Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company has elected to be treated as a RIC under Subchapter M of the Code, and intends to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, the Company must, among other things, distribute to its shareholders in each taxable year generally at least 90% of the Company’s investment company taxable income, as defined by the Code, and net tax-exempt income for that taxable year. In addition, a RIC may, in certain cases, satisfy this distribution requirement by distributing dividends relating to a taxable year after the close of such taxable year under the “spillover dividend” provisions of Subchapter M. To maintain tax treatment as a RIC, the Company, among other things, intends to make the requisite distributions to its shareholders, which generally relieves the Company from corporate-level U.S. federal income taxes.

Depending on the level of taxable income earned in a tax year, the Company can be expected to carry forward taxable income (including net capital gains, if any) in excess of current year dividend distributions from the current tax year into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such taxable income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such income, the Company will accrue excise tax on estimated excess taxable income.

For the three and nine months ended September 30, 2023 we recorded U.S. federal income tax expense/(benefit) of $2.7 million and $8.5 million, respectively, including U.S. federal excise tax expense/(benefit) of $0.9 million and $3.6 million, respectively. For the three and nine months ended September 30, 2022 we recorded U.S. federal income tax expense/(benefit) of $1.6 million and $4.0 million, respectively, including no U.S. federal excise tax expense/(benefit).

Taxable Subsidiaries

Certain of the Company’s consolidated subsidiaries are subject to U.S. federal and state income taxes. For the three months ended September 30, 2023, the Company recorded a current tax benefit of $(1.0) million. For the nine months ended September 30, 2023 the Company did not record a current tax expense or benefit. For the three and nine months ended September 30, 2022, the Company recorded a current tax expense of $1.6 million and $4.0 million, respectively. The income tax expense for the Company’s taxable consolidated subsidiaries will vary depending on the level of investment income earnings and realized gains from the exits of investments held by such taxable subsidiaries during the respective periods.

The Company recorded a net deferred tax liability of $25.1 million and $16.0 million as of September 30, 2023 and December 31, 2022, respectively, for taxable subsidiaries, which is significantly related to GAAP to tax outside basis differences in the taxable subsidiaries' investment in certain partnership interests.