Kayne Anderson BDC, Inc. Income Taxes Disclosure

Note 10. Income Taxes

 

The Company has elected to be treated as a RIC under the Code beginning with the taxable year end December 31, 2021. As a RIC, the Company is not subject to a federal excise tax based on distributive requirements of its taxable income on a calendar year basis. 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 Company makes certain adjustments to the classification of net assets as a result of permanent book-to-tax differences, which include differences in the book and tax basis of certain assets and liabilities, and nondeductible federal taxes or losses among other items. To the extent these differences are permanent, they are charged or credited to additional paid in capital, or total distributable earnings (losses), as appropriate.

 

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, 2025, 2024 and 2023.

 

These reclassifications have no impact on net assets.

 

		For the years ended December 31,
		2025				2024				2023
Increase (decrease) in distributable earnings		$	431			$	819			$	101
Increase (decrease) in additional paid-in capital		$	(431	)		$	(819	)		$	(101	)

 

Taxable income generally differs from the net increase in net assets resulting from operations for financial reporting purposes due to (1) unrealized appreciation (depreciation) on investments, as gains and losses are generally not included in taxable income until these are realized; (2) income or loss recognition on exited investments; (3) non-deductible U.S. federal excise taxes; and (4) other non-deductible expense.

 

The following reconciles net increase in net assets resulting from operations to taxable income for the years ended December 31, 2025, 2024 and 2023:

 

		For the years ended December 31,
		2025				2024				2023
Net increase (decrease) in net assets resulting from operations		$	93,706			$	131,940			$	77,075
Net change in unrealized losses (gains) from investments, net of deferred income tax expense, if any			23,827				(2,098	)			(2,944	)
Net realized gains from investments(1)			-				(570	)			-
Non-deductible expenses, including excise taxes and offering costs disallowed			431				819				101
Capital loss carryforward			79				-				10,686
Other book tax differences			(65	)			(66	)			(65	)
Taxable income before deductions for distributions		$	117,978			$	130,025			$	84,853

 

(1)

The realized gains of $570 are offset by capital losses generated for the year ended December 31, 2023 of $10,686.

For income tax purposes, distributions made to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof.

 

For the years ended December 31, 2025, 2024 and 2023, the Company incurred $431, $817 and $101, respectively, of U.S. federal excise tax.

 

The final determination of tax character will not be made until the Company files its tax return for each tax year and the tax characteristics of all distributions will be reported to stockholders on Form 1099 after the end of each calendar year. The tax character of distributions paid to stockholders during the tax years ended December 31, 2025, 2024 and 2023 were as follows.

 

		For the years ended December 31,
		2025				2024				2023
Ordinary income		$	126,150			$	111,908			$	81,617
Capital gains			-				-				-
Return of capital			-				-				-
Total		$	126,150			$	111,908			$	81,617

 

For the years ended December 31, 2025, 2024 and 2023, the components of accumulated earnings on a tax basis were as follows.

 

		For the years ended December 31,
		2025				2024				2023
Undistributed net investment income (loss)		$	14,173			$	22,345			$	4,227
Undistributed capital gains			-				-				-
Capital loss carryforward			(13,436	)			(13,357	)			(10,686	)
Other accumulated gain (loss)			-				-				-
Other temporary book / tax differences			(662	)			(727	)			(792	)
Net unrealized appreciation (depreciation), net of deferred income tax expense			1,787				25,614				20,275
Total		$	1,862			$	33,875			$	13,024

 

Capital losses can be carried forward indefinitely to offset future capital gains. As of December 31, 2025, the Company had a capital loss carryforward of $401, which was characterized as short-term, and $13,035, which was characterized as long-term. As of December 31, 2024, the Company had a capital loss carryforward of $401, which was characterized as short-term, and $12,956, which was characterized as long-term. As of December 31, 2023, the Company had a capital loss carryforward of $263, which was characterized as short-term, and $10,423, which was characterized as long-term.

 

As of December 31, 2025, 2024 and 2023, the Company’s aggregate unrealized appreciation and depreciation on investments based on cost for U.S. federal income tax purposes was as follows:

 

		For the years ended December 31,
		2025				2024				2023
Tax cost		$	2,219,668			$	2,017,154			$	1,356,025
Gross unrealized appreciation			40,132				36,977				25,718
Gross unrealized depreciation			(35,970	)			(10,646	)			(5,443	)
Net unrealized appreciation/(depreciation) on investments		$	4,162			$	26,331			$	20,275

 

KABDC Corp, LLC, a wholly owned subsidiary, has elected to be treated as a corporation for U.S. tax purposes. As such, KABDC Corp, LLC is subject to U.S. Federal, state and local taxes. For year ended December 31, 2025, KABDC Corp, LLC had a deferred income tax expense of $1,658 and its net deferred tax liability was $2,375. For the year ended December 31, 2024, KABDC Corp, LLC had a deferred tax expense and net deferred tax liability of $717. The net deferred tax liability of $2,375 and $717 is included in accrued expense and other liabilities on the Company’s Consolidated Statement of Assets and Liabilities as of December 31, 2025 and 2024, respectively. For the year ended December 31, 2023, KABDC Corp, LLC did not have a material provision for income taxes.

FASB ASC Topic 740, Accounting for Uncertainty in Income Taxes (“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, 2025, 2024 and 2023, 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 is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months. 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.