(In millions)	2004			2003			2002
GE
Current tax expense	$	2,148		$	2,468		$	2,833
Deferred tax expense (benefit) from temporary differences		(175	)		389			1,004
		1,973			2,857			3,837
GECS
Current tax expense (benefit)		3,067			720			(1,488	)
Deferred tax expense (benefit) from temporary differences		(1,379	)		891			1,441
		1,688			1,611			(47	)
CONSOLIDATED
Current tax expense		5,215			3,188			1,345
Deferred tax expense (benefit) from temporary differences		(1,554	)		1,280			2,445
Total	$	3,661		$	4,468		$	3,790

GE and GECS file a consolidated U.S. federal income tax return. The GECS provision for current tax expense includes its effect on the consolidated return.

Consolidated current tax expense includes amounts applicable to U.S. federal income taxes of $1,839 million, $1,555 million and $137 million in 2004, 2003 and 2002, respectively, and amounts applicable to non-U.S. jurisdictions of $3,135 million, $1,304 million and $1,061 million in 2004, 2003 and 2002, respectively. Consolidated deferred taxes related to U.S. federal income taxes was income of $1,864 million in 2004 compared with expense of $811 million and $2,138 million in 2003 and 2002, respectively.

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases as well as from net operating loss and tax credit carryforwards, and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. We evaluate the recoverability of these future tax deductions by assessing the adequacy of future expected taxable income from all sources, including reversal of temporary differences and forecasted operating earnings. See note 21 for details.

We have not provided U.S. deferred taxes on cumulative earnings of non-U.S. affiliates and associated companies that have been reinvested indefinitely. These earnings relate to ongoing operations and, at December 31, 2004, were approximately $29 billion. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. federal income tax liability that would be payable if such earnings were not reinvested indefinitely. Deferred taxes are provided for earnings of non-U.S. affiliates and associated companies when we plan to remit those earnings.

The American Jobs Creation Act of 2004 (the Act) allows U.S. companies a one-time opportunity to repatriate non-U.S. earnings through 2005 at a 5.25% rate of tax rather than the normal U.S. tax rate of 35%, provided that certain criteria, including qualified U.S. reinvestment, are met. Available tax credits related to the repatriation would be reduced under provisions of the Act. While GE continues to evaluate the Act, because the vast majority of our permanently reinvested non-U.S. earnings have been deployed in active business operations, and it is therefore unlikely that we will repatriate any material portion of our permanently reinvested non-U.S. earnings, no incremental tax provision effect has been recorded through December 31, 2004. If we were to repatriate up to $3,000 million of indefinitely reinvested earnings in 2005, incremental taxes would be provided at less than a 5% rate.

Consolidated U.S. income before taxes and the cumulative effect of accounting changes was $9.0 billion in 2004, $11.6 billion in 2003 and $12.0 billion in 2002. The corresponding amounts for non-U.S.-based operations were $11.5 billion in 2004, $8.7 billion in 2003 and $6.9 billion in 2002.

A reconciliation of the U.S. federal statutory income tax rate to the actual income tax rate is provided below.

RECONCILIATION OF U.S. FEDERAL STATUTORY INCOME TAX RATE TO ACTUAL INCOME TAX RATE

	Consolidated
	2004			2003			2002
U.S. federal statutory income tax rate		35.0	%		35.0	%		35.0	%
Increase (reduction) in rate resulting from:
Inclusion of after-tax earnings of GECS in before-tax earnings of GE		–			–			–
Tax-exempt income		(1.0	)		(1.1	)		(1.2	)
Tax on global activities including exports		(12.2	)		(8.8	)		(10.6	)
IRS settlements of Lockheed Martin tax-free exchange/Puerto Rico subsidiary loss		(3.4	)		–			–
All other–net		(0.5	)		(3.1	)		(3.2	)
		(17.1	)		(13.0	)		(15.0	)
Actual income tax rate		17.9	%		22.0	%		20.0	%

	GE
	2004			2003			2002
U.S. federal statutory income tax rate		35.0	%		35.0	%		35.0	%
Increase (reduction) in rate resulting from:
Inclusion of after-tax earnings of GECS in before-tax earnings of GE		(15.6	)		(15.0	)		(8.6	)
Tax-exempt income		–			–			–
Tax on global activities including exports		(5.7	)		(4.3	)		(5.2	)
IRS settlements of Lockheed Martin tax-free exchange/Puerto Rico subsidiary loss		(3.7	)		–			–
All other–net		0.5			(0.4	)		(1.0	)
		(24.5	)		(19.7	)		(14.8	)
Actual income tax rate		10.5	%		15.3	%		20.2	%

	GECS
	2004			2003			2002
U.S. federal statutory income tax rate		35.0	%		35.0	%		35.0	%
Increase (reduction) in rate resulting from:
Inclusion of after-tax earnings of GECS in before-tax earnings of GE		–			–			–
Tax-exempt income		(1.9	)		(2.3	)		(5.0	)
Tax on global activities including exports		(14.1	)		(10.3	)		(22.1	)
IRS settlements of Lockheed Martin tax-free exchange/Puerto Rico subsidiary loss		–			–			–
All other–net		(2.2	)		(5.6	)		(8.9	)
		(18.2	)		(18.2	)		(36.0	)
Actual income tax rate		16.8	%		16.8	%		(1.0	)%

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