v3.26.1
Income Taxes
 6 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes

M. Income Taxes – Alcoa Corporation’s estimated annualized effective tax rate (AETR) for 2026 as of June 30, 2026 differs from the U.S. federal statutory rate of 21 percent primarily due to losses in foreign jurisdictions with higher statutory tax rates as well as income in certain jurisdictions with full valuation allowances resulting in immaterial incremental tax expense.

 

 

Six months ended
June 30,

 

 

2026

 

 

 

2025

 

 

Income before income taxes

 

$

981

 

 

 

$

829

 

 

Estimated annualized effective tax rate

 

 

13.6

 

%

 

 

15.5

 

%

Income tax expense

 

$

133

 

 

 

$

128

 

 

Unfavorable (favorable) tax impact related to losses in jurisdictions with no tax benefit

 

 

6

 

 

 

 

(4

)

 

Discrete tax expense

 

 

16

 

 

 

 

6

 

 

Provision for income taxes

 

$

155

 

 

 

$

130

 

 

The Company benefits from the Advanced Manufacturing Tax Credit available under Section 45X, enacted as part of the U.S. Inflation Reduction Act of 2022 (IRA). On October 24, 2024, the U.S. Treasury finalized the Proposed Regulations under Section 45X with important modifications including the ability to include the cost of certain direct and indirect materials in the cost base of the credit. The Proposed Regulation on the definition of aluminum was not finalized; however, management believes that commercial grade aluminum continues to qualify for the Section 45X credit. The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, provides for a progressive phase-out of Section 45X credits beginning in 2031 and fully eliminates such credits beginning in 2034.

In the second quarter and six-month period of 2026, the Company recorded benefits of $18 and $31, respectively, in Cost of goods sold related to its Massena West (New York) smelter and its Warrick (Indiana) smelter, compared with $17 and $31, respectively, recorded in the second quarter and six-month period of 2025. In June 2026, the Company received $36 associated with certain 2023 benefits and the related interest. As of June 30, 2026, benefits, including accrued interest income, of $56 and $112 were included in Other receivables and Other noncurrent assets, respectively, compared with $90 and $83, respectively, as of December 31, 2025.

In March 2026, the Company recorded a valuation allowance of $22 against certain net deferred tax assets of a wholly-owned subsidiary in Canada related to the outside basis difference in the Manicouagan Power Limited Partnership equity investment. Due to the amendment to the partnership agreement executed during the first quarter of 2026, management concluded that it was more likely than not that tax benefits associated with a capital loss upon a future disposition of the investment would not be realized.