Table of Contents The following table details the changes in the valuation allowance: As a result of the 2017 Act, the non-previously taxed post-1986 foreign earnings and profits (calculated based on U.S. tax principles) of certain U.S.- owned foreign corporations has been subject to U.S. tax under the one-time transition tax provisions. The 2017 Act also created a new requirement that certain income earned by foreign subsidiaries, GILTI, must be included in the gross income of the U.S. shareholder. The 2017 Act also established the Base Erosion and Anti-Abuse Tax (BEAT). In the first quarter of 2018, Arconic made a final accounting policy election to treat taxes due from future inclusions in U.S. taxable income related to GILTI as a current period expense when incurred. Arconic has estimated a GILTI inclusion for 2019 and 2018 and recorded tax expense accordingly. Arconic does not anticipate being subject to BEAT for 2019 and 2018. Foreign U.S. GAAP earnings that have not otherwise been subject to U.S. tax, will generally be exempt from future U.S. tax under the 2017 Act when distributed. Such distributions, as well as distributions of previously taxed foreign earnings, could potentially be subject to U.S. state tax in certain states, and foreign withholding taxes. Foreign currency gains/losses related to the translation of previously taxed earnings from functional currency to U.S. dollars could also be subject to U.S. tax when distributed. At this time, Arconic has no plans to distribute such earnings in the foreseeable future. If such earnings were to be distributed, Arconic would expect the potential U.S. state tax and withholding tax impacts to be immaterial and the potential deferred tax liability associated with future foreign currency gains to be impracticable to determine. Arconic and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. With a few minor exceptions, Arconic is no longer subject to income tax examinations by tax authorities for years prior to 2006. All U.S. tax years prior to 2019 have been audited by the Internal Revenue Service. Various state and foreign jurisdiction tax authorities are in the process of examining Arconic’s income tax returns for various tax years through 2018. A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) was as follows: For all periods presented, a portion of the balance pertains to state tax liabilities, which are presented before any offset for federal tax benefits. The effect of unrecognized tax benefits, if recorded, that would impact the annual effective tax rate for 2019, 2018, and 2017 would be approximately 13%, 5%, and 15%, respectively, of pre-tax book income. Arconic does not anticipate that changes in its unrecognized tax benefits will have a material impact on the Statement of Consolidated Operations during 2020. It is Arconic’s policy to recognize interest and penalties related to income taxes as a component of the Provision for income taxes on the accompanying Statement of Consolidated Operations. Arconic recognized interest of $6, $22 and $1 for 2019, 2018, and 2017, respectively. Due to the expiration of the statute of limitations, settlements with tax authorities, and refunded overpayments, Arconic recognized interest income of $0, $1, and $2 in 2019, 2018, and 2017, respectively. As of December 31, 2019, 2018, and 2017, the amount accrued for the payment of interest and penalties was $23, $21, and $2, respectively. 86 December 31, 2019 2018 2017 Balance at beginning of year $ 166 $ 73 $ 28 Additions for tax positions of the current year 34 — 23 Additions for tax positions of prior years 3 143 27 Reductions for tax positions of prior years — (42) — Settlements with tax authorities — — — Expiration of the statute of limitations (2) (6) (5) Foreign currency translation (4 ) (2 ) — Balance at end of year $ 197 $ 166 $ 73 December 31, 2019 2018 2017 Balance at beginning of year $ 2,486 $ 2,584 $ 1,940 Increase to allowance 37 136 831 Release of allowance (222 ) (154 ) (246 ) Acquisitions and divestitures (2) — (1) Tax apportionment, tax rate and tax law changes (13 ) (14 ) (24 ) Foreign currency translation (30) (66) 84 Balance at end of year $ 2,256 $ 2,486 $ 2,584