MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
TO: Leonard Cross, Responsible Partner, Tax Sylvia Hartwell, Billing Partner, Tax
FROM: Robert Jansen, Lead Associate, Tax Garrett Simmons, Working Associate, Tax
DATE: May 27, 2025
RE: Initial Client Intake — Solara Digital Infrastructure LP Cross-Border Fund-Platform Reorganization; Private Letter Ruling Request
ENGAGEMENT NO.: 20250527-SDILP-PLR
This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It is prepared solely for Calderwood & Harkness LLP's internal use in connection with the referenced engagement. Do not distribute outside the engagement team without the prior written approval of Leonard Cross, Responsible Partner.
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I. Purpose of Memorandum
This memorandum summarizes the facts received from Solara Digital Infrastructure LP's ("Solara" or the "Client") in-house legal and tax teams during two initial intake calls conducted on May 22, 2025, and May 26, 2025, in advance of the formal matter opening on May 27, 2025. The May 22 call was approximately ninety minutes in duration and focused primarily on the existing fund structure and business rationale for the proposed reorganization. The May 26 call was approximately two hours in duration and covered the proposed multi-step transaction, the representative portfolio company holdings, the aggregate financial parameters of the reorganization, and outstanding data needs. Both calls were conducted by videoconference, with Robert Jansen and Garrett Simmons participating from Calderwood & Harkness's Washington, D.C. and New York offices, respectively.
The principal Solara contacts for the intake were Priya Narasimhan, General Counsel, and Stefan Dalmqvist, Head of Tax. Additional financial data, including aggregate fair market valuations, adjusted tax basis information, and liability schedules, were confirmed during the May 26 call by Douglas Wexford, Chief Financial Officer. Ms. Narasimhan and Mr. Dalmqvist indicated that their internal team has been developing the reorganization concept since early 2025 and has already obtained preliminary approval from the LP Advisory Committee (the "LPAC"), as discussed in further detail below.
The purpose of this memorandum is to establish the factual foundation for the preparation and submission of a private letter ruling ("PLR") request to the Internal Revenue Service ("IRS") 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"). The PLR request will seek confirmation of the intended tax-free treatment of a multi-step cross-border reorganization of Solara's fund platform and the continued partnership classification of the resulting entities for U.S. federal income tax purposes. The reorganization involves the domestication and consolidation of four offshore fund vehicles into a newly established Delaware-domiciled master fund structure, with corresponding distributions to limited partners and migration of investor classes into appropriate feeder vehicles.
This memorandum is organized as follows: Section II provides an overview of the Client; Section III details the existing fund structure; Section IV describes representative portfolio company holdings; Section V sets forth the business rationale for the reorganization; Section VI outlines the proposed multi-step transaction; Section VII presents the aggregate financials; Section VIII identifies preliminary tax issues and the rulings to be requested; Section IX catalogs key third parties and advisors; Section X presents the target timeline; Section XI addresses IRS submission logistics; Section XII summarizes engagement information; Section XIII details outstanding data requests and next steps; and Section XIV addresses confidentiality and privilege matters.
II. Client Overview
A. Solara Digital Infrastructure LP
The Client's full legal name is Solara Digital Infrastructure LP. It is a Delaware limited partnership organized under the Delaware Revised Uniform Limited Partnership Act (6 Del. C. §§ 17-101 et seq.) and formed on March 17, 2014. Its principal office and headquarters are located at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801. The Client's Employer Identification Number is 82-4917366.
As of March 31, 2025, Solara reports total assets under management ("AUM") of approximately $14.7 billion across all fund vehicles. Solara is a private equity sponsor that targets investments in digital infrastructure assets, including data centers, fiber-optic networks, and edge computing facilities, as well as enterprise software-as-a-service ("SaaS") platforms. The firm's investment thesis centers on the secular growth of data consumption, cloud computing demand, and the buildout of next-generation telecommunications infrastructure. Solara pursues a control-oriented investment strategy, typically acquiring majority or significant minority stakes in operating companies within its target sectors.
Solara operates through a series of parallel fund structures established across three jurisdictions — Delaware, the Cayman Islands, and the Grand Duchy of Luxembourg — to accommodate three distinct investor pools: U.S. taxable investors, U.S. tax-exempt investors, and non-U.S. investors. The rationale for this multi-jurisdictional structure, and the business drivers for the proposed reorganization that would simplify it, are discussed in Sections III and V below.
B. Key Management Personnel
The following individuals constitute Solara's senior management team and have been identified as relevant contacts for purposes of this engagement:
• Viktor Raines — Managing Partner and Founder, age 52. Mr. Raines founded Solara in 2014 after serving as a Managing Director in the infrastructure and technology investment group at Havensgate Capital Partners, where he was responsible for approximately $3 billion in deployed capital. Mr. Raines serves as the manager of Solara Digital Infrastructure GP LLC and is the authorized signatory for the general partner entity. He will be the signatory on the penalties of perjury statement required for the PLR submission.
• Meredith Tsao — Chief Operating Officer, age 47. Ms. Tsao oversees fund operations, investor relations, and compliance functions across the platform.
• Douglas Wexford — Chief Financial Officer, age 50. Mr. Wexford is responsible for all financial reporting, treasury management, and capital markets activities. He confirmed the aggregate financial data set forth in this memorandum during the May 26 intake call.
• Priya Narasimhan — General Counsel, age 44. Ms. Narasimhan serves as Calderwood & Harkness's primary legal contact for the engagement. She oversees all legal affairs for the Solara platform and coordinates with external counsel across jurisdictions.
• Stefan Dalmqvist — Head of Tax, age 46. Mr. Dalmqvist is responsible for tax planning, compliance, and reporting across all fund vehicles. He is Calderwood & Harkness's primary technical contact for the engagement and has been the principal driver of the reorganization from a tax-planning perspective.
C. General Partner Entity
The general partner for Solara's Delaware fund vehicles is Solara Digital Infrastructure GP LLC, a Delaware limited liability company with EIN 82-4917365. The entity is manager-managed, with Viktor Raines serving as the sole manager. Solara Digital Infrastructure GP LLC was organized contemporaneously with Solara Digital Infrastructure LP in March 2014 and is classified as a partnership for U.S. federal income tax purposes (it has more than one member, and no election to be treated as a corporation has been filed). The entity's registered agent is Capitol Registered Agents Inc., located at 850 New Burton Road, Suite 201, Dover, Delaware 19904.
As described in Section III below, separate general partner entities were established in the Cayman Islands and Luxembourg for the offshore fund vehicles.
III. Existing Fund Structure
A. Overview. Solara currently operates through six parallel fund vehicles spanning three jurisdictions — Delaware, the Cayman Islands, and the Grand Duchy of Luxembourg. These six vehicles are divided across two vintage-year fund families: Fund IV (vintage 2021) and Fund V (vintage 2023). Each fund family consists of three parallel vehicles: a Delaware limited partnership for U.S. taxable investors, a Cayman Islands exempted limited partnership for non-U.S. and U.S. tax-exempt investors, and a Luxembourg special limited partnership (société en commandite spéciale, or "SCSp") for certain European and Asian non-U.S. investors requiring access to Luxembourg's extensive bilateral tax treaty network or preferring a regulated European domicile for internal governance reasons.
As of the date of intake, the total number of portfolio companies held across all six vehicles is twenty-three (23), of which eleven (11) are held by Fund IV vehicles and twelve (12) are held by Fund V vehicles. Certain portfolio companies are held jointly across the Delaware and offshore vehicles within the same vintage, reflecting parallel investment structures in which each vehicle invests pro rata alongside the others in each portfolio investment.
The following subsections describe each of the six fund vehicles in detail.
B. Fund IV Family
The Fund IV family reached its final close on June 15, 2021, and comprises the following three vehicles:
1. Solara Digital Partners Fund IV LP.
• Entity Type: Delaware limited partnership
• EIN: 85-2103748
• Fund Size: $4.2 billion (vintage 2021; final close June 15, 2021)
• General Partner: Solara Digital Infrastructure GP LLC
• Deployment Status: Approximately 72% deployed as of March 31, 2025
• Investor Base: U.S. taxable investors (high-net-worth individuals, family offices, U.S. taxable institutional investors)
• Entity Classification: Partnership for U.S. federal income tax purposes (default classification under Treas. Reg. § 301.7701-3)
Fund IV LP is the domestic anchor vehicle for the Fund IV family. It is the largest single vehicle by committed capital within Fund IV and serves as the lead investment vehicle, with the offshore parallel vehicles generally co-investing in identical portfolio company transactions on a pro rata basis according to each vehicle's available capital. The limited partnership agreement of Fund IV LP was most recently amended and restated as of June 15, 2021 (the "Fund IV LPA"), and governs investor rights, fee arrangements, carried interest allocations, and other material terms. A copy of the Fund IV LPA has been requested from the Client as part of our initial data request.
2. Solara Digital Partners Fund IV-A (Cayman) LP.
• Entity Type: Cayman Islands exempted limited partnership, organized under the Cayman Islands Exempted Limited Partnership Act (As Revised)
• U.S. EIN: 98-6241503
• CIMA Registration Number: MF-72491 (registered with the Cayman Islands Monetary Authority as a mutual fund)
• Registered Office: Harborstone Corporate Services Ltd., P.O. Box 2714, 94 Solaris Avenue, George Town, Grand Cayman KY1-1111, Cayman Islands
• Fund Size: $1.85 billion (parallel fund for non-U.S. and U.S. tax-exempt investors)
• General Partner: Solara Offshore GP Ltd., a Cayman Islands exempted company incorporated under the Cayman Islands Companies Act (As Revised)
• Entity Classification: Partnership for U.S. federal income tax purposes (Form 8832 check-the-box election filed at formation to ensure partnership treatment)
Fund IV-A (Cayman) LP serves two primary investor populations: (a) non-U.S. investors, such as sovereign wealth funds and non-U.S. insurance companies, that invest through the Cayman vehicle for tax efficiency and to minimize direct U.S. filing obligations; and (b) U.S. tax-exempt investors, such as public pension funds and university endowments, that invest through the Cayman vehicle to achieve UBTI blocker benefits via offshore corporate subsidiary holding structures interposed between the fund and debt-financed portfolio investments. This vehicle co-invests alongside Fund IV LP in each Fund IV portfolio company on a pro rata basis.
3. Solara Digital Partners Fund IV-B (Luxembourg) SCSp.
• Entity Type: Luxembourg special limited partnership (société en commandite spéciale), organized under the Luxembourg law of July 12, 2013 on alternative investment fund managers (as amended)
• U.S. EIN: 98-6241571
• Luxembourg Trade and Companies Register (RCS) Number: B 248193
• Registered Office: 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg, Grand Duchy of Luxembourg
• Fund Size: €1.15 billion (approximately $1.24 billion at the 1.08 EUR/USD exchange rate applied uniformly throughout this memorandum)
• General Partner (gérant commandité): Solara Luxembourg Management S.à r.l., a Luxembourg société à responsabilité limitée; RCS number B 248194
• Entity Classification: Partnership for U.S. federal income tax purposes (Form 8832 check-the-box election filed at formation)
Fund IV-B (Luxembourg) SCSp was established to accommodate non-U.S. investors — principally European institutional investors and certain Asian investors — that preferred investment through a Luxembourg-domiciled vehicle for treaty access, regulatory familiarity, or internal governance mandate reasons. The Luxembourg SCSp is a tax-transparent entity under Luxembourg domestic law and is treated as a partnership for U.S. federal income tax purposes. This vehicle co-invests alongside Fund IV LP and Fund IV-A (Cayman) LP in the Fund IV portfolio.
C. Fund V Family
The Fund V family reached its final close on September 30, 2023, and comprises the following three vehicles:
1. Solara Digital Partners Fund V LP.
• Entity Type: Delaware limited partnership
• EIN: 88-3467219
• Fund Size: $5.6 billion (vintage 2023; final close September 30, 2023)
• General Partner: Solara Digital Infrastructure GP LLC
• Deployment Status: Approximately 38% deployed as of March 31, 2025
• Investor Base: U.S. taxable investors
• Entity Classification: Partnership for U.S. federal income tax purposes (default classification)
Fund V LP is the largest single fund vehicle in the Solara platform and represents the domestic anchor vehicle for the Fund V family. Given its relatively recent vintage, a substantial portion of committed capital remains undeployed. The limited partnership agreement of Fund V LP was executed as of September 30, 2023 (the "Fund V LPA"). Stefan Dalmqvist noted during the May 26 call that Fund V LP has the most recent and investor-favorable governance provisions among the Solara fund documents, and that the Consolidated Master Fund LP's partnership agreement will likely be modeled on the Fund V LPA.
2. Solara Digital Partners Fund V-A (Cayman) LP.
• Entity Type: Cayman Islands exempted limited partnership
• U.S. EIN: 98-7891234
• CIMA Registration Number: MF-89103
• Registered Office: Harborstone Corporate Services Ltd., George Town, Grand Cayman, Cayman Islands
• Fund Size: $2.45 billion (parallel fund for non-U.S. and U.S. tax-exempt investors)
• General Partner: Solara Offshore GP Ltd.
• Entity Classification: Partnership for U.S. federal income tax purposes (Form 8832 check-the-box election filed at formation)
Fund V-A (Cayman) LP serves the same investor populations as Fund IV-A (Cayman) LP, as described above. The vehicle is registered with CIMA and administered by Clarendon Fund Services Ltd.
3. Solara Digital Partners Fund V-B (Luxembourg) SCSp.
• Entity Type: Luxembourg special limited partnership (société en commandite spéciale)
• U.S. EIN: 98-7891267
• Luxembourg RCS Number: B 271056
• Registered Office: 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg, Grand Duchy of Luxembourg
• Fund Size: €1.38 billion (approximately $1.49 billion at 1.08 EUR/USD)
• General Partner (gérant commandité): Solara Luxembourg Management S.à r.l.
• Entity Classification: Partnership for U.S. federal income tax purposes (Form 8832 check-the-box election filed at formation)
Fund V-B (Luxembourg) SCSp serves the same investor profile as Fund IV-B (Luxembourg) SCSp. Stefan Dalmqvist noted during the intake call that the Luxembourg vehicles have attracted modestly higher capital commitments in Fund V relative to Fund IV, reflecting increased allocations from European institutional investors, but that the OECD Pillar Two developments discussed in Section V below have diminished the forward-looking rationale for maintaining separate Luxembourg-domiciled vehicles.
D. Investor Categories Across the Platform
The Solara platform accommodates three principal categories of investors, each of which is directed to the appropriate fund vehicle based on its tax and regulatory profile:
U.S. Taxable Investors. U.S. taxable investors — including high-net-worth individuals, family offices, and U.S. taxable institutional investors — invest through the Delaware main funds (Fund IV LP and Fund V LP). These investors receive annual Schedule K-1s from the Delaware partnerships and report their allocable shares of fund income, gain, loss, deduction, and credit on their individual or entity-level U.S. federal income tax returns. A representative investor in this category is Argyle Family Office Holdings LLC, a Delaware-organized family office with its principal office in Greenwich, Connecticut. Argyle's principal is Elliot Argyle. Argyle committed $95 million to Fund IV LP and $130 million to Fund V LP.
U.S. Tax-Exempt Investors. U.S. tax-exempt investors — including public pension funds, state retirement systems, university endowments, and certain foundations — invest through the Cayman parallel vehicles (Fund IV-A Cayman and Fund V-A Cayman) to achieve UBTI blocker benefits. Specifically, these investors typically access the fund through one or more offshore corporate subsidiary holding structures interposed between the Cayman fund vehicle and the underlying debt-financed portfolio investments, thereby blocking unrelated business taxable income ("UBTI") that would otherwise be generated by the use of fund-level or portfolio-level leverage. Representative investors in this category include:
• Pinnacle State Employees' Retirement System — a public pension fund established under the laws of the State of Pinnacle. Pinnacle committed $275 million to Fund IV-A (Cayman) LP and $340 million to Fund V-A (Cayman) LP. The Chief Investment Officer is Margaret Faulkner.
• Grandview University Endowment — a university endowment established by Grandview University, a private university organized under the laws of the Commonwealth of Massachusetts. Grandview committed $120 million to Fund IV-A (Cayman) LP and $185 million to Fund V-A (Cayman) LP. The Director of Investments is Harold Kingsley.
Non-U.S. Investors. Non-U.S. investors invest through either the Cayman or Luxembourg parallel vehicles, depending on bilateral tax treaty access, regulatory considerations, and investor-specific governance requirements. Representative investors in this category include:
• Nordhaven Sovereign Wealth Fund — a sovereign wealth fund established by the Kingdom of Nordhaven. Nordhaven committed $380 million to Fund IV-A (Cayman) LP and $500 million to Fund V-A (Cayman) LP. The Head of Alternative Investments is Anders Bjørkman. Nordhaven has engaged independent tax counsel, Bramhall & Quelwick LLP (San Francisco, CA), to evaluate U.S. withholding tax and treaty implications of the proposed reorganization.
• Kestrel Pacific Insurance Group — a Singapore-domiciled insurance group. Kestrel committed €200 million to Fund IV-B (Luxembourg) SCSp and €275 million to Fund V-B (Luxembourg) SCSp. The Senior Portfolio Manager responsible for the Solara allocation is Christine Leung. Kestrel selected the Luxembourg vehicles for regulatory and treaty-related reasons specific to Singapore-Luxembourg bilateral arrangements.
IV. Representative Portfolio Company Holdings
Stefan Dalmqvist provided details during the May 26 intake call on the key portfolio company interests held by the offshore vehicles that will be subject to the reorganization. The following table sets forth five representative portfolio company interests, together with their entity types, jurisdictions of organization, aggregate fair market values ("FMV"), adjusted tax bases, built-in gains, and holding fund allocations. These valuations are based on Solara's internal marks as of March 31, 2025, and will be confirmed by independent appraisals to be prepared by Redstone Advisory Group LLC in connection with the PLR submission.
These five portfolio company interests are representative of the broader portfolio and have been selected for inclusion in this memorandum because they present the most significant built-in gain positions and illustrate the range of entity types, jurisdictions, and holding structures across the platform. The full portfolio comprises twenty-three (23) portfolio companies, of which eleven (11) are held by Fund IV vehicles and twelve (12) are held by Fund V vehicles. A complete schedule of all portfolio company holdings, ownership percentages, FMV, and adjusted tax basis has been requested from the Client as part of our initial data request described in Section XIII below.
Several features of these holdings are noteworthy from a tax perspective. First, the aggregate built-in gain across the five representative holdings alone totals approximately $1.18 billion, underscoring the critical importance of obtaining confirmation of tax-free treatment for the proposed contributions and distributions. Second, certain of the portfolio companies — particularly NovaBright Data Systems Inc. (data centers) and Thorngate Fiber Networks LP (fiber-optic networks) — may hold interests in U.S. real property, which will require analysis under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") and IRC § 897 to determine whether the interests constitute U.S. real property interests ("USRPIs"). Third, the Helix SaaS Holdings Ltd. interest is held through a Cayman Islands exempted company, and the contribution of that interest to a domestic partnership will require careful analysis of any potential outbound transfer issues, even though our preliminary view is that IRC § 367 does not apply to partnership-to-partnership transfers.
V. Business Rationale for the Reorganization
Stefan Dalmqvist and Priya Narasimhan articulated four principal business rationales for the proposed reorganization during the intake calls. These rationales are summarized below and will be incorporated into the PLR request to establish the non-tax business purpose underlying the transaction, consistent with the requirements of Rev. Proc. 2025-1 and the IRS's general expectation that ruling requests demonstrate a bona fide business purpose independent of any tax benefit.
A. Operational Cost Reduction
Solara currently incurs approximately $3.8 million annually in duplicative offshore administration, audit, and regulatory fees across the four Cayman and Luxembourg vehicles. These costs include fund administration fees paid to Clarendon Fund Services Ltd. for each offshore vehicle, annual audit fees for separate financial statement audits of each offshore entity conducted by Caldwell Pierce & Co. LLP (or its affiliated international member firms), CIMA annual registration fees for the two Cayman vehicles, Luxembourg regulatory compliance costs for the two SCSp vehicles, and fees for local registered office and corporate services providers in both jurisdictions. Additionally, Solara's internal tax and compliance team devotes approximately 2,400 hours annually to managing the multi-jurisdictional fund structure, including the preparation and coordination of separate tax filings, investor reports, and regulatory submissions for each vehicle.
Consolidation of the four offshore vehicles into a single Delaware-domiciled Consolidated Master Fund LP, with two Cayman feeder vehicles (one for non-U.S. investors and one for U.S. tax-exempt investors), would substantially reduce these recurring costs. Solara estimates annual savings of approximately $2.1 million in external fees and a meaningful reduction in internal staff time. Over the remaining projected life of the Fund IV and Fund V investments (estimated at five to seven years), these savings are expected to total between $10.5 million and $14.7 million on an undiscounted basis.
B. OECD Pillar Two GloBE Rules
The OECD Pillar Two Global Anti-Base Erosion ("GloBE") rules, as implemented in Luxembourg through the Grand Ducal Law of December 22, 2023, transposing Council Directive (EU) 2022/2523 (the "EU Minimum Tax Directive"), became effective for Solara's Luxembourg entities beginning with fiscal year 2025. These rules impose a minimum effective tax rate of 15% on the income of constituent entities of multinational enterprise groups meeting specified revenue thresholds. While the Luxembourg SCSp vehicles were historically attractive to certain non-U.S. investors due to the combination of Luxembourg's favorable tax treaty network and the tax transparency of the SCSp structure, the GloBE rules have substantially diminished the incremental tax benefits historically obtained through the Luxembourg-domiciled structures.
Stefan Dalmqvist noted during the May 22 call that the firm's preliminary analysis, conducted in consultation with Veldhuis & Gérard S.à r.l. (Luxembourg counsel), indicates that the top-up tax liability exposure for certain Luxembourg vehicle constituent entities could range from €2.5 million to €4.2 million annually, which, when combined with the incremental compliance costs of Pillar Two reporting, further erodes the economic rationale for maintaining separate Luxembourg vehicles. The reorganization would eliminate the Luxembourg SCSp vehicles entirely, thereby avoiding both the substantive top-up tax exposure and the associated compliance burden.
C. FATCA and CRS Compliance Simplification
The current multi-jurisdictional fund structure creates duplicative reporting obligations under the Foreign Account Tax Compliance Act ("FATCA") and the OECD's Common Reporting Standard ("CRS"). Each offshore vehicle is separately registered as a reporting financial institution under FATCA and CRS in its jurisdiction of organization, resulting in separate FATCA reporting to the IRS (via the Cayman Islands and Luxembourg intergovernmental agreements) and separate CRS reporting to the relevant local tax authorities for exchange with other participating jurisdictions. The consolidation of the four offshore vehicles into a Delaware master fund with two Cayman feeders would simplify these compliance obligations by reducing the number of reporting entities from four to two (the two remaining Cayman feeders), while the consolidated master fund would report directly to the IRS as a domestic partnership.
Stefan Dalmqvist estimated that the duplicative FATCA and CRS compliance currently costs approximately $450,000 annually in external advisory and filing fees and consumes approximately 600 hours of internal staff time.
D. LP-Requested Governance Simplification
The limited partners, acting through the LP Advisory Committee, have formally requested that Solara explore a streamlined governance structure for the fund platform. The LPAC's concerns centered on the complexity of the existing structure, including the need to review and approve matters separately across six parallel vehicles, the lack of a unified governance framework, and the administrative burden of maintaining multiple sets of fund documents with differing governing law provisions (Delaware, Cayman, and Luxembourg).
Preliminary LP consent to explore the reorganization was obtained at the LPAC meeting held on April 22, 2025, with 78% in interest of the LPAC members approving the exploration of the proposed restructuring. This approval was advisory in nature; formal LP consent to the actual reorganization will be required under the applicable limited partnership agreements and will be sought following completion of the PLR process. The LPAC is represented by independent counsel, Whitfield, Carruthers & Doyle LLP, with Diana Carruthers, Partner (Fund Formation & Tax), serving as the lead partner. Ms. Carruthers's office is located at 200 South Biscayne Boulevard, Suite 4000, Miami, Florida 33131. Calderwood & Harkness anticipates coordinating with Ms. Carruthers on the PLR process and the terms of the formal LP consent.
VI. Proposed Reorganization — Multi-Step Transaction
A. Overview. The proposed reorganization consists of five integrated steps, planned for execution in the fourth quarter of 2025, with a target effective date of December 1, 2025 for the final step. The reorganization is designed to domesticate and merge the four 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, the Solara Consolidated Master Fund LP. Following the reorganization, the platform will consist of three Delaware partnerships (the existing Fund IV LP, the existing Fund V LP, and the new Consolidated Master Fund LP), together with two Cayman Islands feeder partnerships (one for non-U.S. investors and one for U.S. tax-exempt investors) that will invest through the Consolidated Master Fund LP. The five steps of the proposed reorganization are described in detail below.
The engagement team notes at the outset that the multi-step nature of the transaction raises potential step transaction doctrine issues, which will need to be addressed in the PLR request. The steps are structured to occur over a period of approximately ten weeks (from the target date for Step 2 on October 1, 2025, through the target effective date for Step 5 on December 1, 2025) and are designed to be independently meaningful and separately motivated, but the IRS may seek to collapse the steps for analytical purposes. The PLR request will need to address the step transaction doctrine proactively, as discussed further in Section VIII below.
B. Step 1 — Formation of New Entities (Target: September 15, 2025)
Step 1 involves the formation of four new entities that will constitute the post-reorganization fund platform:
1. Solara Consolidated Master Fund GP LLC — a Delaware limited liability company to serve as the general partner of the Consolidated Master Fund LP. This entity will be manager-managed, with Viktor Raines as the sole manager, mirroring the governance structure of the existing Solara Digital Infrastructure GP LLC.
2. Solara Consolidated Master Fund LP — a Delaware limited partnership that will serve as the master fund into which all offshore vehicle portfolio assets will be contributed. This entity will be the central investment vehicle in the post-reorganization structure.
3. Solara International Feeder (Cayman) LP — a Cayman Islands exempted limited partnership that will serve as the feeder fund for non-U.S. investors. Non-U.S. limited partners currently invested in the offshore vehicles will be migrated to this feeder in Step 5.
4. Solara Tax-Exempt Feeder (Cayman) LP — a Cayman Islands exempted limited partnership that will serve as the feeder fund for U.S. tax-exempt investors, designed to mitigate UBTI concerns by maintaining appropriate UBTI blocker structures between the feeder and the master fund's debt-financed investments.
Concurrently with formation, IRS Form 8832 (Entity Classification Election) will be filed for each new entity to elect classification as a partnership for U.S. federal income tax purposes under Treasury Regulation § 301.7701-3. Although the default classification for a domestic LLC with two or more members and a domestic limited partnership is partnership classification, affirmative elections will be filed for the avoidance of doubt and to establish a clear record for the PLR submission. For the two Cayman feeder entities, affirmative elections are necessary because a foreign eligible entity with two or more members defaults to partnership classification only if at least one member has unlimited liability; the exempted limited partnership structure may present ambiguity depending on the terms of the partnership agreement, and an affirmative election eliminates any uncertainty. The engagement team will work with Meridian Offshore Legal (Cayman counsel) on the formation of the two new Cayman vehicles.
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 assets — consisting of interests in portfolio companies, cash, and other fund-level assets — to the newly formed Solara Consolidated Master Fund LP in exchange for a limited partnership interest in the Consolidated Master Fund. The key financial parameters of this contribution are as follows:
• Aggregate Fair Market Value: $2.31 billion
• Aggregate Adjusted Tax Basis: $1.62 billion
• Aggregate Built-In Gain: $690 million
The intended U.S. federal income tax treatment of Step 2 is as a tax-free contribution under IRC § 721(a), which provides that no gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership. No gain or loss would be recognized by Fund IV-A (Cayman) LP as the contributing partner or by the Consolidated Master Fund LP as the receiving partnership.
Several ancillary tax provisions will require careful analysis in connection with Step 2:
• IRC § 721(b) Exception. Section 721(b) provides that Section 721(a) does not apply to gain realized on a transfer of property to a partnership that would be treated as an "investment company" (within the meaning of IRC § 351(e)) if the partnership were incorporated. The engagement team will need to analyze whether the Consolidated Master Fund LP, after receiving the contributed assets, would constitute an investment company. Our preliminary view, based on the intake facts, is that the portfolio consists of operating companies in the digital infrastructure and SaaS sectors — not stocks, securities, or other passive investment assets — and therefore the investment company exception should not apply. However, this analysis will require a detailed review of the composition of the contributed assets and the definition of "stock and securities" under Treas. Reg. § 1.351-1(c)(1).
• Carryover Basis. Under IRC § 723, the Consolidated Master Fund LP will take a carryover basis in the contributed assets equal to the adjusted tax basis of such assets in the hands of Fund IV-A (Cayman) LP immediately prior to the contribution. This preserves the $690 million built-in gain for future recognition upon a taxable disposition of the contributed assets.
• Holding Period Tacking. Under IRC § 1223(2), the Consolidated Master Fund LP's holding period in the contributed assets will include the period during which Fund IV-A (Cayman) LP held such assets, provided the assets were capital assets or property described in IRC § 1231 in the hands of the contributing partner. This tacking is critical for preserving long-term capital gain treatment on future dispositions.
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 assets to the Consolidated Master Fund LP in exchange for a limited partnership interest. The key financial parameters are as follows:
• Aggregate Fair Market Value: €1.07 billion / $1.16 billion (at 1.08 EUR/USD)
• Aggregate Adjusted Tax Basis: €782 million / $844.6 million
• Aggregate Built-In Gain: €288 million / $311 million
The intended U.S. federal income tax treatment is the same as Step 2: a tax-free contribution under IRC § 721(a), with no gain or loss recognized by the contributing Luxembourg SCSp or by the Consolidated Master Fund LP. The Section 721(b) investment company exception analysis and the carryover basis and holding period tacking analysis described in connection with Step 2 apply equally to Step 3.
Step 3 raises two additional tax issues not present in Step 2:
• IRC § 367 Analysis. Step 3 involves the transfer of assets by a foreign partnership (the Luxembourg SCSp) to a domestic partnership (the Consolidated Master Fund LP). IRC § 367(a) provides special rules for transfers of property from the United States to foreign corporations, and IRC § 367(b) provides rules for certain exchanges involving foreign corporations. Our preliminary position is that IRC § 367 does not apply to the Step 3 contribution because Section 367, by its terms, applies to transfers to or from corporations, not partnerships. The Luxembourg SCSp is classified as a partnership for U.S. federal income tax purposes, and the Consolidated Master Fund LP is likewise a domestic partnership. Accordingly, the Section 367 gain recognition rules and outbound transfer provisions should not be implicated. Nevertheless, given the aggregate built-in gain of $311 million and the cross-border nature of the transfer, we expect the IRS to scrutinize this position, and we recommend including a specific ruling request on this point.
• Luxembourg Withholding Tax Analysis. Under Luxembourg domestic law, the SCSp is a tax-transparent entity, and no Luxembourg capital gains tax is expected to apply at the SCSp level on the transfer of its portfolio assets to the Consolidated Master Fund LP. Specifically, Article 3(2) of the Luxembourg law of July 12, 2013 provides that the SCSp is not itself subject to Luxembourg income tax; rather, each partner is subject to tax in its jurisdiction of residence on its allocable share of SCSp income. Solara's Luxembourg counsel, Veldhuis & Gérard S.à r.l., will provide a formal opinion on this point. Additionally, to the extent any deemed disposition occurs at the partner level, the engagement team will analyze whether Section 1446 withholding obligations arise with respect to any effectively connected income allocable to the foreign partners of the Luxembourg SCSp.
E. Step 4 — Contribution of Fund V Offshore Assets (Target: November 1, 2025)
Step 4 replicates the contribution structure of Steps 2 and 3 with respect to the Fund V offshore vehicles. Specifically:
• Fund V-A (Cayman) LP will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for a limited partnership interest. Aggregate FMV: $2.89 billion; aggregate adjusted tax basis: $2.34 billion; aggregate built-in gain: $550 million.
• Fund V-B (Luxembourg) SCSp will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for a limited partnership interest. Aggregate FMV: €1.29 billion / $1.39 billion (at 1.08 EUR/USD); aggregate adjusted tax basis: €1.14 billion / $1.23 billion; aggregate built-in gain: €150 million / $162 million.
The intended U.S. federal income tax treatment of both contributions is the same as Steps 2 and 3: tax-free contributions under IRC § 721(a), with no gain or loss recognized. The same ancillary analyses — including the Section 721(b) investment company exception, Section 367 inapplicability to partnership-to-partnership transfers, Luxembourg withholding tax, Section 1446 withholding, carryover basis under Section 723, and holding period tacking under Section 1223(2) — apply to the Step 4 contributions.
The engagement team notes that Step 4 is scheduled to occur one month after the completion of Step 2 (the Fund IV-A Cayman contribution) and approximately two weeks after the completion of Step 3 (the Fund IV-B Luxembourg contribution). The compressed timeline between Steps 2 through 4 reinforces the need to address step transaction doctrine concerns in the PLR request, as discussed in Section VIII below.
F. Step 5 — Dissolution of Legacy Offshore Vehicles and LP Migration (Target: December 1, 2025)
Step 5 is the final step of the reorganization and involves two integrated sub-steps:
Sub-Step 5(a): Dissolution and Distribution. Each of 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 its respective limited partnership interest in the Consolidated Master Fund LP (received in Steps 2 through 4) to its existing limited partners in complete liquidation. Following these distributions, the four legacy offshore vehicles will cease to exist as legal entities. The dissolution of the two Cayman vehicles will be effected in accordance with the Cayman Islands Exempted Limited Partnership Act (As Revised) and will require CIMA deregistration, to be coordinated by Meridian Offshore Legal. The dissolution of the two Luxembourg SCSps will be effected in accordance with the Luxembourg law of July 12, 2013 and will require notification to the Commission de Surveillance du Secteur Financier ("CSSF"), to be coordinated by Veldhuis & Gérard S.à r.l.
Sub-Step 5(b): LP Migration to Feeders. Following receipt of their respective Consolidated Master Fund LP interests, the limited partners of the dissolved offshore vehicles will be allocated to the appropriate feeder vehicle based on their investor category:
• Non-U.S. investors (e.g., Nordhaven Sovereign Wealth Fund, Kestrel Pacific Insurance Group) will contribute their Consolidated Master Fund LP interests to Solara International Feeder (Cayman) LP in exchange for limited partnership interests in the feeder.
• U.S. tax-exempt investors (e.g., Pinnacle State Employees' Retirement System, Grandview University Endowment) will contribute their Consolidated Master Fund LP interests to Solara Tax-Exempt Feeder (Cayman) LP in exchange for limited partnership interests in the feeder.
The intended U.S. federal income tax treatment of the liquidating distributions in Sub-Step 5(a) is as tax-free distributions under IRC § 731(a), which provides that in the case of a distribution by a partnership to a partner, gain is recognized only to the extent that any money distributed exceeds the adjusted basis of the partner's interest in the partnership immediately before the distribution. Because the dissolved vehicles will distribute only partnership interests (in the Consolidated Master Fund LP), and not money or other property, no gain should be recognized under Section 731(a), provided that the distributed partnership interests do not constitute "marketable securities" within the meaning of IRC § 731(c).
The engagement team will need to conduct a thorough analysis of IRC § 731(c), which treats the distribution of "marketable securities" by a partnership as a distribution of money, potentially triggering gain recognition. The term "marketable securities" is defined in Section 731(c)(2) to include, among other things, interests that are "actively traded" within the meaning of IRC § 1092(d)(1). The Consolidated Master Fund LP interests to be distributed in Step 5 are limited partnership interests in a private investment fund and are not publicly traded or actively traded on an established securities market. Accordingly, our preliminary view is that Section 731(c) should not apply to these distributions. However, this analysis will require further review, and the PLR request will include a specific ruling on this point.
The contributions of Consolidated Master Fund LP interests by the non-U.S. and U.S. tax-exempt LPs to the new feeder vehicles in Sub-Step 5(b) are intended to be treated as additional tax-free contributions under IRC § 721(a).
Resulting Post-Reorganization Structure. Following completion of all five steps, the Solara fund platform will be organized as follows:
• Solara Digital Partners Fund IV LP (Delaware) — continues to hold Fund IV portfolio company interests directly; U.S. taxable investors remain directly invested.
• Solara Digital Partners Fund V LP (Delaware) — continues to hold Fund V portfolio company interests directly; U.S. taxable investors remain directly invested.
• Solara Consolidated Master Fund LP (Delaware) — holds all portfolio company interests formerly held by the four offshore vehicles; receives capital through the two feeder vehicles described below and co-invests alongside Fund IV LP and Fund V LP.
• Solara International Feeder (Cayman) LP — invests as a limited partner in the Consolidated Master Fund LP; non-U.S. investors are limited partners.
• Solara Tax-Exempt Feeder (Cayman) LP — invests as a limited partner in the Consolidated Master Fund LP; U.S. tax-exempt investors are limited partners; UBTI blocker structures to be maintained between the feeder and debt-financed portfolio investments.
VII. Aggregate Financials of the Reorganization
The following table summarizes the aggregate financial parameters of the proposed reorganization, as confirmed by Douglas Wexford during the May 26 intake call. All figures are presented in U.S. dollars, with Euro-denominated amounts converted at the uniform exchange rate of 1.08 EUR/USD.
The aggregate built-in gain of $1.72 billion represents the total unrealized appreciation in the portfolio company interests to be transferred to the Consolidated Master Fund LP. This gain will be preserved through carryover basis treatment under IRC § 723, and Section 704(c) built-in gain accounts will carry over from the contributing vehicles to the Consolidated Master Fund LP, as discussed further in Section VIII below.
The $1.34 billion in aggregate liabilities assumed by the Consolidated Master Fund LP consists of portfolio-level liabilities (including debt incurred by portfolio companies and assumed by the fund vehicles) as well as fund-level liabilities under the subscription credit facilities described in Section IX.D below. The liability shifts resulting from the reorganization will require careful analysis under IRC § 752 and the regulations thereunder, including the tiered partnership rules of Treas. Reg. § 1.752-4(a), to ensure that the resulting changes in each partner's share of partnership liabilities do not trigger gain recognition under IRC § 731(a) (treating a net decrease in a partner's share of partnership liabilities as a deemed distribution of money).
VIII. Preliminary Identification of Tax Issues and Rulings to be Requested
Based on the facts gathered during the intake process, the engagement team at Calderwood & Harkness LLP anticipates requesting the following eight rulings from the IRS in the PLR submission:
Ruling 1 — IRC § 721(a) (Tax-Free Contributions). The contributions of portfolio assets by the four offshore vehicles to the Consolidated Master Fund LP in Steps 2, 3, and 4 qualify as tax-free contributions under IRC § 721(a), and no gain or loss is recognized by any contributing vehicle or by the Consolidated Master Fund LP.
Ruling 2 — IRC § 721(b) (Investment Company Exception). The Consolidated Master Fund LP does not constitute an "investment company" within the meaning of IRC § 721(b) and § 351(e), because its portfolio consists of operating companies in the digital infrastructure and enterprise SaaS sectors — not stocks, securities, or other passive investment assets within the meaning of Treas. Reg. § 1.351-1(c)(1). Accordingly, the exception to tax-free treatment under Section 721(b) does not apply.
Ruling 3 — IRC § 367 (Inapplicability to Partnership-to-Partnership Transfers). IRC § 367(a) and (b), which by their terms apply to transfers to or from corporations in reorganizations and other specified transactions, do not apply to the contributions of assets by the Luxembourg SCSps (classified as partnerships for U.S. federal income tax purposes) to the Consolidated Master Fund LP (a domestic partnership). The Section 367 gain recognition and toll charge provisions are not implicated by these partnership-to-partnership transfers.
Ruling 4 — IRC § 731(a) and § 731(c) (Tax-Free Distributions). The liquidating distributions of Consolidated Master Fund LP interests by the dissolved offshore vehicles to their existing limited partners in Step 5 qualify as tax-free distributions under IRC § 731(a), and the distributed partnership interests do not constitute "marketable securities" within the meaning of IRC § 731(c).
Ruling 5 — IRC § 752 (Liability Shifts). The shifts in partnership liabilities resulting from the reorganization — involving $1.34 billion in aggregate liabilities — do not trigger gain recognition under IRC § 731(a) when analyzed under the netting rules of Treas. Reg. § 1.752-1(f) and the tiered partnership rules of Treas. Reg. § 1.752-4(a). No partner experiences a net decrease in its share of partnership liabilities sufficient to trigger a deemed distribution of money in excess of its adjusted basis in its partnership interest.
Ruling 6 — IRC § 704(c) (Built-In Gain Accounts). The Section 704(c) built-in gain accounts attributable to the contributed assets carry over from the contributing offshore vehicles to the Consolidated Master Fund LP, and the remedial allocation method under Treas. Reg. § 1.704-3(d) continues to apply to allocations of income, gain, loss, and deduction with respect to such assets in the Consolidated Master Fund LP.
Ruling 7 — IRC § 1446 (No Withholding on Nonrecognition Transactions). No withholding under IRC § 1446(a) or § 1446(f) is required in connection with the nonrecognition contributions in Steps 2 through 4 or the nonrecognition distributions in Step 5, because no effectively connected taxable income is recognized in those transactions.
Ruling 8 — Entity Classification. All newly formed entities — Solara Consolidated Master Fund GP LLC, Solara Consolidated Master Fund LP, Solara International Feeder (Cayman) LP, and Solara Tax-Exempt Feeder (Cayman) LP — are properly classified as partnerships for U.S. federal income tax purposes under Treas. Reg. § 301.7701-3, and their Form 8832 elections are valid and effective.
In addition to the eight rulings listed above, the engagement team has identified the following issues that will require analysis in the PLR request or in separate memoranda, even though they may not be the subject of formal ruling requests:
• FIRPTA / IRC § 897. Whether interests in data center properties (e.g., NovaBright Data Systems Inc.) and fiber-optic network assets (e.g., Thorngate Fiber Networks LP) constitute U.S. real property interests ("USRPIs") within the meaning of IRC § 897(c), and whether the contributions and distributions in the reorganization trigger FIRPTA withholding under IRC § 1445 or gain recognition under IRC § 897(a). This analysis is particularly relevant for non-U.S. investors in the Cayman vehicles.
• Anti-Abuse and Judicial Doctrines. Whether the IRS could challenge the reorganization under the step transaction doctrine, the substance-over-form doctrine, or the economic substance doctrine. The engagement team will address these doctrines proactively in the PLR request, emphasizing the independent business purposes described in Section V and the fact that each step of the reorganization has independent legal and economic significance.
IX. Key Third Parties and Advisors
The following third parties and advisors have been identified as relevant to the engagement. Calderwood & Harkness will need to coordinate with each of these parties at various stages of the PLR preparation and reorganization execution.
A. External Counsel
B. Accounting and Advisory
C. Fund Administrator
Clarendon will need to be engaged in connection with the reorganization to effect the transfer of investor capital accounts from the dissolving offshore vehicles to the new feeder vehicles, update NAV calculations for the Consolidated Master Fund LP, and establish new investor reporting lines for the post-reorganization structure.
D. Lenders.
Priya Narasimhan confirmed during the May 22 call that lender consent will be required for the restructuring under existing credit agreements for both the Fund IV and Fund V subscription facilities. The credit agreements contain change-of-control and restructuring covenants that will be triggered by the dissolution of the offshore fund vehicles and the migration of investor commitments to the new feeder structure. Calderwood & Harkness will need to review the credit agreements to assess the scope of required lender consents and any potential default or acceleration provisions that may be implicated. This review is included in our initial data request described in Section XIII.
E. Insurance.
Priya Narasimhan indicated that the D&O/E&O policy may require endorsement or amendment to cover the new entities formed in Step 1 and to reflect the post-reorganization structure. Calderwood & Harkness will review the existing policy as part of our initial data request.
F. Registered Office / Agent
X. Key Dates and Target Timeline
The following table sets forth the key historical dates and target dates for the reorganization and PLR process. All target dates are subject to adjustment based on the pace of client data collection, the PLR drafting process, and the IRS's scheduling of the pre-submission conference and processing of the ruling request.
The engagement team notes that the timeline is aggressive, particularly with respect to the August 15, 2025 target for PLR submission. Timely receipt of client data and cooperation from third-party advisors — particularly Caldwell Pierce & Co. LLP (tax-basis records) and Redstone Advisory Group LLC (FMV appraisals) — will be essential to meeting this target. If the IRS is unable to schedule the pre-submission conference for July 22, 2025, the submission date may need to be adjusted. Leonard Cross will initiate scheduling efforts promptly upon opening of the matter.
XI. IRS Submission Logistics