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Income Taxes
12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

Note 10. Income Taxes

 

The Company intends to elect to be treated as a RIC under the Internal Revenue Code (“Code”) for its taxable year end December 31, 2022. As a RIC, the Company is not subject to federal income tax on the portion of its taxable income and gains distributed currently to its stockholders as a dividend. The Company anticipates distributing substantially all of its taxable income and gains, within the Subchapter M rules, and thus the Company anticipates that it will not incur any federal or state income tax at the RIC level. As a RIC, the Company is also subject to a federal excise tax based on distributive requirements of its taxable income on a calendar year basis (e.g., calendar year 2022). Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4% excise tax on such income, to the extent required.

  

The permanent differences for tax purposes from distributable earnings to additional paid in capital were reclassified for tax purposes for the tax years ended December 31, 2022 and December 31, 2021. These reclassifications have no impact on net assets.

 

    Year Ended December 31,  
    2022     2021  
Increase (decrease) in distributable earnings   $ -     $ -  
Increase (decrease) in capital in excess of par value   $ -     $ -  

 

The following reconciles net increase in net assets resulting from operations to taxable income for the years ended December 31, 2022 and December 31, 2021:

 

   Year Ended  December 31, 
   2022   2021 
Net increase (decrease) in net assets resulting from operations  $(74,482,335)  $19,059,718 
Net change in unrealized appreciation (depreciation) from investments   107,432,980    8,527,786 
Other book tax differences   8,109,784    (897,245)
Taxable income before deductions for distributions  $41,060,429   $26,690,259 

 

    Year Ended December 31,  
    2022     2021  
Distributions paid from:            
Ordinary income   $ 43,482,016     $ 22,163,852  
Capital gains     573,101       3,788,641  
Return of Capital     -       -  
Total   $ 44,055,117     $ 25,952,493  

 

For the years ended December 31, 2022 and December 31, 2021, the components of accumulated earnings on a tax basis were as follows:

 

    Year Ended
December 31,
2022
   

Year Ended

December 31,

2021

 
Undistributed net investment income (loss)   $ -     $ 1,834,053  
Undistributed capital gains     -       513,796  
Other accumulated gain (loss)     (7,575,518 )     (101,573 )
Net unrealized appreciation (depreciation)     (102,926,664 )     5,788,994  
Total   $ (110,502,182 )   $ 8,035,270  

 

Capital losses can be carried forward indefinitely to offset future capital gains. As of December 31, 2022 and December 31, 2021, the Company had no capital loss carryforwards.

 

As of December 31, 2022 and December 31, 2021, the Company’s aggregate unrealized appreciation and depreciation on investments based on cost for U.S. federal income tax purposes was as follows:

 

    December 31,     December 31,  
    2022     2021  
Tax cost     1,120,121,398       1,188,452,438  
Gross unrealized appreciation     1,008,264       9,331,858  
Gross unrealized depreciation     (103,934,928 )     (3,542,964 )
Net unrealized appreciation/(depreciation) on investments   $ (102,926,664 )   $ 5,788,994  

 

The Company adopted FASB ASC Topic 740, Accounting for Uncertainty in Income Taxes (“ASC 740”) as of January 23, 2020, commencement of operations. ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the consolidated financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. The Company recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. As of December 31, 2022, management has analyzed the Company’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken in the Company’s current year tax return. The Company identifies its major tax jurisdiction as U.S. Federal. The 2020-2022 tax years remain subject to examination by U.S. federal, state and local authorities. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof.