GE 2009 Annual Report Download - page 93

GE 2009 ANNUAL REPORT 91
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Note 13.
All Other Liabilities
This caption includes liabilities for various items including non-
current compensation and benefits, deferred income, interest
on tax liabilities, unrecognized tax benefits, accrued participation
and residuals, environmental remediation, asset retirement
obligations, derivative instruments, product warranties and a
variety of sundry items.
Accruals for non-current compensation and benefits amounted
to $24,921 million and $22,543 million for year-end 2009 and
2008, respectively. These amounts include postretirement benefits,
pension accruals, and other compensation and benefit accruals
such as deferred incentive compensation. The increase in 2009
was primarily the result of an increase in pension accruals.
We are involved in numerous remediation actions to clean up
hazardous wastes as required by federal and state laws. Liabilities
for remediation costs exclude possible insurance recoveries and,
when dates and amounts of such costs are not known, are not
discounted. When there appears to be a range of possible costs
with equal likelihood, liabilities are based on the low end of such
range. Uncertainties about the status of laws, regulations, tech-
nology and information related to individual sites make it difficult
to develop a meaningful estimate of the reasonably possible
aggregate environmental remediation exposure.
Note 14.
Income Taxes
PROVISION FOR INCOME TAXES
(In millions) 2009 2008 2007
GE
Current tax expense $ 3,199 $ 3,844 $2,230
Deferred tax expense (benefit) from
temporary differences (460) (417) 564
2,739 3,427 2,794
GECS
Current tax expense (benefit) (1,584) (1,508) 1,268
Deferred tax expense (benefit) from
temporary differences (2,245) (867) 93
(3,829) (2,375) 1,361
CONSOLIDATED
Current tax expense 1,615 2,336 3,498
Deferred tax expense (benefit) from
temporary differences (2,705) (1,284) 657
Total $(1,090) $ 1,052 $4,155
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. The effect of GECS on the consolidated
liability is settled in cash as GE tax payments are due.
Consolidated U.S. earnings (loss) from continuing operations
before income taxes were $(498) million in 2009, $2,659 million
in 2008 and $9,078 million in 2007. The corresponding amounts
for non-U.S.-based operations were $10,842 million in 2009,
$17,123 million in 2008 and $18,450 million in 2007.
Consolidated current tax expense includes amounts appli-
cable to U.S. federal income taxes of a benefit of $886 million
and $723 million in 2009 and 2008, respectively, and expense of
$64 million in 2007, and amounts applicable to non-U.S. jurisdic-
tions of $2,416 million, $3,060 million and $3,042 million in 2009,
2008 and 2007, respectively. Consolidated deferred taxes related
to U.S. federal income taxes were a benefit of $2,423 million
and $827 million in 2009 and 2008, respectively, and expense of
$776 million in 2007.
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 and credits 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 strate-
gies. To the extent we do not consider it more likely than not
that a deferred tax asset will be recovered, a valuation allowance
is established.
Our businesses are subject to regulation under a wide variety
of U.S. federal, state and foreign tax laws, regulations and policies.
Changes to these laws or regulations may affect our tax liability,
return on investments and business operations. For example,
GE’s effective tax rate is reduced because active business income
earned and indefinitely reinvested outside the United States is
taxed at less than the U.S. rate. A significant portion of this
reduction depends upon a provision of U.S. tax law that defers
the imposition of U.S. tax on certain active financial services
income until that income is repatriated to the United States as
a dividend. This provision is consistent with international tax
norms and permits U.S. financial services companies to compete
more effectively with foreign banks and other foreign financial
institutions in global markets. This provision, which expired at
the end of 2009, has been scheduled to expire and has been
extended by Congress on five previous occasions, including in
October of 2008. A one-year extension was passed by the House
of Representatives in 2009 and the Senate Finance Committee
Chairman and Ranking Member have indicated an intention to
extend the provision for one year retroactive to the beginning of
2010, but there can be no assurance that it will be extended. In
the event the provision is not extended after 2009, the current
U.S. tax imposed on active financial services income earned
outside the United States would increase, making it more difficult
for U.S. financial services companies to compete in global markets.
If this provision is not extended, we expect our effective tax rate
to increase significantly after 2010.