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Note 8 - Federal Income Tax
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 8.         Federal income tax

 

The Company has elected to be treated as a RIC under Subchapter M of the Code and to distribute substantially all of its taxable income. Accordingly, no provision for federal, state or local income tax has been recorded in the financial statements. Taxable income differs from net increase in net assets resulting from operations primarily due to unrealized appreciation on investments as investment gains and losses are not included in taxable income until they are realized.

 

The following table reconciles net increase (decrease) in net assets resulting from operations to taxable income:

 

  

Years Ended December 31,

 
  

2024

  

2023

  

2022

 
  

(In thousands)

 

Net (decrease) increase in net assets resulting from operations

 $(5,633) $(17,185) $21,151 

Net unrealized depreciation on investments

  18,785   48,780   5,552 

Other book-tax differences

  1,455   931   3,292 

Change in capital loss carry forward

  34,631   29,853   9,484 

Taxable income before deductions for distributions

 $49,238  $62,379  $39,479 

 

The tax characters of distributions paid are as follows:

 

  

Years Ended December 31,

 
  

2024

  

2023

  

2022

 
  

(In thousands)

 

Ordinary income

 $49,467  $42,576  $31,490 

Total

 $49,467  $42,576  $31,490 

 

The components of undistributed ordinary income earnings on a tax basis were as follows:

 

  

As of December 31,

 
  

2024

  

2023

  

2022

 
  

(In thousands)

 

Undistributed ordinary income

 $38,387  $38,616  $18,813 

Long term capital loss carry forward

  (137,539)  (102,908)  (73,055)

Unrealized appreciation

  14,819   14,935   18,542 

Unrealized depreciation

  (83,701)  (65,032)  (19,771)

Other temporary differences

  13,957   12,547   11,875 

Total

 $(154,077) $(101,842) $(43,596)

 

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 incur a 4% excise tax on such income, as required. For the years ended December 31, 2024 and 2023, the Company elected to carry forward taxable income in excess of current year distributions of $38.4 million and $38.6 million, respectively. At December 31, 2024 and 2023, a provision for excise tax of $1.5 million was recorded.

 

Capital losses in excess of capital gains earned in a tax year may generally be carried forward, without expiration, and used to offset capital gains, subject to certain limitations. During the years ended December 31, 2024, 2023 and 2022, the Company did not use any material capital loss carry forwards to offset capital gains.

 

For federal income tax purposes, the tax cost of investments at December 31, 2024 and 2023 was $766.8 million and $759.2 million, respectively. The gross unrealized appreciation on investments at December 31, 2024 and 2023 was $14.8 million and $14.9 million, respectively. The gross unrealized depreciation on investments at December 31, 2024 and 2023 was $83.7 million and $65.0 million, respectively.