Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

The tax character of shareholder distributions attributable to the fiscal years ended December 31, 2023, 2022 and 2021 were as follows:

	Twelve Months Ended		Twelve Months Ended		Twelve Months Ended
	December 31, 2023		December 31, 2022		December 31, 2021
Ordinary Income (1)	$	151,336	$	124,760	$	225,522
Long Term Capital Gains		28,630		19,562		35,968
Total	$	179,966	$	144,322	$	261,490

(1)For the years ended December 31, 2023, 2022 and 2021, 87.01%, 87.86%, and 84.46% of ordinary income qualified as interest related dividend which is exempt from U.S. withholding tax applicable to non-U.S. shareholders.

The tax basis components of distributable earnings for the years ended December 31, 2023, 2022 and 2021 were as follows:

	December 31, 2023			December 31, 2022			December 31, 2021
Undistributed net investment income - tax basis	$	85,002		$	36,436		$	17,209
Undistributed net realized gains - tax basis		6,562			26,377			14,818
Net unrealized gains on investments		23,675			3,823			77,220
Other temporary differences		(14,463	)		(10,180	)		(19,144	)
Total distributable earnings - book basis	$	100,776		$	56,456		$	90,103

The following reconciles increase in net assets resulting from operations for the fiscal years ended December 31, 2023, 2022 and 2021, to taxable income at December 31, 2023, 2022 and 2021:

	Twelve Months Ended			Twelve Months Ended			Twelve Months Ended
	December 31, 2023			December 31, 2022			December 31, 2021
Increase in net assets resulting from    operations	$	222,023		$	108,053		$	211,780
Adjustments:
Net unrealized (gains) losses on investments		(13,191	)		74,969			(40,546	)
Other income for tax purposes, not book		2,680			688			4,957
Deferred organization costs		(100	)		(100	)		(100	)
Other expenses not currently deductible		2,263			2,621			391
Other book-tax differences		(4,959	)		(11,123	)		(3,771	)
Taxable Income	$	208,716		$	175,108		$	172,711

Note: Taxable income is an estimate and is not fully determined until the Company’s tax return is filed. The Company's tax year end is currently March 31, however the Company intends to change its tax year end to December 31 during calendar year 2024.

Taxable income generally differs from increase in net assets resulting from operations due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized gains or losses, as unrealized gains or losses are generally not included in taxable income until they are realized.

The Company makes certain adjustments to the classification of stockholders’ equity 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 distributable earnings, as appropriate. In addition, due to the Company’s differing fiscal, tax, and excise tax year ends, the best estimates available are recorded to the above accounts in the period that such differences arise or are identifiable.

During the period April 1, 2023 through December 31, 2023, the Company increased distributable earnings and decreased additional paid in capital by $1.9 million which was primarily attributable to U.S. federal excise taxes.

During the period April 1, 2022 through December 31, 2022, the Company increased distributable earnings and decreased additional paid in capital by $2.3 million which was primarily attributable to U.S. federal excise taxes.

During the period April 1, 2021 through December 31, 2021, the Company increased distributable earnings and decreased additional paid in capital by $0.1 million which was primarily attributable to U.S. federal excise taxes.

The Company’s wholly-owned subsidiary, Sixth Street SL Holding, LLC, is a taxable subsidiary in which the Company holds certain equity investments. Sixth Street SL Holding, LLC is not consolidated for U.S. federal income tax purposes and may generate income tax expense as a result of its ownership of certain portfolio companies. The income tax expense, or benefit, and the related tax assets and liabilities, if any, are reflected in our Statement of Operations.

As of December 31, 2023, the Company had a deferred tax liability of $2.8 million pertaining to unrealized gains, related to seven of its investments. Given the unrealized gains generated by this entity, the deferred tax liability has been offset by a deferred tax asset of $0.9 million pertaining to operating losses. The Company recorded a current tax expense of $0.1 million and a deferred tax benefit of $0.6 million for the year ended December 31, 2023.

As of December 31, 2022, the Company had a deferred tax liability of $3.3 million pertaining to unrealized gains, related to five of its investments. Given the unrealized gains generated by this entity, the deferred tax liability has been offset by a deferred tax asset of $0.8 million pertaining to operating losses.

As of December 31, 2021, the Company had a deferred tax liability of $2.8 million pertaining to unrealized gains, related to six of its investments. Given the unrealized gains generated by the entity, the deferred tax liability has been offset by a deferred tax asset of $0.9 million pertaining to operating losses. The Company carried back a portion of its operating losses to the previous tax years generating a $0.3 million tax refund.

The tax cost of the Company’s investments as of December 31, 2023 was $3,256,630, resulting in estimated gross unrealized gains and losses of $159,281 and $135,606, respectively. The tax cost of the Company’s investments as of December 31, 2022 was $2,787,005, resulting in estimated gross unrealized gains and losses of $109,609 and $105,786, respectively. The tax cost of the Company’s investments as of December 31, 2021 was $2,445,863, resulting in estimated gross unrealized gains and losses of $156,819 and $79,599, respectively.

To the extent that the Company determines that its estimated current year annual taxable income will exceed its estimated current year dividends from such taxable income, the Company accrues excise tax on estimated excess taxable income. For the year ended December 31, 2023, 2022 and 2021, a net expense of $2.3 million, $2.2 million and $0.7 million, respectively, was recorded for U.S. federal excise tax.