6. Income Taxes

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		Income Tax Expense		For the Years Ended December 31,
				2002					2001				2000
				(in millions)
		Current income taxes
		Federal		$	85				$	826			$	679
		State			13					106				109
		Foreign			25					24				18
		Total current income taxes			123					956				806
		Deferred income taxes, net
		Federal			440					165				187
		State			21					9				13
		Foreign			48					33				29
		Total deferred income taxes, net			509					207				229
		Investment tax credit amortization			(14	)				(13	)			(15	)
		Total income tax expense		$	618				$	1,150	(a)		$	1,020

		Earnings before Income Taxes		For the Years Ended December 31,
				2002					2001					2000
				(in millions)
		Domestic		$	1,621				$	2,943				$	2,587
		Foreign			31					201					209
		Total Income		$	1,652				$	3,144				$	2,796

		Income Tax Expense Reconciliation to Statutory Rate		For the Years Ended December 31,
				2002					2001					2000
				(in millions)
		Income tax, computed at the statutory rate of 35%		$	578				$	1,100				$	979
		State income tax, net of federal income tax effect			22					74					75
		Tax differential on foreign earnings			62					(13	)				(26	)
		Employee Stock Ownership Plan dividends			(33	)				(2	)				—
		Other items, net			(11	)				(9	)				(8	)
		Total income tax expense		$	618				$	1,150				$	1,020
		Effective tax rate			37.4	%				36.6	%				36.5	%

		Net Deferred Income Tax Liability Components		December 31,
				2002					2001
				(in millions)
		Deferred credits and other liabilities		$	1,540				$	544
		Other			145					158
		Total deferred income tax assets			1,685					702
		Valuation allowance			(41	)				(17	)
		Net deferred income tax assets			1,644					685
		Investments and other assets			(1,043	)				(725	)
		Accelerated depreciation rates			(4,224	)				(3,171	)
		Regulatory assets and deferred debits			(856	)				(816	)
		Total deferred income tax liabilities			(6,123	)				(4,712	)
		Total net deferred income tax liabilities		$	(4,479	)			$	(4,027	)

Valuation allowances have been established for certain foreign net operating loss carryforwards that reduce deferred tax assets to an amount that will, more likely than not, be realized. The net change in the total valuation allowance is included in the tax differential on foreign earnings line of the Statutory Rate Reconciliation.

Deferred income taxes have not been provided on the undistributed earnings of Duke Energy’s foreign subsidiaries as such amounts are deemed to be permanently reinvested.

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