(In millions)		2006			2005			2004
GE
Current tax expense		$ 1,738			$ 3,037			$ 2,148
Deferred tax expense (benefit) from temporary differences		842			(287	)		(175	)
		2,580			2,750			1,973
GECS
Current tax expense		266			1,938			1,497
Deferred tax expense (benefit) from temporary differences		1,108			(653	)		226
		1,374			1,285			1,723
CONSOLIDATED
Current tax expense		2,004			4,975			3,645
Deferred tax expense (benefit) from temporary differences		1,950			(940	)		51
Total		$ 3,954			$ 4,035			$ 3,696

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 $61 million, $2,543 million and $629 million in 2006, 2005 and 2004, respectively, and amounts applicable to non-U.S. jurisdictions of $1,738 million, $2,224 million and $2,522 million in 2006, 2005 and 2004, respectively. Consolidated deferred taxes related to U.S. federal income taxes were an expense of $1,723 million in 2006 and benefits of $137 million and $27 million in 2005 and 2004, respectively.

Consolidated U.S. earnings from continuing operations before income taxes were $9,245 million in 2006, $10,918 million in 2005 and $9,597 million in 2004. The corresponding amounts for non-U.S.-based operations were $15,375 million in 2006, $11,778 million in 2005 and $10,700 million in 2004.

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 taxable temporary differences, forecasted operating earnings and available tax planning strategies. 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, 2006, were approximately $47 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) allowed 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 of those earnings, were met. Available U.S. foreign tax credits related to the repatriation are reduced under provisions of the Act. Because the vast majority of our non-U.S. earnings have been permanently reinvested in active business operations, we repatriated only $1.2 billion of non-U.S. earnings. Because a U.S. tax provision at normal tax rates had been provided on the majority of this amount, the result was a reduction of the 2005 GE and consolidated tax rates of approximately 0.5 percentage points.

The U.S. Internal Revenue Service (IRS) is currently auditing GE’s consolidated 2000–2005 income tax returns. It is reasonably possible that both the 2000–2002 and 2003–2005 audit cycles will be completed during 2007. The effect of the completion of these audit cycles will depend on the result of the examinations. In addition, certain potential deficiency issues and refund claims remain unresolved for years prior to 2000. GE or consolidated affiliates are under audit in numerous state, local and non-U.S. jurisdictions. We believe that adequate provision has been made for all income tax uncertainties.

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
		2006			2005			2004
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 on global activities including exports		(17.7	)		(15.8	)		(12.3	)
U.S. business credits		(1.4	)		(1.3	)		(1.1	)
IRS settlements of Lockheed Martin tax-free exchange/Puerto Rico subsidiary loss		—			—			(3.4	)
All other — net		0.2			(0.1	)		—
		(18.9	)		(17.2	)		(16.8	)
Actual income tax rate		16.1	%		17.8	%		18.2	%
	GE
		2006			2005			2004
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		(15.8	)		(15.6	)		(15.4	)
Tax on global activities including exports		(7.7	)		(5.8	)		(5.8	)
U.S. business credits		(0.4	)		(0.2	)		—
IRS settlements of Lockheed Martin tax-free exchange/Puerto Rico subsidiary loss		—			—			(3.7	)
All other — net		—			(0.6	)		0.5
		(23.9	)		(22.2	)		(24.4	)
Actual income tax rate		11.1	%		12.8	%		10.6	%
	GECS
		2006			2005			2004
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 on global activities including exports		(21.6	)		(21.7	)		(14.5	)
U.S. business credits		(2.1	)		(2.5	)		(2.3	)
IRS settlements of Lockheed Martin tax-free exchange/Puerto Rico subsidiary loss		—			—			—
All other — net		0.3			1.1			(0.8	)
		(23.4	)		(23.1	)		(17.6	)
Actual income tax rate		11.6	%		11.9	%		17.4	%

Back to top

Previous  Next