INCOME TAXES

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 15. INCOME TAXES. GE Industrial and GE Capital file a consolidated U.S. federal income tax return. This enables GE Industrial and GE Capital to use tax deductions and credits of one member of the group to reduce the tax that otherwise would have been payable by another member of the group. The effective tax rate reflects the benefit of these tax reductions in the consolidated return. GE Industrial makes cash payments to GE Capital for tax reductions and GE Capital pays for tax increases at the time GE Industrial’s tax payments are due.

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.

(BENEFIT) PROVISION FOR INCOME TAXES	2020		2019		2018
Current tax expense (benefit)	$	2,123	$	2,551	$	1,743
Deferred tax expense (benefit) from temporary differences	(1,735)		(1,242)		(1,276)
Total GE Industrial	388		1,309		467
Current tax expense (benefit)	329		(720)		596
Deferred tax expense (benefit) from temporary differences	(1,191)		138		(970)
Total GE Capital	(862)		(582)		(374)
Current tax expense (benefit)	2,452		1,831		2,339
Deferred tax expense (benefit) from temporary differences	(2,926)		(1,104)		(2,245)
Total consolidated	$	(474)	$	726	$	93

CONSOLIDATED EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	2020		2019		2018
U.S. earnings (loss)	$	(5,325)	$	506	$	(9,861)
Non-U.S. earnings (loss)	10,522		643		(11,126)
Total	$	5,197	$	1,149	$	(20,987)

CONSOLIDATED (BENEFIT) PROVISION FOR INCOME TAXES	2020		2019		2018
U.S. Federal
Current	$	939	$	146	$	1,019
Deferred	(2,032)		(1,266)		(3,144)
Non - U.S.
Current	1,331		2,008		1,132
Deferred	(793)		106		1,197
Other	80		(267)		(111)
Total	$	(474)	$	726	$	93

INCOME TAXES PAID (RECOVERED)	2020		2019		2018
GE Industrial	$	2,399	$	2,183	$	1,803
GE Capital	(1,108)		45		65
Total(a)	$	1,291	$	2,228	$	1,868

(a) Includes tax payments reported in discontinued operations.

RECONCILIATION OF U.S. FEDERAL STATUTORY INCOME TAX RATE TO ACTUAL INCOME TAX RATE	Consolidated						GE Industrial						GE Capital
	2020		2019		2018		2020		2019		2018		2020		2019		2018
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
Tax on global activities including exports(a)	(28.5)		91.0		(5.0)		(16.3)		61.0		(5.1)		13.8		8.1		3.2
U.S. business credits(b)	(3.3)		(22.5)		2.6		(1.0)		(6.4)		0.4		4.7		21.9		120.0
Goodwill impairments	6.9		26.0		(21.5)		2.5		16.6		(21.9)		(8.3)		—		—
Tax Cuts and Jobs Act enactment	0.9		0.2		(0.2)		0.7		5.6		0.5		0.1		15.2		(36.5)
All other – net(c)(d)(e)	(6.1)		(52.5)		2.7		(1.6)		(25.1)		2.8		9.8		23.1		(8.0)
	(30.1)		42.2		(21.4)		(15.7)		51.7		(23.3)		20.1		68.3		78.7
Actual income tax rate	(9.1)	%	63.2	%	(0.4)	%	5.3	%	72.7	%	(2.3)	%	41.1	%	89.3	%	99.7	%

(a)For the year ended December 31, 2020, included (27.8)%, (18.5)% and 4.6% in consolidated, GE Industrial and GE Capital, respectively, related to the sale of our Biopharma business. For the year ended December 31, 2019, included 55.1% and 35.1% in consolidated and GE Industrial, respectively related to the sale of our BioPharma business.

(b)U.S. general business credits, primarily the credit for energy produced from renewable sources and the credit for research performed in the U.S.

(c)For the year ended December 31, 2020, included (2.7)%, (0.9)% and 3.6% in consolidated, GE Industrial and GE Capital, respectively for the resolution of the IRS audit of our consolidated U.S. income tax returns for 2014-2015. For the year ended December 31, 2019, included (32.9)%, (19.7)% and 3.5% in consolidated, GE Industrial and GE Capital, respectively for the resolution of the IRS audit of our consolidated U.S. income tax returns for 2012-2013.

(d)For the year ended December 31, 2020, included (3.9)%, (2.1)% and 2.2% in consolidated, GE Industrial and GE Capital, respectively, related to deductible stock losses. For the year ended December 31, 2019, included (12.5)% and (8.0)% in consolidated and GE Industrial, respectively, related to the disposition of the Digital ServiceMax business. For the year ended December 31, 2018, included 2.8% and 2.8% in consolidated and GE Industrial, respectively, related to deductible stock losses.

(e)Included for each period, the expense or benefit for Other taxes reported above in the consolidated (benefit) provision for income taxes, net of 21.0% federal effect.

U.S. TAX REFORM. On December 22, 2017, the U.S. enacted legislation commonly known as the Tax Cuts and Jobs Act (U.S. tax reform) that lowered the statutory tax rate on U.S. earnings to 21%, taxes historic foreign earnings at a reduced rate of tax, establishes a territorial tax system and enacts new taxes associated with global operations.

The impact of enactment of U.S. tax reform was recorded in 2017 on a provisional basis as the legislation provided for additional guidance to be issued by the U.S. Department of the Treasury on several provisions including the computation of the transition tax. This amount was adjusted in both 2018 and 2019 based on guidance issued during each of these years. Additional guidance may be issued after 2020 and any resulting effects will be recorded in the quarter of issuance. Additionally, as part of U.S. tax reform, the U.S. has enacted a minimum tax on foreign earnings (global intangible low tax income). We have not made an accrual for the deferred tax aspects of this provision.

For the year ended December 31, 2018, we finalized our provisional estimate of the enactment of U.S. tax reform and recorded an additional tax expense of $41 million. For the year ended December 31, 2019, we recorded an additional tax expense of $2 million based on the issuance in January 2019 of final regulations on the transition tax on historic foreign earnings. The cash impact of the transition tax on historic foreign earnings was largely offset by accelerated use of deductions and tax credits and was substantially incurred with the filing of the 2017 tax return with no amount subject to the deferred payment provision provided under law. For the year ended December 31, 2020, we recorded an additional tax expense of $49 million to reflect the impact of voluntary adjustments we provided the government reflecting finalization of amounts reported on the 2017 tax return. There could be further adjustment to the transition tax as a result of the current audit of the 2017 and 2018 tax years.

UNRECOGNIZED TAX POSITIONS. Annually, we file over 3,600 income tax returns in almost 300 global taxing jurisdictions. We are under examination or engaged in tax litigation in many of these jurisdictions. The IRS is currently auditing our consolidated U.S. income tax returns for 2016-2018. In December 2020, the IRS completed the audit of our consolidated U.S. income tax returns for 2014-2015. The Company recognized a continuing operations benefit of $140 million plus an additional net interest benefit of $96 million. In addition, GE Capital recorded a benefit in discontinued operations of $130 million of tax benefits and $25 million of net interest benefits. In June 2019, the IRS completed the audit of our consolidated U.S. income tax returns for 2012-2013. The Company recognized a continuing operations tax benefit of $378 million plus an additional net interest benefit of $107 million. GE Capital recorded an additional non-cash benefit in discontinued operations of $332 million of tax benefits and $46 million of net interest benefits. See Note 2 for further information. The United Kingdom tax authorities disallowed interest deductions claimed by GE Capital for the years 2004-2015 that could result in a potential impact of approximately $1.1 billion, which includes a possible assessment of tax and reduction of deferred tax assets, not including interest and penalties. We are contesting the disallowance. We comply with all applicable tax laws and judicial doctrines of the United Kingdom and believe that the entire benefit is more likely than not to be sustained on its technical merits. We believe that there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties.

The balance of unrecognized tax benefits, the amount of related interest and penalties we have provided and what we believe to be the range of reasonably possible changes in the next 12 months were:

UNRECOGNIZED TAX BENEFITS December 31	2020		2019		2018
Unrecognized tax benefits	$	4,191	$	4,169	$	5,563
Portion that, if recognized, would reduce tax expense and effective tax rate(a)	2,986		2,701		4,265
Accrued interest on unrecognized tax benefits	628		722		934
Accrued penalties on unrecognized tax benefits	179		195		182
Reasonably possible reduction to the balance of unrecognized tax benefits in succeeding 12 months	0-350		0-700		0-1,300
Portion that, if recognized, would reduce tax expense and effective tax rate(a)	0-250		0-650		0-1,200

(a) Some portion of such reduction may be reported as discontinued operations.

UNRECOGNIZED TAX BENEFITS RECONCILIATION	2020		2019		2018
Balance at January 1	$	4,169	$	5,563	$	5,449
Additions for tax positions of the current year	836		403		300
Additions for tax positions of prior years	326		500		945
Reductions for tax positions of prior years(a)	(863)		(1,927)		(905)
Settlements with tax authorities	(127)		(155)		(64)
Expiration of the statute of limitations	(151)		(214)		(162)
Balance at December 31	$	4,191	$	4,169	$	5,563

(a)For 2019, reductions included $710 million related to the completion of the 2012-2013 IRS audit and $442 million related to the deconsolidation of Baker Hughes.

We classify interest on tax deficiencies as interest expense; we classify income tax penalties as provision for income taxes. For the years ended December 31, 2020, 2019 and 2018, $(30) million, $(93) million and $127 million of interest expense (income), respectively, and $(13) million, $20 million and $(7) million of tax expense (income) related to penalties, respectively, were recognized in our consolidated Statement of Earnings (Loss).

DEFERRED INCOME TAXES. We have not provided deferred taxes on cumulative net earnings of non-U.S. affiliates and associated companies of approximately $42 billion that have been reinvested indefinitely. Given U.S. tax reform, substantially all of our prior unrepatriated net earnings were subject to U.S. tax and accordingly we expect to have the ability to repatriate available non-U.S. cash without additional federal tax cost, and any foreign withholding tax on a repatriation to the U.S. would potentially be partially offset by a U.S. foreign tax credit. However, because most of these earnings have been reinvested in active non-U.S. business operations, as of December 31, 2020, we have not decided to repatriate these earnings to the U.S. It is not practicable to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.

The following table presents our net deferred tax assets and net deferred tax liabilities attributable to different tax jurisdictions or different tax paying components.

DEFERRED INCOME TAXES December 31	2020		2019
GE Industrial	$	10,069	$	8,888
GE Capital	3,610		2,500
Total assets	13,679		11,388
GE Industrial	(719)		(699)
GE Capital	(879)		(800)
Total liabilities	(1,598)		(1,499)
Net deferred income tax asset (liability)	$	12,081	$	9,889

COMPONENTS OF THE NET DEFERRED INCOME TAX ASSET (LIABILITY) December 31	2020		2019
Principal pension plans	$	3,666	$	4,016
Provision for expenses	2,258		1,990
Other compensation and benefits	1,968		2,206
Principal retiree benefit plans	1,026		1,023
Capitalized expenditures	993		860
Non-U.S. loss carryforwards(a)	814		602
Intangible assets	486		1,315
Baker Hughes investment	(973)		(1,256)
Depreciation	(676)		(823)
Contract assets	(460)		(1,232)
Other – net(b)	248		(512)
GE Industrial	9,350		8,189
Insurance company loss reserves	1,684		1,715
Non-U.S. loss carryforwards(a)	1,194		1,274
Capitalized expenditures	799		742
Operating leases	(1,900)		(2,218)
Financing leases	(393)		(477)
Other – net(b)	1,347		664
GE Capital	2,731		1,700
Net deferred income tax asset (liability)	$	12,081	$	9,889

(a)Net of valuation allowances of $5,934 million and $4,801 million for GE Industrial and $265 million and $201 million for GE Capital as of December 31, 2020 and 2019, respectively. Of the net deferred tax asset as of December 31, 2020 of $2,008 million, $19 million relates to net operating loss carryforwards that expire in various years ending from December 31, 2021 through December 31, 2023; $112 million relates to net operating losses that expire in various years ending from December 31, 2024 through December 31, 2040 and $1,957 million relates to net operating loss carryforwards that may be carried forward indefinitely.

(b) Included valuation allowances related to assets other than non-U.S. loss carryforwards of $898 million and $1,897 million for GE Industrial and $221 million and $248 million for GE Capital as of December 31, 2020 and 2019, respectively.