Contract analysis

From: Diana Carruthers <dcarruthers@whitfieldcd.com> To: Leonard Cross <lcross@calderwoodharkness.com> Cc: Sylvia Hartwell <shartwell@calderwoodharkness.com> Subject: Re: LPAC Comments on PLR Draft v3.0 — Solara Cross-Border Fund-Platform Reorganization

Thank you for transmitting PLR Draft v3.0 for LPAC counsel review. Whitfield, Carruthers & Doyle has now completed its review of the draft on behalf of the LP Advisory Committee for Solara Digital Partners Funds IV and V.

At the outset, the LPAC wishes to acknowledge the thoroughness of Calderwood & Harkness's analysis and to confirm its general support for the reorganization's stated objectives — namely, the elimination of approximately $3.8 million in annual duplicative administrative, audit, and regulatory fees across the six existing fund vehicles (Funds IV and V, each with Delaware, Cayman, and Luxembourg entities), compliance wi

That said, the LPAC does have specific comments and concerns in three principal areas, set forth below. We respectfully request that Calderwood & Harkness address each of these before the PLR request is finalized for submission. We note that the LPAC review completion target date is July 15, 2025, and we are providing these comments a day ahead of that deadline to allow maximum time for discussion.

**I. Section 731(c) Marketable Securities Analysis**

A. The LPAC is concerned about the robustness of the analysis concluding that the distributed Consolidated Master Fund LP interests are not "marketable securities" within the meaning of IRC § 731(c)(2). We acknowledge the draft's position that the Master Fund LP interests are not actively traded on an established securities market or readily tradable on a secondary market, and we do not quarrel with that conclusion a

B. However, given that the Consolidated Master Fund will hold approximately $7.75 billion in total fair market value of assets (against a total adjusted tax basis of $6.03 billion and aggregate built-in gain of $1.72 billion) and the underlying portfolio comprises 23 portfolio companies across Funds IV and V, some of which may hold publicly traded securities or debt — or may undertake IPOs during the remaining fund t

C. Specifically, we request additional discussion of the § 731(c)(3) exceptions and the scope of the "investment partnership" safe harbor. The LPAC wants comfort that even if the Master Fund indirectly holds interests that could become marketable during the fund term, the distributed partnership interests themselves are not caught by § 731(c).

D. We further request that the PLR request include an explicit representation that the Master Fund LP interests will not be listed or traded on any securities exchange or secondary market, and that Solara Digital Infrastructure LP does not intend to facilitate a secondary trading platform for such interests.

E. This concern is particularly acute with respect to the dissolution step (Step 5, target date December 1, 2025), where the legacy offshore vehicles — including the Cayman and Luxembourg entities — distribute their Master Fund LP interests to existing LPs as part of the migration into the International Feeder and Tax-Exempt Feeder structures. If those distributed interests were recharacterized as marketable securiti

**II. Section 752 Liability Shifting Impact on Individual LPs**

A. The LPAC notes the $1.34 billion in aggregate liabilities to be assumed by the Consolidated Master Fund and the draft's reliance on the netting rules under Treas. Reg. § 1.752-1(f). We have reviewed the entity-level analysis and find it generally sound in approach.

B. Our concern is that the analysis in PLR Draft v3.0 addresses the § 752 liability shifting at the entity level but does not sufficiently illustrate the impact on individual LPs — particularly the larger LPs with significant capital commitments. Given the tiered partnership treatment (LP → Feeder → Master Fund) that will result from the reorganization, the § 752 allocation methodology at the individual partner level

C. We request that the PLR request (and/or the supporting § 752 schedule in Exhibit E) include worked examples or a representative allocation showing how the liability shifts affect partners with varying commitment sizes. At minimum, we believe the analysis should address the following representative investors:

1. **Pinnacle State Employees' Retirement System** ($275 million committed in Fund IV / $340 million committed in Fund V) — as a U.S. tax-exempt investor migrating to the Tax-Exempt Feeder. The LPAC is particularly focused on whether any deemed distribution triggers UBTI concerns.

2. **Nordhaven Sovereign Wealth Fund** ($380 million committed in Fund IV-A Cayman / $500 million committed in Fund V-A Cayman, totaling $880 million in aggregate commitments) — as a non-U.S. sovereign investor migrating to the International Feeder. The migration from a direct interest in the Cayman vehicles to an indirect interest through the International Feeder raises specific § 752(b) deemed distribution question

3. **Kestrel Pacific Insurance Group** (€200 million committed in Fund IV-B Luxembourg / €275 million committed in Fund V-B Luxembourg) — as a non-U.S. insurance company (Singapore-domiciled) migrating from the Luxembourg vehicles. The euro-denominated commitments and the interplay between § 752 and currency translation add an additional layer of complexity.

D. The LPAC's concern is that if netting under § 752(a) and § 752(b) does not fully eliminate deemed distributions for certain LPs — particularly those moving from a direct partnership interest in a legacy vehicle to an indirect interest through a feeder — there could be unexpected gain recognition under § 731 for individual LPs. This is a material issue. The conversion from direct to tiered interests inherently chan

E. Accordingly, the LPAC requests that Calderwood & Harkness provide a supplemental analysis or comfort letter confirming that no individual LP will recognize gain solely as a result of § 752 liability shifts in the reorganization. If such blanket comfort cannot be provided, the LPAC needs to understand which LPs may be affected and the magnitude of any potential gain recognition, so that the LP Tax Impact Summary Le

**III. FIRPTA / IRC § 897 Representations for Non-U.S. Sovereign Investors**

A. The LPAC raises a concern on behalf of the non-U.S. sovereign investors participating in the reorganization, most notably the Nordhaven Sovereign Wealth Fund, which as noted above has aggregate committed capital of $880 million across Funds IV-A Cayman and V-A Cayman.

B. We note that Bramhall & Quelwick LLP (Jason Tremaine) is independently advising Nordhaven on U.S. withholding tax and treaty implications. However, the LPAC has its own fiduciary obligation to ensure the PLR request adequately addresses FIRPTA exposure for all non-U.S. LPs, and we raise the following concerns in that capacity.

C. The FIRPTA analysis in the draft examines whether certain data center and fiber-optic network interests constitute U.S. real property interests (USRPIs) under IRC § 897, with particular focus on NovaBright Data Systems Inc. (FMV of $890 million / basis of $520 million) and Thorngate Fiber Networks LP (FMV of $670 million / basis of $490 million). However, the representations in the PLR request do not explicitly co

D. We request that the PLR request include a comprehensive representation regarding the USRPI status of each of the 23 portfolio companies, or at minimum the five specifically identified portfolio companies — NovaBright Data Systems Inc., Crestline Cloud Solutions (FMV of €340 million / basis of €195 million), Veridian Edge Computing (FMV of $1.12 billion / basis of $780 million), Thorngate Fiber Networks LP, and Hel

E. We have a specific concern about NovaBright and Thorngate. NovaBright operates data center facilities and Thorngate operates fiber-optic network infrastructure. Both companies hold significant real property or infrastructure — including owned or leased data center facilities and fiber-optic rights-of-way — that could be classified as real property interests under IRC § 897(c). The LPAC requests that the analysis a

F. The sovereign wealth fund exemption under IRC § 892 may provide relief for Nordhaven, but the LPAC wants the PLR request to address the interaction between § 892 and § 897 in the context of the reorganization — specifically, whether the § 892 exemption applies to the contribution and distribution steps (Steps 2 through 5) or only to ongoing investment income. This is a nuanced question that we believe should be sq

G. We request that Calderwood & Harkness coordinate with Jason Tremaine at Bramhall & Quelwick to ensure consistency in the FIRPTA analysis and that Nordhaven's specific treaty position is not prejudiced by the representations in the PLR request. The PLR representations should be drafted with sufficient care that they do not inadvertently narrow the scope of any treaty-based relief available to Nordhaven or other non

H. We also note that Kestrel Pacific Insurance Group, which is domiciled in Singapore and holds commitments of €200 million and €275 million through the Luxembourg vehicles, may have separate FIRPTA concerns that should be addressed in light of the U.S.-Singapore income tax treaty. We request that the draft include at least a brief analysis of whether the treaty provides any relief from FIRPTA for Kestrel's interest

A. **LP Consent Solicitation.** The LPAC notes that the LP consent solicitation process is proceeding and that, as of the April 22, 2025 LPAC meeting, 78% in interest preliminary consent had been obtained. The LPAC expects that the final PLR request, once filed, will support the formal LP consent solicitation. In that connection, the LP Tax Impact Summary Letter should be updated to reflect the final form of the PLR

B. **Section 1446 Withholding.** The LPAC requests that the § 1446 withholding analysis expressly confirm that no withholding is required on distributions to the International Feeder or Tax-Exempt Feeder in Step 5 (the dissolution and migration step, target December 1, 2025), and not just on the contributions in Steps 2 through 4. The current draft addresses contributions but is less clear on the distribution leg of

C. **Third-Party Advisors.** As a minor drafting comment, the PLR request should consistently reference the engagement of Redstone Advisory Group LLC for fair market value appraisals and Caldwell Pierce & Co. LLP for tax-basis data as independent third-party support for the financial figures used throughout the submission. We noted some inconsistency in how these engagements are referenced across different sections o

To be clear, the LPAC is supportive of the reorganization in principle. These comments are intended to strengthen the PLR request and protect LP interests — objectives that we believe are fully aligned with Solara's own interests in obtaining a favorable ruling.

We would welcome a call with you and Robert to discuss these comments at your earliest convenience, ideally before the July 22, 2025 pre-submission conference with IRS CC:INTL, so that any revisions can be incorporated into the draft before that meeting. The LPAC reserves the right to provide additional comments following the pre-submission conference, depending on the guidance received from the Service.

Finally, if it would be helpful, we are happy to coordinate directly with Jason Tremaine at Bramhall & Quelwick on the FIRPTA and treaty issues discussed in Section III above. Please let us know how you would prefer to handle that coordination.

Thank you for your attention to these comments. We look forward to discussing.

Diana Carruthers Partner Whitfield, Carruthers & Doyle LLP 1700 K Street NW, Suite 900 Washington, DC 20006 Tel: (202) 555-0184 dcarruthers@whitfieldcd.com

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