GE 2011 Annual Report Download - page 109

GE 2011 ANNUAL REPORT 107
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In 2006, we entered into a consent decree with the
Environmental Protection Agency (EPA) to dredge PCB-containing
sediment from the upper Hudson River. The consent decree pro-
vided that the dredging would be performed in two phases. Phase
1 was completed in May through November of 2009. Between
Phase 1 and Phase 2 there was an intervening peer review by
an independent panel of national experts. The panel evaluated
the performance of Phase 1 dredging operations with respect to
Phase 1 Engineering Performance Standards and recommended
proposed changes to the standards. On December 17, 2010, EPA
issued its decision setting forth the fi nal performance standards
for Phase 2 of the Hudson River dredging project, incorporat-
ing aspects of the recommendations from the independent
peer review panel and from GE. In December 2010, we agreed
to perform Phase 2 of the project in accordance with the fi nal
performance standards set by EPA and increased our reserve
by $845 million in the fourth quarter of 2010 to account for the
probable and estimable costs of completing Phase 2. In 2011, we
completed the fi rst year of Phase 2 dredging and commenced
work on planned upgrades to the Hudson River wastewater pro-
cessing facility. Based on the results from 2011 dredging and
our best professional engineering judgment, we believe that our
current reserve continues to refl ect our probable and estimable
costs for the remainder of Phase 2 of the dredging project.
Note 14.
Income Taxes
PROVISION FOR INCOME TAXES
(In millions) 2011 2010 2009
GE
Current tax expense $ 5,166 $ 2,401 $ 3,199
Deferred tax expense (benefit) from
temporary differences (327) (377) (460)
4,839 2,024 2,739
GECS
Current tax expense (benefit) 769 (2,298) (1,563)
Deferred tax expense (benefit) from
temporary differences 124 1,307 (2,318)
893 (991) (3,881)
CONSOLIDATED
Current tax expense 5,935 103 1,636
Deferred tax expense (benefit) from
temporary differences (203) 930 (2,778)
Total $ 5,732 $ 1,033 $(1,142)
GE and GECS fi le a consolidated U.S. federal income tax return. This
enables GE to use GECS tax deductions and credits to reduce the
tax that otherwise would have been payable by GE. The GECS
effective tax rate for each period refl ects the benefi t of these tax
reductions in the consolidated return. GE makes cash payments to
GECS for these tax reductions at the time GE’s tax payments are
due. The effect of GECS on the amount of the consolidated tax
liability from the formation of the NBCU joint venture will be settled
in cash when GECS tax deductions and credits otherwise would
have reduced the liability of the group absent the tax on formation.
Consolidated U.S. earnings (loss) from continuing operations
before income taxes were $10,244 million in 2011, $5,444 million
in 2010 and $286 million in 2009. The corresponding amounts
for non-U.S. based operations were $9,854 million in 2011,
$8,641 million in 2010 and $9,578 million in 2009.
Consolidated current tax expense includes amounts appli-
cable to U.S. federal income taxes of an expense of $1,032 million
in 2011, and a benefi t of $3,027 million and $649 million in 2010
and 2009, respectively, including the benefi t from GECS deduc-
tions and credits applied against GE’s current U.S. tax expense.
Consolidated current tax expense amounts applicable to non-U.S.
jurisdictions were $4,657 million, $3,132 million and $2,192 mil-
lion in 2011, 2010 and 2009, respectively. Consolidated deferred
taxes related to U.S. federal income taxes were an expense of
$1,529 million and $1,993 million in 2011 and 2010, respectively,
and a benefi t of $2,489 million in 2009, and amounts applicable to
non-U.S. jurisdictions of a benefi t of $2,076 million, $1,178 million
and $261 million in 2011, 2010 and 2009, respectively.
Deferred income tax balances refl ect 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 recov-
erability 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 strategies. 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 indefi nitely reinvested outside the United States is
taxed at less than the U.S. rate. A signifi cant portion of this reduc-
tion depends upon a provision of U.S. tax law that defers the
imposition of U.S. tax on certain active fi nancial services income
until that income is repatriated to the United States as a divi-
dend. This provision is consistent with international tax norms
and permits U.S. fi nancial services companies to compete more
effectively with foreign banks and other foreign fi nancial institu-
tions in global markets. This provision, which expired at the end
of 2011, had been scheduled to expire and had been extended
by Congress on six previous occasions, including in December
of 2010, but there can be no assurance that it will be extended,
including retroactively. In the event the provision is not extended
after 2011, the current U.S. tax imposed on active fi nancial ser-
vices income earned outside the United States would increase,
making it more diffi cult for U.S. fi nancial services companies to
compete in global markets. If this provision is not extended, we
expect our effective tax rate to increase signifi cantly after 2012.