Quarterly report [Sections 13 or 15(d)]

DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME

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DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME
 9 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME
MSC Income currently pays regular quarterly dividends to its stockholders and periodically pays supplemental dividends to its stockholders. Future dividends, if any, will be determined by its Board of Directors on a quarterly basis.
The following table provides a summary of dividends accrued during the three and nine months ended September 30, 2025 and 2024.
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
(in thousands, except per share amounts)
Regular quarterly dividends per share $ 0.35  $ 0.36  $ 1.05  $ 1.09 
Supplemental quarterly dividends per share 0.01  —  0.03  — 
Total dividends per share $ 0.36  $ 0.36  $ 1.08  $ 1.09 
Total regular quarterly dividends $ 16,544  $ 14,478  $ 49,444  $ 43,724 
Total supplemental quarterly dividends 472  —  1,412  — 
Total dividends
 $ 17,016  $ 14,478  $ 50,856  $ 43,724 
MSIF has elected to be treated for U.S. federal income tax purposes as a RIC. MSIF’s taxable income includes the taxable income generated by MSIF and certain of its subsidiaries, including the Structured Subsidiaries, which are treated as disregarded entities for tax purposes. As a RIC, MSIF generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that MSIF distributes to its stockholders. MSIF must generally distribute at least 90% of its “investment company taxable income” (which is generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and 90% of its tax-exempt income to maintain its RIC status (pass-through tax treatment for amounts distributed). As part of maintaining RIC status, undistributed taxable income (subject to a 4% non-deductible U.S. federal excise tax) pertaining to a given fiscal year may be distributed up to twelve months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) filing of the U.S. federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated.
The determination of the tax attributes for MSC Income’s distributions is made annually, based upon its taxable income for the full year and distributions paid for the full year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. Ordinary dividend distributions from a RIC do not qualify for the 20% maximum tax rate (plus a 3.8% Medicare surtax, if applicable) on dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes for distributions will generally include both ordinary income and qualified dividends, but may also include either one or both of capital gains and return of capital.
Listed below is a reconciliation of “Net increase in net assets resulting from operations” to taxable income and to total distributions declared to common stockholders for the nine months ended September 30, 2025 and 2024.
Nine Months Ended September 30,
2025 2024
(estimated, in thousands)
Net increase in net assets resulting from operations $ 58,693  $ 36,089 
Net unrealized (appreciation) depreciation (35,886) 24,656 
Income tax provision 2,176  6,150 
Pre-tax book income not consolidated for tax purposes (11,924) (9,867)
Book income and tax income differences, including debt origination, structuring fees, dividends, realized gains and changes in estimates 27,980  (9,989)
Estimated taxable income (1) 41,039  47,039 
Taxable income earned in prior year and carried forward for distribution in current year 20,348  14,745 
Taxable income earned prior to period end and carried forward for distribution next period (27,547) (32,538)
Dividend payable as of period end and paid in the following period 17,016  14,478 
Total distributions accrued or paid to common stockholders $ 50,856  $ 43,724 
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(1)MSIF’s taxable income for each period is an estimate and will not be finally determined until MSIF files its tax return for each year. Therefore, the final taxable income, and the taxable income earned in each period and carried forward for distribution in the following period, may be different than this estimate.
The Taxable Subsidiaries primarily hold certain equity investments for MSC Income. The Taxable Subsidiaries permit MSC Income to hold equity investments in portfolio companies which are “pass-through” entities for tax purposes and to continue to comply with the “source-of-income” requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with MSIF for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in MSC Income’s consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSIF for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from their book income, or loss, due to temporary book and tax timing differences and permanent differences. The Taxable Subsidiaries are each taxed at corporate income tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the Taxable Subsidiaries are reflected in MSC Income’s consolidated financial statements.
The income tax provision for MSC Income is generally composed of (i) deferred tax expense (benefit), which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation or depreciation and other temporary book-tax differences, and (ii) current tax expense, which is primarily the result of current U.S. federal income and state taxes relating to net currently taxable activity relating to the portfolio investments held in the Taxable Subsidiaries and excise taxes on MSC Income’s estimated undistributed taxable income. The income tax expense, or benefit, and the related tax assets and liabilities generated by the Taxable Subsidiaries, if any, are reflected in MSC Income’s Consolidated Statements of Operations. MSC Income’s provision for income taxes was comprised of the following for the three and nine months ended September 30, 2025 and 2024:
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
(in thousands)
Net investment income taxes
Current tax expense (benefit):
Federal $ (38) $ 761  $ 80  $ 940 
State and other
 108  396  449  810 
Excise (39) 491  240  570 
Total current tax expense 31  1,648  769  2,320 
Deferred tax expense (benefit):
Federal 474  (245) 1,716  500 
State and other
 (52) (137) 8  (49)
Total deferred tax expense (benefit) 422  (382) 1,724  451 
Total net investment income tax provision $ 453  $ 1,266  $ 2,493  $ 2,771 
Investment valuation related taxes
Current tax expense:
Federal $ —  $ —  $ —  $ 205 
Total current tax expense —  —  —  205 
Deferred tax expense (benefit):
Federal 1,051  898  (362) 2,895 
State and other 150  270  45  279 
Total deferred tax expense (benefit) 1,201  1,168  (317) 3,174 
Total investment valuation related income tax provision (benefit) $ 1,201  $ 1,168  $ (317) $ 3,379 
Total income tax provision $ 1,654  $ 2,434  $ 2,176  $ 6,150 
The net deferred tax liability as of September 30, 2025 was $0.8 million and the net deferred tax asset as of December 31, 2024 was $0.6 million, with the change primarily related to changes in net unrealized appreciation or depreciation, changes in loss carryforwards and other temporary book-tax differences relating to portfolio investments held by the Taxable Subsidiaries. As of September 30, 2025, for U.S. federal income tax purposes, the Taxable Subsidiaries had a net operating loss carryforward, which is not subject to expiration and will carryforward indefinitely until utilized. The Taxable Subsidiaries have net capital loss carryforwards from prior years which, if unused, will expire in various taxable years 2025 through 2029. Additionally, the Taxable Subsidiaries have interest expense limitation carryforwards which have an indefinite carryforward period.