MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
TO: Viktor Raines, Managing Partner & Founder; Priya Narasimhan, General Counsel; Stefan Dalmqvist, Head of Tax — Solara Digital Infrastructure LP
FROM: Leonard Cross, Responsible Partner; Sylvia Hartwell, Billing Partner — Calderwood & Harkness LLP
DATE: May 27, 2025
RE: Engagement Scope — Private Letter Ruling Request Regarding Cross-Border Fund-Platform Reorganization
ENGAGEMENT NUMBER: 20250527-SDILP-PLR
MATTER STATUS: Active
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I. Purpose of This Memorandum
This memorandum supplements the Engagement Letter dated May 12, 2025, executed by Sylvia Hartwell on behalf of Calderwood & Harkness LLP and countersigned by Priya Narasimhan in her capacity as General Counsel of Solara Digital Infrastructure LP. The Engagement Letter established the general terms and conditions governing the attorney-client relationship between Calderwood & Harkness LLP and Solara Digital Infrastructure LP, including applicable fee arrangements, conflict of interest disclosures, and standard terms of representation.
The purpose of this memorandum is to set forth in detail the scope of work, underlying assumptions, and limitations of Calderwood & Harkness LLP's engagement in connection with the preparation and submission of a private letter ruling ("PLR") request to the Internal Revenue Service ("IRS") on behalf of Solara Digital Infrastructure LP and its affiliated fund entities. The PLR request concerns a proposed cross-border fund-platform reorganization that will consolidate four legacy offshore fund vehicles into a newly established Delaware-domiciled master fund structure, as described more fully in Sections III and IV below.
This memorandum is intended to provide a definitive reference for the engagement team and the client regarding the boundaries of the representation. It identifies each specific deliverable within scope, delineates the matters expressly excluded from scope, sets forth the factual, legal, and timing assumptions upon which the engagement is predicated, and describes the coordination framework with other professional advisors retained by Solara. This memorandum should be read in conjunction with the Engagement Letter, and in the event of any conflict between this memorandum and the Engagement Letter with respect to the description of the scope of work, the terms of this memorandum shall control.
All capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Engagement Letter or as set forth in the relevant context below.
II. Client and Engagement Overview
A. The Client
The client for purposes of this engagement is Solara Digital Infrastructure LP ("Solara" or "SDILP"), a Delaware limited partnership formed on March 17, 2014, under the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101 et seq. Solara's principal office and headquarters are located at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801.
Solara is a private equity sponsor focused on digital infrastructure and enterprise software-as-a-service ("SaaS") verticals. As of March 31, 2025, Solara had approximately $14.7 billion in assets under management across its family of fund vehicles. Solara's investment portfolio spans data center operations, fiber-optic network infrastructure, edge computing platforms, and enterprise SaaS businesses.
The general partner of Solara Digital Infrastructure LP is Solara Digital Infrastructure GP LLC, a Delaware limited liability company managed by Viktor Raines. Solara Digital Infrastructure GP LLC holds Employer Identification Number ("EIN") 82-4917365. Solara Digital Infrastructure LP holds EIN 82-4917366.
The registered agent for all Delaware entities within the Solara platform is Capitol Registered Agents Inc., located at 850 New Burton Road, Suite 201, Dover, Delaware 19904.
B. Engagement Firm and Team
The engagement firm is Calderwood & Harkness LLP, a limited liability partnership organized under the laws of the State of New York. Calderwood & Harkness maintains offices relevant to this engagement at the following locations:
• New York Office: 600 Lexington Avenue, 38th Floor, New York, New York 10022
• Washington, D.C. Office: 1900 K Street NW, Suite 1100, Washington, D.C. 20006
The engagement team assigned to this matter consists of the following professionals:
• Leonard Cross — Responsible Partner, Tax Practice Group, based in the Washington, D.C. office. Mr. Cross has twenty-eight years of experience advising private equity funds, sovereign wealth funds, and multinational enterprises on matters involving international tax, partnership tax, and fund formation. Mr. Cross will serve as the senior engagement partner with primary responsibility for the substantive tax analysis and all direct interactions with the IRS, including attendance at any pre-submission conference and post-submission communications.
• Sylvia Hartwell — Billing Partner, Tax Practice Group, based in the New York office. Ms. Hartwell has twenty-four years of experience concentrating in cross-border restructurings, investment fund taxation, and the negotiation of tax-related provisions in fund formation documents. Ms. Hartwell will serve as the billing partner responsible for engagement economics, staffing, and budget management, and will participate in the substantive tax analysis as a senior reviewer.
• Robert Jansen — Lead Associate, Tax Practice Group, based in the Washington, D.C. office. Mr. Jansen has six years of experience in partnership tax, international tax, and PLR submission practice. Mr. Jansen will serve as the day-to-day lead on drafting the PLR request and supporting memoranda.
• Garrett Simmons — Working Associate, Tax Practice Group, based in the New York office. Mr. Simmons has three years of experience in tax research, entity classification, and transactional tax analysis. Mr. Simmons will support Mr. Jansen in the preparation of exhibits, research memoranda, and financial schedules.
The primary client-side contacts for this engagement are Stefan Dalmqvist, Head of Tax, and Priya Narasimhan, General Counsel, each of Solara Digital Infrastructure LP. All substantive communications regarding the engagement, including draft deliverables, data requests, and status updates, will be directed to Mr. Dalmqvist and Ms. Narasimhan unless otherwise agreed.
C. Engagement Basics
The key administrative parameters of the engagement are as follows:
• Engagement Letter Execution Date: May 12, 2025
• Matter Opened Date: May 27, 2025
• Engagement Number: 20250527-SDILP-PLR
• Fee Arrangement: Blended hourly rate of $1,175 per hour, applicable to all timekeeper hours billed to this matter. The blended rate reflects a weighted average across partner and associate billing rates and was negotiated as part of the Engagement Letter to provide cost certainty relative to the varying seniority levels of professionals staffed on the matter.
• Estimated Total Fees: $1,800,000 to $2,400,000. This estimate is based on Calderwood & Harkness's experience with PLR submissions of comparable complexity and scope. The estimate is subject to revision based on the complexity of IRS interactions, the number of supplemental submission letters required, and the extent of coordination with foreign counsel and other advisors.
• Estimated Disbursements: $85,000. This estimate includes the IRS user fee of $38,000 (per the fee schedule set forth in Rev. Proc. 2025-1), travel expenses for the pre-submission conference at IRS headquarters in Washington, D.C., courier and filing costs, and other out-of-pocket expenses.
• Billing Cycle: Monthly, with invoices rendered on or about the first business day of each month for services performed in the preceding month. Payment is due within thirty (30) days of invoice date.
• Fee Cap: There is no fee cap on this engagement. The matter is billed on a time-and-materials basis. Calderwood & Harkness will provide quarterly budget updates to Mr. Dalmqvist and Ms. Narasimhan, and will promptly notify the client if actual or projected fees are expected to exceed the upper end of the estimated range.
III. Background and Business Context
A. Existing Fund Platform Structure
Solara currently operates its investment activities through six parallel fund vehicles organized across three jurisdictions — Delaware, the Cayman Islands, and Luxembourg. The parallel fund structure was established to accommodate the differing tax, regulatory, and treaty requirements of Solara's diverse investor base, which includes U.S. taxable investors, U.S. tax-exempt institutional investors, and non-U.S. investors from multiple jurisdictions.
The six existing fund vehicles, together with their key attributes, are described below:
Fund IV Vehicles:
1. Solara Digital Partners Fund IV LP — A Delaware limited partnership with total capital commitments of $4.2 billion (vintage 2021), approximately 72% deployed as of March 31, 2025. EIN: 85-2103748. General Partner: Solara Digital Infrastructure GP LLC. This vehicle serves as the main domestic fund for U.S. taxable investors.
2. Solara Digital Partners Fund IV-A (Cayman) LP — A Cayman Islands exempted limited partnership with total capital commitments of $1.85 billion, operating as a parallel fund for non-U.S. investors and U.S. tax-exempt investors seeking UBTI blocker benefits. EIN: 98-6241503. CIMA Registration: MF-72491. General Partner: Solara Offshore GP Ltd. Registered office: Harborstone Corporate Services Ltd., P.O. Box 2714, 94 Solaris Avenue, George Town, Grand Cayman KY1-1111.
3. Solara Digital Partners Fund IV-B (Luxembourg) SCSp — A Luxembourg special limited partnership (société en commandite spéciale) with total capital commitments of €1.15 billion (approximately $1.24 billion at 1.08 EUR/USD), established to provide treaty access and regulatory familiarity for European and Asian institutional investors. EIN: 98-6241571. Luxembourg Register of Commerce and Companies ("RCS"): B 248193. General Partner: Solara Luxembourg Management S.à r.l. (RCS B 248194). Registered office: 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg.
Fund V Vehicles:
4. Solara Digital Partners Fund V LP — A Delaware limited partnership with total capital commitments of $5.6 billion (vintage 2023), approximately 38% deployed as of March 31, 2025. EIN: 88-3467219. General Partner: Solara Digital Infrastructure GP LLC. This vehicle serves as the main domestic fund for U.S. taxable investors in the current generation of investments.
5. Solara Digital Partners Fund V-A (Cayman) LP — A Cayman Islands exempted limited partnership with total capital commitments of $2.45 billion, serving as the parallel fund for non-U.S. investors and U.S. tax-exempt investors. EIN: 98-7891234. CIMA Registration: MF-89103. Registered office: Harborstone Corporate Services Ltd., George Town, Grand Cayman.
6. Solara Digital Partners Fund V-B (Luxembourg) SCSp — A Luxembourg special limited partnership with total capital commitments of €1.38 billion (approximately $1.49 billion at 1.08 EUR/USD). EIN: 98-7891267. RCS: B 271056. Registered office: 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg.
Investor Base Allocation:
The allocation of investors across the fund vehicles follows a well-established pattern based on the tax status and domicile of each investor:
• U.S. taxable investors invest through the Delaware main funds (Fund IV LP and Fund V LP). This category includes U.S. taxable institutional investors and family offices. For example, Argyle Family Office Holdings LLC, a U.S. taxable family office, holds commitments of $95 million in Fund IV LP and $130 million in Fund V LP.
• U.S. tax-exempt investors invest through the Cayman parallel vehicles to obtain UBTI blocker benefits, thereby avoiding the recognition of unrelated business taxable income under IRC §§ 511–514 that might otherwise arise from leveraged investments or operating business income. Representative U.S. tax-exempt investors include the Pinnacle State Employees' Retirement System ($275 million committed to Fund IV-A Cayman; $340 million committed to Fund V-A Cayman) and the Grandview University Endowment ($120 million committed to Fund IV-A Cayman; $185 million committed to Fund V-A Cayman).
• Non-U.S. investors invest through the Cayman or Luxembourg vehicles based on treaty access and regulatory considerations applicable to each investor's jurisdiction of domicile. Representative non-U.S. investors include Nordhaven Sovereign Wealth Fund ($380 million committed to Fund IV-A Cayman; $500 million committed to Fund V-A Cayman), which invests through the Cayman vehicles, and Kestrel Pacific Insurance Group, a Singapore-domiciled insurer (€200 million committed to Fund IV-B Luxembourg; €275 million committed to Fund V-B Luxembourg), which invests through the Luxembourg vehicles for European treaty access and Solvency II regulatory reporting purposes.
B. Business Rationale for the Reorganization
Solara's management team has determined that the existing six-vehicle parallel fund structure has become operationally burdensome and, in light of evolving international tax rules, increasingly less advantageous from a tax perspective. The proposed reorganization is motivated by four principal business considerations:
Operational Cost Reduction. Solara currently incurs approximately $3.8 million annually in duplicative offshore administration, audit, and regulatory compliance fees across the parallel structures. These costs include annual fees payable to Harborstone Corporate Services Ltd. for Cayman registered office services, annual fees payable to the Commission de Surveillance du Secteur Financier ("CSSF") in Luxembourg, annual audit fees for the separate financial statements required for each offshore vehicle, and administration fees payable to Clarendon Fund Services Ltd. for NAV calculation and investor reporting across multiple parallel entities. Consolidation into a single master fund with two feeder vehicles is expected to yield meaningful annual cost savings.
Pillar Two GloBE Rules. The OECD Inclusive Framework's Pillar Two Global Anti-Base Erosion ("GloBE") rules, as implemented by Luxembourg through the Grand Ducal law transposing EU Directive 2022/2523, become effective for Solara's Luxembourg entities beginning in fiscal year 2025. The GloBE rules impose a minimum effective tax rate of 15% on the income of constituent entities within large multinational groups. While the Luxembourg SCSp structures were historically designed to provide tax transparency and treaty benefits, the incremental compliance burden and potential top-up tax exposure under the GloBE rules diminish the continuing benefit of maintaining separate Luxembourg fund vehicles.
FATCA and CRS Simplification. The existing multi-jurisdictional structure requires separate Foreign Account Tax Compliance Act ("FATCA") reporting under intergovernmental agreements applicable to each of the Cayman Islands and Luxembourg, as well as Common Reporting Standard ("CRS") reporting under the Cayman Tax Information Authority (International Tax Compliance) Regulations and Luxembourg's CRS implementing legislation. Consolidation of the offshore vehicles into Cayman-domiciled feeders that invest through a single Delaware master fund will reduce the number of reporting financial institutions and simplify ongoing compliance obligations.
LP-Requested Governance Simplification. Several of Solara's largest limited partners have expressed a preference for a simplified fund governance structure that reduces the number of separate limited partnership agreements, advisory committee structures, and consent processes to which they are subject. The reorganization responds to this investor feedback by creating a streamlined architecture in which investment decisions and governance matters are centralized at the master fund level.
C. Key Portfolio Company Interests Involved
The proposed reorganization will result in the transfer of portfolio company interests currently held by the four legacy offshore vehicles into the newly established Consolidated Master Fund LP. The six existing fund vehicles collectively hold interests in twenty-three portfolio companies — eleven in the Fund IV vehicles and twelve in the Fund V vehicles. The portfolio spans the digital infrastructure and enterprise SaaS sectors.
The following representative portfolio company holdings, which are among the largest positions being transferred and which illustrate the range of entity types, asset values, and built-in gain positions involved, are described below for context:
• NovaBright Data Systems Inc. — A Delaware corporation engaged in the operation of hyperscale data center facilities in Northern Virginia, Dallas, and Phoenix. Fair market value: $890 million. Adjusted tax basis: $520 million. Built-in gain: $370 million. Ownership: Fund IV-A (Cayman) LP holds 60%; Fund IV LP holds 40%.
• Crestline Cloud Solutions LLC — A Delaware limited liability company classified as a disregarded entity for U.S. federal income tax purposes, operating a cloud-based enterprise SaaS platform for supply chain management. Fair market value: €340 million ($367 million at 1.08 EUR/USD). Adjusted tax basis: €195 million ($211 million). Built-in gain: €145 million ($156 million). Ownership: Fund IV-B (Luxembourg) SCSp holds 100%.
• Veridian Edge Computing Corp. — A Delaware corporation providing edge computing infrastructure and managed services to telecommunications carriers and enterprise customers. Fair market value: $1.12 billion. Adjusted tax basis: $780 million. Built-in gain: $340 million. Ownership: Fund V-A (Cayman) LP holds 55%; Fund V LP holds 45%.
• Thorngate Fiber Networks LP — A Delaware limited partnership that owns and operates metropolitan and long-haul fiber-optic network assets across the northeastern United States. Fair market value: $670 million. Adjusted tax basis: $490 million. Built-in gain: $180 million. Ownership: Fund IV-A (Cayman) LP holds 100%.
• Helix SaaS Holdings Ltd. — A Cayman Islands exempted company serving as a holding company for a portfolio of enterprise SaaS businesses focused on financial services technology. Fair market value: $445 million. Adjusted tax basis: $310 million. Built-in gain: $135 million. Ownership: Fund V-A (Cayman) LP holds 100%.
The remaining eighteen portfolio company interests are of comparable character and will be detailed in the asset schedules prepared as part of the PLR exhibits. The aggregate financial summary of all assets being transferred is set forth in Section IV.G below.
IV. Description of the Proposed Reorganization
A. Overview — Five-Step Integrated Transaction
The proposed reorganization is structured as a five-step integrated transaction designed to consolidate the four legacy offshore 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 established Delaware-domiciled master fund structure with two Cayman-domiciled feeder vehicles.
The target effective date for completion of all five steps is December 1, 2025. Each step has been sequenced to optimize operational logistics, accommodate regulatory lead times in the Cayman Islands and Luxembourg, and minimize the period during which legacy offshore vehicles and new entities will coexist. The five steps are designed to be treated as an integrated transaction for U.S. federal income tax purposes, and the PLR request will present them as such. However, the steps are also designed to be independently defensible under the applicable Internal Revenue Code provisions in the event the IRS were to disaggregate the transaction for analytical purposes.
The five steps are summarized below and described in detail in Sections IV.B through IV.F.
B. Step 1 — Formation of New Entities (Target: September 15, 2025)
The first step involves the formation of four new legal entities that will constitute the post-reorganization consolidated fund architecture:
1. Solara Consolidated Master Fund GP LLC — A Delaware limited liability company to be formed under the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq., which will serve as the general partner of the Consolidated Master Fund LP. This entity will be managed by Solara Digital Infrastructure GP LLC and will hold a nominal general partner interest in the Master Fund.
2. Solara Consolidated Master Fund LP — A Delaware limited partnership to be formed under the Delaware Revised Uniform Limited Partnership Act, which will serve as the master fund vehicle into which all portfolio assets currently held by the four legacy offshore vehicles will be contributed. The general partner of the Master Fund LP will be Solara Consolidated Master Fund GP LLC.
3. Solara International Feeder (Cayman) LP — A Cayman Islands exempted limited partnership to be formed under the Cayman Islands Exempted Limited Partnership Act (as revised), which will serve as the feeder vehicle for non-U.S. investors who currently invest through the Fund IV-A and Fund V-A Cayman parallel vehicles and through the Fund IV-B and Fund V-B Luxembourg vehicles.
4. Solara Tax-Exempt Feeder (Cayman) LP — A Cayman Islands exempted limited partnership to be formed under the same Cayman Islands legislation, which will serve as the feeder vehicle for U.S. tax-exempt investors to mitigate exposure to unrelated business taxable income ("UBTI") under IRC §§ 511–514.
Concurrently with or promptly following the formation of each new entity, IRS Form 8832 (Entity Classification Election) will be filed with the IRS under Treasury Regulation § 301.7701-3 to elect classification as a partnership for U.S. federal income tax purposes for each of the three new entities required to make such an election — namely, the Consolidated Master Fund LP, the International Feeder (Cayman) LP, and the Tax-Exempt Feeder (Cayman) LP. The effective dates of the check-the-box elections will be coordinated with the target dates for the subsequent reorganization steps to ensure that the new entities are classified as partnerships prior to the contribution transactions described in Steps 2 through 4. The 75-day retroactivity rule under Treasury Regulation § 301.7701-3(c)(1)(iii) will be taken into account in establishing the election effective dates.
C. Step 2 — Contribution of Fund IV-A Cayman Assets (Target: October 1, 2025)
In Step 2, Solara Digital Partners Fund IV-A (Cayman) LP will contribute all of its portfolio company assets to Solara Consolidated Master Fund LP in exchange for a limited partnership interest in the Consolidated Master Fund LP.
The aggregate financial parameters of the Step 2 contribution are as follows:
The intended U.S. federal income tax treatment of the Step 2 contribution is as a tax-free contribution under IRC § 721(a), pursuant to which no gain or loss is recognized by Fund IV-A (Cayman) LP or by the Consolidated Master Fund LP upon the contribution. The adjusted tax basis of each contributed asset will carry over to the Consolidated Master Fund LP under IRC § 723, and the holding period of each contributed asset will include the period during which the asset was held by Fund IV-A (Cayman) LP under IRC § 1223(2).
As part of the tax analysis supporting the PLR request, Calderwood & Harkness will analyze whether the contribution implicates the investment company exception under IRC § 721(b). This provision denies tax-free treatment to a contribution to a partnership that would be treated as an "investment company" within the meaning of IRC § 351(e) if the partnership were a corporation. The analysis will address whether the Consolidated Master Fund LP's portfolio of operating company interests — consisting of data center operators, fiber-optic network businesses, edge computing platforms, and SaaS enterprises — constitutes a portfolio of "stocks, securities, or other investment assets" for purposes of this analysis.
D. Step 3 — Contribution of Fund IV-B Luxembourg Assets (Target: October 15, 2025)
In Step 3, Solara Digital Partners Fund IV-B (Luxembourg) SCSp will contribute all of its portfolio company assets to Solara Consolidated Master Fund LP in exchange for a limited partnership interest in the Consolidated Master Fund LP.
The aggregate financial parameters of the Step 3 contribution are as follows:
The intended U.S. federal income tax treatment is the same as Step 2: a tax-free contribution under IRC § 721(a) with carryover basis under IRC § 723 and holding period tacking under IRC § 1223(2).
Step 3 raises additional cross-border tax considerations that are not present in Step 2. Because Fund IV-B (Luxembourg) SCSp is a foreign partnership contributing assets to a domestic partnership (the Consolidated Master Fund LP), Calderwood & Harkness will analyze the applicability of IRC § 367 to the contribution. Specifically, the PLR request will address the position that IRC § 367 does not apply to this transfer because, by its terms, IRC § 367(a) applies to transfers of property by a United States person to a foreign corporation, and IRC § 367(b) applies to exchanges described in certain enumerated provisions involving a foreign corporation. Neither subsection, by its terms, applies to a transfer by a foreign partnership to a domestic partnership. The PLR request will seek an affirmative ruling that IRC § 367 is inapplicable to the Step 3 contribution.
With respect to Luxembourg tax consequences, no Luxembourg capital gains tax is expected to arise at the SCSp level on the transfer, based on Article 3(2) of the Luxembourg law of July 12, 2013 (Loi du 12 juillet 2013 relative aux gestionnaires de fonds d'investissement alternatifs), which provides for tax transparency of the SCSp. However, Calderwood & Harkness expressly disclaims any responsibility for the analysis of Luxembourg tax law, which will be addressed by Veldhuis & Gérard S.à r.l., as set forth in Section VI.A below.
Additionally, Calderwood & Harkness will analyze whether the contribution gives rise to a deemed disposition triggering withholding obligations under IRC § 1446, which imposes a withholding tax on effectively connected taxable income allocable to foreign partners.
E. Step 4 — Contribution of Fund V Offshore Assets (Target: November 1, 2025)
In Step 4, the two Fund V offshore vehicles will contribute their respective portfolio company assets to the Consolidated Master Fund LP:
Fund V-A (Cayman) LP Contribution:
Fund V-B (Luxembourg) SCSp Contribution:
The intended U.S. federal income tax treatment is the same as described in Steps 2 and 3 above: tax-free contributions under IRC § 721(a) with carryover basis under IRC § 723 and holding period tacking under IRC § 1223(2). The IRC § 367 inapplicability analysis and IRC § 1446 withholding analysis applicable to the Fund V-B (Luxembourg) SCSp contribution will mirror the analysis described in connection with Step 3.
F. Step 5 — Dissolution of Legacy Offshore Vehicles and LP Migration (Target: December 1, 2025)
In Step 5, the four legacy offshore vehicles — Fund IV-A (Cayman) LP, Fund IV-B (Luxembourg) SCSp, Fund V-A (Cayman) LP, and Fund V-B (Luxembourg) SCSp — will dissolve and distribute their respective limited partnership interests in the Consolidated Master Fund LP to their existing limited partners in liquidation of those limited partners' interests in the dissolving vehicles.
Following the dissolution distributions:
• Non-U.S. limited partners will contribute their distributed Master Fund LP interests to the newly formed Solara International Feeder (Cayman) LP, receiving limited partnership interests in the International Feeder in exchange.
• U.S. tax-exempt limited partners will contribute their distributed Master Fund LP interests to the newly formed Solara Tax-Exempt Feeder (Cayman) LP, receiving limited partnership interests in the Tax-Exempt Feeder in exchange.
The intended U.S. federal income tax treatment of the dissolution distributions is as tax-free distributions under IRC § 731(a), pursuant to which no gain or loss is recognized by the distributing partnership or the distributee partners except to the extent that money distributed exceeds a partner's adjusted basis in its partnership interest.
A critical aspect of the Step 5 analysis is whether the limited partnership interests in the Consolidated Master Fund LP distributed by the dissolving vehicles constitute "marketable securities" within the meaning of IRC § 731(c). If so, the distribution of such interests could be treated as a distribution of money under IRC § 731(c)(1), potentially triggering gain recognition. Calderwood & Harkness will analyze whether the Consolidated Master Fund LP interests are "marketable securities" as defined in IRC § 731(c)(2), which generally requires that the securities be actively traded or, in certain cases, that they be of a type that is actively traded. The PLR request will seek a ruling that the Master Fund LP interests are not marketable securities within the meaning of § 731(c)(2), on the basis that they are interests in a newly formed, non-publicly traded limited partnership that are not actively traded on an established securities market or readily tradable on a secondary market or the substantial equivalent thereof.
Resulting Post-Reorganization Structure. Upon completion of all five steps, the resulting fund structure will consist of:
• Solara Consolidated Master Fund LP (Delaware), holding the consolidated portfolio of twenty-three portfolio companies previously held by the four legacy offshore vehicles.
• Solara International Feeder (Cayman) LP, holding a limited partnership interest in the Master Fund LP, through which all non-U.S. investors will invest.
• Solara Tax-Exempt Feeder (Cayman) LP, holding a limited partnership interest in the Master Fund LP, through which all U.S. tax-exempt investors will invest.
• Solara Digital Partners Fund IV LP and Solara Digital Partners Fund V LP (each a Delaware LP), which will continue to hold their existing portfolio company interests directly and will co-invest alongside the Consolidated Master Fund LP. U.S. taxable investors will remain as limited partners in these vehicles.
G. Aggregate Financial Summary
The aggregate financial parameters of the proposed reorganization are as follows:
The magnitude of the aggregate built-in gain of $1.72 billion underscores the critical importance of obtaining a favorable PLR confirming the tax-free treatment of the contribution and distribution transactions. Any adverse ruling, or failure to obtain the requested rulings, could expose the fund vehicles and their limited partners to significant gain recognition in the year of the reorganization.
V. Scope of Work — Specific Deliverables
The following subsections describe each category of deliverables that Calderwood & Harkness will produce in connection with this engagement. Except as expressly noted below, all deliverables will be prepared by the Calderwood & Harkness engagement team and will be subject to review and approval by Leonard Cross (Responsible Partner) and Sylvia Hartwell (Billing Partner) prior to delivery to the client or submission to any third party.
A. Tax Analysis Memoranda
Calderwood & Harkness will prepare comprehensive tax analysis memoranda addressing each material provision of the Internal Revenue Code and Treasury Regulations implicated by the proposed reorganization. These memoranda are intended to serve dual purposes: (i) to provide Solara's management and tax team with a thorough analysis of the tax consequences of each step of the reorganization, and (ii) to form the analytical foundation for the positions taken in the PLR request.
The following memoranda will be prepared:
1. Master Tax Analysis Memorandum — A comprehensive overview memorandum analyzing the entire five-step reorganization as an integrated transaction, identifying each material IRC provision implicated, summarizing the intended tax treatment of each step, and flagging any areas of material uncertainty or risk.
2. IRC § 721(a) Contribution Analysis (Steps 2–4) — A detailed memorandum analyzing the application of IRC § 721(a) to the contributions by the four legacy offshore vehicles of their portfolio company interests to the Consolidated Master Fund LP, including discussion of the requirements for nonrecognition treatment, the effect of carryover basis under IRC § 723, and holding period tacking under IRC § 1223(2).
3. IRC § 721(b) Investment Company Exception Analysis — A dedicated memorandum analyzing whether the Consolidated Master Fund LP, upon receipt of the contributed assets, would be treated as an "investment company" within the meaning of IRC § 721(b) and Treasury Regulation § 1.351-1(c)(1)(ii). This analysis will examine whether the portfolio company interests contributed constitute "stocks, securities, or other investment assets" under the applicable regulations, with particular attention to the distinction between operating company interests (as Solara contends) and passive investment assets.
4. IRC § 367 Inapplicability to Partnership-to-Partnership Transfers — A memorandum analyzing the statutory text and legislative history of IRC § 367 and supporting the position that § 367 does not apply to transfers by a foreign partnership to a domestic partnership because the provision, by its terms, applies only to transfers to or from a "foreign corporation."
5. IRC § 731(a) Distribution Analysis (Step 5) — A memorandum analyzing the application of IRC § 731(a) to the dissolution distributions by the four legacy offshore vehicles of their respective Master Fund LP interests to the existing limited partners, including analysis of the conditions for nonrecognition and the basis consequences under IRC § 732.
6. IRC § 731(c) Marketable Securities Exception Analysis — A memorandum specifically addressing whether the Master Fund LP limited partnership interests distributed in Step 5 constitute "marketable securities" as defined in IRC § 731(c)(2), and the consequences under IRC § 731(c)(1) if they were so classified.
7. IRC § 752 Liability Shifting Analysis — A comprehensive memorandum modeling the partner-level shares of the $1.34 billion in aggregate liabilities being assumed by the Consolidated Master Fund LP, both before and after the reorganization. This analysis will address the netting rules under Treasury Regulation § 1.752-1(f), the tiered partnership rules applicable to the feeder-master fund structure, and the potential for deemed contributions or deemed distributions under IRC § 752(a) and (b) arising from shifts in partnership liabilities, including whether any such deemed distribution could trigger gain recognition under IRC § 731.
8. IRC § 704(c) Built-In Gain Carryover Analysis — A memorandum addressing the treatment of the $1.72 billion in aggregate built-in gain upon contribution to the Consolidated Master Fund LP, including the carryover of built-in gain/loss accounts under IRC § 704(c)(1)(A) and the applicable Treasury Regulations.
9. IRC § 704(c) Remedial Allocation Method Election Continuation — A memorandum analyzing whether the remedial allocation method under Treasury Regulation § 1.704-3(d), previously elected by the contributing fund vehicles with respect to certain portfolio company interests, may continue to be applied by the Consolidated Master Fund LP following the contribution.
10. IRC § 1446 Withholding Analysis — A memorandum analyzing whether the contributions in Steps 2–4 or the distributions in Step 5 give rise to withholding obligations under IRC § 1446 and Treasury Regulations §§ 1.1446-1 through 1.1446-6, which impose withholding on effectively connected taxable income allocable to foreign partners of a partnership engaged in a U.S. trade or business.
11. FIRPTA / IRC § 897 Analysis — A memorandum analyzing whether any of the portfolio company interests being transferred constitute "United States real property interests" ("USRPIs") within the meaning of IRC § 897(c)(1), with particular attention to whether the data center facilities and fiber-optic network assets held by certain portfolio companies (including NovaBright Data Systems Inc. and Thorngate Fiber Networks LP) are treated as U.S. real property for purposes of the Foreign Investment in Real Property Tax Act ("FIRPTA").
12. Entity Classification Analysis Under Treas. Reg. § 301.7701-3 — A memorandum confirming the entity classification of each new entity and each existing entity involved in the reorganization under the check-the-box regulations, including analysis of the default classification rules, the effectiveness of filed Form 8832 elections, and any implications of changes in entity membership.
13. Anti-Abuse Considerations — A memorandum addressing potential anti-abuse doctrines that the IRS might raise in connection with the reorganization, including the substance-over-form doctrine, the step transaction doctrine, and the partnership anti-abuse rule under Treasury Regulation § 1.701-2. This memorandum will analyze why, under the facts and circumstances, none of these doctrines should prevent the application of the intended tax treatment.
The target completion date for the initial master tax analysis memorandum is June 16, 2025. Completion dates for the individual topic-specific memoranda will follow on a rolling basis thereafter, with all memoranda completed in advance of the Version 1.0 draft of the PLR request.
B. Private Letter Ruling Request
Calderwood & Harkness will draft and iteratively revise the PLR request letter to be submitted to the IRS on behalf of Solara Digital Infrastructure LP and its affiliated fund entities. The PLR request will be addressed to the IRS, Office of the Associate Chief Counsel (International), CC:INTL, with secondary subject-matter jurisdiction in the Office of the Associate Chief Counsel (Passthroughs and Special Industries), CC:PSI. The submission address is:
Internal Revenue Service
Attn: CC:INTL
1111 Constitution Avenue NW Washington, DC 20224
The PLR request will seek the following eight specific rulings from the IRS:
Ruling 1 (IRC § 721). The contributions by the Legacy Offshore Vehicles of their portfolio company interests to the Consolidated Master Fund LP in Steps 2, 3, and 4 of the proposed reorganization constitute tax-free contributions under IRC § 721(a), and no gain or loss is recognized by any contributing partnership or by the Consolidated Master Fund LP upon such contributions.
Ruling 2 (IRC § 721(b)). The Consolidated Master Fund LP does not constitute an "investment company" within the meaning of IRC § 721(b) and Treasury Regulation § 1.351-1(c)(1)(ii), because the portfolio of assets contributed to and held by the Consolidated Master Fund LP consists of interests in operating companies engaged in the digital infrastructure and enterprise SaaS sectors, rather than "stocks, securities, or other investment assets" within the meaning of the applicable regulations.
Ruling 3 (IRC § 367 Inapplicability). IRC § 367 does not apply to the contributions described in Steps 2, 3, and 4 because IRC § 367(a) and (b), by their terms, apply only to transfers of property to or from a "foreign corporation" within the meaning of IRC § 7701(a)(5), and the Consolidated Master Fund LP is classified as a partnership — not a corporation — for U.S. federal income tax purposes under Treasury Regulation § 301.7701-3.
Ruling 4 (IRC § 731). The distributions by the Legacy Offshore Vehicles of their respective limited partnership interests in the Consolidated Master Fund LP to the existing limited partners in Step 5 of the proposed reorganization constitute tax-free distributions under IRC § 731(a), and IRC § 731(c) does not apply because the distributed Master Fund LP interests do not constitute "marketable securities" as defined in IRC § 731(c)(2).
Ruling 5 (IRC § 752). The shifts in partner-level shares of partnership liabilities arising from the reorganization do not result in deemed contributions or deemed distributions that would trigger gain recognition under IRC § 731, taking into account the netting rules under Treasury Regulation § 1.752-1(f) and the tiered partnership rules applicable to the post-reorganization feeder-master fund structure.
Ruling 6 (IRC § 704(c)). The built-in gain and built-in loss accounts attributable to the contributed portfolio company interests carry over from the Legacy Offshore Vehicles to the Consolidated Master Fund LP, and the remedial allocation method under Treasury Regulation § 1.704-3(d), previously elected by the contributing vehicles, may continue to be applied by the Consolidated Master Fund LP with respect to such interests.
Ruling 7 (IRC § 1446). No withholding is required under IRC § 1446 and Treasury Regulations §§ 1.1446-1 through 1.1446-6 in connection with the contributions in Steps 2–4 or the distributions in Step 5, because neither the contributions nor the distributions constitute allocations of effectively connected taxable income that would trigger a withholding obligation.
Ruling 8 (Entity Classification). The Consolidated Master Fund LP, the International Feeder (Cayman) LP, and the Tax-Exempt Feeder (Cayman) LP are each properly classified as partnerships for U.S. federal income tax purposes under Treasury Regulation § 301.7701-3, and such classifications are effective as of the dates specified in their respective IRS Form 8832 elections.
Anticipated Drafting Timeline:
The PLR request will be developed through an iterative drafting and review process as follows:
Each iteration will be tracked using document comparison technology, and all prior versions will be maintained in the engagement file. All draft versions circulated externally will bear the legend "PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION — DRAFT — NOT FOR SUBMISSION."
C. PLR Exhibits
Calderwood & Harkness will prepare the following exhibits to accompany the PLR request upon submission to the IRS:
Exhibit A: Organizational Charts (Pre-Reorganization). Detailed organizational charts depicting the existing fund platform structure, showing each of the six existing fund vehicles, the two general partner entities, the portfolio companies held by each vehicle, and the categories of limited partners investing through each vehicle. The charts will include full legal entity names, jurisdictions of formation, EINs, and ownership percentages.
Exhibit B: Organizational Charts (Post-Reorganization). Detailed organizational charts depicting the resulting fund platform structure after completion of all five reorganization steps, showing the Consolidated Master Fund LP, the two Cayman feeder vehicles, the continuing Delaware main funds (Fund IV LP and Fund V LP), and the allocation of limited partners across the post-reorganization vehicles.
Exhibit C: Step Transaction Diagrams. A series of visual diagrams depicting each of the five reorganization steps in chronological sequence, with target dates, descriptions of the assets and interests being transferred, and references to the applicable IRC sections and Treasury Regulations governing the tax treatment of each step.
Exhibit D: Schedule of Contributing Entities and Assets. A comprehensive tabular schedule identifying each contributing entity (transferor), each portfolio company interest being contributed (including full legal name, entity type, and jurisdiction), the fair market value, adjusted tax basis, and built-in gain attributable to each portfolio company interest, and the percentage ownership held by each contributing entity.
Exhibit E: Schedule of Liabilities and § 752 Analysis. A detailed schedule setting forth the pre-reorganization and post-reorganization allocations of partnership liabilities among the partners of each fund vehicle and the Consolidated Master Fund LP, together with a quantitative analysis demonstrating the application of the netting rules under Treasury Regulation § 1.752-1(f) and the tiered partnership rules to the liability shifts arising from the reorganization.
D. IRS Procedural Documents
Calderwood & Harkness will prepare and file the following procedural documents and submissions in connection with the PLR process:
IRS Form 2848 (Power of Attorney and Declaration of Representative). Calderwood & Harkness will prepare and file IRS Form 2848 designating Leonard Cross and Sylvia Hartwell as the authorized representatives of Solara Digital Infrastructure LP (EIN 82-4917366), Solara Digital Infrastructure GP LLC (EIN 82-4917365), and all affiliated fund entities with respect to the PLR request and all related communications with the IRS.
Penalties of Perjury Declaration. Calderwood & Harkness will prepare the penalties of perjury declaration required under Rev. Proc. 2025-1 to accompany the PLR request, which must be signed by an authorized officer of the applicant. Viktor Raines, in his capacity as the managing member of Solara Digital Infrastructure GP LLC (the general partner of Solara Digital Infrastructure LP), will be requested to execute this declaration.
IRS User Fee Payment Transmittal Letter. Calderwood & Harkness will prepare the transmittal letter accompanying the IRS user fee payment of $38,000, which is required under the fee schedule set forth in Rev. Proc. 2025-1 for PLR requests involving multiple entities with combined assets exceeding $50 million. Calderwood & Harkness will coordinate with Solara's finance team on the wire transfer of the user fee to the IRS.
Pre-Submission Conference Request Letter. Calderwood & Harkness will prepare and submit a letter to IRS CC:INTL Branch 1 requesting a pre-submission conference with the IRS technical staff to discuss the proposed PLR request before formal submission. The requested date for the pre-submission conference is July 22, 2025. Pre-submission conferences are governed by Section 10.07 of Rev. Proc. 2025-1 and provide an opportunity to discuss the proposed transaction structure, the specific rulings to be requested, and any issues the IRS technical staff may wish to raise before the formal submission is prepared. Leonard Cross will attend the pre-submission conference on behalf of Calderwood & Harkness, and Sylvia Hartwell may also attend depending on scheduling.
Post-Conference Summary Memorandum. Following the pre-submission conference, Calderwood & Harkness will prepare a detailed internal memorandum summarizing the conference discussions, any substantive feedback or concerns raised by the IRS technical staff, any modifications to the PLR request suggested or required by the IRS, and any additional factual information or legal analysis requested. This memorandum will be circulated to Stefan Dalmqvist and Priya Narasimhan.
Supplemental Submission Letters. As needed during the post-submission review period, Calderwood & Harkness will prepare and submit supplemental letters to the IRS responding to any questions, requests for additional information, or proposed modifications raised by the IRS technical staff in the course of their review of the PLR request.
PLR Submission Transmittal Letter. Calderwood & Harkness will prepare the formal transmittal letter accompanying the PLR request and all supporting exhibits, declarations, powers of attorney, and user fee payment upon submission to the IRS. The target date for formal submission is August 15, 2025.
E. Entity Formation Support
Calderwood & Harkness will provide the following entity formation support services in connection with the establishment of the four new entities described in Step 1 of the reorganization:
• Review and Comment on Formation Documents. Calderwood & Harkness will review and provide tax-related comments on the draft formation documents for each new entity, including the Certificate of Formation for Solara Consolidated Master Fund GP LLC (Delaware), the Certificate of Limited Partnership for Solara Consolidated Master Fund LP (Delaware), and the draft Limited Partnership Agreement for Solara Consolidated Master Fund LP. The review will focus on provisions with tax implications, including allocations, distributions, capital accounts, and partnership termination provisions. The preparation of the underlying formation documents is outside the scope of this engagement and is expected to be handled by Solara's corporate counsel.
• IRS Form 8832 Elections. Calderwood & Harkness will prepare IRS Form 8832 (Entity Classification Election) for each of the three new partnership entities — the Consolidated Master Fund LP, the International Feeder (Cayman) LP, and the Tax-Exempt Feeder (Cayman) LP — electing classification as a partnership for U.S. federal income tax purposes under Treasury Regulation § 301.7701-3.
• Timing Memorandum. Calderwood & Harkness will prepare a memorandum analyzing the optimal timing of the check-the-box elections, including coordination of the election effective dates with the target dates for each reorganization step and the application of the 75-day retroactivity rule under Treasury Regulation § 301.7701-3(c)(1)(iii).
• Instruction Letters to Foreign Counsel. Calderwood & Harkness will prepare instruction letters to Meridian Offshore Legal (for Cayman Islands entity formation and subsequent dissolution of legacy Cayman vehicles) and to Veldhuis & Gérard S.à r.l. (for dissolution of the Luxembourg SCSps), specifying the formation parameters, timing requirements, and U.S. tax considerations that foreign counsel should take into account in preparing the foreign entity formation and dissolution documentation.
F. Lender Consent Support
The proposed reorganization will affect the collateral and borrowing base structures underlying two existing subscription credit facilities maintained by the Solara fund vehicles. Calderwood & Harkness will provide the following support in connection with obtaining lender consents:
• Lender Consent Request Letters. Calderwood & Harkness will prepare lender consent request letters addressed to:
(i) Ashford National Bank, N.A. (Thomas Greenleaf, Managing Director, Fund Finance), the administrative agent under the $1.1 billion Fund IV subscription credit facility; and
(ii) Ashford National Bank, N.A. and Sentinel Capital Markets LLC (Laura Pak, Vice President), the co-administrative agents under the $1.5 billion Fund V subscription credit facility.
• Consent and Amendment Agreements. Calderwood & Harkness will draft the consent and amendment agreements for both credit facilities, addressing any required changes to the definitions of "Eligible Investors," "Borrowing Base," and "Permitted Transfers," and any modifications to change-of-control, assignment, and event-of-default provisions necessitated by the reorganization.
• Analysis Memorandum. Calderwood & Harkness will prepare an internal analysis memorandum identifying the credit facility provisions most likely implicated by the reorganization, including change-of-control provisions, borrowing base impact, assignment restrictions, and any requirements for pledge or collateral modification.
G. LP Communication and Consent Support
The proposed reorganization requires formal limited partner consent under the applicable provisions of the Fund IV and Fund V limited partnership agreements. Calderwood & Harkness notes that preliminary consent of 78% in interest was obtained from the LP Advisory Committee ("LPAC") at the meeting held on April 22, 2025. Calderwood & Harkness will provide the following support to facilitate the formal LP consent process:
• LPAC Presentation Materials. Calderwood & Harkness will prepare presentation materials for LPAC meetings summarizing the reorganization, the intended tax treatment of each step, the anticipated timeline, and the status of the PLR request.
• LP Consent Solicitation Letter. Calderwood & Harkness will draft the LP consent solicitation letter to be distributed to all limited partners in the four legacy offshore vehicles, together with the form of LP consent to be executed and returned by each limited partner.
• LP Tax Impact Summary Letter. Calderwood & Harkness will prepare a plain-language tax impact summary letter for distribution to limited partners, summarizing the anticipated U.S. federal income tax consequences of the reorganization for each category of investor: (i) U.S. taxable investors, (ii) U.S. tax-exempt investors, and (iii) non-U.S. investors. This letter will include appropriate caveats that each limited partner should consult its own tax advisors regarding its individual circumstances.
• LPA Amendments. Calderwood & Harkness will draft the amendments to the Fund IV Limited Partnership Agreement and the Fund V Limited Partnership Agreement necessary to authorize the general partner to cause the fund vehicles to contribute their portfolio company assets to the Consolidated Master Fund LP.
H. Third-Party Coordination and Notifications
Calderwood & Harkness will prepare the following third-party notification and coordination documents:
• Insurance Broker Notification. Calderwood & Harkness will prepare a notification letter to Hawkstone Specialty Insurance Co. (Neil Braddock, Senior Underwriter) regarding the endorsement or amendment of existing $50 million directors' and officers' / errors and omissions liability insurance policies to cover the officers and directors of the newly formed entities.
• Fund Administrator Notification. Calderwood & Harkness will prepare a notification letter to Clarendon Fund Services Ltd. (Rachel Okonkwo, Client Relationship Director) regarding the transition of NAV calculation and investor reporting responsibilities from the legacy offshore vehicle structure to the post-reorganization consolidated structure.
• Valuation Coordination. Calderwood & Harkness will coordinate with Redstone Advisory Group LLC (Marco DeLuca, Managing Director, 750 Seventh Avenue, 21st Floor, New York, NY 10019) on the engagement for fair market value appraisals of all portfolio company interests being transferred in the reorganization. Calderwood & Harkness will prepare a valuation engagement cover memorandum specifying the tax-related requirements for the appraisals, including the applicable valuation date(s), the standard of value to be applied, and the IRS-required disclosures for appraisals submitted in connection with a PLR request.
• Accounting Coordination. Calderwood & Harkness will coordinate with Caldwell Pierce & Co. LLP (Helen Okamoto, Partner, Financial Services Tax) on the collection and verification of historical financial data, prior-year tax returns (Forms 1065), and Schedules K-1 for all fund vehicles, which will be required as supporting documentation for the PLR exhibits and the IRC § 704(c) and § 752 analyses.
I. Internal Work Product and Administration
In addition to the client-facing deliverables described above, Calderwood & Harkness will prepare and maintain the following internal work product and administrative materials throughout the engagement:
• Research Memorandum — Analogous PLRs. Calderwood & Harkness will prepare a research memorandum surveying previously issued private letter rulings involving partnership reorganizations, cross-border fund restructurings, and the specific IRC provisions at issue, identifying precedents that support the requested rulings and distinguishing any adverse rulings.
• Issue Tracking Log. Calderwood & Harkness will maintain a comprehensive issue tracking log documenting each substantive tax issue identified during the engagement, the current status of the analysis, the responsible attorney, and the resolution or disposition of each issue.
• Privilege Log. Calderwood & Harkness will maintain a privilege log cataloguing all privileged communications and work product generated in connection with the engagement, consistent with the firm's document retention and privilege preservation protocols.
• Closing Checklist. Calderwood & Harkness will prepare and maintain a closing checklist for the PLR submission, itemizing each required component of the submission package, the status of each component, and the responsible attorney or staff member.
• Quarterly Budget Updates. Calderwood & Harkness will provide quarterly budget updates to Stefan Dalmqvist and Priya Narasimhan, summarizing fees and disbursements incurred to date, comparing actual expenditures to the original budget estimate, and providing a revised estimate of fees and disbursements to completion.