1015-00005 · Calloway-Briggs Renewables Inc · Transaction Documents

tax-matters-partner-designation.docx DOCUMENT M&A / Corporate

36 / 37 ← → ✕

PARTNERSHIP REPRESENTATIVE DESIGNATION AND TAX MATTERS AGREEMENT

dated as of September 21, 2023

among

SOLSTICE HOLDINGS, LLC a Delaware limited liability company

CBR SOLSTICE MANAGER, LLC a Delaware limited liability company (in its capacity as Managing Member and Partnership Representative)

and

RIDGELINE CAPITAL PARTNERS, LLC a Delaware limited liability company (in its capacity as Tax-Equity Member)

Right-click to update Table of Contents

PARTNERSHIP REPRESENTATIVE DESIGNATION AND TAX MATTERS AGREEMENT

This Partnership Representative Designation and Tax Matters Agreement (this "Agreement") is entered into as of September 21, 2023, by and among:

(1) Solstice Holdings, LLC, a Delaware limited liability company (EIN: 88-4071523) (the "Partnership");

(2) CBR Solstice Manager, LLC, a Delaware limited liability company (EIN: 88-4071597), in its capacity as the Managing Member of the Partnership (the "Managing Member" or "Partnership Representative"); and

(3) Ridgeline Capital Partners, LLC, a Delaware limited liability company (EIN: 13-4827651), in its capacity as the Tax-Equity Member of the Partnership (the "Tax-Equity Member").

The Managing Member and the Tax-Equity Member are referred to herein individually as a "Party" and collectively as the "Parties." Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Amended and Restated Limited Liability Company Agreement of Solstice Holdings, LLC, dated as of September 21, 2023 (the "LLCA").

RECITALS

WHEREAS, Solstice Holdings, LLC is a Delaware limited liability company formed on August 14, 2023, and classified as a partnership for federal income tax purposes pursuant to Section 301.7701-3 of the Treasury Regulations;

WHEREAS, the Partnership holds one hundred percent (100%) of the membership interests in seven project companies, each of which owns and operates a solar photovoltaic generation facility: (i) Pecos Sun Solar, LLC (85 MW(dc), Reeves County, Texas); (ii) Red Mesa Solar, LLC (70 MW(dc), Pecos County, Texas); (iii) Coyote Flats Solar, LLC (65 MW(dc), Ward County, Texas); (iv) Llano Verde Solar, LLC (55 MW(dc), Hudspeth County, Texas); (v) Cimarron Solar, LLC (50 MW(dc), Lea County, New Mexico); (vi) Sandoval Ridge Solar, LLC (50 MW(dc), Sandoval County, New Mexico); and (vii) Amistad Solar, LLC (45 MW(dc), Val Verde County, Texas) (collectively, the "Solstice Portfolio," representing an aggregate nameplate capacity of approximately 420 MW(dc));

WHEREAS, the Members have entered into the LLCA providing for a partnership-flip tax-equity structure in which the Tax-Equity Member has committed capital contributions in the aggregate amount of One Hundred Twenty Million Dollars ($120,000,000) and, during the pre-flip period, is allocated ninety-nine percent (99%) of all tax items (including Investment Tax Credits under Section 48 of the Internal Revenue Code of 1986, as amended (the "Code"), and depreciation deductions attributable to the Modified Accelerated Cost Recovery System ("MACRS")) and thirty percent (30%) of cash distributions, and following the occurrence of the flip date, is allocated five percent (5%) of all tax items and cash distributions;

WHEREAS, the Partnership anticipates generating Investment Tax Credits under Section 48 of the Code of approximately One Hundred Fifty-Three Million Eight Hundred Forty Thousand Dollars ($153,840,000) in connection with solar energy property placed in service by the project companies, a portion of which will be allocated to the Tax-Equity Member through the partnership structure and a portion of which will be transferred to third-party transferee taxpayers pursuant to transfer elections under Section 6418 of the Code;

WHEREAS, the Bipartisan Budget Act of 2015 (Public Law 114-74) and subsequent amendments thereto replaced the prior "tax matters partner" regime under former Sections 6221 through 6234 of the Code with a centralized partnership audit regime under Sections 6221 through 6241 of the Code, effective for partnership taxable years beginning after December 31, 2017;

WHEREAS, Section 6223 of the Code requires each partnership subject to the centralized partnership audit regime to designate a partnership representative who shall have the sole authority to act on behalf of the partnership in any federal income tax proceeding;

WHEREAS, the Members desire to designate CBR Solstice Manager, LLC as the Partnership Representative of the Partnership for all taxable years of the Partnership, acting through Theo Vasquez, Chief Financial Officer of Calloway-Briggs Renewables Inc. (the sole member of CBR Solstice Manager, LLC), as the "Designated Individual" within the meaning of Treasury Regulation Section 301.6223-1(b)(3);

WHEREAS, this Agreement supplements and is subject to the tax-related provisions of the LLCA, including Article VIII thereof (Tax Matters), and is intended to set forth in detail the procedural obligations, consent requirements, notification protocols, and indemnification arrangements governing the Partnership Representative's exercise of authority under the centralized partnership audit rules; and

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I — DEFINITIONS

Section 1.1 — Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below. Terms defined in the LLCA and not otherwise defined herein shall have the meanings assigned to them in the LLCA.

(a) "Adjustment" means any adjustment to a partnership-related item (as defined in Section 6241(2)(B) of the Code) proposed, determined, or assessed by the IRS or any court of competent jurisdiction under the centralized partnership audit rules of Sections 6221 through 6241 of the Code, including any adjustment arising from a Partnership Audit, an administrative adjustment request, or a judicial proceeding.

(b) "BBA" means the Bipartisan Budget Act of 2015 (Public Law 114-74), as amended by the Protecting Americans from Tax Hikes Act of 2015 (Public Law 114-113), the Tax Technical Corrections Act of 2018, and any subsequent legislation amending Sections 6221 through 6241 of the Code.

(c) "Code" or "IRC" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute. References to specific sections of the Code shall include any successor provisions thereto and any applicable Treasury Regulations promulgated thereunder.

(d) "Designated Individual" means Theo Vasquez, Chief Financial Officer of Calloway-Briggs Renewables Inc. (EIN: 84-3291076), or any successor individual designated in accordance with Section 7.3 of this Agreement, who shall act on behalf of the Partnership Representative as required by Treasury Regulation Section 301.6223-1(b)(3).

(e) "Imputed Underpayment" has the meaning assigned to such term in Section 6225 of the Code and the Treasury Regulations thereunder, including any imputed underpayment calculated by the IRS as a result of a Partnership Audit or final partnership adjustment.

(f) "IRS" means the Internal Revenue Service, a bureau of the United States Department of the Treasury, or any successor agency.

(g) "ITC" or "Investment Tax Credit" means the investment tax credit available under Section 48 of the Code with respect to energy property, as modified by the Inflation Reduction Act of 2022 (Public Law 117-169).

(h) "LLCA" means the Amended and Restated Limited Liability Company Agreement of Solstice Holdings, LLC, dated as of September 21, 2023, by and between the Managing Member and the Tax-Equity Member, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.

(i) "MACRS" means the Modified Accelerated Cost Recovery System under Section 168 of the Code.

(j) "Managing Member" means CBR Solstice Manager, LLC, a Delaware limited liability company (EIN: 88-4071597), in its capacity as the managing member of the Partnership under the LLCA.

(k) "Member" or "Members" means the Managing Member and the Tax-Equity Member, individually or collectively, as the context requires, and shall include any successor or transferee of such Member's interest in the Partnership to the extent permitted by the LLCA.

(l) "Notice of Administrative Proceeding" means any notice of a partnership adjustment, notice of proposed partnership adjustment ("NOPPA"), final partnership adjustment ("FPA"), notice of selection for examination, 30-day letter, 90-day letter, or similar communication from the IRS to the Partnership or the Partnership Representative in connection with any Partnership Audit or administrative proceeding.

(m) "Partnership" means Solstice Holdings, LLC, a Delaware limited liability company (EIN: 88-4071523).

(n) "Partnership Audit" means any federal income tax examination, audit, administrative proceeding, or judicial proceeding relating to any tax items of the Partnership, including any proceeding arising under the centralized partnership audit rules of Sections 6221 through 6241 of the Code, and any related proceeding in the United States Tax Court, United States District Court, or United States Court of Federal Claims.

(o) "Partnership Representative" means CBR Solstice Manager, LLC, as designated under Section 2.1 of this Agreement, or any successor Partnership Representative designated in accordance with this Agreement and applicable law.

(p) "Partnership Return" means the Partnership's federal income tax return on IRS Form 1065, U.S. Return of Partnership Income, and all schedules thereto (including, without limitation, Schedules K-1 (Partner's Share of Income, Deductions, Credits, etc.), Schedule L, Schedule M-1, Schedule M-2, Schedule M-3, and all other required statements, attachments, and elections), for each taxable year of the Partnership.

(q) "Push-Out Election" means an election under Section 6226 of the Code (and the Treasury Regulations thereunder) to cause each reviewed-year partner (and, if applicable, each indirect partner) to take into account its allocable share of any partnership adjustment, in lieu of the Partnership paying the Imputed Underpayment.

(r) "Solstice Portfolio" means, collectively, Pecos Sun Solar, LLC, Red Mesa Solar, LLC, Coyote Flats Solar, LLC, Llano Verde Solar, LLC, Cimarron Solar, LLC, Sandoval Ridge Solar, LLC, and Amistad Solar, LLC, each a Delaware limited liability company and a wholly owned subsidiary of the Partnership.

(s) "Tax-Equity Member" means Ridgeline Capital Partners, LLC, a Delaware limited liability company (EIN: 13-4827651), in its capacity as the tax-equity member of the Partnership under the LLCA.

(t) "Treasury Regulations" means the regulations promulgated under the Code by the United States Department of the Treasury, as such regulations may be amended from time to time, including any successor regulations and any temporary or proposed regulations to the extent relied upon by the IRS or the Partnership.

Section 1.2 — Interpretation. Unless the context otherwise requires:

(a) Terms defined in the LLCA and not otherwise defined herein shall have the meanings assigned to such terms in the LLCA.

(b) References to any section or provision of the Code or the Treasury Regulations shall include any successor or amended provision, and all references to the Code or Treasury Regulations shall include any applicable guidance, rulings, or other pronouncements issued by the IRS or the United States Department of the Treasury with respect thereto.

(c) The words "herein," "hereof," "hereunder," and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, or other subdivision.

(d) References to "Sections" and "Articles" are to the Sections and Articles of this Agreement, unless otherwise specified.

(e) The terms "include" and "including" shall be deemed to be followed by the phrase "without limitation."

(f) The use of the singular shall include the plural and vice versa, and the use of any gender shall include all genders, as the context may require.

(g) All references to "$" or "Dollars" shall refer to United States dollars.

(h) References to "business days" mean any day other than a Saturday, Sunday, or any other day on which commercial banks in New York, New York or Houston, Texas are authorized or required by law or executive order to close.

ARTICLE II — DESIGNATION OF PARTNERSHIP REPRESENTATIVE

Section 2.1 — Designation. The Partnership hereby designates CBR Solstice Manager, LLC as the Partnership Representative of Solstice Holdings, LLC for all taxable years of the Partnership, effective as of the Partnership's first taxable year (which commenced upon the Partnership's formation on August 14, 2023). Such designation is made pursuant to, and in compliance with, Section 6223 of the Code and Treasury Regulation Section 301.6223-1. The Partnership Representative shall serve in such capacity until removed or replaced in accordance with Article VII of this Agreement. Each Member hereby consents to such designation and agrees to cooperate in effectuating the same, including by executing any documents or forms required by the IRS in connection therewith.

Section 2.2 — Designated Individual. CBR Solstice Manager, LLC, as the Partnership Representative, hereby designates Theo Vasquez, Chief Financial Officer of Calloway-Briggs Renewables Inc. (EIN: 84-3291076), the sole member of CBR Solstice Manager, LLC, as the Designated Individual within the meaning of Treasury Regulation Section 301.6223-1(b)(3). Theo Vasquez shall have, and hereby represents that he does have, a substantial presence in the United States as required by Treasury Regulation Section 301.6223-1(b)(3)(ii), including a valid United States taxpayer identification number, a United States street address, and a United States telephone number. The identity of the Designated Individual, together with all information required by Treasury Regulation Section 301.6223-1(b)(3), shall be reported on each Partnership Return (IRS Form 1065) filed by the Partnership, and the Partnership Representative shall ensure that such information is accurate and current as of the date of each such filing. The information pertaining to the Designated Individual is set forth in Exhibit A attached hereto.

Section 2.3 — Authority. Subject to the limitations, conditions, and consent requirements set forth in Article IV of this Agreement, the Partnership Representative shall have the sole authority to act on behalf of the Partnership in any federal income tax proceeding or matter arising under the centralized partnership audit rules of Sections 6221 through 6241 of the Code, including, without limitation, the authority to:

(a) receive all notices, correspondence, and communications from the IRS directed to or concerning the Partnership in connection with any Partnership Audit or related proceeding;

(b) respond to, negotiate with, and communicate with the IRS (including agents, examiners, revenue officers, appeals officers, and IRS counsel) regarding any Partnership Audit, proposed Adjustment, or other federal tax matter concerning the Partnership;

(c) extend or consent to the extension of any statute of limitations applicable to the assessment or collection of any tax attributable to the Partnership or any partnership-related item, pursuant to Section 6235 of the Code or otherwise;

(d) file administrative adjustment requests under Section 6227 of the Code on behalf of the Partnership;

(e) bind the Partnership and, to the extent permitted by the Code, its Members, with respect to any settlement, closing agreement, or other resolution of a Partnership Audit, subject to the consent requirements of Section 4.2;

(f) make elections permitted or required under Sections 6221 through 6241 of the Code and the Treasury Regulations thereunder, including, without limitation, Push-Out Elections under Section 6226 of the Code and elections to modify any Imputed Underpayment under Section 6225(c) of the Code;

(g) file petitions for readjustment with the United States Tax Court, the United States District Court, or the United States Court of Federal Claims, as applicable, pursuant to Section 6234 of the Code;

(h) engage legal counsel, accountants, and other advisors on behalf of the Partnership in connection with any Partnership Audit or proceeding; and

(i) take such other actions as may be necessary or appropriate to fulfill the duties and exercise the authority of the Partnership Representative under the Code, the Treasury Regulations, and this Agreement.

The foregoing enumeration of authority shall not be construed to limit the scope of the Partnership Representative's authority under the Code and the Treasury Regulations, except to the extent expressly limited by this Agreement.

Section 2.4 — Fiduciary Duty. The Partnership Representative shall exercise its authority under this Agreement and the Code in good faith and in a manner reasonably believed to be in the best interests of the Partnership and all Members, taking into account the respective tax positions, economic interests, and allocation entitlements of both the Managing Member and the Tax-Equity Member under the LLCA. Without limiting the generality of the foregoing, the Partnership Representative shall give due consideration to the impact of any proposed settlement, election, or other action on the Tax-Equity Member's Investment Tax Credits, depreciation deductions, and other tax benefits allocated to the Tax-Equity Member during the pre-flip period, recognizing the Tax-Equity Member's substantial reliance on such tax benefits in connection with its capital contributions to the Partnership.

Section 2.5 — Standard of Care. The Partnership Representative shall not be liable to the Partnership or any Member for any loss, liability, damage, cost, or expense arising from any action taken or omission made by the Partnership Representative in good faith and in accordance with this Agreement and the LLCA, except to the extent that such loss, liability, damage, cost, or expense results from the Partnership Representative's (or the Designated Individual's) willful misconduct, bad faith, gross negligence, or material breach of this Agreement or the LLCA. Nothing in this Section 2.5 shall limit or affect any indemnification obligations of the Managing Member under Article VI of this Agreement.

ARTICLE III — OBLIGATIONS OF THE PARTNERSHIP REPRESENTATIVE

Section 3.1 — Tax Return Preparation and Filing.

(a) Preparation and Filing. The Partnership Representative shall cause the Partnership to prepare and timely file (including timely filing for extensions, if applicable) all Partnership Returns (IRS Form 1065, Schedules K-1, and all related schedules, statements, elections, and attachments) for each taxable year of the Partnership. The Partnership Representative shall ensure that all Partnership Returns are filed by the applicable due date (currently September 15 for calendar-year partnerships filing on extension, or March 15 if no extension is filed), and shall cause the Partnership to file for an automatic extension of time to file using IRS Form 7004 if additional time is required to finalize such returns.

(b) Tax Return Preparer. Tax return preparation shall be performed by, or under the direct supervision of, Larchmont & Associates, PLLC (Managing Partner: Martin Larchmont; Tax Partner: Susan Kaplan), located at 3200 Southwest Freeway, Suite 2200, Houston, Texas 77027, or such other nationally recognized public accounting firm or qualified tax advisor as may be approved in writing by both the Managing Member and the Tax-Equity Member. The Partnership Representative shall be responsible for the engagement, direction, and oversight of such tax return preparer and shall ensure that the tax return preparer has access to all information reasonably necessary to prepare accurate and complete Partnership Returns.

(c) Consistency with LLCA. Partnership Returns shall be prepared in a manner consistent with the terms and provisions of the LLCA, including without limitation the allocation provisions set forth therein (ninety-nine percent (99%) of all tax items to the Tax-Equity Member and one percent (1%) to the Managing Member during the pre-flip period; five percent (5%) of all tax items to the Tax-Equity Member and ninety-five percent (95%) to the Managing Member during the post-flip period), and shall properly reflect all ITCs, MACRS depreciation deductions on the Three Hundred Seven Million Six Hundred Eighty Thousand Dollar ($307,680,000) aggregate depreciable basis of the Solstice Portfolio, and all other tax items of the Partnership and the project companies.

(d) Draft K-1 Review. The Partnership Representative shall provide draft Schedules K-1 and supporting schedules (including detailed ITC and depreciation schedules, placed-in-service date documentation, and prevailing wage and apprenticeship compliance certifications) to the Tax-Equity Member for review and comment no later than forty-five (45) days prior to the applicable filing deadline (including any extension of such filing deadline). The Tax-Equity Member shall have twenty (20) business days following receipt of such draft Schedules K-1 to provide written comments to the Partnership Representative, and the Partnership Representative shall consider such comments in good faith and make such revisions as are reasonably appropriate prior to finalization and filing of the Partnership Returns.

Section 3.2 — Consistency with LLCA Allocations. The Partnership Representative shall ensure that all partnership items of income, gain, loss, deduction, and credit reported on the Partnership Returns are allocated among the Members in strict accordance with the allocation provisions of Article VII of the LLCA, including without limitation:

(a) Pre-Flip Allocations. During the pre-flip period (as defined in the LLCA), ninety-nine percent (99%) of all tax items — including ITCs, MACRS depreciation deductions, taxable income, taxable loss, and all other items of income, gain, loss, deduction, and credit — shall be allocated to the Tax-Equity Member, and one percent (1%) shall be allocated to the Managing Member;

(b) Post-Flip Allocations. Following the occurrence of the flip date (as defined and determined in accordance with the LLCA), five percent (5%) of all tax items shall be allocated to the Tax-Equity Member, and ninety-five percent (95%) shall be allocated to the Managing Member;

(c) Capital Accounts. The Partnership Representative shall cause the Partnership to establish and maintain capital accounts for each Member in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv), and shall ensure that such capital accounts are properly adjusted to reflect all allocations of income, gain, loss, deduction, and credit, all contributions and distributions, and all other items required to be reflected therein under the Treasury Regulations;

(d) Substantial Economic Effect. The Partnership Representative shall cause all allocations of tax items to be made in compliance with the substantial economic effect safe harbor under Section 704(b) of the Code and Treasury Regulation Section 1.704-1(b)(2), including compliance with the alternate test for economic effect and the partners' interests in the partnership rules, as set forth in the LLCA; and

(e) Section 704(c) Allocations. To the extent any property of the Partnership or the project companies has a book value that differs from its adjusted tax basis, the Partnership Representative shall ensure that allocations under Section 704(c) of the Code are made in accordance with the method specified in the LLCA and in compliance with Treasury Regulation Section 1.704-3.

Section 3.3 — Record Keeping. The Partnership Representative shall maintain, or cause to be maintained, complete and accurate books, records, workpapers, and supporting documentation for all tax positions taken on Partnership Returns, including without limitation:

(a) documentation of ITC eligibility for each project company, including evidence of energy property qualification, cost segregation studies, and placed-in-service determinations;

(b) documentation of prevailing wage and apprenticeship compliance for each project company, including certified payroll records, contractor certifications, and Department of Labor apprenticeship program registrations;

(c) documentation of domestic content qualification under Section 48(a)(12) of the Code for each project company, including manufacturer certifications, component sourcing records, and cost analysis supporting the applicable domestic content thresholds;

(d) placed-in-service date determinations for each of the seven project companies in the Solstice Portfolio, including interconnection agreements, certificates of completion, and other evidence of the date on which each project was placed in a condition or state of readiness and availability for its specifically assigned function;

(e) depreciation schedules, including elections under Section 168(b)(2) or (b)(3) of the Code, bonus depreciation elections (or elections out of bonus depreciation), and cost basis determinations for each asset or class of assets;

(f) copies of all tax opinions, memoranda, and analyses delivered at or prior to the closing of the tax-equity transaction, including the opinions of Calderwood & Harkness LLP dated December 8, 2023; and

(g) all correspondence with the IRS, state and local taxing authorities, and the tax return preparer relating to the Partnership or any project company.

All such records shall be retained for a period of not less than seven (7) years following the date on which the applicable Partnership Return is filed, or, if longer, until the expiration of all applicable statutes of limitations (including extensions) with respect to the applicable taxable year.

Section 3.4 — Compliance with Section 6418 Coordination. To the extent that certain project companies in the Solstice Portfolio have made transfer elections under Section 6418 of the Code with respect to a portion of the ITCs generated by such project companies (totaling Sixty-Four Million Eight Hundred Thousand Dollars ($64,800,000) in face-value credits, of which Sixty Million Dollars ($60,000,000) were sold and transferred to Pinehurst Insurance Group, Inc. (EIN: 36-4219803) pursuant to the Tax Credit Purchase Agreement dated September 21, 2023, and Four Million Eight Hundred Thousand Dollars ($4,800,000) were retained by Calloway-Briggs Renewables Inc.), the Partnership Representative shall ensure that the Partnership Returns properly reflect the interaction of such transfer elections with the Partnership's ITC allocations. Specifically, only the ITCs that flow through the partnership structure to the Members (aggregating approximately Eighty-Nine Million Forty Thousand Dollars ($89,040,000)) shall be reflected on the Partnership's Schedules K-1, and the ITCs transferred under Section 6418 shall be separately reported on the applicable project company returns and transfer election statements, and shall not be duplicated on the Partnership's returns. The Partnership Representative shall coordinate with Calloway-Briggs Renewables Inc. and its tax advisors to ensure accurate and consistent treatment across all related filings.

Section 3.5 — Annual Compliance Monitoring. The Partnership Representative shall monitor and cause the Partnership and each of the project companies in the Solstice Portfolio to comply with the following requirements on an ongoing basis:

(a) Prevailing Wage and Apprenticeship Requirements. The Partnership Representative shall monitor and ensure compliance with the prevailing wage and apprenticeship requirements under Section 48(a)(10) and Section 48(a)(11) of the Code (as added by the Inflation Reduction Act of 2022) for each project company, which requirements must be satisfied in order for the ITCs to be calculated at the thirty percent (30%) base rate (rather than the six percent (6%) base rate). Such monitoring shall include periodic review of contractor payroll records, verification of registered apprenticeship program participation, and maintenance of documentation sufficient to demonstrate compliance in the event of an IRS examination.

(b) Domestic Content Requirements. The Partnership Representative shall monitor and ensure compliance with the domestic content bonus credit requirements under Section 48(a)(12) of the Code for each project company that has claimed the ten percent (10%) domestic content bonus adder, including compliance with the applicable percentage thresholds for steel, iron, and manufactured products that are produced in the United States.

(c) ITC Recapture Avoidance. The Partnership Representative shall monitor and take all commercially reasonable actions to avoid the triggering of ITC recapture under Section 50(a) of the Code during the five-year recapture period applicable to each project company. The five-year recapture period for each project shall run from such project's respective commercial operation date (COD) through the fifth anniversary thereof. The Partnership Representative shall not permit or cause any disposition, cessation of qualified use, change in ownership, or other event with respect to any energy property of any project company that would result in ITC recapture during such recapture period, without the prior written consent of the Tax-Equity Member.

(d) Reporting of Recapture Events. The Partnership Representative shall promptly (and in any event within five (5) business days) notify the Tax-Equity Member in writing of any event or circumstance that has occurred, or that the Partnership Representative reasonably believes is likely to occur, that could trigger ITC recapture under Section 50(a) of the Code, result in the disallowance or reduction of any ITC previously claimed by or allocated to the Tax-Equity Member, or otherwise adversely affect the Tax-Equity Member's tax benefits under the LLCA, including any casualty, condemnation, sale, lease termination, regulatory change, or other event affecting any project company or its energy property.

ARTICLE IV — NOTIFICATION AND CONSENT REQUIREMENTS

Section 4.1 — Notification of Audit or Proceeding. The Partnership Representative shall provide written notice to the Tax-Equity Member and to the Tax-Equity Member's counsel within ten (10) business days of the Partnership Representative's receipt (directly or through the Designated Individual, the tax return preparer, or any agent of the Partnership) of any of the following:

(a) any Notice of Administrative Proceeding, notice of proposed partnership adjustment (NOPPA), final partnership adjustment (FPA), or similar notice or communication from the IRS relating to any Partnership taxable year;

(b) any notice of a proposed adjustment to any of the Partnership's tax items, including any information document request (IDR), notice of deficiency, or similar communication that could result in an Adjustment;

(c) any notice of the commencement of a Partnership Audit, including any notification of selection for examination or any opening conference letter;

(d) any correspondence from the IRS relating to the Partnership's returns, tax positions, elections, or filings, whether formal or informal, including any agent contact, telephone inquiry, or campus correspondence; and

(e) any inquiry, assessment, demand, or notice relating to ITCs, MACRS depreciation deductions, or any other tax benefits allocated to the Tax-Equity Member, or relating to the eligibility, availability, or amount of any such tax benefits.

All notices under this Section 4.1 shall be delivered to the following addresses:

To the Tax-Equity Member:

Ridgeline Capital Partners, LLC 390 Park Avenue, 22nd Floor New York, New York 10022

Attention: David Lim, Vice President

Email: dlim@ridgelinecapital.com

With a copy to: Samara Okonkwo, Tax Director

Email: sokonkwo@ridgelinecapital.com

To the Tax-Equity Member's Counsel:

Whitfield & Ayers LLP 51 West 52nd Street New York, New York 10019

Attention: Patricia Whitfield, Partner

Email: pwhitfield@whitfieldayers.com

With a copy to: Kenji Watanabe, Counsel

Email: kwatanabe@whitfieldayers.com

The form of notification to be used for notices under this Section 4.1 is attached hereto as Exhibit B.

Section 4.2 — Consent Requirements. The Partnership Representative shall not take any of the following actions without the prior written consent of the Tax-Equity Member (such consent not to be unreasonably withheld, conditioned, or delayed, except with respect to clauses (a), (b), and (h) below, for which the Tax-Equity Member's consent may be withheld in its sole and absolute discretion):

(a) settle, compromise, or otherwise resolve any Partnership Audit, proposed Adjustment, or administrative or judicial proceeding that would affect the amount, availability, timing, or character of any ITCs, depreciation deductions, or other tax items allocated to the Tax-Equity Member;

(b) agree to, consent to, or fail to contest any assessment or payment of an Imputed Underpayment under Section 6225 of the Code;

(c) extend, or agree to the extension of, any statute of limitations with respect to any of the Partnership's tax returns or any partnership-related item for any taxable year;

(d) elect (or fail to elect) to make a Push-Out Election under Section 6226 of the Code;

(e) file an administrative adjustment request under Section 6227 of the Code that would modify, reduce, or otherwise affect the allocation of any tax items (including ITCs and depreciation deductions) to the Tax-Equity Member;

(f) amend or cause to be amended any Partnership Return previously filed, or file any superseding return, if such amendment or superseding return would modify any tax item allocated to the Tax-Equity Member;

(g) take any position on any Partnership Return or in any Partnership Audit proceeding that is inconsistent with the tax opinions delivered at the closing of the tax-equity transaction by Calderwood & Harkness LLP (Opinion of Tax Counsel dated December 8, 2023, and ITC Eligibility Opinion dated December 8, 2023);

(h) change or cause to be changed the Partnership's classification for federal income tax purposes, including the filing or revocation of any election under Treasury Regulation Section 301.7701-3;

(i) change the identity of the tax return preparer (currently Larchmont & Associates, PLLC) without providing the Tax-Equity Member no less than thirty (30) days' prior written notice and a reasonable opportunity to object; or

(j) take any other action that would reasonably be expected to have a material adverse effect on the Tax-Equity Member's tax benefits under the LLCA, including any action affecting the Partnership's or any project company's eligibility for ITCs, the applicable ITC rate, or the amount of depreciation deductions available to the Partnership.

Section 4.3 — Response Period. The Tax-Equity Member shall have twenty (20) business days from its receipt of a notice under Section 4.1, or from its receipt of a request for consent under Section 4.2, to provide written comments, grant consent, or withhold consent to any proposed action. If the Tax-Equity Member fails to respond within such twenty (20) business-day period, its consent shall be deemed to have been withheld with respect to all actions requiring consent under Section 4.2; provided, however, that with respect to requests for consent to extend a statute of limitations under Section 4.2(c), failure of the Tax-Equity Member to respond within such twenty (20) business-day period shall be deemed to constitute consent to such extension. The Partnership Representative shall not take any action for which consent is required during the pendency of the twenty (20) business-day response period, unless such action must be taken prior to the expiration of such period to avoid the imposition of a penalty, the assessment of a tax, or the lapse of a right, in which case the Partnership Representative shall promptly notify the Tax-Equity Member and shall take such action as is reasonably necessary to preserve the rights of the Partnership and the Members pending the Tax-Equity Member's response.

Section 4.4 — Participation Rights. The Tax-Equity Member shall have the right, at its own expense, to:

(a) participate in and attend any meetings, conferences, or proceedings with the IRS relating to a Partnership Audit, including opening conferences, closing conferences, appeals conferences, and any judicial proceedings;

(b) review, prior to submission, all correspondence, responses, protests, petitions, briefs, and other documents proposed to be sent to the IRS by or on behalf of the Partnership or the Partnership Representative in connection with any Partnership Audit;

(c) engage its own legal counsel (including Whitfield & Ayers LLP or such other counsel as the Tax-Equity Member may select) and tax advisors to advise the Tax-Equity Member on any Partnership Audit matters and to attend any proceedings or meetings with the IRS alongside the Partnership Representative; and

(d) submit written positions, analyses, and recommendations to the Partnership Representative for inclusion in, or consideration in connection with, any response to the IRS or any filing with a court of competent jurisdiction, and the Partnership Representative shall consider such submissions in good faith.

Section 4.5 — Managing Member Notification to CBR. The Managing Member (CBR Solstice Manager, LLC) shall promptly (and in any event within three (3) business days) notify Calloway-Briggs Renewables Inc., as its sole member, of any notices received, actions required, or consents sought or provided under this Article IV. Notices to Calloway-Briggs Renewables Inc. shall be directed to:

Calloway-Briggs Renewables Inc. 2700 Post Oak Boulevard, Suite 1450 Houston, Texas 77056

Attention: Marcus Calloway, Chairman and Chief Executive Officer

Email: mcalloway@calloway-briggs.com

With a copy to: Theo Vasquez, Chief Financial Officer

Email: tvasquez@calloway-briggs.com

ARTICLE V — PUSH-OUT ELECTION UNDER IRC § 6226

Section 5.1 — Obligation to Make Push-Out Election. If the Partnership receives a notice of final partnership adjustment under Section 6231 of the Code resulting in the assessment of an Imputed Underpayment, the Partnership Representative shall, upon the written request of the Tax-Equity Member, timely make a Push-Out Election under Section 6226 of the Code with respect to such Imputed Underpayment, so that each reviewed-year partner (and, if applicable, each indirect partner) shall be required to take into account its allocable share of the adjusted partnership items individually, rather than the Partnership paying the Imputed Underpayment at the entity level. The Partnership Representative shall not be required to make a Push-Out Election if (and only if) the Managing Member and the Tax-Equity Member mutually agree in writing that making a Push-Out Election would not be in the best interests of the Members, taking into account the nature and magnitude of the Adjustment, the potential tax impact on each Member, and the administrative costs and burdens associated with the Push-Out Election.

Section 5.2 — Mechanics of Push-Out Election. Upon making a Push-Out Election under Section 6226 of the Code:

(a) Statements to Partners. The Partnership Representative shall cause the Partnership to furnish to each Member that was a partner (or an indirect partner) during the reviewed year, and to each former Member who held an interest in the Partnership during the reviewed year (if applicable), a statement reflecting such Member's share of the adjusted partnership items, in accordance with Section 6226(a)(2) of the Code and Treasury Regulation Section 301.6226-2. Such statements shall be furnished within sixty (60) days of the date on which the Partnership Adjustment becomes final, or within such other period as may be required by applicable law or Treasury Regulations.

(b) Individual Liability. Each Member that receives a statement under clause (a) shall be individually liable for any resulting tax, interest, penalties, and additions to tax attributable to its allocable share of the Adjustment, calculated in accordance with Section 6226(b) of the Code (including the application of the "correction amount" and "interest amount" methodologies set forth in Treasury Regulation Section 301.6226-3).

(c) Partnership Not Liable. Upon the timely and valid making of a Push-Out Election, the Partnership shall not be liable for the Imputed Underpayment to which such election relates, and the IRS's sole recourse shall be against the reviewed-year partners (and indirect partners) individually in accordance with Section 6226 of the Code.

Section 5.3 — Imputed Underpayment Modifications. Prior to making any determination regarding whether to make a Push-Out Election, the Partnership Representative shall, to the extent reasonably practicable and with the prior written consent of the Tax-Equity Member:

(a) seek modifications to any Imputed Underpayment under Section 6225(c) of the Code, including modifications based on amended returns filed by the Members under Section 6225(c)(2);

(b) seek rate modifications under Section 6225(c)(4) of the Code with respect to any portion of the Imputed Underpayment attributable to partners that are tax-exempt entities, C corporations subject to tax at rates lower than the highest individual rate, or other partners entitled to rate-based modifications; and

(c) seek any other available modifications, including modifications for the portion of the Adjustment attributable to adjustments that do not result in an increase in tax for the relevant partners, in accordance with Treasury Regulation Section 301.6225-2.

The Partnership Representative shall keep the Tax-Equity Member informed of the status and progress of any Imputed Underpayment modification requests and shall provide the Tax-Equity Member with copies of all modification requests, supporting documentation, and IRS responses in connection therewith.

Section 5.4 — Cost Allocation. Costs and expenses reasonably incurred by the Partnership in connection with a Push-Out Election (including IRS processing fees, advisory fees, accounting fees, legal fees, and other expenses) shall be borne by the Partnership as an operating expense and shall be taken into account in determining distributable cash under the LLCA; provided, however, that if the Adjustment giving rise to the Push-Out Election arises from the willful misconduct, bad faith, or fraud of a specific Member, then all costs and expenses associated with such Push-Out Election shall be borne solely by the responsible Member, and such Member shall reimburse the Partnership for any costs paid by the Partnership within thirty (30) days of written demand.

ARTICLE VI — INDEMNIFICATION AND ALLOCATION OF TAX LIABILITY

Section 6.1 — Indemnification by Managing Member. The Managing Member (CBR Solstice Manager, LLC), and, to the extent of its guarantee obligations under the LLCA and this Agreement, Calloway-Briggs Renewables Inc. (as the sole member of CBR Solstice Manager, LLC), shall indemnify, defend, and hold harmless the Tax-Equity Member and its affiliates, members, partners, officers, directors, employees, agents, and representatives from and against any and all losses, liabilities, damages, costs, and expenses (including reasonable attorneys' fees and disbursements) arising from or related to any Imputed Underpayment, tax, interest, penalty, or addition to tax imposed on or payable by the Partnership under the centralized partnership audit rules of Sections 6221 through 6241 of the Code, to the extent that such liability is attributable to:

(a) errors, omissions, misstatements, or misrepresentations in the Partnership Returns (or any schedule, statement, or attachment thereto) prepared under the Partnership Representative's supervision or direction, including any error in the calculation, reporting, or allocation of ITCs, depreciation deductions, or any other tax item;

(b) any breach by the Managing Member (or the Partnership Representative or the Designated Individual) of its obligations under this Agreement or the LLCA, including any failure to comply with the notification and consent requirements of Article IV;

(c) the failure of the Partnership Representative to make a Push-Out Election when requested by the Tax-Equity Member in accordance with Section 5.1 of this Agreement; or

(d) any act or omission of the Managing Member, the Partnership Representative, the Designated Individual, or any of their respective agents, employees, or affiliates constituting willful misconduct, bad faith, or gross negligence in connection with any Partnership Audit or the performance of duties under this Agreement.

The indemnification obligations of the Managing Member under this Section 6.1 shall survive the termination of this Agreement and shall not be subject to any limitation of liability that may otherwise apply under the LLCA, except to the extent expressly provided therein.

Section 6.2 — Indemnification by Tax-Equity Member. The Tax-Equity Member (Ridgeline Capital Partners, LLC) shall indemnify, defend, and hold harmless the Managing Member, the Partnership, and their respective affiliates, members, officers, directors, employees, agents, and representatives from and against any and all losses, liabilities, damages, costs, and expenses (including reasonable attorneys' fees and disbursements) arising from or related to:

(a) any incremental tax, interest, penalty, or addition to tax attributable to the Tax-Equity Member's own separate tax position, tax elections, or tax reporting that is inconsistent with the Partnership Returns as filed or with the terms of this Agreement or the LLCA;

(b) the Tax-Equity Member's failure to comply with any obligation imposed on it under this Agreement, including any failure to timely file amended returns in connection with a Push-Out Election as contemplated by Section 5.2(b); or

(c) any misrepresentation by the Tax-Equity Member in connection with any Imputed Underpayment modification request under Section 6225(c) of the Code.

Section 6.3 — Allocation of Partnership-Level Liabilities. To the extent that an Imputed Underpayment is assessed against the Partnership under Section 6225 of the Code and no Push-Out Election is made (whether because neither Member requests such election, or because the Members mutually agree that such election is not in their best interests), the economic burden of such Imputed Underpayment (including any associated interest, penalties, and additions to tax) shall be allocated among the Members in proportion to each Member's allocable share of the underlying tax items that gave rise to the Adjustment, determined consistently with the allocation provisions of the LLCA. Accordingly, during the pre-flip period, ninety-nine percent (99%) of the economic burden of any such Imputed Underpayment shall be allocated to the Tax-Equity Member and one percent (1%) shall be allocated to the Managing Member, and during the post-flip period, five percent (5%) of such economic burden shall be allocated to the Tax-Equity Member and ninety-five percent (95%) shall be allocated to the Managing Member. Each Member shall contribute to the Partnership its allocable share of any Imputed Underpayment assessed against the Partnership within thirty (30) days of receipt of written demand from the Partnership Representative specifying the amount of such Member's allocable share. Any failure by a Member to timely contribute its allocable share shall bear interest at the rate specified in Section 6621 of the Code from the date of demand until the date of payment.

Notwithstanding the foregoing, the allocation of the economic burden of an Imputed Underpayment under this Section 6.3 shall not relieve the Managing Member of any indemnification obligation under Section 6.1 to the extent the Imputed Underpayment is attributable to errors, omissions, breaches, or other conduct described therein.

ARTICLE VII — REMOVAL AND REPLACEMENT OF PARTNERSHIP REPRESENTATIVE

Section 7.1 — Removal for Cause. The Partnership Representative may be removed from its position as Partnership Representative upon the written request or consent of the Tax-Equity Member (which may be given in the Tax-Equity Member's sole discretion) if any of the following events shall have occurred:

(a) the Partnership Representative commits willful misconduct, bad faith, or gross negligence in the performance of its duties under this Agreement, the LLCA, or applicable law;

(b) the Partnership Representative materially breaches any of its obligations under this Agreement or the LLCA and fails to cure such breach within thirty (30) days of receipt of written notice from the Tax-Equity Member specifying the nature of such breach in reasonable detail; or

(c) the Designated Individual (Theo Vasquez) ceases to be an officer or employee of Calloway-Briggs Renewables Inc. or CBR Solstice Manager, LLC, unless a successor Designated Individual who meets the requirements of Section 7.3 of this Agreement is appointed within thirty (30) days of such cessation.

Upon the occurrence of any event described in clauses (a) through (c) above, the Tax-Equity Member shall deliver written notice to the Managing Member specifying the grounds for removal, and the removal shall be effective upon the earlier of (i) the date specified in such notice (which shall not be earlier than the date of delivery of such notice) or (ii) the date on which the IRS processes the revocation of the Partnership Representative designation as filed by the Partnership.

Section 7.2 — Removal Without Cause. The Partnership Representative may be removed from its position without cause only upon the mutual written consent of both the Managing Member and the Tax-Equity Member. Any such removal shall be effective as of the date agreed upon by the Members or, if no date is specified, upon the filing with the IRS of a revocation of the Partnership Representative designation.

Section 7.3 — Replacement Designated Individual. If Theo Vasquez ceases to serve as the Designated Individual for any reason (including death, disability, resignation, termination of employment, or removal under Section 7.1(c)), the Managing Member shall, within thirty (30) days of such cessation, appoint a successor Designated Individual who:

(a) has substantial presence in the United States, as required by Treasury Regulation Section 301.6223-1(b)(3)(ii), including a valid United States taxpayer identification number, a United States street address, and a United States telephone number;

(b) possesses appropriate qualifications, experience, and expertise in federal income tax matters, including familiarity with partnership taxation, the centralized partnership audit rules, and renewable energy tax credits; and

(c) is reasonably acceptable to the Tax-Equity Member, such acceptance not to be unreasonably withheld, conditioned, or delayed.

The Partnership shall make all required filings with the IRS to reflect the change in Designated Individual, including updating the information reported on IRS Form 1065 and filing any required revocation and redesignation statements under Treasury Regulation Section 301.6223-1(e).

Section 7.4 — Successor Partnership Representative. If the Managing Member ceases to be a Member of the Partnership (including upon the exercise of the purchase option by the Managing Member under the Purchase Option Agreement dated September 21, 2023, or upon any transfer, withdrawal, or removal of the Managing Member under the LLCA), the Members shall designate a successor Partnership Representative in accordance with the LLCA and applicable IRS procedures within thirty (30) days of such event. The successor Partnership Representative shall be subject to the same obligations, consent requirements, and limitations set forth in this Agreement as though it were the original Partnership Representative. If the Members are unable to agree upon a successor Partnership Representative within such thirty (30) day period, the Tax-Equity Member shall have the right to designate the successor Partnership Representative, subject to the requirements of Section 6223 of the Code and the Treasury Regulations.

Section 7.5 — Revocation Filing. Upon any change in the Partnership Representative or the Designated Individual, the outgoing Partnership Representative shall cooperate fully and promptly in executing and delivering any IRS forms, filings, statements, or other documents necessary to effect the revocation of the prior designation and the redesignation of the successor, including any filings required under Treasury Regulation Section 301.6223-1(e). Such cooperation shall include providing all information regarding pending or anticipated IRS proceedings, the status of any Partnership Audits, and all relevant books, records, and correspondence to the incoming Partnership Representative or Designated Individual.

ARTICLE VIII — STATE AND LOCAL TAX MATTERS

Section 8.1 — State Tax Returns. The Partnership Representative shall cause the Partnership and, to the extent required, each project company in the Solstice Portfolio to prepare and timely file all required state and local income, franchise, gross receipts, and other applicable tax returns and reports in each jurisdiction where the Partnership or its project companies conduct business, own property, or otherwise have filing obligations, including the States of Texas and New Mexico. The Partnership Representative shall ensure that all state and local tax returns are prepared in a manner consistent with the Partnership Returns and the LLCA, and that allocations of state-source income, deductions, and credits among the Members are made in accordance with applicable state law and the terms of the LLCA.

Section 8.2 — State Audit Coordination. The Partnership Representative shall manage and coordinate any state or local tax audit, examination, inquiry, or administrative or judicial proceeding relating to the Partnership or any project company in a manner consistent with this Agreement. The notification and consent provisions of Article IV shall apply mutatis mutandis to any state or local tax audit or proceeding, including the obligation to provide written notice to the Tax-Equity Member within ten (10) business days of receipt of any state or local tax audit notice, proposed adjustment, or assessment, and the requirement to obtain the Tax-Equity Member's prior written consent before settling, compromising, or resolving any state or local tax matter that would affect the Tax-Equity Member's state tax benefits or obligations.

Section 8.3 — Texas Franchise Tax. The Partnership Representative shall ensure compliance with the Texas franchise tax (margin tax) requirements applicable to the Partnership and each of the Texas project companies (Pecos Sun Solar, LLC, Red Mesa Solar, LLC, Coyote Flats Solar, LLC, Llano Verde Solar, LLC, and Amistad Solar, LLC), including the timely filing of Texas franchise tax reports, the calculation and payment of franchise tax due, and the maintenance of records sufficient to support the applicable margin tax computation methodology (whether cost of goods sold, compensation, or the 70% revenue deduction).

Section 8.4 — New Mexico Taxes. The Partnership Representative shall ensure compliance with all applicable New Mexico state and local tax requirements for Cimarron Solar, LLC and Sandoval Ridge Solar, LLC, including New Mexico gross receipts tax, corporate income tax (to the extent applicable to the project companies or the Partnership), and any applicable New Mexico renewable energy tax incentives. The Partnership Representative shall coordinate with New Mexico tax counsel as necessary to ensure proper reporting and compliance with New Mexico's pass-through entity tax rules and any related composite return or withholding requirements applicable to nonresident members.

ARTICLE IX — REPORTING OBLIGATIONS

Section 9.1 — Annual Tax Reporting to Members. The Partnership Representative shall deliver or cause to be delivered to each Member the following:

(a) Draft Schedules K-1. Draft Schedules K-1 (IRS Form 1065, Schedule K-1) for such Member, together with supporting schedules (including detailed ITC, depreciation, income, and loss schedules, and placed-in-service date documentation), no later than forty-five (45) days prior to the applicable filing deadline for the Partnership Return (including extensions).

(b) Final Schedules K-1. Final executed Schedules K-1 and all related statements and attachments no later than March 15 of each calendar year following the close of the applicable Partnership taxable year, or, if an extension of time to file the Partnership Return has been obtained, no later than the extended due date of such return. If the Partnership files its Partnership Return on extension, the Partnership Representative shall use commercially reasonable efforts to deliver final Schedules K-1 as promptly as practicable following the completion and filing of the Partnership Return, and in no event later than September 15 of such calendar year.

(c) Annual ITC Recapture Compliance Certifications. Annual certifications, in form and substance reasonably satisfactory to the Tax-Equity Member, confirming that no ITC recapture event (within the meaning of Section 50(a) of the Code) has occurred with respect to any project company during the applicable taxable year, and that each project company continues to satisfy the prevailing wage, apprenticeship, and domestic content requirements applicable to its ITCs. Such certifications shall be delivered no later than the date on which the final Schedules K-1 are delivered for such taxable year.

Section 9.2 — Ad Hoc Reporting. The Partnership Representative shall provide to the Tax-Equity Member, within ten (10) business days of a written request by the Tax-Equity Member (or such shorter period as may be reasonably necessary under the circumstances):

(a) copies of any correspondence, notices, or communications received from or sent to the IRS or any state or local taxing authority relating to the Partnership or any project company;

(b) supporting workpapers, schedules, and analyses for ITC calculations, including eligible basis determinations, placed-in-service dates, ITC rate calculations, and bonus adder eligibility determinations, for each project company;

(c) documentation relating to prevailing wage compliance, apprenticeship compliance, and domestic content qualification for each project company, including contractor certifications, payroll records, and manufacturer attestations;

(d) copies of any Section 6418 transfer election statements, transfer election returns, and related filings made by or on behalf of the project companies, together with any correspondence with Pinehurst Insurance Group, Inc. or other transferee taxpayers in connection therewith; and

(e) such other tax-related information or documentation as the Tax-Equity Member may reasonably request in connection with its own tax reporting obligations, financial reporting, audit support, or compliance programs.

Section 9.3 — Coordination with Tax Credit Purchase Agreement. The Partnership Representative shall coordinate with Calloway-Briggs Renewables Inc. and its tax advisors to ensure that all tax reporting related to the Sixty Million Dollars ($60,000,000) in ITCs transferred to Pinehurst Insurance Group, Inc. (EIN: 36-4219803) under the Tax Credit Purchase Agreement dated September 21, 2023 (and the transfer election statements filed in connection therewith unde

PARTNERSHIP REPRESENTATIVE DESIGNATION AND TAX MATTERS AGREEMENT
dated as of September 21, 2023
among
SOLSTICE HOLDINGS, LLC a Delaware limited liability company
CBR SOLSTICE MANAGER, LLC a Delaware limited liability company (in its capacity as Managing Member and Partnership Representative)
and
RIDGELINE CAPITAL PARTNERS, LLC a Delaware limited liability company (in its capacity as Tax-Equity Member)
Right-click to update Table of Contents
PARTNERSHIP REPRESENTATIVE DESIGNATION AND TAX MATTERS AGREEMENT
This Partnership Representative Designation and Tax Matters Agreement (this "Agreement") is entered into as of September 21, 2023, by and among:
(1) Solstice Holdings, LLC, a Delaware limited liability company (EIN: 88-4071523) (the "Partnership");
(2) CBR Solstice Manager, LLC, a Delaware limited liability company (EIN: 88-4071597), in its capacity as the Managing Member of the Partnership (the "Managing Member" or "Partnership Representative"); and
(3) Ridgeline Capital Partners, LLC, a Delaware limited liability company (EIN: 13-4827651), in its capacity as the Tax-Equity Member of the Partnership (the "Tax-Equity Member").
The Managing Member and the Tax-Equity Member are referred to herein individually as a "Party" and collectively as the "Parties." Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Amended and Restated Limited Liability Company Agreement of Solstice Holdings, LLC, dated as of September 21, 2023 (the "LLCA").
RECITALS
WHEREAS, Solstice Holdings, LLC is a Delaware limited liability company formed on August 14, 2023, and classified as a partnership for federal income tax purposes pursuant to Section 301.7701-3 of the Treasury Regulations;
WHEREAS, the Partnership holds one hundred percent (100%) of the membership interests in seven project companies, each of which owns and operates a solar photovoltaic generation facility: (i) Pecos Sun Solar, LLC (85 MW(dc), Reeves County, Texas); (ii) Red Mesa Solar, LLC (70 MW(dc), Pecos County, Texas); (iii) Coyote Flats Solar, LLC (65 MW(dc), Ward County, Texas); (iv) Llano Verde Solar, LLC (55 MW(dc), Hudspeth County, Texas); (v) Cimarron Solar, LLC (50 MW(dc), Lea County, New Mexico); (vi) Sandoval Ridge Solar, LLC (50 MW(dc), Sandoval County, New Mexico); and (vii) Amistad Solar, LLC (45 MW(dc), Val Verde County, Texas) (collectively, the "Solstice Portfolio," representing an aggregate nameplate capacity of approximately 420 MW(dc));
WHEREAS, the Members have entered into the LLCA providing for a partnership-flip tax-equity structure in which the Tax-Equity Member has committed capital contributions in the aggregate amount of One Hundred Twenty Million Dollars ($120,000,000) and, during the pre-flip period, is allocated ninety-nine percent (99%) of all tax items (including Investment Tax Credits under Section 48 of the Internal Revenue Code of 1986, as amended (the "Code"), and depreciation deductions attributable to the Modified Accelerated Cost Recovery System ("MACRS")) and thirty percent (30%) of cash distributions, and following the occurrence of the flip date, is allocated five percent (5%) of all tax items and cash distributions;
WHEREAS, the Partnership anticipates generating Investment Tax Credits under Section 48 of the Code of approximately One Hundred Fifty-Three Million Eight Hundred Forty Thousand Dollars ($153,840,000) in connection with solar energy property placed in service by the project companies, a portion of which will be allocated to the Tax-Equity Member through the partnership structure and a portion of which will be transferred to third-party transferee taxpayers pursuant to transfer elections under Section 6418 of the Code;
WHEREAS, the Bipartisan Budget Act of 2015 (Public Law 114-74) and subsequent amendments thereto replaced the prior "tax matters partner" regime under former Sections 6221 through 6234 of the Code with a centralized partnership audit regime under Sections 6221 through 6241 of the Code, effective for partnership taxable years beginning after December 31, 2017;
WHEREAS, Section 6223 of the Code requires each partnership subject to the centralized partnership audit regime to designate a partnership representative who shall have the sole authority to act on behalf of the partnership in any federal income tax proceeding;
WHEREAS, the Members desire to designate CBR Solstice Manager, LLC as the Partnership Representative of the Partnership for all taxable years of the Partnership, acting through Theo Vasquez, Chief Financial Officer of Calloway-Briggs Renewables Inc. (the sole member of CBR Solstice Manager, LLC), as the "Designated Individual" within the meaning of Treasury Regulation Section 301.6223-1(b)(3);
WHEREAS, this Agreement supplements and is subject to the tax-related provisions of the LLCA, including Article VIII thereof (Tax Matters), and is intended to set forth in detail the procedural obligations, consent requirements, notification protocols, and indemnification arrangements governing the Partnership Representative's exercise of authority under the centralized partnership audit rules; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below. Terms defined in the LLCA and not otherwise defined herein shall have the meanings assigned to them in the LLCA.
(a) "Adjustment" means any adjustment to a partnership-related item (as defined in Section 6241(2)(B) of the Code) proposed, determined, or assessed by the IRS or any court of competent jurisdiction under the centralized partnership audit rules of Sections 6221 through 6241 of the Code, including any adjustment arising from a Partnership Audit, an administrative adjustment request, or a judicial proceeding.
(b) "BBA" means the Bipartisan Budget Act of 2015 (Public Law 114-74), as amended by the Protecting Americans from Tax Hikes Act of 2015 (Public Law 114-113), the Tax Technical Corrections Act of 2018, and any subsequent legislation amending Sections 6221 through 6241 of the Code.
(c) "Code" or "IRC" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute. References to specific sections of the Code shall include any successor provisions thereto and any applicable Treasury Regulations promulgated thereunder.
(d) "Designated Individual" means Theo Vasquez, Chief Financial Officer of Calloway-Briggs Renewables Inc. (EIN: 84-3291076), or any successor individual designated in accordance with Section 7.3 of this Agreement, who shall act on behalf of the Partnership Representative as required by Treasury Regulation Section 301.6223-1(b)(3).
(e) "Imputed Underpayment" has the meaning assigned to such term in Section 6225 of the Code and the Treasury Regulations thereunder, including any imputed underpayment calculated by the IRS as a result of a Partnership Audit or final partnership adjustment.
(f) "IRS" means the Internal Revenue Service, a bureau of the United States Department of the Treasury, or any successor agency.
(g) "ITC" or "Investment Tax Credit" means the investment tax credit available under Section 48 of the Code with respect to energy property, as modified by the Inflation Reduction Act of 2022 (Public Law 117-169).
(h) "LLCA" means the Amended and Restated Limited Liability Company Agreement of Solstice Holdings, LLC, dated as of September 21, 2023, by and between the Managing Member and the Tax-Equity Member, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
(i) "MACRS" means the Modified Accelerated Cost Recovery System under Section 168 of the Code.
(j) "Managing Member" means CBR Solstice Manager, LLC, a Delaware limited liability company (EIN: 88-4071597), in its capacity as the managing member of the Partnership under the LLCA.
(k) "Member" or "Members" means the Managing Member and the Tax-Equity Member, individually or collectively, as the context requires, and shall include any successor or transferee of such Member's interest in the Partnership to the extent permitted by the LLCA.
(l) "Notice of Administrative Proceeding" means any notice of a partnership adjustment, notice of proposed partnership adjustment ("NOPPA"), final partnership adjustment ("FPA"), notice of selection for examination, 30-day letter, 90-day letter, or similar communication from the IRS to the Partnership or the Partnership Representative in connection with any Partnership Audit or administrative proceeding.
(m) "Partnership" means Solstice Holdings, LLC, a Delaware limited liability company (EIN: 88-4071523).
(n) "Partnership Audit" means any federal income tax examination, audit, administrative proceeding, or judicial proceeding relating to any tax items of the Partnership, including any proceeding arising under the centralized partnership audit rules of Sections 6221 through 6241 of the Code, and any related proceeding in the United States Tax Court, United States District Court, or United States Court of Federal Claims.
(o) "Partnership Representative" means CBR Solstice Manager, LLC, as designated under Section 2.1 of this Agreement, or any successor Partnership Representative designated in accordance with this Agreement and applicable law.
(p) "Partnership Return" means the Partnership's federal income tax return on IRS Form 1065, U.S. Return of Partnership Income, and all schedules thereto (including, without limitation, Schedules K-1 (Partner's Share of Income, Deductions, Credits, etc.), Schedule L, Schedule M-1, Schedule M-2, Schedule M-3, and all other required statements, attachments, and elections), for each taxable year of the Partnership.
(q) "Push-Out Election" means an election under Section 6226 of the Code (and the Treasury Regulations thereunder) to cause each reviewed-year partner (and, if applicable, each indirect partner) to take into account its allocable share of any partnership adjustment, in lieu of the Partnership paying the Imputed Underpayment.
(r) "Solstice Portfolio" means, collectively, Pecos Sun Solar, LLC, Red Mesa Solar, LLC, Coyote Flats Solar, LLC, Llano Verde Solar, LLC, Cimarron Solar, LLC, Sandoval Ridge Solar, LLC, and Amistad Solar, LLC, each a Delaware limited liability company and a wholly owned subsidiary of the Partnership.
(s) "Tax-Equity Member" means Ridgeline Capital Partners, LLC, a Delaware limited liability company (EIN: 13-4827651), in its capacity as the tax-equity member of the Partnership under the LLCA.
(t) "Treasury Regulations" means the regulations promulgated under the Code by the United States Department of the Treasury, as such regulations may be amended from time to time, including any successor regulations and any temporary or proposed regulations to the extent relied upon by the IRS or the Partnership.
Section 1.2 — Interpretation. Unless the context otherwise requires:
(a) Terms defined in the LLCA and not otherwise defined herein shall have the meanings assigned to such terms in the LLCA.
(b) References to any section or provision of the Code or the Treasury Regulations shall include any successor or amended provision, and all references to the Code or Treasury Regulations shall include any applicable guidance, rulings, or other pronouncements issued by the IRS or the United States Department of the Treasury with respect thereto.
(c) The words "herein," "hereof," "hereunder," and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, or other subdivision.
(d) References to "Sections" and "Articles" are to the Sections and Articles of this Agreement, unless otherwise specified.
(e) The terms "include" and "including" shall be deemed to be followed by the phrase "without limitation."
(f) The use of the singular shall include the plural and vice versa, and the use of any gender shall include all genders, as the context may require.
(g) All references to "$" or "Dollars" shall refer to United States dollars.
(h) References to "business days" mean any day other than a Saturday, Sunday, or any other day on which commercial banks in New York, New York or Houston, Texas are authorized or required by law or executive order to close.
ARTICLE II — DESIGNATION OF PARTNERSHIP REPRESENTATIVE
Section 2.1 — Designation. The Partnership hereby designates CBR Solstice Manager, LLC as the Partnership Representative of Solstice Holdings, LLC for all taxable years of the Partnership, effective as of the Partnership's first taxable year (which commenced upon the Partnership's formation on August 14, 2023). Such designation is made pursuant to, and in compliance with, Section 6223 of the Code and Treasury Regulation Section 301.6223-1. The Partnership Representative shall serve in such capacity until removed or replaced in accordance with Article VII of this Agreement. Each Member hereby consents to such designation and agrees to cooperate in effectuating the same, including by executing any documents or forms required by the IRS in connection therewith.
Section 2.2 — Designated Individual. CBR Solstice Manager, LLC, as the Partnership Representative, hereby designates Theo Vasquez, Chief Financial Officer of Calloway-Briggs Renewables Inc. (EIN: 84-3291076), the sole member of CBR Solstice Manager, LLC, as the Designated Individual within the meaning of Treasury Regulation Section 301.6223-1(b)(3). Theo Vasquez shall have, and hereby represents that he does have, a substantial presence in the United States as required by Treasury Regulation Section 301.6223-1(b)(3)(ii), including a valid United States taxpayer identification number, a United States street address, and a United States telephone number. The identity of the Designated Individual, together with all information required by Treasury Regulation Section 301.6223-1(b)(3), shall be reported on each Partnership Return (IRS Form 1065) filed by the Partnership, and the Partnership Representative shall ensure that such information is accurate and current as of the date of each such filing. The information pertaining to the Designated Individual is set forth in Exhibit A attached hereto.
Section 2.3 — Authority. Subject to the limitations, conditions, and consent requirements set forth in Article IV of this Agreement, the Partnership Representative shall have the sole authority to act on behalf of the Partnership in any federal income tax proceeding or matter arising under the centralized partnership audit rules of Sections 6221 through 6241 of the Code, including, without limitation, the authority to:
(a) receive all notices, correspondence, and communications from the IRS directed to or concerning the Partnership in connection with any Partnership Audit or related proceeding;
(b) respond to, negotiate with, and communicate with the IRS (including agents, examiners, revenue officers, appeals officers, and IRS counsel) regarding any Partnership Audit, proposed Adjustment, or other federal tax matter concerning the Partnership;
(c) extend or consent to the extension of any statute of limitations applicable to the assessment or collection of any tax attributable to the Partnership or any partnership-related item, pursuant to Section 6235 of the Code or otherwise;
(d) file administrative adjustment requests under Section 6227 of the Code on behalf of the Partnership;
(e) bind the Partnership and, to the extent permitted by the Code, its Members, with respect to any settlement, closing agreement, or other resolution of a Partnership Audit, subject to the consent requirements of Section 4.2;
(f) make elections permitted or required under Sections 6221 through 6241 of the Code and the Treasury Regulations thereunder, including, without limitation, Push-Out Elections under Section 6226 of the Code and elections to modify any Imputed Underpayment under Section 6225(c) of the Code;
(g) file petitions for readjustment with the United States Tax Court, the United States District Court, or the United States Court of Federal Claims, as applicable, pursuant to Section 6234 of the Code;
(h) engage legal counsel, accountants, and other advisors on behalf of the Partnership in connection with any Partnership Audit or proceeding; and
(i) take such other actions as may be necessary or appropriate to fulfill the duties and exercise the authority of the Partnership Representative under the Code, the Treasury Regulations, and this Agreement.
The foregoing enumeration of authority shall not be construed to limit the scope of the Partnership Representative's authority under the Code and the Treasury Regulations, except to the extent expressly limited by this Agreement.
Section 2.4 — Fiduciary Duty. The Partnership Representative shall exercise its authority under this Agreement and the Code in good faith and in a manner reasonably believed to be in the best interests of the Partnership and all Members, taking into account the respective tax positions, economic interests, and allocation entitlements of both the Managing Member and the Tax-Equity Member under the LLCA. Without limiting the generality of the foregoing, the Partnership Representative shall give due consideration to the impact of any proposed settlement, election, or other action on the Tax-Equity Member's Investment Tax Credits, depreciation deductions, and other tax benefits allocated to the Tax-Equity Member during the pre-flip period, recognizing the Tax-Equity Member's substantial reliance on such tax benefits in connection with its capital contributions to the Partnership.
Section 2.5 — Standard of Care. The Partnership Representative shall not be liable to the Partnership or any Member for any loss, liability, damage, cost, or expense arising from any action taken or omission made by the Partnership Representative in good faith and in accordance with this Agreement and the LLCA, except to the extent that such loss, liability, damage, cost, or expense results from the Partnership Representative's (or the Designated Individual's) willful misconduct, bad faith, gross negligence, or material breach of this Agreement or the LLCA. Nothing in this Section 2.5 shall limit or affect any indemnification obligations of the Managing Member under Article VI of this Agreement.
ARTICLE III — OBLIGATIONS OF THE PARTNERSHIP REPRESENTATIVE
Section 3.1 — Tax Return Preparation and Filing.
(a) Preparation and Filing. The Partnership Representative shall cause the Partnership to prepare and timely file (including timely filing for extensions, if applicable) all Partnership Returns (IRS Form 1065, Schedules K-1, and all related schedules, statements, elections, and attachments) for each taxable year of the Partnership. The Partnership Representative shall ensure that all Partnership Returns are filed by the applicable due date (currently September 15 for calendar-year partnerships filing on extension, or March 15 if no extension is filed), and shall cause the Partnership to file for an automatic extension of time to file using IRS Form 7004 if additional time is required to finalize such returns.
(b) Tax Return Preparer. Tax return preparation shall be performed by, or under the direct supervision of, Larchmont & Associates, PLLC (Managing Partner: Martin Larchmont; Tax Partner: Susan Kaplan), located at 3200 Southwest Freeway, Suite 2200, Houston, Texas 77027, or such other nationally recognized public accounting firm or qualified tax advisor as may be approved in writing by both the Managing Member and the Tax-Equity Member. The Partnership Representative shall be responsible for the engagement, direction, and oversight of such tax return preparer and shall ensure that the tax return preparer has access to all information reasonably necessary to prepare accurate and complete Partnership Returns.
(c) Consistency with LLCA. Partnership Returns shall be prepared in a manner consistent with the terms and provisions of the LLCA, including without limitation the allocation provisions set forth therein (ninety-nine percent (99%) of all tax items to the Tax-Equity Member and one percent (1%) to the Managing Member during the pre-flip period; five percent (5%) of all tax items to the Tax-Equity Member and ninety-five percent (95%) to the Managing Member during the post-flip period), and shall properly reflect all ITCs, MACRS depreciation deductions on the Three Hundred Seven Million Six Hundred Eighty Thousand Dollar ($307,680,000) aggregate depreciable basis of the Solstice Portfolio, and all other tax items of the Partnership and the project companies.
(d) Draft K-1 Review. The Partnership Representative shall provide draft Schedules K-1 and supporting schedules (including detailed ITC and depreciation schedules, placed-in-service date documentation, and prevailing wage and apprenticeship compliance certifications) to the Tax-Equity Member for review and comment no later than forty-five (45) days prior to the applicable filing deadline (including any extension of such filing deadline). The Tax-Equity Member shall have twenty (20) business days following receipt of such draft Schedules K-1 to provide written comments to the Partnership Representative, and the Partnership Representative shall consider such comments in good faith and make such revisions as are reasonably appropriate prior to finalization and filing of the Partnership Returns.
Section 3.2 — Consistency with LLCA Allocations. The Partnership Representative shall ensure that all partnership items of income, gain, loss, deduction, and credit reported on the Partnership Returns are allocated among the Members in strict accordance with the allocation provisions of Article VII of the LLCA, including without limitation:
(a) Pre-Flip Allocations. During the pre-flip period (as defined in the LLCA), ninety-nine percent (99%) of all tax items — including ITCs, MACRS depreciation deductions, taxable income, taxable loss, and all other items of income, gain, loss, deduction, and credit — shall be allocated to the Tax-Equity Member, and one percent (1%) shall be allocated to the Managing Member;
(b) Post-Flip Allocations. Following the occurrence of the flip date (as defined and determined in accordance with the LLCA), five percent (5%) of all tax items shall be allocated to the Tax-Equity Member, and ninety-five percent (95%) shall be allocated to the Managing Member;
(c) Capital Accounts. The Partnership Representative shall cause the Partnership to establish and maintain capital accounts for each Member in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv), and shall ensure that such capital accounts are properly adjusted to reflect all allocations of income, gain, loss, deduction, and credit, all contributions and distributions, and all other items required to be reflected therein under the Treasury Regulations;
(d) Substantial Economic Effect. The Partnership Representative shall cause all allocations of tax items to be made in compliance with the substantial economic effect safe harbor under Section 704(b) of the Code and Treasury Regulation Section 1.704-1(b)(2), including compliance with the alternate test for economic effect and the partners' interests in the partnership rules, as set forth in the LLCA; and
(e) Section 704(c) Allocations. To the extent any property of the Partnership or the project companies has a book value that differs from its adjusted tax basis, the Partnership Representative shall ensure that allocations under Section 704(c) of the Code are made in accordance with the method specified in the LLCA and in compliance with Treasury Regulation Section 1.704-3.
Section 3.3 — Record Keeping. The Partnership Representative shall maintain, or cause to be maintained, complete and accurate books, records, workpapers, and supporting documentation for all tax positions taken on Partnership Returns, including without limitation:
(a) documentation of ITC eligibility for each project company, including evidence of energy property qualification, cost segregation studies, and placed-in-service determinations;
(b) documentation of prevailing wage and apprenticeship compliance for each project company, including certified payroll records, contractor certifications, and Department of Labor apprenticeship program registrations;
(c) documentation of domestic content qualification under Section 48(a)(12) of the Code for each project company, including manufacturer certifications, component sourcing records, and cost analysis supporting the applicable domestic content thresholds;
(d) placed-in-service date determinations for each of the seven project companies in the Solstice Portfolio, including interconnection agreements, certificates of completion, and other evidence of the date on which each project was placed in a condition or state of readiness and availability for its specifically assigned function;
(e) depreciation schedules, including elections under Section 168(b)(2) or (b)(3) of the Code, bonus depreciation elections (or elections out of bonus depreciation), and cost basis determinations for each asset or class of assets;
(f) copies of all tax opinions, memoranda, and analyses delivered at or prior to the closing of the tax-equity transaction, including the opinions of Calderwood & Harkness LLP dated December 8, 2023; and
(g) all correspondence with the IRS, state and local taxing authorities, and the tax return preparer relating to the Partnership or any project company.
All such records shall be retained for a period of not less than seven (7) years following the date on which the applicable Partnership Return is filed, or, if longer, until the expiration of all applicable statutes of limitations (including extensions) with respect to the applicable taxable year.
Section 3.4 — Compliance with Section 6418 Coordination. To the extent that certain project companies in the Solstice Portfolio have made transfer elections under Section 6418 of the Code with respect to a portion of the ITCs generated by such project companies (totaling Sixty-Four Million Eight Hundred Thousand Dollars ($64,800,000) in face-value credits, of which Sixty Million Dollars ($60,000,000) were sold and transferred to Pinehurst Insurance Group, Inc. (EIN: 36-4219803) pursuant to the Tax Credit Purchase Agreement dated September 21, 2023, and Four Million Eight Hundred Thousand Dollars ($4,800,000) were retained by Calloway-Briggs Renewables Inc.), the Partnership Representative shall ensure that the Partnership Returns properly reflect the interaction of such transfer elections with the Partnership's ITC allocations. Specifically, only the ITCs that flow through the partnership structure to the Members (aggregating approximately Eighty-Nine Million Forty Thousand Dollars ($89,040,000)) shall be reflected on the Partnership's Schedules K-1, and the ITCs transferred under Section 6418 shall be separately reported on the applicable project company returns and transfer election statements, and shall not be duplicated on the Partnership's returns. The Partnership Representative shall coordinate with Calloway-Briggs Renewables Inc. and its tax advisors to ensure accurate and consistent treatment across all related filings.
Section 3.5 — Annual Compliance Monitoring. The Partnership Representative shall monitor and cause the Partnership and each of the project companies in the Solstice Portfolio to comply with the following requirements on an ongoing basis:
(a) Prevailing Wage and Apprenticeship Requirements. The Partnership Representative shall monitor and ensure compliance with the prevailing wage and apprenticeship requirements under Section 48(a)(10) and Section 48(a)(11) of the Code (as added by the Inflation Reduction Act of 2022) for each project company, which requirements must be satisfied in order for the ITCs to be calculated at the thirty percent (30%) base rate (rather than the six percent (6%) base rate). Such monitoring shall include periodic review of contractor payroll records, verification of registered apprenticeship program participation, and maintenance of documentation sufficient to demonstrate compliance in the event of an IRS examination.
(b) Domestic Content Requirements. The Partnership Representative shall monitor and ensure compliance with the domestic content bonus credit requirements under Section 48(a)(12) of the Code for each project company that has claimed the ten percent (10%) domestic content bonus adder, including compliance with the applicable percentage thresholds for steel, iron, and manufactured products that are produced in the United States.
(c) ITC Recapture Avoidance. The Partnership Representative shall monitor and take all commercially reasonable actions to avoid the triggering of ITC recapture under Section 50(a) of the Code during the five-year recapture period applicable to each project company. The five-year recapture period for each project shall run from such project's respective commercial operation date (COD) through the fifth anniversary thereof. The Partnership Representative shall not permit or cause any disposition, cessation of qualified use, change in ownership, or other event with respect to any energy property of any project company that would result in ITC recapture during such recapture period, without the prior written consent of the Tax-Equity Member.
(d) Reporting of Recapture Events. The Partnership Representative shall promptly (and in any event within five (5) business days) notify the Tax-Equity Member in writing of any event or circumstance that has occurred, or that the Partnership Representative reasonably believes is likely to occur, that could trigger ITC recapture under Section 50(a) of the Code, result in the disallowance or reduction of any ITC previously claimed by or allocated to the Tax-Equity Member, or otherwise adversely affect the Tax-Equity Member's tax benefits under the LLCA, including any casualty, condemnation, sale, lease termination, regulatory change, or other event affecting any project company or its energy property.
ARTICLE IV — NOTIFICATION AND CONSENT REQUIREMENTS
Section 4.1 — Notification of Audit or Proceeding. The Partnership Representative shall provide written notice to the Tax-Equity Member and to the Tax-Equity Member's counsel within ten (10) business days of the Partnership Representative's receipt (directly or through the Designated Individual, the tax return preparer, or any agent of the Partnership) of any of the following:
(a) any Notice of Administrative Proceeding, notice of proposed partnership adjustment (NOPPA), final partnership adjustment (FPA), or similar notice or communication from the IRS relating to any Partnership taxable year;
(b) any notice of a proposed adjustment to any of the Partnership's tax items, including any information document request (IDR), notice of deficiency, or similar communication that could result in an Adjustment;
(c) any notice of the commencement of a Partnership Audit, including any notification of selection for examination or any opening conference letter;
(d) any correspondence from the IRS relating to the Partnership's returns, tax positions, elections, or filings, whether formal or informal, including any agent contact, telephone inquiry, or campus correspondence; and
(e) any inquiry, assessment, demand, or notice relating to ITCs, MACRS depreciation deductions, or any other tax benefits allocated to the Tax-Equity Member, or relating to the eligibility, availability, or amount of any such tax benefits.
All notices under this Section 4.1 shall be delivered to the following addresses:
To the Tax-Equity Member:
Ridgeline Capital Partners, LLC 390 Park Avenue, 22nd Floor New York, New York 10022
Attention: David Lim, Vice President
Email: dlim@ridgelinecapital.com
With a copy to: Samara Okonkwo, Tax Director
Email: sokonkwo@ridgelinecapital.com
To the Tax-Equity Member's Counsel:
Whitfield & Ayers LLP 51 West 52nd Street New York, New York 10019
Attention: Patricia Whitfield, Partner
Email: pwhitfield@whitfieldayers.com
With a copy to: Kenji Watanabe, Counsel
Email: kwatanabe@whitfieldayers.com
The form of notification to be used for notices under this Section 4.1 is attached hereto as Exhibit B.
Section 4.2 — Consent Requirements. The Partnership Representative shall not take any of the following actions without the prior written consent of the Tax-Equity Member (such consent not to be unreasonably withheld, conditioned, or delayed, except with respect to clauses (a), (b), and (h) below, for which the Tax-Equity Member's consent may be withheld in its sole and absolute discretion):
(a) settle, compromise, or otherwise resolve any Partnership Audit, proposed Adjustment, or administrative or judicial proceeding that would affect the amount, availability, timing, or character of any ITCs, depreciation deductions, or other tax items allocated to the Tax-Equity Member;
(b) agree to, consent to, or fail to contest any assessment or payment of an Imputed Underpayment under Section 6225 of the Code;
(c) extend, or agree to the extension of, any statute of limitations with respect to any of the Partnership's tax returns or any partnership-related item for any taxable year;
(d) elect (or fail to elect) to make a Push-Out Election under Section 6226 of the Code;
(e) file an administrative adjustment request under Section 6227 of the Code that would modify, reduce, or otherwise affect the allocation of any tax items (including ITCs and depreciation deductions) to the Tax-Equity Member;
(f) amend or cause to be amended any Partnership Return previously filed, or file any superseding return, if such amendment or superseding return would modify any tax item allocated to the Tax-Equity Member;
(g) take any position on any Partnership Return or in any Partnership Audit proceeding that is inconsistent with the tax opinions delivered at the closing of the tax-equity transaction by Calderwood & Harkness LLP (Opinion of Tax Counsel dated December 8, 2023, and ITC Eligibility Opinion dated December 8, 2023);
(h) change or cause to be changed the Partnership's classification for federal income tax purposes, including the filing or revocation of any election under Treasury Regulation Section 301.7701-3;
(i) change the identity of the tax return preparer (currently Larchmont & Associates, PLLC) without providing the Tax-Equity Member no less than thirty (30) days' prior written notice and a reasonable opportunity to object; or
(j) take any other action that would reasonably be expected to have a material adverse effect on the Tax-Equity Member's tax benefits under the LLCA, including any action affecting the Partnership's or any project company's eligibility for ITCs, the applicable ITC rate, or the amount of depreciation deductions available to the Partnership.
Section 4.3 — Response Period. The Tax-Equity Member shall have twenty (20) business days from its receipt of a notice under Section 4.1, or from its receipt of a request for consent under Section 4.2, to provide written comments, grant consent, or withhold consent to any proposed action. If the Tax-Equity Member fails to respond within such twenty (20) business-day period, its consent shall be deemed to have been withheld with respect to all actions requiring consent under Section 4.2; provided, however, that with respect to requests for consent to extend a statute of limitations under Section 4.2(c), failure of the Tax-Equity Member to respond within such twenty (20) business-day period shall be deemed to constitute consent to such extension. The Partnership Representative shall not take any action for which consent is required during the pendency of the twenty (20) business-day response period, unless such action must be taken prior to the expiration of such period to avoid the imposition of a penalty, the assessment of a tax, or the lapse of a right, in which case the Partnership Representative shall promptly notify the Tax-Equity Member and shall take such action as is reasonably necessary to preserve the rights of the Partnership and the Members pending the Tax-Equity Member's response.
Section 4.4 — Participation Rights. The Tax-Equity Member shall have the right, at its own expense, to:
(a) participate in and attend any meetings, conferences, or proceedings with the IRS relating to a Partnership Audit, including opening conferences, closing conferences, appeals conferences, and any judicial proceedings;
(b) review, prior to submission, all correspondence, responses, protests, petitions, briefs, and other documents proposed to be sent to the IRS by or on behalf of the Partnership or the Partnership Representative in connection with any Partnership Audit;
(c) engage its own legal counsel (including Whitfield & Ayers LLP or such other counsel as the Tax-Equity Member may select) and tax advisors to advise the Tax-Equity Member on any Partnership Audit matters and to attend any proceedings or meetings with the IRS alongside the Partnership Representative; and
(d) submit written positions, analyses, and recommendations to the Partnership Representative for inclusion in, or consideration in connection with, any response to the IRS or any filing with a court of competent jurisdiction, and the Partnership Representative shall consider such submissions in good faith.
Section 4.5 — Managing Member Notification to CBR. The Managing Member (CBR Solstice Manager, LLC) shall promptly (and in any event within three (3) business days) notify Calloway-Briggs Renewables Inc., as its sole member, of any notices received, actions required, or consents sought or provided under this Article IV. Notices to Calloway-Briggs Renewables Inc. shall be directed to:
Calloway-Briggs Renewables Inc. 2700 Post Oak Boulevard, Suite 1450 Houston, Texas 77056
Attention: Marcus Calloway, Chairman and Chief Executive Officer
Email: mcalloway@calloway-briggs.com
With a copy to: Theo Vasquez, Chief Financial Officer
Email: tvasquez@calloway-briggs.com
ARTICLE V — PUSH-OUT ELECTION UNDER IRC § 6226
Section 5.1 — Obligation to Make Push-Out Election. If the Partnership receives a notice of final partnership adjustment under Section 6231 of the Code resulting in the assessment of an Imputed Underpayment, the Partnership Representative shall, upon the written request of the Tax-Equity Member, timely make a Push-Out Election under Section 6226 of the Code with respect to such Imputed Underpayment, so that each reviewed-year partner (and, if applicable, each indirect partner) shall be required to take into account its allocable share of the adjusted partnership items individually, rather than the Partnership paying the Imputed Underpayment at the entity level. The Partnership Representative shall not be required to make a Push-Out Election if (and only if) the Managing Member and the Tax-Equity Member mutually agree in writing that making a Push-Out Election would not be in the best interests of the Members, taking into account the nature and magnitude of the Adjustment, the potential tax impact on each Member, and the administrative costs and burdens associated with the Push-Out Election.
Section 5.2 — Mechanics of Push-Out Election. Upon making a Push-Out Election under Section 6226 of the Code:
(a) Statements to Partners. The Partnership Representative shall cause the Partnership to furnish to each Member that was a partner (or an indirect partner) during the reviewed year, and to each former Member who held an interest in the Partnership during the reviewed year (if applicable), a statement reflecting such Member's share of the adjusted partnership items, in accordance with Section 6226(a)(2) of the Code and Treasury Regulation Section 301.6226-2. Such statements shall be furnished within sixty (60) days of the date on which the Partnership Adjustment becomes final, or within such other period as may be required by applicable law or Treasury Regulations.
(b) Individual Liability. Each Member that receives a statement under clause (a) shall be individually liable for any resulting tax, interest, penalties, and additions to tax attributable to its allocable share of the Adjustment, calculated in accordance with Section 6226(b) of the Code (including the application of the "correction amount" and "interest amount" methodologies set forth in Treasury Regulation Section 301.6226-3).
(c) Partnership Not Liable. Upon the timely and valid making of a Push-Out Election, the Partnership shall not be liable for the Imputed Underpayment to which such election relates, and the IRS's sole recourse shall be against the reviewed-year partners (and indirect partners) individually in accordance with Section 6226 of the Code.
Section 5.3 — Imputed Underpayment Modifications. Prior to making any determination regarding whether to make a Push-Out Election, the Partnership Representative shall, to the extent reasonably practicable and with the prior written consent of the Tax-Equity Member:
(a) seek modifications to any Imputed Underpayment under Section 6225(c) of the Code, including modifications based on amended returns filed by the Members under Section 6225(c)(2);
(b) seek rate modifications under Section 6225(c)(4) of the Code with respect to any portion of the Imputed Underpayment attributable to partners that are tax-exempt entities, C corporations subject to tax at rates lower than the highest individual rate, or other partners entitled to rate-based modifications; and
(c) seek any other available modifications, including modifications for the portion of the Adjustment attributable to adjustments that do not result in an increase in tax for the relevant partners, in accordance with Treasury Regulation Section 301.6225-2.
The Partnership Representative shall keep the Tax-Equity Member informed of the status and progress of any Imputed Underpayment modification requests and shall provide the Tax-Equity Member with copies of all modification requests, supporting documentation, and IRS responses in connection therewith.
Section 5.4 — Cost Allocation. Costs and expenses reasonably incurred by the Partnership in connection with a Push-Out Election (including IRS processing fees, advisory fees, accounting fees, legal fees, and other expenses) shall be borne by the Partnership as an operating expense and shall be taken into account in determining distributable cash under the LLCA; provided, however, that if the Adjustment giving rise to the Push-Out Election arises from the willful misconduct, bad faith, or fraud of a specific Member, then all costs and expenses associated with such Push-Out Election shall be borne solely by the responsible Member, and such Member shall reimburse the Partnership for any costs paid by the Partnership within thirty (30) days of written demand.
ARTICLE VI — INDEMNIFICATION AND ALLOCATION OF TAX LIABILITY
Section 6.1 — Indemnification by Managing Member. The Managing Member (CBR Solstice Manager, LLC), and, to the extent of its guarantee obligations under the LLCA and this Agreement, Calloway-Briggs Renewables Inc. (as the sole member of CBR Solstice Manager, LLC), shall indemnify, defend, and hold harmless the Tax-Equity Member and its affiliates, members, partners, officers, directors, employees, agents, and representatives from and against any and all losses, liabilities, damages, costs, and expenses (including reasonable attorneys' fees and disbursements) arising from or related to any Imputed Underpayment, tax, interest, penalty, or addition to tax imposed on or payable by the Partnership under the centralized partnership audit rules of Sections 6221 through 6241 of the Code, to the extent that such liability is attributable to:
(a) errors, omissions, misstatements, or misrepresentations in the Partnership Returns (or any schedule, statement, or attachment thereto) prepared under the Partnership Representative's supervision or direction, including any error in the calculation, reporting, or allocation of ITCs, depreciation deductions, or any other tax item;
(b) any breach by the Managing Member (or the Partnership Representative or the Designated Individual) of its obligations under this Agreement or the LLCA, including any failure to comply with the notification and consent requirements of Article IV;
(c) the failure of the Partnership Representative to make a Push-Out Election when requested by the Tax-Equity Member in accordance with Section 5.1 of this Agreement; or
(d) any act or omission of the Managing Member, the Partnership Representative, the Designated Individual, or any of their respective agents, employees, or affiliates constituting willful misconduct, bad faith, or gross negligence in connection with any Partnership Audit or the performance of duties under this Agreement.
The indemnification obligations of the Managing Member under this Section 6.1 shall survive the termination of this Agreement and shall not be subject to any limitation of liability that may otherwise apply under the LLCA, except to the extent expressly provided therein.
Section 6.2 — Indemnification by Tax-Equity Member. The Tax-Equity Member (Ridgeline Capital Partners, LLC) shall indemnify, defend, and hold harmless the Managing Member, the Partnership, and their respective affiliates, members, officers, directors, employees, agents, and representatives from and against any and all losses, liabilities, damages, costs, and expenses (including reasonable attorneys' fees and disbursements) arising from or related to:
(a) any incremental tax, interest, penalty, or addition to tax attributable to the Tax-Equity Member's own separate tax position, tax elections, or tax reporting that is inconsistent with the Partnership Returns as filed or with the terms of this Agreement or the LLCA;
(b) the Tax-Equity Member's failure to comply with any obligation imposed on it under this Agreement, including any failure to timely file amended returns in connection with a Push-Out Election as contemplated by Section 5.2(b); or
(c) any misrepresentation by the Tax-Equity Member in connection with any Imputed Underpayment modification request under Section 6225(c) of the Code.
Section 6.3 — Allocation of Partnership-Level Liabilities. To the extent that an Imputed Underpayment is assessed against the Partnership under Section 6225 of the Code and no Push-Out Election is made (whether because neither Member requests such election, or because the Members mutually agree that such election is not in their best interests), the economic burden of such Imputed Underpayment (including any associated interest, penalties, and additions to tax) shall be allocated among the Members in proportion to each Member's allocable share of the underlying tax items that gave rise to the Adjustment, determined consistently with the allocation provisions of the LLCA. Accordingly, during the pre-flip period, ninety-nine percent (99%) of the economic burden of any such Imputed Underpayment shall be allocated to the Tax-Equity Member and one percent (1%) shall be allocated to the Managing Member, and during the post-flip period, five percent (5%) of such economic burden shall be allocated to the Tax-Equity Member and ninety-five percent (95%) shall be allocated to the Managing Member. Each Member shall contribute to the Partnership its allocable share of any Imputed Underpayment assessed against the Partnership within thirty (30) days of receipt of written demand from the Partnership Representative specifying the amount of such Member's allocable share. Any failure by a Member to timely contribute its allocable share shall bear interest at the rate specified in Section 6621 of the Code from the date of demand until the date of payment.
Notwithstanding the foregoing, the allocation of the economic burden of an Imputed Underpayment under this Section 6.3 shall not relieve the Managing Member of any indemnification obligation under Section 6.1 to the extent the Imputed Underpayment is attributable to errors, omissions, breaches, or other conduct described therein.
ARTICLE VII — REMOVAL AND REPLACEMENT OF PARTNERSHIP REPRESENTATIVE
Section 7.1 — Removal for Cause. The Partnership Representative may be removed from its position as Partnership Representative upon the written request or consent of the Tax-Equity Member (which may be given in the Tax-Equity Member's sole discretion) if any of the following events shall have occurred:
(a) the Partnership Representative commits willful misconduct, bad faith, or gross negligence in the performance of its duties under this Agreement, the LLCA, or applicable law;
(b) the Partnership Representative materially breaches any of its obligations under this Agreement or the LLCA and fails to cure such breach within thirty (30) days of receipt of written notice from the Tax-Equity Member specifying the nature of such breach in reasonable detail; or
(c) the Designated Individual (Theo Vasquez) ceases to be an officer or employee of Calloway-Briggs Renewables Inc. or CBR Solstice Manager, LLC, unless a successor Designated Individual who meets the requirements of Section 7.3 of this Agreement is appointed within thirty (30) days of such cessation.
Upon the occurrence of any event described in clauses (a) through (c) above, the Tax-Equity Member shall deliver written notice to the Managing Member specifying the grounds for removal, and the removal shall be effective upon the earlier of (i) the date specified in such notice (which shall not be earlier than the date of delivery of such notice) or (ii) the date on which the IRS processes the revocation of the Partnership Representative designation as filed by the Partnership.
Section 7.2 — Removal Without Cause. The Partnership Representative may be removed from its position without cause only upon the mutual written consent of both the Managing Member and the Tax-Equity Member. Any such removal shall be effective as of the date agreed upon by the Members or, if no date is specified, upon the filing with the IRS of a revocation of the Partnership Representative designation.
Section 7.3 — Replacement Designated Individual. If Theo Vasquez ceases to serve as the Designated Individual for any reason (including death, disability, resignation, termination of employment, or removal under Section 7.1(c)), the Managing Member shall, within thirty (30) days of such cessation, appoint a successor Designated Individual who:
(a) has substantial presence in the United States, as required by Treasury Regulation Section 301.6223-1(b)(3)(ii), including a valid United States taxpayer identification number, a United States street address, and a United States telephone number;
(b) possesses appropriate qualifications, experience, and expertise in federal income tax matters, including familiarity with partnership taxation, the centralized partnership audit rules, and renewable energy tax credits; and
(c) is reasonably acceptable to the Tax-Equity Member, such acceptance not to be unreasonably withheld, conditioned, or delayed.
The Partnership shall make all required filings with the IRS to reflect the change in Designated Individual, including updating the information reported on IRS Form 1065 and filing any required revocation and redesignation statements under Treasury Regulation Section 301.6223-1(e).
Section 7.4 — Successor Partnership Representative. If the Managing Member ceases to be a Member of the Partnership (including upon the exercise of the purchase option by the Managing Member under the Purchase Option Agreement dated September 21, 2023, or upon any transfer, withdrawal, or removal of the Managing Member under the LLCA), the Members shall designate a successor Partnership Representative in accordance with the LLCA and applicable IRS procedures within thirty (30) days of such event. The successor Partnership Representative shall be subject to the same obligations, consent requirements, and limitations set forth in this Agreement as though it were the original Partnership Representative. If the Members are unable to agree upon a successor Partnership Representative within such thirty (30) day period, the Tax-Equity Member shall have the right to designate the successor Partnership Representative, subject to the requirements of Section 6223 of the Code and the Treasury Regulations.
Section 7.5 — Revocation Filing. Upon any change in the Partnership Representative or the Designated Individual, the outgoing Partnership Representative shall cooperate fully and promptly in executing and delivering any IRS forms, filings, statements, or other documents necessary to effect the revocation of the prior designation and the redesignation of the successor, including any filings required under Treasury Regulation Section 301.6223-1(e). Such cooperation shall include providing all information regarding pending or anticipated IRS proceedings, the status of any Partnership Audits, and all relevant books, records, and correspondence to the incoming Partnership Representative or Designated Individual.
ARTICLE VIII — STATE AND LOCAL TAX MATTERS
Section 8.1 — State Tax Returns. The Partnership Representative shall cause the Partnership and, to the extent required, each project company in the Solstice Portfolio to prepare and timely file all required state and local income, franchise, gross receipts, and other applicable tax returns and reports in each jurisdiction where the Partnership or its project companies conduct business, own property, or otherwise have filing obligations, including the States of Texas and New Mexico. The Partnership Representative shall ensure that all state and local tax returns are prepared in a manner consistent with the Partnership Returns and the LLCA, and that allocations of state-source income, deductions, and credits among the Members are made in accordance with applicable state law and the terms of the LLCA.
Section 8.2 — State Audit Coordination. The Partnership Representative shall manage and coordinate any state or local tax audit, examination, inquiry, or administrative or judicial proceeding relating to the Partnership or any project company in a manner consistent with this Agreement. The notification and consent provisions of Article IV shall apply mutatis mutandis to any state or local tax audit or proceeding, including the obligation to provide written notice to the Tax-Equity Member within ten (10) business days of receipt of any state or local tax audit notice, proposed adjustment, or assessment, and the requirement to obtain the Tax-Equity Member's prior written consent before settling, compromising, or resolving any state or local tax matter that would affect the Tax-Equity Member's state tax benefits or obligations.
Section 8.3 — Texas Franchise Tax. The Partnership Representative shall ensure compliance with the Texas franchise tax (margin tax) requirements applicable to the Partnership and each of the Texas project companies (Pecos Sun Solar, LLC, Red Mesa Solar, LLC, Coyote Flats Solar, LLC, Llano Verde Solar, LLC, and Amistad Solar, LLC), including the timely filing of Texas franchise tax reports, the calculation and payment of franchise tax due, and the maintenance of records sufficient to support the applicable margin tax computation methodology (whether cost of goods sold, compensation, or the 70% revenue deduction).
Section 8.4 — New Mexico Taxes. The Partnership Representative shall ensure compliance with all applicable New Mexico state and local tax requirements for Cimarron Solar, LLC and Sandoval Ridge Solar, LLC, including New Mexico gross receipts tax, corporate income tax (to the extent applicable to the project companies or the Partnership), and any applicable New Mexico renewable energy tax incentives. The Partnership Representative shall coordinate with New Mexico tax counsel as necessary to ensure proper reporting and compliance with New Mexico's pass-through entity tax rules and any related composite return or withholding requirements applicable to nonresident members.
ARTICLE IX — REPORTING OBLIGATIONS
Section 9.1 — Annual Tax Reporting to Members. The Partnership Representative shall deliver or cause to be delivered to each Member the following:
(a) Draft Schedules K-1. Draft Schedules K-1 (IRS Form 1065, Schedule K-1) for such Member, together with supporting schedules (including detailed ITC, depreciation, income, and loss schedules, and placed-in-service date documentation), no later than forty-five (45) days prior to the applicable filing deadline for the Partnership Return (including extensions).
(b) Final Schedules K-1. Final executed Schedules K-1 and all related statements and attachments no later than March 15 of each calendar year following the close of the applicable Partnership taxable year, or, if an extension of time to file the Partnership Return has been obtained, no later than the extended due date of such return. If the Partnership files its Partnership Return on extension, the Partnership Representative shall use commercially reasonable efforts to deliver final Schedules K-1 as promptly as practicable following the completion and filing of the Partnership Return, and in no event later than September 15 of such calendar year.
(c) Annual ITC Recapture Compliance Certifications. Annual certifications, in form and substance reasonably satisfactory to the Tax-Equity Member, confirming that no ITC recapture event (within the meaning of Section 50(a) of the Code) has occurred with respect to any project company during the applicable taxable year, and that each project company continues to satisfy the prevailing wage, apprenticeship, and domestic content requirements applicable to its ITCs. Such certifications shall be delivered no later than the date on which the final Schedules K-1 are delivered for such taxable year.
Section 9.2 — Ad Hoc Reporting. The Partnership Representative shall provide to the Tax-Equity Member, within ten (10) business days of a written request by the Tax-Equity Member (or such shorter period as may be reasonably necessary under the circumstances):
(a) copies of any correspondence, notices, or communications received from or sent to the IRS or any state or local taxing authority relating to the Partnership or any project company;
(b) supporting workpapers, schedules, and analyses for ITC calculations, including eligible basis determinations, placed-in-service dates, ITC rate calculations, and bonus adder eligibility determinations, for each project company;
(c) documentation relating to prevailing wage compliance, apprenticeship compliance, and domestic content qualification for each project company, including contractor certifications, payroll records, and manufacturer attestations;
(d) copies of any Section 6418 transfer election statements, transfer election returns, and related filings made by or on behalf of the project companies, together with any correspondence with Pinehurst Insurance Group, Inc. or other transferee taxpayers in connection therewith; and
(e) such other tax-related information or documentation as the Tax-Equity Member may reasonably request in connection with its own tax reporting obligations, financial reporting, audit support, or compliance programs.
Section 9.3 — Coordination with Tax Credit Purchase Agreement. The Partnership Representative shall coordinate with Calloway-Briggs Renewables Inc. and its tax advisors to ensure that all tax reporting related to the Sixty Million Dollars ($60,000,000) in ITCs transferred to Pinehurst Insurance Group, Inc. (EIN: 36-4219803) under the Tax Credit Purchase Agreement dated September 21, 2023 (and the transfer election statements filed in connection therewith unde

PARTNERSHIP REPRESENTATIVE DESIGNATION AND TAX MATTERS AGREEMENT

PARTNERSHIP REPRESENTATIVE DESIGNATION AND TAX MATTERS AGREEMENT

RECITALS

Record

Parties

Dates

Amounts