INCOME TAXES (Tables)

12 Months Ended

Mar. 31, 2023

Our distributions for the tax years ended December 31, 2022 and 2021 were as follows:


Payment Date	Cash Dividend
Tax Year Ended December 31, 2022
March 31, 2022	$	0.48
June 30, 20221	0.63
September 30, 2022	0.50
December 31, 20222	0.57
	$	2.18

Tax Year Ended December 31, 2021
March 31, 20213	$	0.52
June 30, 20213	0.53
September 30, 20213	0.54
December 31, 20214	0.97
	$	2.56


Tax Year Ended December 31, 2020
March 31, 20203	$	0.51
June 30, 20203	0.51
September 30, 20203	0.51
December 31, 20203	0.51
	$	2.04

1On June 30, 2022, CSWC paid a regular dividend of $0.48 per share and a special dividend of $0.15 per share.

2On December 31, 2022, CSWC paid a regular dividend of $0.52 per share and a supplemental dividend of $0.05 per share.

3On each of these dates, the dividend paid included a supplemental dividend of $0.10 per share.

4On December 31, 2021, CSWC paid a regular dividend of $0.47 per share and a supplemental dividend of $0.50 per share.

The tax character of distributions paid for the tax years ended December 31, 2022 and 2021 was as follows (amounts in thousands):


	Twelve Months Ended December 31,
	2022		2021
Ordinary income	$	60,960	$	56,633
Distributions of long term capital gains	—		—
Distributions on tax basis1	$	60,960	$	56,633

1Includes only those distributions which reduce estimated taxable income.

Book and Tax Basis Differences Relating to Dividends and Distributions

Book and tax basis differences relating to dividends and distributions to our shareholders and other permanent book and tax differences are typically reclassified among the CSWC’s capital accounts. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from U.S. GAAP; accordingly, for the years ended March 31, 2023 and 2022, CSWC reclassified for book purposes amounts arising from permanent book/tax differences related to the tax treatment of return of capital and/or deemed distributions, tax treatment of investments upon disposition, and non-deductible expenses, as follows (amounts in thousands):


	Years Ended March 31,
	2023		2022
Additional capital	$	(6,420)	$	(7,648)
Total distributable earnings	6,420		7,648

Schedule of Net Assets Resulting from Operations to Estimated RIC Taxable Income

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


	Years Ended March 31,
Reconciliation of RIC Distributable Income1	2023		2022		2021
Net increase in net assets from operations	$	33,093	$	42,815	$	50,883
Net unrealized depreciation (appreciation) on investments	18,589		(11,467)		(28,755)
Income/gain (expense/loss) recognized for tax on pass-through entities	962		3,753		(11,000)
(Gain) loss recognized on dispositions	(1,473)		152		2,206
Capital loss carryover2	12,796		(878)		17,924
Net operating income - wholly-owned subsidiary	809		(10,757)		(378)
Dividend income from wholly-owned subsidiary	1,068		4,000		—
Non-deductible tax expense	628		65		1,066
Loss on extinguishment of debt	(2,726)		12,268		—
Non-deductible compensation	3,243		3,679		—
Compensation related book/tax differences	812		36		—
Interest on non-accrual loans	3,343		4,171		—
Other book/tax differences	1,191		1,530		870
Estimated distributable income before deductions for distributions	$	72,335	$	49,367	$	32,816
Distributions3:
Ordinary	$	70,034	$	57,518	$	38,917
Capital gains	—		—		—
Deemed distributions	—		—		—
Distributions payable3	—		—		—
Estimated annual RIC undistributed taxable income	$	2,301	$	(8,151)	$	(6,101)

1The calculation of taxable income for each period is an estimate and will not be finally determined until the Company files its tax return each year. Final taxable income may be different than this estimate.

2At March 31, 2023, the Company had long-term capital loss carryforwards of $30.2 million to offset future capital gains. These capital loss carryforwards are not subject to expiration.

3Includes only those distributions which reduce estimated distributable income.

Schedule of Deferred Tax Assets and Liabilities

The following table sets forth the significant components of the deferred tax assets and liabilities as of March 31, 2023 and March 31, 2022 (amounts in thousands):


	March 31, 2023		March 31, 2022
Deferred tax asset:
Net operating loss carryforwards	$	—	$	—
Interest	219		185
Total deferred tax asset	219		185
Deferred tax liabilities:
Net unrealized appreciation on investments	(11,413)		(4,899)
Net basis differences in portfolio investments	(923)		(1,033)
Total deferred tax liabilities	(12,336)		(5,932)
Total net deferred tax (liabilities) assets	$	(12,117)	$	(5,747)

Schedule of Significant Components of Income Tax Provision

The following table sets forth the significant components of income tax provision as of March 31, 2023, 2022 and 2021 (amounts in thousands):


	Years Ended March 31,
Components of Income Tax Provision	2023		2022		2021
162(m) limitation	$	—	$	—	$	122
Excise tax	630		65		637
Write-off of deferred tax asset	—		—		1,837
Tax (benefit) provision related to Taxable Subsidiary	(301)		550		50
Stock compensation benefits	—		—		(207)
Other	—		—		3
Total income tax provision (benefit)	$	329	$	615	$	2,442

Components of Estimated Tax Basis RIC Accumulated Earnings

As of March 31, 2023, 2022 and 2021, the components of estimated RIC accumulated earnings on a tax basis were as follows (amounts in thousands):


	Years Ended March 31,
Components of RIC Accumulated Earnings on a Tax Basis1	2023		2022		2021
Undistributed ordinary income - tax basis	$	16,070	$	12,682	$	21,083
Undistributed net realized (loss) gain	(30,201)		(17,252)		(17,924)
Unrealized (depreciation) appreciation on investments	(61,710)		(20,126)		(766)
Other temporary differences	(13,639)		—		(663)
Components of distributable earnings at year-end	$	(89,480)	$	(24,696)	$	1,730