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INCOME TAX
 3 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
INCOME TAX INCOME TAX
A TRS is an entity taxed as a corporation that has not elected to be taxed as a REIT, in which a REIT directly or indirectly holds equity, and that has made a joint election with such REIT to be treated as a TRS. A TRS generally may engage in any business, including investing in assets and engaging in activities that could not be held or conducted directly by the Company without jeopardizing its qualification as a REIT. TRS1 was subject to applicable United States federal, state and local income tax on its taxable income. In addition, while the Company was a REIT, it was subject to a 100% excise tax on certain transactions between it and TRS1 that were not conducted on an arm’s-length basis. The income tax provision is included in the line item income tax expense, including excise tax.
Effective January 1, 2026, in connection with the Conversion to a BDC, the Company became subject to the 1940 Act and ceased to rely on the exclusion from the definition of an “investment company” in Section 3(c)(5) of the 1940 Act. Beginning with taxable year ending December 31, 2026, the Company intends to elect to be treated as a RIC under Subchapter M of the Code. To maintain qualification as a RIC, the Company generally must distribute 90% of investment company taxable income each taxable year and meet certain source-of-income, asset diversification, and other requirements.
The income tax (benefit) provision for the Company was approximately $0.1 million and $0.2 million for the three months ended March 31, 2026 and 2025, respectively. The income tax benefit/expense for the three months ended March 31, 2026 and 2025 primarily related to activities of the Company’s TRS1 subsidiary.
The income tax provision for the Company and TRS1 consisted of the following for the three months ended March 31, 2026:
Three Months Ended
March 31, 2026
Net investment income taxes:
Current:
Federal$86,090 
State23,278 
Excise tax— 
Total current income tax expense (benefit)109,368 
Investment valuation related taxes:
Total deferred income tax expense (benefit)517,227 
Total income tax expense (benefit), including excise tax$626,595 
The income tax provision for the Company and TRS1 pre-Conversion consisted of the following for the three months ended March 31, 2025:
Three Months Ended
March 31, 2025
Current:
Federal$100,000 
State64,981 
Total current income tax expense (benefit)164,981 
Total deferred income tax expense (benefit)(52,575)
Excise tax— 
Total income tax expense (benefit), including excise tax$112,406 
The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months. As of March 31, 2026, tax years 2022-2025 remain subject to examination by taxing authorities.
The federal statutory rate was 21% for the three months ended March 31, 2026 and 2025. The primary difference between the Company’s statutory rate and effective tax rate is largely determined by the amount of income subject to tax by TRS1. TRS1 is a corporate subsidiary that was formerly treated as a taxable REIT subsidiary prior to the Conversion. Following the Conversion, TRS1 is a taxable corporation. The Company expects that its future effective tax rate will be determined in a similar manner.
Excise Tax
For the three months ended March 31, 2026, the Company did not incur United States federal excise tax expense. As a RIC, the Company is subject to ordinary income and capital gain distribution requirements under U.S. federal excise tax rules for each calendar year. If the Company does not meet the required distributions, the Company will be subject to a 4% nondeductible federal excise tax on the undistributed amount. If it is determined that an excise tax liability exists for the current period, the Company will accrue excise tax on estimated excess taxable income as such taxable income is earned. The expense is calculated in accordance with applicable tax regulations.
Pre-Conversion Excise Tax
For the three months ended March 31, 2025, the Company did not incur United States federal excise tax expense. As previously taxed as a REIT, excise tax represents a 4% tax on the sum of a portion of the Company’s ordinary income and net capital gains not distributed during the period. If it is determined that an excise tax liability exists for the current period, the Company accrued excise tax on estimated excess taxable income as such taxable income is earned. The expense is calculated in accordance with applicable tax regulations.
Deferred Tax
As of March 31, 2026 and 2025, the Company’s deferred tax assets were $0.8 million and $1.4 million, respectively, and are included in prepaid expenses and other assets in the Company’s consolidated statements of assets and liabilities. The Company believes it is more likely than not that the deferred tax assets will be realized in the future. Realization of the deferred tax assets is dependent upon the Company’s generation of sufficient taxable income in future years in appropriate tax jurisdictions to benefit from the reversal of temporary differences. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.
The Company recorded deferred tax assets related to temporary differences related to the change in unrealized appreciation and depreciation on investments held in TRS1. There were no valuation allowances for deferred tax assets during the three months ended March 31, 2026 and 2025.