Attachment: draft-plr-request-v3.docx
Diana,
I hope this finds you well. As you know, Calderwood & Harkness serves as U.S. tax counsel to Solara Digital Infrastructure LP (our matter no. 20250527-SDILP-PLR) in connection with the cross-border fund-platform reorganization. I am writing in your capacity as outside counsel to the LP Advisory Committee of Solara Digital Partners Fund IV LP and Solara Digital Partners Fund V LP (and their respective parallel vehicles). Attached as a Word document is Draft PLR Request v3.0, which incorporates the client's factual corrections and substantive comments and is now ready for LPAC counsel review.
**Summary of PLR Request Scope**
By way of brief background for your team, the PLR request addresses the proposed consolidation of four offshore parallel fund vehicles — Fund IV-A (Cayman) LP, Fund IV-B (Luxembourg) SCSp, Fund V-A (Cayman) LP, and Fund V-B (Luxembourg) SCSp — into a newly formed Delaware-domiciled master fund structure (Solara Consolidated Master Fund LP). The reorganized structure will include two new Cayman feeder vehicles: Solara International Feeder (Cayman) LP for non-U.S. investors and Solara Tax-Exempt Feeder (Cayman) LP for U.S. tax-exempt investors. The transaction is structured as a five-step reorganization with a target effective date of December 1, 2025.
The PLR request seeks eight specific rulings from the IRS Office of the Associate Chief Counsel (International), with secondary jurisdiction in CC:PSI, covering the following:
1. Tax-free contribution treatment under IRC § 721(a) for contributions of portfolio assets (aggregate FMV of $7.75 billion; aggregate adjusted tax basis of $6.03 billion; $1.72 billion of built-in gain) to the Consolidated Master Fund; 2. Confirmation that the § 721(b) investment company exception does not apply, given that the portfolio consists of operating company interests in digital infrastructure and enterprise SaaS rather than passive investment assets; 3. IRC § 367 inapplicability, on the basis that § 367 applies to transfers to or from corporations and does not govern partnership-to-partnership contributions; 4. Tax-free distribution treatment under IRC § 731(a) for Step 5 dissolutions of the legacy offshore vehicles; 5. Confirmation that the § 731(c) marketable securities exception does not apply to distributed Consolidated Master Fund LP interests; 6. Analysis of § 752 liability shifting ($1.34 billion in aggregate liabilities) and confirmation that no gain recognition results from deemed contributions or distributions; 7. Confirmation of § 704(c) built-in gain carryover and continuation of the remedial allocation method; and 8. Confirmation that no § 1446 withholding is required on the nonrecognition transactions, together with entity classification confirmation under Treas. Reg. § 301.7701-3.
**Areas of Particular Interest for LPAC Counsel Review**
While we welcome your comments on the draft as a whole, we would particularly appreciate your team's focused review on the areas most directly affecting limited partners, including but not limited to:
- The § 731 distribution analysis in Step 5 and its impact on individual limited partners across all investor categories (U.S. taxable, U.S. tax-exempt, and non-U.S.); - The § 731(c) characterization of distributed Consolidated Master Fund LP interests as marketable securities; - The § 752 liability shifting impact on individual LP-level outside basis; - The FIRPTA / § 897 analysis as it relates to non-U.S. sovereign investors — in particular, Nordhaven Sovereign Wealth Fund, which holds significant commitments of $380 million in Fund IV-A (Cayman) and $500 million in Fund V-A (Cayman) — and non-U.S. institutional investors such as Kestrel Pacific Insurance Group (€200 million and €275 million in the Luxembourg vehicles); and - The § 1446 withholding analysis and its implications for non-U.S. partners generally.
I should note that certain investors have retained independent counsel. Specifically, Nordhaven Sovereign Wealth Fund has engaged Bramhall & Quelwick LLP (Jason Tremaine) for an independent evaluation of U.S. withholding tax and treaty implications. We are coordinating separately with Bramhall & Quelwick on those matters and will keep you apprised as appropriate.
**Prior Process Context**
As you will recall, preliminary LP consent was obtained at the April 22, 2025 LPAC meeting, with 78% in interest voting in favor. The draft has been through two prior rounds of revision: v1.0 was reviewed internally by our engagement team here at Calderwood & Harkness, and v2.0 was reviewed by Solara's in-house team — Stefan Dalmqvist (Head of Tax) and Priya Narasimhan (General Counsel) — whose factual corrections and comments are now incorporated into this v3.0.
**Comment Deadline and Next Steps**
We would respectfully request that LPAC counsel comments be provided by **July 15, 2025**. This deadline is driven by the overall project timeline: we have requested a pre-submission conference with IRS CC:INTL Branch 1 for July 22, 2025, and our target submission date for the PLR request is August 15, 2025. Following incorporation of your comments, we will prepare a final circulated draft (v4.0) and then the execution version for IRS submission. The penalties of perjury declaration will be signed by Viktor Raines in his capacity as Managing Partner of Solara Digital Infrastructure GP LLC.
**Logistical Notes**
Please note that the attached draft cross-references Exhibits A through E (organizational charts, step transaction diagrams, schedule of contributing entities and assets, and schedule of liabilities / § 752 analysis), which are being finalized in parallel and will be circulated separately. The supporting financial data is being compiled from Caldwell Pierce & Co. LLP (the independent accounting firm), and fair market value appraisals are being prepared by Redstone Advisory Group LLC. We expect these to be available for your review within the next week to ten days.
If it would be helpful, I am happy to schedule a call to walk through the draft with you and your team. Robert Jansen, the lead associate on our engagement team, is also available to address questions on specific sections. You can reach me directly at (202) 555-4180.
Diana, thank you very much to you and your team for your attention to this on the requested timeline. We appreciate the collaborative approach throughout this process and look forward to receiving your comments.
Best regards,
Leonard Cross Partner, Tax Calderwood & Harkness LLP 1900 K Street NW, Suite 1100 Washington, DC 20006 Direct: (202) 555-4180 lcross@calderwoodharkness.com
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