6. Income Taxes

	For the Years Ended December 31,
	2003			2002		2001
	(in millions)
Current income taxes
Federal	$	(232)		$	84	$	823
State		(78)			14		106
Foreign		130			18		27
Total current income taxes		(180)			116		956
Deferred income taxes
Federal		(472)			440		165
State		(9)			21		9
Foreign		(33)			48		33
Total deferred income taxes		(514)			509		207
Investment tax credit amortization		(13)			(14)		(13)
Total income tax (benefit) expense from continuing operations	$	(707)	(a)	$	611	$	1,150	(b)

(a) Excludes $94 million of deferred federal, state and foreign tax benefits related to the cumulative effect of changes in accounting principles recorded net of tax.

(b) Excludes $59 million of deferred federal and state tax benefits related to the cumulative effect of change in accounting principle recorded net of tax.

The taxes recorded for discontinuing operations are excluded from the continuing operations section above and are presented as a separate column in Note 12.

(Loss) Earnings from Continuing Operations before Income Taxes

	For the Years Ended December 31,
	2003		2002		2001
	(in millions)
Domestic	$	(2,013)	$	1,619	$	2,930
Foreign		301		287		219
Total (loss) income	$	(1,712)	$	1,906	$	3,149

Income Tax (Benefit) Expense from Continuing Operations Reconciliation to Statutory Rate

	For the Years Ended December 31,
	2003			2002			2001
	(in millions)
Income tax (benefit) expense, computed at the statutory rate of 35%	$	(599)		$	667		$	1,102
State income tax, net of federal income tax effect		(57)			23			74
Tax differential on foreign earnings		(9)			(34)			(17)
Employee stock ownership plan dividends		(20)			(33)			(2)
Other items, net		(22)			(12)			(7)
Total income tax (benefit) expense from continuing operations	$	(707)		$	611		$	1,150
Effective tax rate		41.3	%		32.1	%		36.5	%

Net Deferred Income Tax Liability Components

	December 31,
	2003		2002
	(in millions)
Deferred credits and other liabilities	$	1,190	$	1,540
Other		38		145
Total deferred income tax assets		1,228		1,685
Valuation allowance		(39)		(41)
Net deferred income tax assets		1,189		1,644
Investments and other assets		(985)		(1,043)
Accelerated depreciation rates		(3,006)		(4,224)
Regulatory assets and deferred debits		(1,059)		(856)
Total deferred income tax liabilities		(5,050)		(6,123)
Total net deferred income tax liabilities	$	(3,861)	$	(4,479)

The above amounts have been classified in the Consolidated Balance Sheets as follows:

Deferred Tax Liabilities

	December 31,
	2003		2002
	(in millions)
Current deferred tax assets, included in other current assets	$	62	$	59
Non-current deferred tax assets, included in other investments and other assets		197		296
Non-current deferred tax liabilities		(4,120)		(4,834)
Total net deferred income tax liabilities	$	(3,861)	$	(4,479)

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 "Tax differential on foreign earnings" of the Reconciliation to Statutory Rate.

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. The cumulative undistributed earnings as of December 31, 2003, on which Duke Energy has not provided deferred income taxes, is approximately $630 million. During 2003 Duke Energy utilized certain losses that relate to the foreign currency adjustment in the amount of $114 million.