Distributions

12 Months Ended

Dec. 31, 2023

Distributions [Abstract]

DISTRIBUTIONS

NOTE 11. DISTRIBUTIONS

The Company intends to continue to operate so as to qualify to be taxed as a RIC under the Code and, as such, the Company would not be subject to federal income tax on the portion of its taxable income and gains distributed to stockholders. To qualify to be taxed as a RIC, the Company is required, among other requirements, to distribute at least 90% of its annual investment company taxable income, as defined by the Code. The amount to be paid out as a distribution each quarter is determined by the Board and is based upon the annual taxable income estimated by the management of the Company. Income calculated in accordance with U.S. federal income tax regulations differs substantially from GAAP income. To the extent that the Company’s cumulative undistributed taxable earnings fall below the amount of distributions declared, however, a portion of the total amount of the Company’s distributions for the fiscal year may be deemed a return of capital for tax purposes to the Company’s stockholders.

The Company intends to comply with the applicable provisions of the Code pertaining to RICs to make distributions of taxable income sufficient to relieve it of substantially all federal income taxes. The Company, at its discretion, may carry forward taxable income in excess of calendar year distributions and pay a 4% excise tax on such income. The Company will accrue excise tax on estimated excess taxable income, if any, as required. The Company accrued approximately $750,000 for estimated 2023 excise tax on estimated excess undistributed taxable income. The Company incurred approximately $674,000 in excise tax relating to the tax year ended December 31, 2022. This amount was expensed and paid during the year ended December 31, 2023.

The tax character of distributions declared and paid in 2023 represented, on an estimated basis, $29,503,040 from ordinary income. The tax character of distributions declared and paid in 2022 represented, on an estimated basis, $20,897,611 from ordinary income. The tax character of distributions declared and paid in 2021 represented, on an estimated basis, $20,842,166 from ordinary income.

GAAP requires adjustments to certain components of net assets to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net asset value per share. For 2023, 2022 and 2021, the permanent differences between financial and tax reporting are noted below. These adjustments were the result of book/tax differences in the treatment of unscheduled prepayments, book/tax differences in the treatment of defaulted bonds, extinguishment fees, the treatment of CLO equity investments, non deductible excise tax paid, and adjustment to certain components of net assets from those originally published in quarterly and annual reports to conform to the current period presentation for comparative purposes.

	December 31,
	2023			2022			2021
Adjustment to accumulated net investment income	$	9,908,779		$	(40,593)		$	16,339,454
Adjustment to accumulated net realized (losses)/gains		(8,485,093	)		292,765			2,273,510
Adjustment to total distributable earnings/(accumulated losses)	$	1,423,686		$	252,172		$	18,612,964
Adjustment to capital in excess of par value	$	(1,423,686	)	$	(252,172	)	$	(18,612,964	)

The Company has adopted an “opt out” distribution reinvestment plan for its common stockholders. As a result, if the Company makes a cash distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of its common stock, unless they specifically “opt out” of the distribution reinvestment plan so as to receive cash distributions. During the years ended December 31, 2023, 2022 and 2021, the Company issued 309,016, 154,737 and 100,452 shares, respectively, of common stock to stockholders

for approximately $0.9 million, $0.5 million, and $0.4 million, respectively, in connection with the distribution reinvestment plan. During the year ended December 31, 2023 and 2022, the Company’s dividend administrator did not purchase any shares in the open market to satisfy the reinvestment portion of the Company’s dividends. During the year ended December 31, 2021, as part of the Company’s dividend reinvestment plan for its common stockholders, the Company’s dividend administrator purchased 23,202 shares of common stock for approximately $0.1 million in the open market to satisfy the reinvestment portion of the Company’s dividends.

For U.S. federal income tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. These capital losses can be carried forward for an indefinite period and will retain their character as either short-term or long-term capital losses. As of December 31, 2023, the Company had $1,454,528 of short-term capital losses and $127,471,191 of long-term capital losses available to be carried forward for an indefinite period. The tax character of distributions for the year ended December 31, 2023, represented, on an estimated basis, $0.54 per share, from ordinary income. For the year ended December 31, 2023, the amounts and sources of distributions reported are only estimates (based on an average of the reported tax character historically) and are not being provided for U.S. tax reporting purposes. Because the Company believes the historical tax characteristics of distributions is the most useful information which is readily available, the Company has used the average of all years from inception of the Company in providing the estimates herein. However, the timing and character of distributions for federal income tax purposes (which are determined in accordance with the U.S. federal tax rules which may differ from GAAP) may be materially different than the historical information the Company used in providing the estimates herein. The final determination of the source of all distributions in 2023 will be made after year-end and the amounts represented may be materially different from the amounts disclosed in the final Form 1099-DIV notice. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Company’s investment performance and may be subject to change based on tax regulations.

As of December 31, 2023, 2022 and 2021, the estimated components of distributable earnings/(accumulated losses) on a tax basis were as follow:

	December 31,
	2023			2022			2021
Distributable ordinary income	$	34,551,675		$	30,254,968		$	23,110,561
Capital loss carry forward		(128,925,720	)		(103,955,360	)		(105,858,035	)
Unrealized depreciation on investments		(213,031,716	)		(221,821,951	)		(106,574,531	)
Other timing differences		—			(1,042,092	)		(1,042,092	)
Total accumulated losses	$	(307,405,761	)	$	(296,564,435	)	$	(190,364,097	)

The 2023 amounts will be finalized before filing the U.S. federal income tax return.