reduction in the second quarter reflecting a favorable tax audit settlement and benefits from an overseas tax program. During the fourth quarter of 2002, International Paper completed a review of its deferred income tax accounts, including the effects of state tax credits and the taxability of the Company’s operations in various state taxing jurisdictions. As a result of this review, the Company recorded a decrease of approximately $46 million in the income tax provision in the 2002 fourth quarter, reflecting the effect of the estimated state income tax effective rate applied to these deferred tax items. International Paper has federal and non-U.S. net operating loss carryforwards that expire as follows: years 2005 through 2014 - $169 million, years 2015 through 2024 - $2.7 billion, and indefinite carryforwards - $829 million. International Paper has tax benefits from net operating loss carryforwards for state taxing jurisdictions of approximately $326 million that expire as follows: years 2005 through 2014 - $84 million, and years 2015 through 2024 - $242 million. International Paper also has federal, non-U.S. and state tax credit carryforwards that expire as follows: years 2005 through 2014 - $52 million, years 2015 through 2024 - $119 million, and indefinite carryforwards - $405 million. Deferred taxes are not provided for temporary differences of approximately $2.7 billion, $2.5 billion and $1.8 billion as of December 31, 2004, 2003 and 2002, respectively, representing earnings of non-U.S. subsidiaries that are intended to be permanently reinvested. Computation of the potential deferred tax liability associated with these undistributed earnings and other basis differences are not practicable. International Paper is currently being audited by various federal, state and non-U.S. taxing authorities for the tax periods 1995 through 2003. Some of these audits are expected to conclude in 2005. The Company believes that it is adequately accrued for any possible audit adjustments. While the overall resolution of these examinations cannot be determined at this time, the Company may realize a tax benefit, the effects of which could be material to the reported operating results for any given period, if such positions are ultimately sustained. In October 2004, the American Jobs Creation Act of 2004 (the Act) was signed into law. The Act provides for a special one-time deduction of 85% of certain foreign earnings that are repatriated. International Paper may elect to apply this provision to qualifying earnings repatriations in 2005. As of December 31, 2004, International Paper has started an evaluation of the effects of the repatriation provision, but does not expect to be able to complete this evaluation until the second quarter of 2005. While no repatriation decisions have been made as of December 31, 2004, the range of possible amounts that the Company is considering for repatriation is between zero and $1.8 billion. The related potential range of deferred taxes that would have to be provided should a repatriation decision be made is between zero and $300 million. NOTE 10 COMMITMENTS AND CONTINGENT  LIABILITIES Certain property, machinery and equipment are leased under cancelable and non-cancelable agreements. At December 31, 2004, total future minimum rental commitments under non- cancelable leases were $918 million, due as follows: 2005 - $211 million; 2006 - $170 million; 2007 - $141 million; 2008 - $115 million; 2009 - $67 million; and thereafter - $214 million. Rent expense was $259 million, $262 million and $267 million for 2004, 2003 and 2002, respectively. Unconditional purchase obligations have been entered into during the ordinary course of business for the purchase of certain pulpwood, logs, wood chips, raw materials, energy and services. At December 31, 2004, total unconditional purchase obligations were $6,853 million, due as follows: 2005 - $2,723 million; 2006 - $447 million; 2007 - $354 million; 2008 - $337 million; 2009 - $292 million; and thereafter - $2,700 million. International Paper entered into an agreement in 2000 to guarantee, for a fee, an unsecured contractual credit agreement of an unrelated third party customer. The guarantee, which expires in 2008, was made in exchange for a ten-year contract as the exclusive paper supplier to the customer. Both the loan to the customer and the guarantee are unsecured. Under the terms of the guarantee, International Paper could be required to make future payments up to a maximum of $110 million if the third party were to default under the credit agreement. There is no liability recorded on International Paper’s books for the guarantee. It is possible that payments may be required under this guarantee arrangement in the future, although it is uncertain how much or when such payments, if any, might be required. In connection with sales of businesses, property, equipment, forestlands, and other assets, International Paper commonly makes representations and warranties relating to such businesses or assets, and may enter into indemnification arrangements with respect to tax and environmental liabilities, breaches of representations and warranties, and other matters. Where any liabilities for such matters are probable and subject to reasonable estimation, accrued liabilities are recorded at the time of sale as a cost of the transaction. International Paper believes that possible future unrecorded liabilities for these matters, if any, would not have a material adverse effect on its consolidated financial statements. 59