PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
Leonard,
I wanted to provide you with a mid-engagement budget check-in on the Solara Digital Infrastructure LP private letter ruling engagement (Matter No. 20250527-SDILP-PLR) before we get further into the home stretch. As you know, the matter was opened on May 27, 2025, pursuant to the engagement letter executed May 12, 2025. I have reviewed all time entries through today's date and want to give you a clear snapshot of where we stand financially with approximately three weeks remaining until the August 15 target PLR submission date.
**I. Hours and Fees Billed to Date**
Below is a summary of actual hours billed and fees incurred by timekeeper through July 25:
**Leonard Cross** (Responsible Partner) — approximately 180 hours. Your time reflects partner-level review and markup of all tax memoranda produced by the team, substantive markup of PLR Draft v1.0, preparation for and attendance at the pre-submission conference with IRS CC:INTL Branch 1 on July 22, and ongoing client communications with the Solara team.
**Sylvia Hartwell** (Billing Partner) — approximately 85 hours. My time has been concentrated on the cross-border restructuring analysis, review of the Luxembourg SCSp and Cayman exempted limited partnership tax memoranda, and coordination on billing and engagement administration matters.
**Robert Jansen** (Lead Associate) — approximately 420 hours. Robert has been the workhorse on this engagement. His time covers primary drafting of the master tax analysis memorandum (completed on target around June 16), the § 721(a) nonrecognition analysis, § 731 distribution analysis, § 752 liability allocation memorandum, § 704(c) remedial allocation method carryover memoranda, the credit facility implications memorandum, all PLR drafting across versions 1.0 through 4.0, data requests to and coordination with Caldwell Pierce & Co. LLP, and extensive coordination with Diana Carruthers at Whitfield, Carruthers & Doyle LLP on LPAC-related matters.
**Garrett Simmons** (Working Associate) — approximately 350 hours. Garrett's time reflects the analogous PLR survey and research memorandum, the § 721(b) investment company analysis, entity classification and check-the-box analysis, § 752 liability allocation modeling, the § 1446 withholding analysis, FIRPTA/§ 897 analysis, the anti-abuse and step transaction doctrine memorandum, check-the-box election timing memorandum, and supporting preparation of PLR exhibits.
At a blended rate of $1,175 per hour across the team, total fees billed to date are approximately **$1,216,125** on approximately **1,035 total hours**.
Disbursements incurred to date total approximately **$12,000**, consisting primarily of travel expenses related to the July 22 pre-submission conference in Washington, courier and filing costs, and research database charges. Notably, the $38,000 IRS user fee has not yet been paid — that will be submitted by wire transfer with the PLR package on August 15.
**Total spend to date, including disbursements: approximately $1.25 million.**
**II. Comparison Against Original Budget Estimate**
The original engagement estimate contemplated a fee range of $1.8 million to $2.4 million, with estimated disbursements of $85,000 (inclusive of the $38,000 IRS user fee).
At approximately $1.22 million in fees, we are roughly at the two-thirds mark of the engagement with the following budgeted phases still to be completed:
- Finalization of the PLR execution version (moving from v4.0, the final circulated draft, to the execution version for submission); - Completion of all PLR exhibits (Exhibits A through E), including organizational charts, step transaction diagrams, the Schedule of Contributing Entities and Assets (reflecting $7.75 billion total FMV, $6.03 billion aggregate basis, and $1.72 billion built-in gain detail), and the § 752 liability schedule covering $1.34 billion in aggregate liabilities; - Preparation and filing of IRS Forms 2848 (powers of attorney for you and me); - Finalization of the penalties of perjury declaration for Viktor Raines's signature; - User fee transmittal and wire transfer ($38,000); - PLR submission transmittal letter assembly; - Any supplemental submission to the IRS following the pre-submission conference (discussed further below); - Entity formation support, including Certificates of Formation/LP for Master Fund GP LLC and Master Fund LP, Cayman formation instructions to Fiona McAllister at Meridian Offshore Legal, and Luxembourg dissolution instructions to Marc Gérard at Veldhuis & Gérard; - Form 8832 check-the-box elections (three forms — Master Fund LP, International Feeder, Tax-Exempt Feeder); - LP consent solicitation and tracking support; and - Lender consent work for the Ashford National Bank Fund IV facility ($1.1 billion) and the Fund V facility ($1.5 billion) with Sentinel Capital Markets as co-lender and administrative agent.
If the engagement proceeds according to the original scope, I project that total fees will likely land in the **$1.65 million to $1.85 million range** — at or slightly below the low end of the original $1.8 million to $2.4 million estimate. That is a positive development from a client relationship standpoint, and I think the team deserves credit for efficient execution through the heavy drafting phases.
However, I want to flag two items that could move the final number.
**III. Scope Expansion Items — Flagged Concerns**
Two developments have emerged that could push total fees toward the middle or upper end of the original range, or potentially beyond it:
**1. Additional Lender Consent Work**
Robert's analysis of the credit facility implications (his memorandum on change-of-control, borrowing-base, and assignment provisions) has revealed that the lender consent process is materially more complex than we originally scoped. The Fund V subscription facility ($1.5 billion) involves Sentinel Capital Markets LLC as administrative agent in addition to Ashford National Bank as co-lender, and the two institutions will require separate consent and amendment agreements for each facility. Both lenders have already raised preliminary questions about the post-reorganization borrowing base and the impact of asset transfers on subscription line collateral — specifically, the effect on LP capital commitment assignments underlying the borrowing base calculations.
Our engagement scope memorandum treated lender consent work as ancillary and limited in scope. The actual negotiation and documentation work may require **80 to 120 additional hours**, which I estimate at **$95,000 to $140,000 in additional fees**. I would recommend discussing with Stefan Dalmqvist and Priya Narasimhan whether Solara wants Calderwood & Harkness to handle the full lender consent negotiation or whether Solara's in-house team or separate finance counsel should take the lead on that workstream. There may be good reasons to keep it with us for coordination purposes, but we should be transparent about the fee implications.
**2. Supplemental IRS Submission**
As you know from the pre-submission conference with IRS CC:INTL Branch 1 on July 22, and as summarized in the Pre-Submission Conference Summary Memorandum circulated to the client, the IRS has requested additional factual detail and supplemental representations on certain issues. The areas of particular focus were the § 367 inapplicability argument for the Luxembourg SCSp contributions and the § 752 netting analysis for the $1.34 billion in aggregate liability shifts across the tiered partnership structure. The IRS also flagged potential interest from CC:PSI (secondary jurisdiction) in the § 704(c) remedial allocation method carryover across the tiered structure, which could generate additional questions.
The supplemental submission letter will require additional drafting, your review, and potentially further valuation support from Marco DeLuca at Redstone Advisory Group LLC. I estimate this workstream could require **60 to 100 additional hours**, or approximately **$70,000 to $120,000** in additional fees.
I should also note that any post-submission IRS correspondence and follow-up questions during the ruling process itself would constitute additional scope beyond the current engagement estimate. We should ensure the client understands that distinction.
Taken together, these two items could add $165,000 to $260,000 to the engagement total. Even at the high end, the overall engagement would remain within or modestly above the original $1.8 million to $2.4 million estimate, but I want us to get ahead of the conversation rather than presenting the client with a surprise at final billing.
**IV. Disbursement Update**
- Current disbursements incurred: approximately $12,000 (pre-submission conference travel, courier/filing, research databases) - Remaining anticipated disbursements: - IRS user fee: $38,000 (wire transfer with August 15 submission) - Additional travel, if IRS requests in-person follow-up: estimated $5,000–$10,000 - Filing and miscellaneous: approximately $5,000 - **Total projected disbursements: $60,000–$65,000**, well within the original $85,000 estimate
If the supplemental submission requires additional IRS meetings in Washington, disbursements could increase modestly, but I would not expect them to exceed the original estimate.
**V. Recommendations and Next Steps**
A few items for your consideration:
1. I recommend discussing both scope expansion items — lender consent and the supplemental IRS submission — with Stefan Dalmqvist and Priya Narasimhan on the next client call, ideally before the end of this week. We need a decision on the lender consent scope in particular before the August 15 submission date, as the timeline for consent negotiations will run in parallel with the IRS ruling process.
2. I am finalizing Quarterly Budget Update #1 (the Q3 2025 budget-to-actual comparison) and suggest we provide it to Solara as a formal written budget update, clearly identifying the scope expansion items and their fee implications.
3. On the billing cycle: invoices through June have been issued under the standard net-30-day terms. The July invoice is currently being prepared and will reflect the heaviest drafting period of the engagement — expect it to be the single largest monthly invoice.
4. Given the overall engagement economics and the fact that the $1.8 million to $2.4 million range was a time-and-materials estimate without a fee cap, would you like to set up a dedicated budget call with Douglas Wexford and Priya Narasimhan to walk through the fee trajectory? I think it would be well received and demonstrates the kind of proactive financial transparency that strengthens the relationship.
5. Finally, from a matter management perspective, the team is performing efficiently. Garrett Simmons in particular has been highly productive on the research and modeling work — his output on the § 752 liability allocation modeling and the analogous PLR survey has been excellent, and his hours reflect real substantive contribution rather than inefficiency.
Leonard, I am happy to discuss any of this by phone at your convenience. I will be in the New York office the rest of this week and available anytime.
Best regards,
Sylvia Hartwell Partner, Tax Calderwood & Harkness LLP 600 Lexington Avenue, 38th Floor New York, NY 10022 Tel: (212) 555-0184 Email: shartwell@calderwoodharkness.com