GE 2005 Annual Report Download - page 99

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(99)
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. During the fourth quarter of
2005, we reached a final decision concerning repatriation. 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 GE and consolidated tax rates of approximately 0.5 percentage points.
Consolidated U.S. earnings from continuing operations before income taxes and accounting changes were
$10,941 million in 2005, $9,633 million in 2004 and $10,058 million in 2003. The corresponding amounts for non-
U.S.-based operations were $11,777 million in 2005, $10,701 million in 2004 and $8,089 million in 2003.
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 (RESTATED)
Consolidated GE GECS
2005 2004 2003
2005 2004 2003
2005
2004 2003
U.S. federal statutory income tax rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 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
–
–
–
(15.5) (15.4) (12.9) –
– –
Tax–exempt income (0.2 ) (0.3 ) (0.5) –
–
– (0.5 ) (0.5 ) (1.1)
Tax on global activities
including exports (15.5) (12.3) (9.6 ) (5.8) (5.8) (4.7)
(21.0 ) (14.4) (12.5)
IRS settlements of Lockheed
Martin tax–free exchange/
Puerto Rico subsidiary loss
–
(3.4 )
–
– (3.7) – –
– –
All other–net (1.3) (0.8 ) (2.5) (0.8 ) 0.5 (0.5)
(1.2 ) (2.6 ) (5.3)
(17.0) (16.8) (12.6) (22.1) (24.4) (18.1) (22.7 ) (17.5) (18.9)
Actual income tax rate 18.0% 18.2% 22.4% 12.9% 10.6% 16.9% 12.3 % 17.5% 16.1 %