Contract analysis

I. Executive Summary This memorandum analyzes the federal income tax structuring considerations arising from the proposed formation of Solstice Plateau Energy Holdings LLC ("Solstice Plateau" or the "JV"), a 50/50 joint venture between Calloway-Briggs Renewables Inc. ("CBR"), a Texas corporation (EIN 46-2837451), and Lumen Ridge Infrastructure Partners LLC ("Lumen Ridge"), a Delaware limited liability company (EIN 83

1. Entity Classification. Classification of Solstice Plateau as a partnership for federal income tax purposes under the check-the-box regulations (Treas. Reg. §301.7701-3), including the tax advantages of partnership treatment.

2. Tax Treatment of Initial Capital Contributions. Treatment of the members' respective cash contributions and CBR's in-kind contribution of the Project Portfolio under IRC §721, including carryover basis under IRC §723 and the $55,800,000 built-in gain.

3. Disguised Sale Analysis. Evaluation of the potential application of the disguised sale rules under IRC §707(a)(2)(B) and Treas. Reg. §1.707-3 to CBR's receipt of development management fees and construction management fees from the JV in connection with its contribution of the Project Portfolio.

4. Section 704(c) Allocation Methodology. Selection of the appropriate allocation method under IRC §704(c) and Treas. Reg. §1.704-3 for the contributed Project Portfolio, with a recommendation to adopt the remedial allocation method.

5. Depreciation and Bonus Depreciation. Application of the Modified Accelerated Cost Recovery System ("MACRS") depreciation rules and bonus depreciation under IRC §168(k) to both contributed property and new construction expenditures by the JV.

6. Investment Tax Credits. Eligibility for and allocation of Investment Tax Credits ("ITCs") under IRC §48, including the enhanced credit rates available under the Inflation Reduction Act of 2022.

7. Tax Protection Agreement. Design and implementation of a 7-year tax protection agreement to shield CBR from the recognition of the $55,800,000 built-in gain on the contributed Project Portfolio, including make-whole mechanics and minimum debt allocation covenants.

8. Partnership Representative. Designation of CBR as the Partnership Representative under IRC §6223, including push-out election covenants and consent and notice procedures.

9. State and Local Tax Considerations. A preliminary overview of state tax implications in Texas, New Mexico, Arizona, and Delaware. Summary Recommendation. Based on our analysis, we recommend that the parties structure Solstice Plateau as a Delaware limited liability company that retains its default classification as a partnership for federal income tax purposes under Treas. Reg. §301.7701-3(b)(1). We further recomm

II. Background and Transaction Overview A. The Parties

1. Calloway-Briggs Renewables Inc. Calloway-Briggs Renewables Inc. ("CBR") is a Texas corporation organized under the laws of the State of Texas and headquartered at 2300 Travis Street, Suite 4200, Houston, Texas 77006. CBR was founded in 2011 and is a privately held developer and operator of utility-scale solar energy projects across the United States. The company is majority-owned by its co-founders, Margaret "Meg"

2. Lumen Ridge Infrastructure Partners LLC Lumen Ridge Infrastructure Partners LLC ("Lumen Ridge") is a Delaware limited liability company organized in 2018, with its principal office located at 301 Tresser Boulevard, Suite 1400, Stamford, Connecticut 06901. Lumen Ridge is managed by Lumen Ridge Capital Advisors LLC, its investment manager, and serves as a dedicated renewable energy infrastructure investment vehicle

3. The JV Entity Solstice Plateau Energy Holdings LLC ("Solstice Plateau" or the "JV") will be formed as a Delaware limited liability company. Its registered agent will be Peachtree Corporate Services, Inc., located at 1209 Orange Street, Suite 300, Wilmington, Delaware 19801. The principal business office of the JV will be co-located with CBR's offices at 2300 Travis Street, Suite 4210, Houston, Texas 77006. The JV

III. Entity Classification — Partnership Treatment A. Default Classification Under Check-the-box Regulations Solstice Plateau Energy Holdings LLC will be organized as a Delaware limited liability company with two members (CBR and Lumen Ridge). Under the entity classification regulations commonly known as the "check-the-box" regulations, the classification of an eligible entity for federal income tax purposes is deter

IV. Tax Treatment of Initial Capital Contributions A. CBR's Cash Contribution CBR will contribute $60,000,000 in cash to the JV at closing. Under IRC §721(a), no gain or loss is recognized to a partner or a partnership upon the contribution of money to a partnership in exchange for a partnership interest. Accordingly, CBR's contribution of $60,000,000 in cash to the JV is a non-taxable event. Under IRC §722, CBR's ou

1. Applicable Legal Framework IRC §707(a)(2)(B) provides that a transfer of property to a partnership by a partner, followed by a related transfer of money or other consideration from the partnership to the partner, is treated as a sale of property if, when viewed together, the two transfers are properly characterized as a sale or exchange of property. The Treasury Regulations under IRC §707(a)(2)(B) — specifically,

2. Application to CBR's Management Fees In the proposed transaction, CBR will contribute the Project Portfolio to the JV and will also receive development management fees and construction management fees from the JV. The development management fee is 1.5% of aggregate capital deployed per annum (approximately $4,500,000 per year at full $300 million deployment), and the construction management fee is 3.0% of hard con

3. Recommended Documentation To further support the position that the management fees are not disguised sale consideration, we recommend the following documentation steps: (a) Engage Ridgeline Barrow & Co. or another independent financial advisor to prepare a benchmarking analysis confirming that the 1.5% development management fee and 3.0% construction management fee are at fair market value and consistent with arm'

4. Conclusion on Disguised Sale Risk Based on the foregoing analysis, we believe that the risk of the management fees being recharacterized as disguised sale consideration under IRC §707(a)(2)(B) is low, provided that proper documentation is obtained and maintained. The fees are reasonable compensation for genuine, ongoing services to be rendered by CBR over a multi-year period, are calculated at industry-standard ra

V. Section 704(c) Allocation Methodology A. Overview of Available Methods The Treasury Regulations under IRC §704(c) provide three permissible methods for making Section 704(c) allocations with respect to contributed property that has a book/tax disparity. The JV must select one of these methods for the contributed Project Portfolio. The three methods are:

1. Traditional Method — Treas. Reg. §1.704-3(b) Under the traditional method, tax items attributable to contributed property are allocated to the contributing partner (CBR) to the extent of its book allocation, with any remaining tax items allocated to the noncontributing partner (Lumen Ridge) up to the amount of Lumen Ridge's book allocation. However, the traditional method is subject to the "ceiling rule," which pr

2. Traditional Method with Curative Allocations — Treas. Reg. §1.704-3(c) Under the traditional method with curative allocations, the partnership may make additional allocations of other tax items (i.e., items not attributable to the contributed property) to correct the ceiling rule distortions created by the traditional method. For example, the partnership could allocate additional depreciation deductions from partn

3. Remedial Allocation Method — Treas. Reg. §1.704-3(d) Under the remedial allocation method, the partnership addresses the ceiling rule distortion by creating notional (or "phantom") tax items that do not correspond to any actual economic transaction. Specifically, when the ceiling rule prevents Lumen Ridge from receiving its full book allocation of tax depreciation, the JV creates a "remedial" depreciation deductio

VI. Depreciation — MACRS and Bonus Depreciation Under IRC §168(k) A. MACRS Classification Solar energy equipment is classified as 5-year MACRS property under IRC §168(e)(3)(B)(vi), which provides that "any equipment which uses solar energy to generate electricity" qualifies as 5-year property for purposes of the accelerated cost recovery system. This classification applies to solar photovoltaic modules, inverters, ra

VII. Investment Tax Credits Under IRC §48 A. Eligibility Solar energy property placed in service by the JV is eligible for the Investment Tax Credit ("ITC") under IRC §48(a), which provides a tax credit for investment in certain energy property, including solar energy property described in IRC §48(a)(3)(A)(i). The ITC is claimed in the taxable year in which the eligible property is placed in service. Under the Inflat