Capital Southwest Announces Federal Tax Treatment of 2019 Dividends and Deemed Distribution of $0.90 per share
Federal Tax Treatment of 2019 Dividends
The amounts shown in the table below represent the final classification of the Company’s 2019 distributions. This information supersedes any estimated information you may have received during the year. Calendar-year 2019 distributions are classified as follows:
|Form 1099-DIV Reporting||Box 1a||Box 1a and Box 1b||Box 2a||Non-U.S. Shareholder||Non-U.S. Shareholder|
|Record Date||Payment Date||Distribution per Share||Ordinary Dividend Per Share (i)||Qualified Dividends Per Share (i), (ii)||Long-Term Capital Gain Per Share (iii)||% of Interest-Related and Short-Term Capital Gain (iv)||% of Distributions Exempt from U.S. Withholding Tax (v)|
|% of Total Dividend|
|Paid Per Share||100.000||%||40.966||%||6.949||%||52.085||%||42.983||%||95.068||%|
(i) Form 1099-DIV Box 1a includes the combined amounts of the columns "Ordinary Dividend Per Share" and "Qualified Dividends Per Share," contained within table above.
(ii) The portion of the dividend reported in Box 1a treated as Qualified Dividend is reported on Form 1099-DIV in Box 1b.
(iii) Net Capital Gain Dividend is reported on Form 1099-DIV in Box 2a.
(iv) The Company designates the above percentages of each of the total dividends by payment date as Interest-Related Dividend and Short-Term Capital Gain Dividend in accordance with IRC Sections 871(k) and 881(e).
(v) The percentages designate the portion of CSWC's dividends received by Non-U.S. Residents and Foreign Corporation Shareholders that constitute Interest-Related Dividends, Short-Term Capital Gains Dividends, and Net Capital Gain Dividends to total amount of the dividends derived which generally are exempt from
Non-U.S. residents and foreign corporation shareholders ("Non-U.S. Shareholders") in a
Dividends distributed to Non-U.S. Shareholders may have been withheld to pay U.S. federal income tax. Non-U.S. Shareholders should contact their tax advisor with any questions regarding this information, and its application to any claim for refund of taxes paid to the
Deemed Distribution of
The Company also announced a deemed distribution of
What is a deemed distribution?
For U.S. federal income tax purposes, we have elected to be treated as a RIC under Subchapter M of the IRC. To continue to qualify as a RIC for U.S. federal income tax purposes and obtain favorable RIC tax treatment, we must meet certain requirements, including certain minimum distribution requirements. Subchapter M provides the Company with two choices regarding distributing its net capital gains: (i) it can retain them and designate the retained amount as a deemed distribution or (ii) it can pay out the gains as a cash distribution to its stockholders.
The Company has elected to retain a portion of its net capital gains and designate a deemed distribution of
What are the tax consequences of the deemed distribution to me as a stockholder?
The following example generally illustrates the tax treatment under Subchapter M of the IRC for the Company and its common stockholders of record on
1. The Company will pay U.S. federal income tax of 21% on the undistributed net capital gain on behalf of common stockholders in the amount of
2. All stockholders will receive a U.S. federal income tax credit equal to their allocable share of the 21% U.S. federal income tax paid by the Company on the undistributed capital gain.
- Stockholders that are subject to U.S. federal income taxation generally can use that credit to offset their U.S. federal tax liabilities for the stockholder’s taxable year in which the last day of the Company's taxable year falls (generally, the 2019 taxable year for stockholders that are individuals or otherwise have a calendar-year taxable year) and can claim a refund on their U.S. federal income tax return (for example on Form 1040) to the extent of any unused credit.
- Stockholders who hold their shares in tax-deferred accounts can receive a refund from the
IRSfor the taxes paid on their behalf by having their custodians file an IRS Form990-T with the IRS. It typically takes several months for custodians to receive the refund and deposit it into stockholders’ accounts.
- Other tax-exempt stockholders can also receive refunds for the taxes paid on their behalf on the deemed distribution by filing
- Stockholders that are not U.S. tax residents should consult their own tax advisors as to the effect of the deemed distribution and the taxes paid on their behalf in their individual circumstances.
3. Common stockholders will increase the adjusted tax basis in their stock by
Stockholders requiring further information about the impact of the deemed distribution on their state and/or local taxes should consult their tax advisors. The Company does not provide tax advice to its stockholders.
Why did the Company choose to designate a deemed distribution rather than declare a cash dividend at this time?
The Board of Directors, after careful review and deliberation, determined that it is in the best interest of the Company and its continued growth to designate a deemed distribution. The Company will re-deploy the retained capital into income producing debt assets, which will contribute to future net investment income growth.
What are the relevant distribution dates for the deemed distribution?
As there is no cash being paid out, there is no payment date for the deemed distribution. However, the deemed distribution of
Who will send me the tax information of the deemed distribution and when will I get this information?
The deemed distribution is deemed paid to the stockholders of record as of
If you own your shares in “street name,” your brokerage firm or bank will send you the tax information. If you own your shares directly in your name,
In addition, the Company has posted information regarding the 2019 deemed distribution (the "2019 Form 2439 Information") on its website (http://www.capitalsouthwest.com/tax-information).
If I have questions about my individual tax situation, where can I get them answered?
The Company does not provide tax advice to its stockholders. Please consult your personal tax advisor. We are providing these questions and answers solely as a convenience to our stockholders.
This press release contains historical information and forward-looking statements with respect to the business and investments of
Readers should not place undue reliance on any forward-looking statements and are encouraged to review
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Source: Capital Southwest Corporation