Stefan,
I hope this finds you well. It is a pleasure to be working with you and the Solara team again, and we are looking forward to digging into this engagement in earnest.
I am writing to formally confirm commencement of the engagement and to transmit our initial data requests. There is quite a bit of ground to cover, so I have organized this email by topic for ease of reference.
**1. Engagement Commencement**
We have formally opened this matter under engagement number **20250527-SDILP-PLR**, effective today, May 27, 2025. This engagement is governed by the engagement letter executed on **May 12, 2025** between Calderwood & Harkness LLP and Solara Digital Infrastructure LP, countersigned by Priya Narasimhan on behalf of Solara. As set forth in that letter, the engagement covers the preparation and submission of a **private letter ruling (PLR) request** to the Internal Revenue Service regarding the U.S. federal income tax treatment of Solara's proposed cross-border fund-platform reorganization.
**2. Engagement Team**
The Calderwood & Harkness team for this matter is as follows:
- **Leonard Cross** — Responsible Partner, Tax (Washington, D.C. office, 1900 K Street NW, Suite 1100, Washington, DC 20006). I will serve as the primary point of contact for the engagement. - **Sylvia Hartwell** — Billing Partner, Tax (New York office, 600 Lexington Avenue, 38th Floor, New York, NY 10022). Sylvia will oversee all billing and budget matters. - **Robert Jansen** — Lead Associate, Tax (D.C. office). Robert will be the day-to-day lead on PLR drafting and tax analysis. - **Garrett Simmons** — Working Associate, Tax (New York office). Garrett will be supporting research and analysis throughout the engagement.
Per the **Client Communication Protocol** discussed during the intake process, Stefan and Priya will serve as the primary client contacts. To preserve attorney-client privilege, we ask that all substantive communications regarding the PLR engagement be channeled through Stefan and Priya.
**3. Engagement Scope**
To briefly restate the scope for the record: Calderwood & Harkness will prepare a PLR request to be submitted to the IRS's **Office of the Associate Chief Counsel (International) (CC:INTL)**, with secondary jurisdiction in the **Office of the Associate Chief Counsel (Passthroughs & Special Industries) (CC:PSI)**, seeking confirmation of the intended tax-free treatment of the multi-step reorganization and the continued partnership classification of the resulting entities.
Please note that the engagement does **not** include:
- Cayman Islands legal advice (being handled by **Meridian Offshore Legal**); - Luxembourg legal advice (being handled by **Veldhuis & Gérard S.à r.l.**); - Ongoing tax compliance services; - FATCA/CRS reporting; or - Post-ruling implementation beyond the PLR submission itself.
**4. Key Milestones / Timeline**
We will be working toward the following critical path dates:
| Target Date
I want to emphasize the importance of the **June 16 deadline** for the tax analysis memorandum, which is dependent on our timely receipt of the materials described below.
**5. Initial Data Requests**
To enable the team to prepare the tax analysis memoranda and the PLR request, we will need the following categories of information and documentation:
**(a) Organizational and Formation Documents**
1. Current **organizational charts** showing the full structure of all six existing fund vehicles: - Solara Digital Partners Fund IV LP (Delaware) - Solara Digital Partners Fund IV-A (Cayman) LP - Solara Digital Partners Fund IV-B (Luxembourg) SCSp - Solara Digital Partners Fund V LP (Delaware) - Solara Digital Partners Fund V-A (Cayman) LP - Solara Digital Partners Fund V-B (Luxembourg) SCSp
Charts should depict the relationships among the funds, their respective general partners (Solara Digital Infrastructure GP LLC, Solara Offshore GP Ltd., and Solara Luxembourg Management S.à r.l.), and portfolio company holdings.
2. **Certificates of formation / registration** for each entity, including: - Delaware certificates of formation (Fund IV LP, Fund V LP) - Cayman Islands exempted limited partnership registrations (Fund IV-A, CIMA registration no. MF-72491; Fund V-A, CIMA registration no. MF-89103) - Luxembourg SCSp registration documents (Fund IV-B, RCS B 248193; Fund V-B, RCS B 271056) and Solara Luxembourg Management S.à r.l. (RCS B 248194)
3. **EIN confirmation letters / IRS correspondence** for all entities: - Solara GP (EIN 82-4917365) - Solara Digital Infrastructure LP (EIN 82-4917366) - Fund IV LP (EIN 85-2103748) - Fund IV-A Cayman (EIN 98-6241503) - Fund IV-B Lux (EIN 98-6241571) - Fund V LP (EIN 88-3467219) - Fund V-A Cayman (EIN 98-7891234) - Fund V-B Lux (EIN 98-7891267)
**(b) Partnership Agreements and Amendments**
1. Executed **limited partnership agreements (LPAs)** for all six fund vehicles, including all amendments and side letters. 2. **GP operating agreements** for Solara GP, Solara Offshore GP Ltd., and Solara Luxembourg Management S.à r.l. 3. Any **co-investment or parallel investment agreements** among the fund vehicles.
**(c) Tax Returns and K-1 Schedules**
1. U.S. federal income tax returns (**Forms 1065** or equivalent) for the three most recent tax years for each of the six fund vehicles. 2. All **Schedules K-1** issued to limited partners for the same periods. 3. Any **Forms 8865** (Return of U.S. Persons With Respect to Certain Foreign Partnerships) filed with respect to Fund IV-A Cayman, Fund IV-B Lux, Fund V-A Cayman, and Fund V-B Lux. 4. Any **Forms 8832** (Entity Classification Elections) previously filed for any of the existing entities. 5. Any prior **Forms 8804/8805** related to IRC § 1446 withholding.
**(d) Financial Statements and Tax Basis Records**
1. Audited **annual financial statements** for each fund vehicle for the three most recent fiscal years (we understand these were prepared by **Caldwell Pierce & Co. LLP** — Helen Okamoto — and we will coordinate with that firm separately as noted below). 2. **Tax-basis balance sheets** for each fund vehicle as of the most recent available date. 3. **Capital account records** (both book and tax) for each partner/LP in each fund vehicle, including IRC § 704(c) built-in gain/loss layer tracking. 4. Detail of the **remedial allocation method** elections under Treas. Reg. § 1.704-3(d) currently in place for contributed properties. 5. NAV reports from **Clarendon Fund Services Ltd.** for all offshore vehicles.
**(e) Portfolio Company Holdings — Detailed Information**
1. Complete schedule of all **23 portfolio company interests** held across all six fund vehicles (11 in Fund IV vehicles, 12 in Fund V vehicles), including for each: - Legal name, entity type, and jurisdiction - Owning fund vehicle(s) and percentage ownership - **Fair market value** (current estimate, to be refined by Redstone Advisory Group LLC appraisals) - **Adjusted tax basis** - **Built-in gain or loss** - Date of acquisition and holding period
2. We request specific detail for the following representative holdings, which we anticipate will be featured prominently in the PLR request:
- **NovaBright Data Systems Inc.** — Delaware corporation; data center operator; FMV $890M, basis $520M; held 60% by Fund IV-A Cayman, 40% by Fund IV LP - **Crestline Cloud Solutions LLC** — Delaware LLC, disregarded entity owned by Fund IV-B Lux; SaaS platform; FMV €340M / $367M, basis €195M / $211M - **Veridian Edge Computing Corp.** — Delaware corporation; edge computing; FMV $1.12B, basis $780M; held 55% by Fund V-A Cayman, 45% by Fund V LP - **Thorngate Fiber Networks LP** — Delaware LP; fiber-optic networks; FMV $670M, basis $490M; held 100% by Fund IV-A Cayman - **Helix SaaS Holdings Ltd.** — Cayman exempted company; SaaS holding; FMV $445M, basis $310M; held 100% by Fund V-A Cayman
3. Please note that the aggregate figures we will be working to confirm are: total FMV of **$7.75 billion**, total adjusted tax basis of **$6.03 billion**, and total built-in gain of **$1.72 billion**.
**(f) Liability Information**
1. Schedule of all **portfolio-level liabilities** assumed or allocable to each fund vehicle, including terms, lenders, and outstanding balances (aggregate expected to be approximately $1.34 billion). 2. Existing **IRC § 752 liability allocation** schedules as reflected on the most recent tax returns. 3. Copies of the **subscription credit facility agreements** with Ashford National Bank, N.A.: - Fund IV: $1.1 billion revolving credit facility - Fund V: $1.5 billion revolving credit facility (Ashford National Bank as co-lender, Sentinel Capital Markets LLC as administrative agent) 4. Any existing consent or amendment provisions in the credit agreements relating to structural changes, change of control, or assignment.
**(g) Investor / LP Information**
1. Complete **investor roster** for each of the six fund vehicles, with committed capital amounts, investor type (U.S. taxable, U.S. tax-exempt, non-U.S.), and domicile. 2. Specifically, please confirm commitments for the following representative LPs: - Pinnacle State Employees' Retirement System: $275M (Fund IV), $340M (Fund V) - Grandview University Endowment: $120M (Fund IV), $185M (Fund V) - Nordhaven Sovereign Wealth Fund: $380M (Fund IV-A Cayman), $500M (Fund V-A Cayman) - Kestrel Pacific Insurance Group: €200M (Fund IV-B Lux), €275M (Fund V-B Lux) - Argyle Family Office Holdings LLC: $95M (Fund IV), $130M (Fund V) 3. LPAC membership lists and governing provisions. 4. Documentation of the **April 22, 2025 LPAC meeting** and the 78% in interest preliminary consent obtained.
**(h) Insurance**
1. Current **D&O / E&O policy** with Hawkstone Specialty Insurance Co. ($50 million aggregate limit), including the schedule of covered entities.
**(i) Prior IRS Correspondence and Rulings**
1. Any prior **private letter rulings**, determination letters, or other IRS correspondence relating to any of the Solara fund entities. 2. Any **closing agreements** or examination history.
**6. Coordination with Third Parties**
Calderwood & Harkness will be coordinating with the following third parties in connection with this engagement:
- **Caldwell Pierce & Co. LLP** (Helen Okamoto) — for financial data and tax compliance records. We will transmit a separate formal data request letter to Caldwell Pierce shortly. - **Redstone Advisory Group LLC** (Marco DeLuca) — for fair market value appraisals of the portfolio company interests. We will transmit valuation engagement instructions on behalf of Solara. - **Meridian Offshore Legal** (Fiona McAllister) — regarding Cayman Islands formation and dissolution matters. - **Veldhuis & Gérard S.à r.l.** (Marc Gérard) — regarding Luxembourg SCSp dissolution and CSSF notifications. - **Whitfield, Carruthers & Doyle LLP** (Diana Carruthers) — as LPAC counsel, for the PLR review process.
Could you and Priya please confirm that Calderwood & Harkness is authorized to communicate directly with each of these parties regarding the matters described above? In addition, please forward any engagement letters or NDAs already in place with these firms so that we have them in our records.
**7. Billing and Administrative Matters**
For the record, I wanted to confirm the key commercial terms:
- **Blended hourly rate:** $1,175/hour - **Estimated fee range:** $1.8 million–$2.4 million for the PLR engagement - **Estimated disbursements:** $85,000, including the **$38,000 IRS user fee** under Rev. Proc. 2025-1 - **Billing cycle:** Monthly, net 30 days - **Billing contact:** Sylvia Hartwell (shartwell@calderwoodharkness.com) for any fee-related inquiries
A detailed **matter budget and staffing plan** will be circulated under separate cover within the next few days.
**8. Requested Response / Next Steps**
We would ask that you and Priya begin assembling the requested materials as soon as practicable. To allow the team to meet our June 16 tax analysis memorandum deadline, we would suggest a target of **June 6, 2025** — approximately ten days from today — for delivery of the first tranche of materials.
We would also like to propose a **kickoff call** for the week of June 2, 2025, to walk through the data requests in detail, discuss the reorganization steps, and address any preliminary questions. Robert Jansen will follow up separately to schedule the call and to coordinate document delivery logistics, including encrypted file transfer.
Finally, please note that the **Client Communication Protocol Memorandum** will also be circulated under separate cover in the next few days.
Thank you, Stefan. We are glad to have this engagement underway and look forward to working closely with you and Priya throughout the process. Please do not hesitate to reach out if you have any questions in the interim.
Best regards,
**Leonard Cross** Partner, Tax Calderwood & Harkness LLP 1900 K Street NW, Suite 1100 Washington, DC 20006 T: (202) 555-0148 E: lcross@calderwoodharkness.com
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