Regulated Investment Company (RIC)
Private Credit glossary · Fund Structures, Returns & Economics
Definition
US federal-tax pass-through status under Subchapter M of the Internal Revenue Code, available to BDCs and other registered investment companies that (a) earn at least 90% of gross income from dividends, interest, and gains, and (b) distribute at least 90% of taxable income annually to shareholders. RIC status avoids corporate-level taxation — pre-tax NII flows directly to shareholders as dividends — and is the structural reason BDC dividend yields can sustainably exceed 8%–10%.
Regulated Investment Company (RIC) in plain English
Normally a company pays tax on its profits, and then YOU pay tax again on the dividends it hands you — the same money taxed twice. A Regulated Investment Company (RIC) is a special tax status that lets certain investment firms skip that first layer entirely, as long as they follow two rules: earn almost all their money from investments (dividends, interest, gains), and pass at least 90% of their profits straight to shareholders each year. It's like a pass-through pipe — the profit flows to investors without being taxed on the way through the company. That's exactly why these firms (including BDCs, funds that lend to mid-sized businesses) can pay unusually big dividends of 8-10%: the government isn't taking a bite in the middle.
Also called: RIC
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