2015			2014
U.S. federal statutory rate		35.0	%		35.0	%		35.0	%
Taxes on foreign operations		(10.2	)		2.5			(9.4	)
Permanent differences on restructuring and other charges and asset disposals		(107.8	)		3.6			(1.0	)
Non-deductible acquisition costs		8.4			7.1			7.3
Statutory tax rate and law changes⁽¹⁾		(15.7	)		(1.0	)		78.8
Tax holidays⁽²⁾		(0.8	)		(3.9	)		38.5
Tax credits		(1.2	)		(2.8	)		(1.9	)
Changes in valuation allowances		426.8			145.8			17.3
Impairment of goodwill		-			4.8			-
Company-owned life insurance/split-dollar net premiums		23.0			(3.0	)		(9.6	)
Changes in uncertain tax positions		2.3			(2.0	)		(5.6	)
Other		(3.3	)		(0.9	)		4.6
Effective tax rate		356.5	%		185.2	%		154.0	%

⁽¹⁾

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, Arconic remeasured certain deferred tax assets related to Spanish subsidiaries. In December 2016, Spain and the United States enacted tax law changes which resulted in the remeasurement of certain deferred tax liabilities recorded by Arconic.

⁽²⁾	In 2014, a tax holiday for certain former Arconic 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:


	2016					2015
December 31,	Deferred tax assets			Deferred tax liabilities		Deferred tax assets			Deferred tax liabilities
Depreciation	$	15		$	817	$	8		$	964
Employee benefits		1,382			8		1,521			11
Loss provisions		181			1		172			2
Tax loss carryforwards		1,540			-		926			-
Tax credit carryforwards		652			-		673			-
Other		184			93		311			31
		3,954			919		3,611			1,008
Valuation allowance		(1,940	)		-		(1,291	)		-
	$	2,014		$	919	$	2,320		$	1,008

Schedule of Expiration Periods of Deferred Tax Assets

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


December 31, 2016	Expires within 10 years			Expires within 11-20 years			No expiration*			Other*			Total
Tax loss carryforwards	$	81		$	744		$	715		$	-		$	1,540
Tax credit carryforwards		428			89			100			35			652
Other		-			-			72			1,690			1,762
Valuation allowance		(465	)		(663	)		(677	)		(135	)		(1,940	)
	$	44		$	170		$	210		$	1,590		$	2,014

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,	2016			2015			2014
Balance at beginning of year	$	1,291		$	1,151		$	1,252
Increase to allowance		772			180			102
Release of allowance		(209	)		(42	)		(70	)
Acquisitions and divestitures (F)		(1	)		29			(36	)
Tax apportionment, tax rate and tax law changes		106			(15	)		(67	)
Foreign currency translation		(19	)		(12	)		(30	)
Balance at end of year	$	1,940		$	1,291		$	1,151

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,	2016			2015			2014
Balance at beginning of year	$	18		$	7		$	8
Additions for tax positions of the current year		12			-			-
Additions for tax positions of prior years		-			14			4
Reductions for tax positions of prior years		-			(2	)		(3	)
Settlements with tax authorities		(1	)		-			(1	)
Expiration of the statute of limitations		(1	)		(1	)		-
Foreign currency translation		-			-			(1	)
Balance at end of year	$	28		$	18		$	7