How are BAM dividends taxed?
Business Development Companies (BDCs) enjoy a unique tax status under subchapter M of the U.S. Internal Revenue Code, operating similarly to Real Estate Investment Trusts by passing the vast majority of their taxable income directly to shareholders. To maintain this favorable regulated investment company status, a BDC must distribute at least ninety percent of its taxable income annually, which exempts the corporate entity from paying federal corporate income taxes on distributed earnings. Consequently, shareholders receive dividend distributions that are frequently taxed as ordinary income rather than qualified dividends, alongside potential capital gains components.
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