1041-00005 · Client 1041 · Tax Analysis

tax-memo-firpta-section-897.docx DOCUMENT M&A / Corporate

72 / 86 ← → ✕

Contract analysis Extract to table

MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / 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: June 16, 2025

RE: FIRPTA / IRC § 897 Analysis — Solara Digital Infrastructure LP Cross-Border Fund-Platform Reorganization

ENGAGEMENT: Calderwood & Harkness LLP, Engagement No. 20250527-SDILP-PLR

CLIENT: Solara Digital Infrastructure LP

This memorandum is a privileged and confidential attorney-client communication and attorney work product prepared in anticipation of litigation and in connection with the rendering of legal advice. It is intended solely for the use of the addressees and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. Unauthorized disclosure may result in waiver of applicable privileges.

Right-click to update Table of Contents

I. Executive Summary

This memorandum analyzes whether portfolio company interests held by the Solara Digital Infrastructure LP ("Solara" or the "Platform") offshore fund vehicles — particularly NovaBright Data Systems Inc. ("NovaBright") and Thorngate Fiber Networks LP ("Thorngate") — constitute "United States real property interests" ("USRPIs") within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), and evaluates the implications of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") for non-U.S. investors in connection with the proposed five-step cross-border fund-platform reorganization (the "Reorganization").

This memorandum reaches the following principal conclusions:

First, with respect to the USRPI classification of key portfolio assets, NovaBright Data Systems Inc. presents the highest FIRPTA risk among the portfolio companies because of its substantial data center real property holdings, including owned land, buildings, and structural components that likely constitute interests in real property located in the United States. If the fair market value of NovaBright's USRPIs equals or exceeds fifty percent (50%) of the aggregate fair market value of its total assets, NovaBright will qualify as a United States real property holding corporation ("USRPHC"), and the stock interest held by Fund IV-A (Cayman) LP will itself constitute a USRPI. Thorngate Fiber Networks LP presents a moderate risk due to its ownership of easements, rights-of-way, and certain permanent infrastructure, though the personal property character of fiber-optic cable itself and the partnership's substantial intangible asset values may reduce the FIRPTA exposure. Veridian Edge Computing Corp. presents lower FIRPTA risk given its asset-light edge computing model. The SaaS-oriented portfolio companies — Crestline Cloud Solutions LLC and Helix SaaS Holdings Ltd. — present little or no FIRPTA exposure.

Second, regarding the impact of the Reorganization steps, the memorandum concludes that the nonrecognition framework of IRC § 897(e), in conjunction with the contribution and distribution nonrecognition provisions of IRC §§ 721(a) and 731(a), respectively, will prevent the recognition of any FIRPTA-triggered gain at the time of the contributions (Steps 2 through 4) and distributions (Step 5). However, the USRPI "taint" will carry through to the Master Fund LP interests and, by extension, to the interests in the Solara International Feeder (Cayman) LP held by non-U.S. limited partners.

Third, the memorandum identifies residual post-Reorganization FIRPTA exposures for non-U.S. limited partners, including the Nordhaven Sovereign Wealth Fund (Kingdom of Nordhaven, with aggregate commitments of $380 million in Fund IV-A Cayman and $500 million in Fund V-A Cayman) and Kestrel Pacific Insurance Group (Singapore, with aggregate commitments of €200 million in Fund IV-B Lux and €275 million in Fund V-B Lux). Importantly, neither the foreign sovereign immunity exemption under IRC § 892 nor the qualified foreign pension fund exemption under IRC § 897(l) is expected to shield these investors from FIRPTA taxation on gains attributable to USRPIs.

This memorandum should be read in conjunction with the related memoranda prepared as part of this engagement, and in particular the Tax Memorandum addressing IRC § 721(a) Contribution Analysis and the Tax Memorandum addressing IRC § 731 Distribution Analysis. The FIRPTA analysis set forth herein is ancillary to, but directly informs, the eight rulings sought from the Internal Revenue Service ("IRS") Office of the Associate Chief Counsel (International) ("CC:INTL"), with secondary jurisdiction at the Office of the Associate Chief Counsel (Passthroughs & Special Industries) ("CC:PSI"), in the private letter ruling ("PLR") request that Solara intends to submit. In particular, the FIRPTA conclusions bear upon PLR Ruling Request No. 7, which addresses IRC § 1446 withholding obligations for the Reorganization transactions.

The PLR submission is targeted for filing on or before August 15, 2025. The Reorganization's effective date is December 1, 2025, with the preliminary formation and contribution steps commencing on September 15, 2025. A pre-submission conference has been requested with CC:INTL Branch 1 for July 22, 2025, at which time the Service may raise questions regarding the FIRPTA implications of the Reorganization.

II. Scope and Limitations

This memorandum addresses only the U.S. federal income tax analysis under IRC § 897 (FIRPTA) and related provisions, including the interaction of FIRPTA with the partnership nonrecognition provisions of IRC §§ 721 and 731, the withholding provisions of IRC §§ 1445 and 1446, the foreign sovereign immunity provision of IRC § 892, and the qualified foreign pension fund exemption of IRC § 897(l). The analysis is confined to the specific factual circumstances of the Solara platform and the proposed Reorganization as described herein.

This memorandum does not address the tax laws of the Cayman Islands or the Grand Duchy of Luxembourg. The Cayman Islands tax analysis is being handled by Meridian Offshore Legal (Fiona McAllister, Partner, George Town, Grand Cayman), and the Luxembourg tax analysis is being handled by Veldhuis & Gérard S.à r.l. (Marc Gérard, Partner, Luxembourg). We have coordinated with both firms regarding the general structure of the Reorganization, but the conclusions set forth herein are limited to U.S. federal income tax matters and should not be interpreted as addressing the tax consequences of the Reorganization under any non-U.S. jurisdiction.

This memorandum does not constitute a comprehensive review of the IRC § 721 or IRC § 731 nonrecognition analysis applicable to the Reorganization. Those analyses are addressed in separate memoranda prepared as part of this engagement. Similarly, the anti-abuse analysis (including the step transaction doctrine and economic substance doctrine), the IRC § 367 inapplicability analysis, and the comprehensive IRC § 1446 withholding analysis are addressed in their respective memoranda. This memorandum references those analyses only to the extent necessary to evaluate the FIRPTA implications of the Reorganization.

The valuation conclusions and asset composition data referenced throughout this memorandum rely on fair market value appraisals being prepared by Redstone Advisory Group LLC (Marco DeLuca, Managing Director, New York). As of the date of this memorandum, the Redstone appraisals for NovaBright, Thorngate, Veridian, and the remaining portfolio companies have not been finalized. Accordingly, certain conclusions in this memorandum — particularly regarding the USRPHC status of NovaBright and the USRPI composition of Thorngate's assets — are preliminary and subject to revision upon receipt of the final appraisal reports. Financial data, including tax basis schedules and depreciation records, are being provided by Caldwell Pierce & Co. LLP (Helen Okamoto, Partner, San Francisco), Solara's independent auditor and tax return preparer. We have relied upon the accuracy and completeness of all financial data provided by Caldwell Pierce without independent verification.

The analysis set forth herein is based on current law and regulations as of the date of this memorandum, including the Internal Revenue Code, Treasury Regulations, published IRS guidance (Revenue Rulings, Revenue Procedures, Notices, and Announcements), and relevant judicial authority. We note that Congress has periodically considered modifications to the FIRPTA regime, including potential expansions of FIRPTA exemptions in connection with infrastructure investment incentives and digital infrastructure development. As of the date hereof, no such legislation has been enacted or is at an advanced stage of the legislative process sufficient to warrant reliance. However, we recommend monitoring legislative developments through the August 15, 2025 PLR submission date and adjusting the analysis and PLR representations as warranted.

III. Background — The Solara Fund Platform and Reorganization

A. Existing Structure

Solara Digital Infrastructure LP is a Delaware limited partnership founded on March 17, 2014, by Viktor Raines, who serves as Managing Partner and Founder. Solara manages approximately $14.7 billion in assets under management ("AUM") as of March 31, 2025, and is managed through its general partner, Solara Digital Infrastructure GP LLC, a Delaware limited liability company (Employer Identification Number 82-4917365). Solara's investment thesis focuses on private equity investments targeting digital infrastructure assets — including data centers, fiber-optic networks, edge computing platforms, and related telecommunications infrastructure — as well as enterprise software-as-a-service ("SaaS") platforms that serve the digital infrastructure ecosystem.

The Solara platform currently operates through six parallel fund vehicles organized across three jurisdictions — Delaware, the Cayman Islands, and Luxembourg — across two vintage fund families:

Fund IV Family (Vintage 2021):

Fund IV LP — A Delaware limited partnership with total commitments of $4.2 billion, approximately 72% deployed as of March 31, 2025. Fund IV LP is the domestic vehicle serving U.S. taxable investors.

Fund IV-A (Cayman) LP — A Cayman Islands exempted limited partnership with total commitments of $1.85 billion (EIN 98-6241503; Cayman Islands Monetary Authority registration MF-72491), approximately 72% deployed. Fund IV-A Cayman serves non-U.S. investors and certain U.S. tax-exempt investors seeking UBTI blocker treatment.

Fund IV-B (Luxembourg) SCSp — A Luxembourg société en commandite spéciale with total commitments of €1.15 billion (approximately $1.24 billion at a 1.08 EUR/USD exchange rate) (Registre de Commerce et des Sociétés B 248193), approximately 72% deployed. Fund IV-B Luxembourg serves European institutional investors, including those seeking specific Luxembourg treaty benefits and EU regulatory considerations.

Fund V Family (Vintage 2023):

Fund V LP — A Delaware limited partnership with total commitments of $5.6 billion, approximately 38% deployed as of March 31, 2025. Fund V LP is the domestic vehicle serving U.S. taxable investors.

Fund V-A (Cayman) LP — A Cayman Islands exempted limited partnership with total commitments of $2.45 billion (EIN 98-7891234; CIMA registration MF-89103), approximately 38% deployed. Fund V-A Cayman serves non-U.S. investors and certain U.S. tax-exempt investors.

Fund V-B (Luxembourg) SCSp — A Luxembourg société en commandite spéciale with total commitments of €1.38 billion (approximately $1.49 billion at a 1.08 EUR/USD exchange rate) (RCS B 271056), approximately 38% deployed. Fund V-B Luxembourg serves European institutional investors.

The offshore vehicles — i.e., the Cayman and Luxembourg fund vehicles — serve principally to accommodate non-U.S. investors seeking to avoid direct engagement with the U.S. partnership tax filing regime and to accommodate U.S. tax-exempt investors for whom direct partnership investment could generate unrelated business taxable income ("UBTI") under IRC § 512 through the use of so-called "Blocker" structures. The parallel fund structure has been effective in achieving these objectives, but the multiplication of vehicles has created significant operational complexity, duplicative compliance obligations, and administrative costs that the Reorganization is designed to eliminate.

B. Proposed Reorganization — Summary of Five Steps

The proposed Reorganization is a five-step transaction designed to consolidate the four offshore fund vehicles into a single master fund structure, while preserving the economic arrangements of all existing limited partners and maintaining the nonrecognition treatment that is critical to the transaction's viability. The five steps are as follows:

Step 1 — Formation of New Entities (September 15, 2025): Solara will form four new entities: (i) Solara Consolidated Master Fund GP LLC, a Delaware limited liability company that will serve as the general partner of the new master fund; (ii) Solara Consolidated Master Fund LP (the "Master Fund"), a Delaware limited partnership that will serve as the consolidated investment vehicle; (iii) Solara International Feeder (Cayman) LP (the "International Feeder"), a Cayman Islands exempted limited partnership that will serve as the feeder vehicle for non-U.S. investors; and (iv) Solara Tax-Exempt Feeder (Cayman) LP (the "Tax-Exempt Feeder"), a Cayman Islands exempted limited partnership that will serve as the feeder vehicle for U.S. tax-exempt investors. Form 8832 check-the-box elections will be filed for each entity to ensure partnership classification for U.S. federal income tax purposes.

Step 2 — Fund IV-A Cayman Contribution (October 1, 2025): Fund IV-A (Cayman) LP will contribute all of its portfolio assets — including its interests in NovaBright, Thorngate, and all other Fund IV-A portfolio investments — to the Master Fund in exchange for Master Fund LP interests. The aggregate fair market value of the contributed assets is $2.31 billion, with an aggregate adjusted tax basis of $1.62 billion, resulting in an aggregate built-in gain ("BIG") of approximately $690 million. The contribution is intended to qualify as a tax-free contribution under IRC § 721(a).

Step 3 — Fund IV-B Luxembourg Contribution (October 15, 2025): Fund IV-B (Luxembourg) SCSp will contribute all of its portfolio assets — including its interest in Crestline Cloud Solutions LLC and all other Fund IV-B portfolio investments — to the Master Fund in exchange for Master Fund LP interests. The aggregate fair market value of the contributed assets is $1.16 billion (€1.07 billion), with an aggregate adjusted tax basis of $844.6 million (€782 million), resulting in aggregate BIG of approximately $311 million (€288 million). This contribution is also intended to qualify under IRC § 721(a).

Step 4 — Fund V-A Cayman and Fund V-B Luxembourg Contributions (November 1, 2025): Fund V-A (Cayman) LP will contribute all of its portfolio assets — including its interests in Veridian Edge Computing Corp., Helix SaaS Holdings Ltd., and all other Fund V-A portfolio investments — to the Master Fund in exchange for Master Fund LP interests. The aggregate fair market value of Fund V-A's contributed assets is $2.89 billion, with an aggregate adjusted tax basis of $2.34 billion, resulting in aggregate BIG of approximately $550 million. Simultaneously, Fund V-B (Luxembourg) SCSp will contribute all of its portfolio assets to the Master Fund in exchange for Master Fund LP interests, with aggregate fair market value of $1.39 billion (€1.29 billion), aggregate adjusted tax basis of $1.23 billion (€1.14 billion), and aggregate BIG of approximately $162 million (€150 million). Both contributions are intended to qualify under IRC § 721(a).

Step 5 — Dissolution and Distribution (December 1, 2025): All 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 be dissolved. The Master Fund LP interests held by each dissolving vehicle will be distributed to the existing limited partners of that vehicle. Non-U.S. limited partners will roll their Master Fund LP interests into the International Feeder, and U.S. tax-exempt limited partners will roll their Master Fund LP interests into the Tax-Exempt Feeder. These distributions are intended to qualify for nonrecognition treatment under IRC § 731(a).

In the aggregate, the Reorganization involves the transfer of $7.75 billion in fair market value of portfolio assets (with an aggregate adjusted tax basis of $6.03 billion and aggregate BIG of $1.72 billion), together with $1.34 billion of aggregate liabilities assumed by the Master Fund. A total of twenty-three (23) portfolio companies are being contributed to the Master Fund — eleven (11) from the Fund IV vehicles and twelve (12) from the Fund V vehicles.

C. Key Non-U.S. Investors Affected by FIRPTA Analysis

The FIRPTA analysis is of particular significance to the following non-U.S. investors in the Solara offshore vehicles:

Nordhaven Sovereign Wealth Fund (the "Nordhaven SWF"). The Nordhaven SWF is the sovereign wealth fund of the Kingdom of Nordhaven, a Nordic country, and is one of the largest single investors in the Solara platform. The Nordhaven SWF has committed $380 million to Fund IV-A (Cayman) LP and $500 million to Fund V-A (Cayman) LP, for total commitments of $880 million across the two Cayman vehicles. The primary contact at the Nordhaven SWF is Anders Bjørkman, Head of Alternative Investments. The Nordhaven SWF is independently advised by Bramhall & Quelwick LLP (Jason Tremaine, Partner, San Francisco). The Nordhaven SWF's FIRPTA exposure is of particular concern because of the interaction between IRC § 892 (which provides a general exemption from U.S. taxation for income of foreign governments) and IRC § 897 (which overrides that exemption with respect to gains from USRPIs). We have been in contact with Mr. Tremaine regarding the Nordhaven SWF's FIRPTA position and anticipate coordinating closely with Bramhall & Quelwick on the FIRPTA disclosures in the LP Tax Impact Summary Letter.

Kestrel Pacific Insurance Group ("Kestrel Pacific"). Kestrel Pacific is a Singapore-based insurance holding company that has committed €200 million to Fund IV-B (Luxembourg) SCSp and €275 million to Fund V-B (Luxembourg) SCSp, for total commitments of €475 million (approximately $513 million at 1.08 EUR/USD) across the two Luxembourg vehicles. The primary contact at Kestrel Pacific is Christine Leung, Senior Portfolio Manager. The Singapore-U.S. income tax treaty does not override FIRPTA, and Kestrel Pacific's FIRPTA exposure on gains attributable to USRPIs will need to be addressed in connection with the Reorganization and any subsequent portfolio company dispositions.

In addition to the Nordhaven SWF and Kestrel Pacific, numerous other non-U.S. limited partners invest through the Cayman and Luxembourg vehicles. While the specific FIRPTA exposure of each non-U.S. limited partner will depend on its individual facts and circumstances (including any applicable treaty positions), the analysis set forth in this memorandum applies generally to all non-U.S. limited partners in the Solara offshore vehicles.

IV. Legal Framework — IRC § 897 and FIRPTA

A. Overview of FIRPTA Regime

The Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") was enacted to address the perceived inequity in the taxation of foreign persons' gains from dispositions of U.S. real property. Prior to FIRPTA's enactment, non-U.S. persons could often dispose of U.S. real property interests without incurring U.S. income tax liability, either because such gains were treated as capital gains not effectively connected with a U.S. trade or business or because applicable income tax treaties exempted such gains from U.S. taxation. FIRPTA fundamentally altered this framework by treating gains from the disposition of USRPIs as effectively connected income ("ECI") subject to U.S. income tax, regardless of whether the non-U.S. person was engaged in a U.S. trade or business.

FIRPTA is codified principally in IRC § 897, which establishes the substantive rule treating gains from USRPI dispositions as ECI, and IRC § 1445, which establishes the withholding mechanism to ensure collection of the resulting tax liability. The statutory framework has been supplemented by extensive Treasury Regulations, including the permanent regulations under Treas. Reg. §§ 1.897-1 through 1.897-9 and the temporary regulations under Treas. Reg. §§ 1.897-5T through 1.897-7T, as well as by judicial authority and published IRS guidance.

Under IRC § 897(a)(1), any gain or loss of a nonresident alien individual or foreign corporation from the disposition of a USRPI is taken into account as if the taxpayer were engaged in a trade or business within the United States during the taxable year and as if such gain or loss were effectively connected with such trade or business. The term "disposition" for purposes of IRC § 897(a)(1) includes any disposition within the meaning of IRC § 1001 — i.e., a sale, exchange, or other disposition — as well as any other transaction treated as a disposition under the Treasury Regulations, including certain distributions, liquidations, and other transfers.

B. Definition of USRPI — IRC § 897(c)

The definition of "United States real property interest" under IRC § 897(c) is the cornerstone of the FIRPTA analysis. Under IRC § 897(c)(1)(A), the term USRPI includes two categories of interests:

(i) An "interest in real property located in the United States" (as defined in the Treasury Regulations), including land, improvements, and associated personal property; and

(ii) Any interest (other than an interest solely as a creditor) in a domestic corporation that is a "United States real property holding corporation" ("USRPHC").

The first category — interests in real property located in the United States — encompasses direct ownership of, and other interests in, U.S. real property. Under Treas. Reg. § 1.897-1(b), an "interest in real property" includes fee ownership interests, co-ownership interests, leaseholds, options to acquire real property, and any interest other than an interest solely as a creditor in any entity (whether domestic or foreign) to the extent such entity holds USRPIs.

The term "real property" is defined in Treas. Reg. § 1.897-1(b)(1) to include: (a) land; (b) unsevered natural products of the land (e.g., growing crops, timber, mines, wells, and other natural deposits); (c) improvements, meaning buildings, other inherently permanent structures, and their structural components; and (d) personal property associated with the use of real property. The definition of "improvements" and "inherently permanent structures" is critical to the analysis of data center facilities, fiber-optic networks, and other digital infrastructure assets, as discussed in detail in Section V below.

The second category — interests in USRPHCs — is defined by reference to the asset composition test set forth in IRC § 897(c)(2). Under IRC § 897(c)(2), a corporation is a USRPHC if the fair market value of its USRPIs equals or exceeds fifty percent (50%) of the aggregate fair market value of three categories of assets: (a) its USRPIs, (b) its interests in real property located outside the United States, and (c) its other assets used or held for use in a trade or business (the "50% asset test"). This test is applied on a determination date, which generally is the date on which the corporation last acquired or disposed of a USRPI or, if later, the last date on which the fair market value of its assets was determined for another purpose.

The significance of the USRPHC classification is that any interest in a domestic corporation that is a USRPHC — including stock in such corporation — is itself a USRPI. Accordingly, a non-U.S. person who disposes of stock in a USRPHC is treated as disposing of a USRPI, and the resulting gain or loss is treated as ECI under IRC § 897(a)(1).

C. Look-Through Rules for Partnerships — § 897(g) and Treas. Reg. § 1.897-7T

Partnerships are treated as look-through entities for purposes of FIRPTA. Under IRC § 897(g), any gain recognized by a non-U.S. person on the disposition of an interest in a partnership is treated as gain from the disposition of a USRPI to the extent that such gain is attributable to USRPIs held by the partnership. This look-through treatment reflects the general principle that partnerships are not separate taxpaying entities for U.S. federal income tax purposes; rather, each partner is treated as owning a proportionate share of the partnership's underlying assets.

The temporary regulations under Treas. Reg. § 1.897-7T elaborate on the look-through treatment of partnerships. Under these regulations, a non-U.S. partner's share of gain or loss on USRPIs held by the partnership (whether from the partnership's direct disposition of the USRPI or from the partner's disposition of its partnership interest) is subject to FIRPTA. The regulations provide that the gain attributable to USRPIs is determined by reference to the partner's share of the partnership's unrealized gain in its USRPIs, determined under the principles of IRC § 704.

The look-through treatment of partnerships has been supplemented by the enactment of IRC § 864(c)(8), which was added by the Tax Cuts and Jobs Act of 2017 (Pub. L. 115-97). Under IRC § 864(c)(8), gain or loss recognized by a non-U.S. person on the sale, exchange, or other disposition of an interest in a partnership engaged in a U.S. trade or business is treated as ECI to the extent the gain or loss is attributable to assets of the partnership that are used or held for use in connection with the conduct of such trade or business. The scope of IRC § 864(c)(8) is broader than FIRPTA alone, as it applies to all assets used in a U.S. trade or business (not merely USRPIs). However, the FIRPTA provisions and IRC § 864(c)(8) overlap with respect to USRPIs held by partnerships engaged in a U.S. trade or business.

The interaction between IRC § 897(g) and IRC § 864(c)(8) is relevant to the Solara Reorganization because the Master Fund — as a Delaware limited partnership holding portfolio company investments in U.S. businesses — may be treated as engaged in a U.S. trade or business, in which case both the FIRPTA provisions and IRC § 864(c)(8) would apply to dispositions of partnership interests by non-U.S. limited partners. For purposes of this memorandum, however, we focus on the FIRPTA analysis under IRC § 897 and reference IRC § 864(c)(8) only to the extent it interacts with the FIRPTA framework.

D. Interaction with § 1446 Withholding

The FIRPTA regime is enforced through withholding mechanisms established under IRC §§ 1445 and 1446. The withholding analysis is addressed in detail in the separate Tax Memorandum — IRC § 1446 Withholding Analysis prepared as part of this engagement. For purposes of this memorandum, we note the following key provisions:

IRC § 1446(a) requires a partnership engaged in a U.S. trade or business to withhold tax on the effectively connected taxable income ("ECTI") allocable to its foreign partners. To the extent that a partnership recognizes gain from the disposition of a USRPI, such gain constitutes ECI under IRC § 897(a)(1), and the allocable share of such gain to foreign partners is subject to withholding under IRC § 1446(a).

IRC § 1446(f), enacted by the Tax Cuts and Jobs Act of 2017, imposes withholding obligations on transfers of interests in partnerships engaged in a U.S. trade or business. Under IRC § 1446(f)(1), the transferee of a partnership interest is required to withhold ten percent (10%) of the amount realized on the transfer if any portion of the gain on the transfer would be treated as ECI under IRC § 864(c)(8). This withholding obligation extends to transfers that trigger FIRPTA gain under IRC § 897(g).

The interplay between FIRPTA dispositions generating ECI and the resulting withholding obligations under both IRC §§ 1445 and 1446 is a critical compliance consideration for the post-Reorganization structure, as discussed in Section VI.C below.

E. Nonrecognition Exceptions — § 897(e)

IRC § 897(e)(1) provides that, to the extent that a nonrecognition provision of the Code would otherwise apply to a transaction involving a USRPI, the nonrecognition treatment is preserved — but only to the extent provided in regulations. This provision reflects Congress's intent that FIRPTA should not, in general, override the nonrecognition provisions of the Code, but that the Treasury Department should have authority to prescribe rules ensuring that the USRPI character is preserved through nonrecognition transactions, thereby preventing the use of such transactions to strip USRPIs of their FIRPTA taint.

The temporary regulations under Treas. Reg. § 1.897-6T address specific nonrecognition transactions and their treatment under FIRPTA. Of particular relevance to the Reorganization are the provisions governing contributions to partnerships under IRC § 721 and distributions from partnerships under IRC § 731.

Under Treas. Reg. § 1.897-6T(b), a transfer of a USRPI to a partnership in exchange for a partnership interest under IRC § 721(a) is generally treated as a nonrecognition transaction for FIRPTA purposes. Gain is not recognized on the contribution, but the contributing partner's interest in the partnership is treated as a USRPI to the extent attributable to the USRPIs contributed. In other words, the USRPI taint "carries through" the nonrecognition transaction and attaches to the partnership interest received by the contributing partner.

Similarly, distributions of USRPIs (or interests tainted as USRPIs) by a partnership to its partners under IRC § 731 are generally treated as nonrecognition transactions for FIRPTA purposes. The distributed property retains its USRPI character in the hands of the distributee partner.

The key analytical question for the Reorganization is whether the nonrecognition framework of IRC §§ 721 and 731, as implemented by IRC § 897(e) and Treas. Reg. § 1.897-6T, applies to prevent the recognition of FIRPTA gain at each step of the five-step transaction. As discussed in Section VI below, we conclude that the nonrecognition framework does apply, but that the USRPI taint carries through the Reorganization to the Master Fund LP interests and ultimately to the International Feeder LP interests held by non-U.S. limited partners.

V. Analysis of Specific Portfolio Company Interests as USRPIs

A. Analytical Framework

The USRPI analysis for each portfolio company involves a two-part inquiry:

First, does the portfolio company hold "interests in real property located in the United States" within the meaning of IRC § 897(c)(1)(A)(i) and Treas. Reg. § 1.897-1(b)? This inquiry requires examination of the specific assets held by the portfolio company — including land, buildings, structural components, leasehold interests, easements, and associated personal property — to determine whether and to what extent they constitute interests in U.S. real property.

Second, if the portfolio company is a domestic corporation, does it qualify as a USRPHC under the 50% asset test of IRC § 897(c)(2)? This inquiry requires a comparison of the fair market value of the corporation's USRPIs against the aggregate fair market value of all three asset categories (USRPIs, foreign real property interests, and other business assets).

For portfolio companies organized as partnerships (or as disregarded entities), the analysis applies a look-through approach, examining the partnership's or entity's underlying assets to determine the extent of USRPI exposure.

A critical threshold question that pervades the analysis of Solara's portfolio is whether data center facilities and fiber-optic network infrastructure constitute "real property" under FIRPTA. This question arises because the FIRPTA regulations' definition of "real property" — while broadly construed to include land, improvements, inherently permanent structures, and structural components — was drafted primarily with traditional real estate in mind and does not specifically address the technology-intensive infrastructure assets that characterize Solara's portfolio. As discussed in the individual portfolio company analyses below, the classification of these assets requires careful application of the regulatory definitions and analogies to IRS guidance in related contexts.

B. NovaBright Data Systems Inc.

Entity Type: Delaware corporation.

Business: NovaBright is a data center operator that owns and operates multiple data center facilities across the United States. NovaBright's facilities house servers, networking equipment, and related IT infrastructure for enterprise clients, providing colocation, managed hosting, and cloud computing services.

Valuation and Holding: NovaBright has an aggregate fair market value of $890 million, an aggregate adjusted tax basis of $520 million, and a resulting aggregate built-in gain of $370 million. Fund IV-A (Cayman) LP holds a sixty percent (60%) equity interest in NovaBright, representing $534 million of the $890 million FMV. Fund IV LP (the domestic Delaware vehicle) holds the remaining forty percent (40%) equity interest.

Real Property Analysis:

NovaBright's data center operations involve significant physical real property assets that must be analyzed under the USRPI framework.

Data Center Buildings. NovaBright operates data center facilities that consist of purpose-built or renovated buildings designed to house computing equipment, including server halls, control rooms, mechanical and electrical plant rooms, administrative offices, and loading docks. These buildings are permanent structures affixed to land and clearly constitute "improvements" within the meaning of Treas. Reg. § 1.897-1(b)(1). The classification of data center buildings as real property for FIRPTA purposes is well-established and not in dispute.

Land Underlying Data Centers. To the extent NovaBright owns the land on which its data center facilities are situated, such land constitutes an "interest in real property located in the United States" under IRC § 897(c)(1)(A)(i). Based on information provided by Caldwell Pierce & Co. LLP, NovaBright owns the land underlying at least four of its principal data center campuses, with the remaining facilities located on leased land. The owned land interests are unquestionably USRPIs.

Structural Components and Associated Infrastructure. A more nuanced question arises with respect to the infrastructure systems integral to NovaBright's data center operations, including cooling systems (CRAC units, chillers, cooling towers), power distribution systems (uninterruptible power supplies, transformers, switchgear, backup generators), raised flooring systems, fire suppression systems, and physical security infrastructure. The analysis turns on whether these systems constitute "structural components" of the data center buildings — in which case they would be part of the "improvements" that are real property under FIRPTA — or whether they constitute personal property that is merely associated with the buildings.

By analogy to the definition of "structural components" under Treas. Reg. § 1.48-1(e)(2) (applicable in the investment tax credit context), structural components include items such as walls, partitions, floors, ceilings, stairways, plumbing, central heating and cooling systems, electrical wiring, and other components relating to the operation or maintenance of a building. Under this framework, data center cooling systems, power distribution infrastructure, and raised flooring systems are likely "structural components" of the data center buildings to the extent they are permanently installed and integral to the building's function. However, certain modular or readily removable systems — such as portable cooling units or temporary power distribution equipment — may be classified as personal property rather than structural components.

The classification of these infrastructure systems is significant because it directly affects the numerator of the 50% asset test under IRC § 897(c)(2). Systems classified as structural components are included in the fair market value of NovaBright's USRPIs; systems classified as personal property are excluded from the USRPI category and counted as "other assets used or held for use in a trade or business."

Servers, Networking Equipment, and IT Hardware. NovaBright owns a substantial inventory of servers, networking switches, routers, storage arrays, and other IT hardware deployed within its data center facilities. These assets are generally treated as personal property for tax purposes — they are tangible personal property depreciable under IRC § 1245 — and do not constitute "real property" for FIRPTA purposes. Accordingly, the fair market value of NovaBright's IT hardware is excluded from the USRPI numerator in the 50% asset test.

Leasehold Interests. To the extent NovaBright leases (rather than owns) any of its data center facilities or the land underlying such facilities, the leasehold interests in such U.S. real property constitute USRPIs under Treas. Reg. § 1.897-1(b). The characterization of NovaBright's leasehold interests will depend on the specific terms and duration of the applicable leases, but long-term leases of real property are generally treated as interests in real property for FIRPTA purposes.

USRPHC Test (50% Asset Test):

The critical question for NovaBright is whether the fair market value of its USRPIs — including owned land, data center buildings, structural components, and leasehold interests — equals or exceeds fifty percent (50%) of the aggregate fair market value of all three categories of assets under IRC § 897(c)(2).

The Redstone Advisory Group LLC appraisal, when completed, will provide the asset-level breakdown necessary to apply the 50% asset test. The allocation methodology is expected to assign separate fair market values to: (a) land and inherently permanent structures (real property); (b) structural components that are integral to the buildings (real property); (c) IT equipment, servers, and networking hardware (personal property); (d) customer contracts and customer relationships (intangible assets); (e) intellectual property and proprietary technology (intangible assets); (f) goodwill and going-concern value (intangible assets); and (g) working capital and other assets.

Our preliminary assessment, based on discussions with Marco DeLuca at Redstone Advisory Group and a review of publicly available valuation benchmarks for data center companies, is that NovaBright likely qualifies as a USRPHC. Data center companies typically derive a significant portion of their enterprise value from the physical data center infrastructure — land, buildings, and structural components — which can constitute well in excess of fifty percent of total asset value, particularly for operators that own (rather than lease) their facilities. However, we note that data center companies also frequently possess substantial intangible asset values, including customer relationships, contractual backlog, proprietary management software, and going-concern goodwill. In certain cases, particularly for data center operators with significant technology differentiation or large recurring revenue streams, the intangible asset values may be sufficient to push the USRPI ratio below the fifty percent threshold.

Until the Redstone appraisal is finalized, we cannot definitively determine NovaBright's USRPHC status. However, for purposes of this memorandum and the PLR submission, we recommend assuming that NovaBright is a USRPHC and that the stock interest held by Fund IV-A Cayman is a USRPI. This conservative approach ensures that the PLR representations and the LP Tax Impact Summary Letter adequately address the FIRPTA exposure.

Significance for the Reorganization: If NovaBright is a USRPHC, then the sixty percent (60%) stock interest held by Fund IV-A (Cayman) LP constitutes a USRPI under IRC § 897(c)(1)(A)(ii). The contribution of this interest by Fund IV-A Cayman to the Consolidated Master Fund LP in Step 2 of the Reorganization triggers the IRC § 897(e) nonrecognition exception analysis. As discussed in Section VI.A below, the contribution qualifies for nonrecognition under IRC § 721(a), and the nonrecognition treatment is preserved by IRC § 897(e)(1) and Treas. Reg. § 1.897-6T(b). However, the USRPI taint carries through to the Master Fund LP interest received by Fund IV-A Cayman, and ultimately to the interests in the International Feeder held by non-U.S. limited partners of Fund IV-A Cayman (including the Nordhaven SWF).

C. Thorngate Fiber Networks LP

Entity Type: Delaware limited partnership.

Business: Thorngate is a fiber-optic network operator that owns and operates a regional fiber-optic network spanning approximately 12,000 route miles across the mid-Atlantic and southeastern United States. Thorngate's network consists of underground and aerial fiber-optic cables, conduit, splice boxes, repeater stations (also known as regeneration huts), optical line amplifiers, and associated physical infrastructure. Thorngate provides dark fiber and lit fiber services to enterprise customers, wireless carriers, and government agencies.

Valuation and Holding: Thorngate has an aggregate fair market value of $670 million, an aggregate adjusted tax basis of $490 million, and a resulting aggregate built-in gain of $180 million. Fund IV-A (Cayman) LP holds a one hundred percent (100%) interest in Thorngate.

Real Property Analysis:

The real property analysis for Thorngate is more complex than for NovaBright because the assets at issue — fiber-optic cables, conduit, and associated telecommunications infrastructure — do not fit neatly into the traditional FIRPTA categories of land, buildings, and improvements. The analysis requires careful consideration of regulatory definitions, analogies to IRS guidance in related contexts, and the evolving understanding of "real property" in the context of modern telecommunications infrastructure.

Fiber-Optic Cables and Conduit. The core question is whether fiber-optic cables — consisting of glass or plastic optical fibers housed in protective conduit — constitute "interests in real property" under FIRPTA. Fiber-optic cables are physical assets that are typically installed underground (in buried conduit or direct-buried configurations) or aerially (strung on utility poles pursuant to pole attachment agreements). Once installed, they are intended to remain in place for the useful life of the network and are not readily removable without significant cost and disruption. Conduit — the protective tubing through which fiber-optic cables are threaded — is similarly a permanent underground installation.

Under Treas. Reg. § 1.897-1(b)(1), "improvements" include "inherently permanent structures" and their structural components. The question is whether fiber-optic cables and conduit constitute "inherently permanent structures." The regulations do not specifically enumerate fiber-optic cables or conduit among the examples of inherently permanent structures (which include buildings, bridges, tunnels, roadbeds, and similar structures), but the list is illustrative rather than exhaustive.

An important cross-reference is to the classification of fiber-optic cable under the depreciation provisions. Fiber-optic cable has historically been treated as IRC § 1245 property (tangible personal property) for depreciation purposes, rather than as IRC § 1250 property (real property). This classification reflects the IRS's longstanding treatment of utility distribution infrastructure as personal property in the depreciation context. The § 1245 classification, while not dispositive for FIRPTA purposes, is a significant factor weighing against the characterization of fiber-optic cable as real property for FIRPTA. As a general matter, the IRS has been reluctant to treat property as "real property" for one purpose and "personal property" for another purpose within the same statutory framework, although the FIRPTA regulations are not expressly linked to the depreciation classification.

IRS Guidance on Telecommunications Infrastructure. In Rev. Rul. 2011-15, the IRS addressed the classification of certain cell tower structures for purposes of the REIT provisions, concluding that cell towers constituted "real property" under the REIT rules. While Rev. Rul. 2011-15 was issued in the REIT context and not the FIRPTA context, the analysis provides useful analogies. The ruling considered whether cell towers — which are permanently affixed to the ground and not designed to be moved — constitute "inherently permanent structures." The IRS concluded that they do, based on the structures' permanence, the manner of their affixation, and the expectation that they would remain in place indefinitely.

Extending this analysis to fiber-optic networks, underground conduit and fiber-optic cable that is permanently installed and not intended to be moved might similarly be characterized as an "inherently permanent structure." However, the analogy is imperfect: cell towers are freestanding vertical structures visible from the surface, while fiber-optic cable is a linear underground utility asset more akin to pipelines or electrical wiring.

Expanded "Real Property" Definition Under IRC § 1031 Regulations. The 2020 final regulations under IRC § 1031 (Treas. Reg. § 1.1031(a)-3(a)(2)) adopted an expanded definition of "real property" for purposes of the like-kind exchange provisions. Under these regulations, "inherently permanent structures" include buildings, parking facilities, bridges, tunnels, roadways, swimming pools, stationary and permanently installed industrial equipment, and other structures that are "ordinarily attached to real property permanently, and ordinarily will remain affixed for an indefinite period of time." The regulations also identify "structural components" of inherently permanent structures, including wiring, plumbing, central heating and air-conditioning systems, fire suppression systems, and similar components.

While the § 1031 regulations are not directly applicable to the FIRPTA analysis, they provide a useful analytical framework. Fiber-optic conduit installed underground, particularly in owned rights-of-way, might be characterized as an "inherently permanent structure" under this broader definition. However, the fiber-optic cable threaded through the conduit — as a discrete asset that can be replaced, upgraded, or removed independently of the conduit — is more difficult to classify as real property.

Rights-of-Way and Easements. Thorngate's fiber-optic network traverses thousands of miles of public and private land, and Thorngate holds range property interests that provide the legal right to install and maintain its network. These interests include:

(a) Fee ownership of land on which network operations centers ("NOCs"), regeneration huts, and equipment shelters are sited;

(b) Permanent easements across private land, granting Thorngate the right to install, maintain, and operate fiber-optic cables and conduit;

(c) Indefeasible rights of use ("IRUs") — long-term (typically 20- to 30-year) contractual rights to use fiber strands within a third-party conduit system, which may or may not constitute interests in real property depending on their characterization under state and federal law; and

(d) Government franchise agreements and right-of-way permits authorizing Thorngate to install infrastructure in public rights-of-way (e.g., along highways and roadways).

Fee ownership of land and permanent easements across private land are unquestionably "interests in real property located in the United States" under IRC § 897(c)(1)(A)(i). These interests constitute USRPIs regardless of whether the fiber-optic cable itself is classified as real or personal property.

The classification of IRUs is more complex. An IRU that conveys a possessory interest in real property — i.e., an interest in the conduit itself, as opposed to a mere service agreement — may constitute a leasehold interest in real property and therefore a USRPI. However, an IRU structured as a capacity agreement (granting the right to use specific fiber strands without conveying any possessory interest in the underlying infrastructure) may be classified as a service contract or intangible asset rather than an interest in real property. The specific terms of Thorngate's IRU agreements will need to be reviewed to make this determination.

Government franchise agreements and right-of-way permits, while they grant Thorngate the right to access and use public land, may not constitute "interests in real property" under FIRPTA because they are typically revocable licenses or permits rather than possessory interests. However, the analysis depends on the specific terms and duration of each agreement.

Regeneration Facilities and Network Operations Centers. Thorngate owns a number of physical facilities associated with its fiber-optic network, including regeneration huts (small buildings housing optical amplification and regeneration equipment), network operations centers, and equipment shelters. To the extent Thorngate owns the land and buildings associated with these facilities, they constitute USRPIs. The equipment housed within these facilities (optical amplifiers, regenerators, routers, switches) is generally treated as personal property for FIRPTA purposes.

Partnership Look-Through Analysis:

Because Thorngate is organized as a Delaware limited partnership, the USRPI analysis applies a look-through approach under IRC § 897(g) and Treas. Reg. § 1.897-7T. Rather than applying the 50% asset test applicable to corporations, the analysis examines the aggregate value of real property interests held by the partnership and compares them to the partnership's total asset value.

The aggregate value of Thorngate's real property interests includes: (a) owned land; (b) permanent easements; (c) buildings and permanent structures (regeneration huts, NOCs); and (d) to the extent classified as real property, underground conduit infrastructure. The aggregate value of Thorngate's non-real-property assets includes: (a) fiber-optic cable (to the extent classified as personal property); (b) telecommunications equipment; (c) customer contracts and customer relationships; (d) intellectual property; (e) goodwill and going-concern value; and (f) working capital.

Our preliminary assessment is that the real property component of Thorngate's assets — while material — likely does not predominate over the personal property and intangible asset components. Fiber-optic network operators derive significant value from their customer relationships, contractual backlog, network design and topology (Intellectual property), and the going-concern value of the assembled network as a functioning system. These intangible asset values, combined with the personal property classification of the fiber-optic cable itself, are likely to result in a real property ratio below fifty percent. However, the relative proportions will depend heavily on the Redstone Advisory Group appraisal, and we cannot reach a definitive conclusion until that appraisal is completed.

Significance for the Reorganization: Fund IV-A (Cayman) LP's one hundred percent (100%) interest in Thorngate is being contributed to the Master Fund in Step 2 of the Reorganization. To the extent Thorngate's underlying assets include USRPIs, the contributing partner's interest in the Master Fund will be tainted as a USRPI under IRC § 897(e) and Treas. Reg. § 1.897-6T(b), as discussed in Section VI.A. The contribution itself qualifies for nonrecognition under IRC § 721(a) and IRC § 897(e), and no current gain recognition results.

D. Veridian Edge Computing Corp.

Entity Type: Delaware corporation.

Business: Veridian Edge Computing Corp. ("Veridian") designs, deploys, and operates edge computing infrastructure, including micro data centers, network nodes deployed at cell tower base stations, and small-footprint computing facilities located in close proximity to end users. Veridian's business model emphasizes rapid deployment of modular computing infrastructure at the network edge, leveraging partnerships with wireless carriers and internet service providers.

Valuation and Holding: Veridian has an aggregate fair market value of $1.12 billion, an aggregate adjusted tax basis of $780 million, and a resulting aggregate built-in gain of $340 million. Fund V-A (Cayman) LP holds a fifty-five percent (55%) equity interest in Veridian, representing approximately $616 million of the $1.12 billion FMV. Fund V LP (the domestic Delaware vehicle) holds the remaining forty-five percent (45%) equity interest.

Real Property Analysis:

Veridian's edge computing business model is significantly more asset-light than NovaBright's data center operations. Veridian's computing infrastructure consists of micro data centers and network nodes that are typically installed at third-party cell tower base stations, in leased space within telecommunications facilities, or in small modular enclosures that may or may not be permanently affixed to real property.

Leased vs. Owned Facilities. Based on available information, Veridian does not own significant real property. Its edge computing nodes are deployed at leased locations, typically under short- to medium-term lease agreements with wireless carriers, tower companies, and commercial landlords. Veridian's headquarters and administrative offices are also leased. The leasehold interests held by Veridian may constitute interests in real property, but the short-term nature and limited value of these interests relative to Veridian's total asset base suggest that they do not represent a significant portion of enterprise value.

Equipment and Technology. Veridian's primary assets consist of: (a) servers, networking equipment, and power systems deployed at edge computing nodes; (b) proprietary edge computing software and orchestration platforms; (c) customer contracts and service agreements; (d) intellectual property and patents related to edge computing technology; and (e) goodwill and going-concern value. These assets are predominantly personal property and intangible assets, not real property for FIRPTA purposes.

USRPHC Test:

Our preliminary expectation is that Veridian is less likely to qualify as a USRPHC than NovaBright. The asset-light edge computing model, with its emphasis on leased locations and proportionally greater technology and intellectual property value, suggests that the fair market value of Veridian's USRPIs is well below the fifty percent threshold. However, as with NovaBright and Thorngate, the final determination requires the asset-level appraisal from Redstone Advisory Group.

Significance for the Reorganization: Veridian's fifty-five percent (55%) interest held by Fund V-A (Cayman) LP is being contributed to the Master Fund in Step 4 of the Reorganization. If Veridian is not a USRPHC, its stock does not constitute a USRPI, and the FIRPTA implications of the contribution are minimal. If, contrary to our preliminary expectation, Veridian is a USRPHC, the analysis and conclusions would mirror those applicable to NovaBright.

E. Crestline Cloud Solutions LLC

Entity Type: Delaware limited liability company, classified as a disregarded entity for U.S. federal income tax purposes (wholly owned by Fund IV-B (Luxembourg) SCSp).

Business: Crestline Cloud Solutions LLC ("Crestline") operates a SaaS platform providing cloud-based enterprise resource planning and workflow automation solutions to mid-market commercial clients.

Valuation and Holding: Crestline has an aggregate fair market value of €340 million (approximately $367 million at a 1.08 EUR/USD exchange rate), an aggregate adjusted tax basis of €195 million (approximately $211 million), and a resulting aggregate built-in gain of €145 million (approximately $156 million). Fund IV-B (Luxembourg) SCSp holds a one hundred percent (100%) interest in Crestline.

Real Property Analysis:

As a SaaS platform operator, Crestline's assets consist primarily of: (a) proprietary software and technology platforms; (b) customer contracts, customer relationships, and subscription revenue streams; (c) intellectual property, including patents, trademarks, and copyrights; (d) working capital; and (e) goodwill and going-concern value. Crestline does not own significant real property. Its computing infrastructure is cloud-hosted (using third-party cloud providers), and its office space is leased under conventional commercial leases. The minimal real property interests (if any) held by Crestline — limited to minor leasehold interests in office space — are de minimis relative to total asset value.

Preliminary Conclusion: Crestline does not hold significant USRPIs and would not qualify as a USRPHC under the fifty percent asset test. Because Crestline is classified as a disregarded entity for U.S. tax purposes, the analysis focuses on the underlying assets rather than on the entity itself. The FIRPTA exposure from Crestline is negligible.

Significance for the Reorganization: The contribution of Crestline by Fund IV-B Luxembourg SCSp to the Master Fund in Step 3 does not give rise to any meaningful FIRPTA exposure. The resulting Master Fund LP interest received by Fund IV-B Luxembourg is not tainted as a USRPI by reason of the Crestline contribution.

F. Helix SaaS Holdings Ltd.

Entity Type: Cayman Islands exempted company.

Business: Helix SaaS Holdings Ltd. ("Helix") is a holding company that owns interests in multiple SaaS operating subsidiaries, primarily focused on cybersecurity, data analytics, and digital marketing technology platforms.

Valuation and Holding: Helix has an aggregate fair market value of $445 million, an aggregate adjusted tax basis of $310 million, and a resulting aggregate built-in gain of $135 million. Fund V-A (Cayman) LP holds a one hundred percent (100%) interest in Helix.

Real Property Analysis:

As a threshold matter, Helix is a foreign corporation organized under the laws of the Cayman Islands. Under IRC § 897(c)(1)(A)(ii), only interests in domestic corporations that are USRPHCs are treated as USRPIs. An interest in a foreign corporation is not itself a USRPI, regardless of whether the foreign corporation holds USRPIs. Accordingly, the stock of Helix is not a USRPI.

However, the analysis does not end there. If Helix holds interests in U.S. subsidiaries that are themselves USRPHCs, the look-through principles of FIRPTA may apply to the extent of Helix's indirect ownership of USRPIs through its U.S. subsidiaries. Based on available information, Helix's operating subsidiaries are primarily SaaS businesses with minimal real property holdings. Their assets consist predominantly of software, intellectual property, customer contracts, and working capital. We do not expect any of Helix's U.S. subsidiaries to qualify as USRPHCs, but this conclusion is subject to confirmation through the Redstone Advisory Group appraisal process.

Preliminary Conclusion: Helix itself is not a USRPI because it is a foreign corporation. Its underlying SaaS-focused assets and subsidiaries are unlikely to hold significant USRPIs or to qualify as USRPHCs. The FIRPTA exposure from Helix is negligible.

Significance for the Reorganization: The contribution of Helix by Fund V-A (Cayman) LP to the Master Fund in Step 4 does not give rise to any meaningful FIRPTA exposure.

G. Remaining 18 Portfolio Companies

Across the remaining eighteen (18) portfolio companies in the Solara platform — six (6) ad

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / 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: June 16, 2025
RE: FIRPTA / IRC § 897 Analysis — Solara Digital Infrastructure LP Cross-Border Fund-Platform Reorganization
ENGAGEMENT: Calderwood & Harkness LLP, Engagement No. 20250527-SDILP-PLR
CLIENT: Solara Digital Infrastructure LP
This memorandum is a privileged and confidential attorney-client communication and attorney work product prepared in anticipation of litigation and in connection with the rendering of legal advice. It is intended solely for the use of the addressees and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. Unauthorized disclosure may result in waiver of applicable privileges.
Right-click to update Table of Contents
I. Executive Summary
This memorandum analyzes whether portfolio company interests held by the Solara Digital Infrastructure LP ("Solara" or the "Platform") offshore fund vehicles — particularly NovaBright Data Systems Inc. ("NovaBright") and Thorngate Fiber Networks LP ("Thorngate") — constitute "United States real property interests" ("USRPIs") within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), and evaluates the implications of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") for non-U.S. investors in connection with the proposed five-step cross-border fund-platform reorganization (the "Reorganization").
This memorandum reaches the following principal conclusions:
First, with respect to the USRPI classification of key portfolio assets, NovaBright Data Systems Inc. presents the highest FIRPTA risk among the portfolio companies because of its substantial data center real property holdings, including owned land, buildings, and structural components that likely constitute interests in real property located in the United States. If the fair market value of NovaBright's USRPIs equals or exceeds fifty percent (50%) of the aggregate fair market value of its total assets, NovaBright will qualify as a United States real property holding corporation ("USRPHC"), and the stock interest held by Fund IV-A (Cayman) LP will itself constitute a USRPI. Thorngate Fiber Networks LP presents a moderate risk due to its ownership of easements, rights-of-way, and certain permanent infrastructure, though the personal property character of fiber-optic cable itself and the partnership's substantial intangible asset values may reduce the FIRPTA exposure. Veridian Edge Computing Corp. presents lower FIRPTA risk given its asset-light edge computing model. The SaaS-oriented portfolio companies — Crestline Cloud Solutions LLC and Helix SaaS Holdings Ltd. — present little or no FIRPTA exposure.
Second, regarding the impact of the Reorganization steps, the memorandum concludes that the nonrecognition framework of IRC § 897(e), in conjunction with the contribution and distribution nonrecognition provisions of IRC §§ 721(a) and 731(a), respectively, will prevent the recognition of any FIRPTA-triggered gain at the time of the contributions (Steps 2 through 4) and distributions (Step 5). However, the USRPI "taint" will carry through to the Master Fund LP interests and, by extension, to the interests in the Solara International Feeder (Cayman) LP held by non-U.S. limited partners.
Third, the memorandum identifies residual post-Reorganization FIRPTA exposures for non-U.S. limited partners, including the Nordhaven Sovereign Wealth Fund (Kingdom of Nordhaven, with aggregate commitments of $380 million in Fund IV-A Cayman and $500 million in Fund V-A Cayman) and Kestrel Pacific Insurance Group (Singapore, with aggregate commitments of €200 million in Fund IV-B Lux and €275 million in Fund V-B Lux). Importantly, neither the foreign sovereign immunity exemption under IRC § 892 nor the qualified foreign pension fund exemption under IRC § 897(l) is expected to shield these investors from FIRPTA taxation on gains attributable to USRPIs.
This memorandum should be read in conjunction with the related memoranda prepared as part of this engagement, and in particular the Tax Memorandum addressing IRC § 721(a) Contribution Analysis and the Tax Memorandum addressing IRC § 731 Distribution Analysis. The FIRPTA analysis set forth herein is ancillary to, but directly informs, the eight rulings sought from the Internal Revenue Service ("IRS") Office of the Associate Chief Counsel (International) ("CC:INTL"), with secondary jurisdiction at the Office of the Associate Chief Counsel (Passthroughs & Special Industries) ("CC:PSI"), in the private letter ruling ("PLR") request that Solara intends to submit. In particular, the FIRPTA conclusions bear upon PLR Ruling Request No. 7, which addresses IRC § 1446 withholding obligations for the Reorganization transactions.
The PLR submission is targeted for filing on or before August 15, 2025. The Reorganization's effective date is December 1, 2025, with the preliminary formation and contribution steps commencing on September 15, 2025. A pre-submission conference has been requested with CC:INTL Branch 1 for July 22, 2025, at which time the Service may raise questions regarding the FIRPTA implications of the Reorganization.
II. Scope and Limitations
This memorandum addresses only the U.S. federal income tax analysis under IRC § 897 (FIRPTA) and related provisions, including the interaction of FIRPTA with the partnership nonrecognition provisions of IRC §§ 721 and 731, the withholding provisions of IRC §§ 1445 and 1446, the foreign sovereign immunity provision of IRC § 892, and the qualified foreign pension fund exemption of IRC § 897(l). The analysis is confined to the specific factual circumstances of the Solara platform and the proposed Reorganization as described herein.
This memorandum does not address the tax laws of the Cayman Islands or the Grand Duchy of Luxembourg. The Cayman Islands tax analysis is being handled by Meridian Offshore Legal (Fiona McAllister, Partner, George Town, Grand Cayman), and the Luxembourg tax analysis is being handled by Veldhuis & Gérard S.à r.l. (Marc Gérard, Partner, Luxembourg). We have coordinated with both firms regarding the general structure of the Reorganization, but the conclusions set forth herein are limited to U.S. federal income tax matters and should not be interpreted as addressing the tax consequences of the Reorganization under any non-U.S. jurisdiction.
This memorandum does not constitute a comprehensive review of the IRC § 721 or IRC § 731 nonrecognition analysis applicable to the Reorganization. Those analyses are addressed in separate memoranda prepared as part of this engagement. Similarly, the anti-abuse analysis (including the step transaction doctrine and economic substance doctrine), the IRC § 367 inapplicability analysis, and the comprehensive IRC § 1446 withholding analysis are addressed in their respective memoranda. This memorandum references those analyses only to the extent necessary to evaluate the FIRPTA implications of the Reorganization.
The valuation conclusions and asset composition data referenced throughout this memorandum rely on fair market value appraisals being prepared by Redstone Advisory Group LLC (Marco DeLuca, Managing Director, New York). As of the date of this memorandum, the Redstone appraisals for NovaBright, Thorngate, Veridian, and the remaining portfolio companies have not been finalized. Accordingly, certain conclusions in this memorandum — particularly regarding the USRPHC status of NovaBright and the USRPI composition of Thorngate's assets — are preliminary and subject to revision upon receipt of the final appraisal reports. Financial data, including tax basis schedules and depreciation records, are being provided by Caldwell Pierce & Co. LLP (Helen Okamoto, Partner, San Francisco), Solara's independent auditor and tax return preparer. We have relied upon the accuracy and completeness of all financial data provided by Caldwell Pierce without independent verification.
The analysis set forth herein is based on current law and regulations as of the date of this memorandum, including the Internal Revenue Code, Treasury Regulations, published IRS guidance (Revenue Rulings, Revenue Procedures, Notices, and Announcements), and relevant judicial authority. We note that Congress has periodically considered modifications to the FIRPTA regime, including potential expansions of FIRPTA exemptions in connection with infrastructure investment incentives and digital infrastructure development. As of the date hereof, no such legislation has been enacted or is at an advanced stage of the legislative process sufficient to warrant reliance. However, we recommend monitoring legislative developments through the August 15, 2025 PLR submission date and adjusting the analysis and PLR representations as warranted.
III. Background — The Solara Fund Platform and Reorganization
A. Existing Structure
Solara Digital Infrastructure LP is a Delaware limited partnership founded on March 17, 2014, by Viktor Raines, who serves as Managing Partner and Founder. Solara manages approximately $14.7 billion in assets under management ("AUM") as of March 31, 2025, and is managed through its general partner, Solara Digital Infrastructure GP LLC, a Delaware limited liability company (Employer Identification Number 82-4917365). Solara's investment thesis focuses on private equity investments targeting digital infrastructure assets — including data centers, fiber-optic networks, edge computing platforms, and related telecommunications infrastructure — as well as enterprise software-as-a-service ("SaaS") platforms that serve the digital infrastructure ecosystem.
The Solara platform currently operates through six parallel fund vehicles organized across three jurisdictions — Delaware, the Cayman Islands, and Luxembourg — across two vintage fund families:
Fund IV Family (Vintage 2021):
Fund IV LP — A Delaware limited partnership with total commitments of $4.2 billion, approximately 72% deployed as of March 31, 2025. Fund IV LP is the domestic vehicle serving U.S. taxable investors.
Fund IV-A (Cayman) LP — A Cayman Islands exempted limited partnership with total commitments of $1.85 billion (EIN 98-6241503; Cayman Islands Monetary Authority registration MF-72491), approximately 72% deployed. Fund IV-A Cayman serves non-U.S. investors and certain U.S. tax-exempt investors seeking UBTI blocker treatment.
Fund IV-B (Luxembourg) SCSp — A Luxembourg société en commandite spéciale with total commitments of €1.15 billion (approximately $1.24 billion at a 1.08 EUR/USD exchange rate) (Registre de Commerce et des Sociétés B 248193), approximately 72% deployed. Fund IV-B Luxembourg serves European institutional investors, including those seeking specific Luxembourg treaty benefits and EU regulatory considerations.
Fund V Family (Vintage 2023):
Fund V LP — A Delaware limited partnership with total commitments of $5.6 billion, approximately 38% deployed as of March 31, 2025. Fund V LP is the domestic vehicle serving U.S. taxable investors.
Fund V-A (Cayman) LP — A Cayman Islands exempted limited partnership with total commitments of $2.45 billion (EIN 98-7891234; CIMA registration MF-89103), approximately 38% deployed. Fund V-A Cayman serves non-U.S. investors and certain U.S. tax-exempt investors.
Fund V-B (Luxembourg) SCSp — A Luxembourg société en commandite spéciale with total commitments of €1.38 billion (approximately $1.49 billion at a 1.08 EUR/USD exchange rate) (RCS B 271056), approximately 38% deployed. Fund V-B Luxembourg serves European institutional investors.
The offshore vehicles — i.e., the Cayman and Luxembourg fund vehicles — serve principally to accommodate non-U.S. investors seeking to avoid direct engagement with the U.S. partnership tax filing regime and to accommodate U.S. tax-exempt investors for whom direct partnership investment could generate unrelated business taxable income ("UBTI") under IRC § 512 through the use of so-called "Blocker" structures. The parallel fund structure has been effective in achieving these objectives, but the multiplication of vehicles has created significant operational complexity, duplicative compliance obligations, and administrative costs that the Reorganization is designed to eliminate.
B. Proposed Reorganization — Summary of Five Steps
The proposed Reorganization is a five-step transaction designed to consolidate the four offshore fund vehicles into a single master fund structure, while preserving the economic arrangements of all existing limited partners and maintaining the nonrecognition treatment that is critical to the transaction's viability. The five steps are as follows:
Step 1 — Formation of New Entities (September 15, 2025): Solara will form four new entities: (i) Solara Consolidated Master Fund GP LLC, a Delaware limited liability company that will serve as the general partner of the new master fund; (ii) Solara Consolidated Master Fund LP (the "Master Fund"), a Delaware limited partnership that will serve as the consolidated investment vehicle; (iii) Solara International Feeder (Cayman) LP (the "International Feeder"), a Cayman Islands exempted limited partnership that will serve as the feeder vehicle for non-U.S. investors; and (iv) Solara Tax-Exempt Feeder (Cayman) LP (the "Tax-Exempt Feeder"), a Cayman Islands exempted limited partnership that will serve as the feeder vehicle for U.S. tax-exempt investors. Form 8832 check-the-box elections will be filed for each entity to ensure partnership classification for U.S. federal income tax purposes.
Step 2 — Fund IV-A Cayman Contribution (October 1, 2025): Fund IV-A (Cayman) LP will contribute all of its portfolio assets — including its interests in NovaBright, Thorngate, and all other Fund IV-A portfolio investments — to the Master Fund in exchange for Master Fund LP interests. The aggregate fair market value of the contributed assets is $2.31 billion, with an aggregate adjusted tax basis of $1.62 billion, resulting in an aggregate built-in gain ("BIG") of approximately $690 million. The contribution is intended to qualify as a tax-free contribution under IRC § 721(a).
Step 3 — Fund IV-B Luxembourg Contribution (October 15, 2025): Fund IV-B (Luxembourg) SCSp will contribute all of its portfolio assets — including its interest in Crestline Cloud Solutions LLC and all other Fund IV-B portfolio investments — to the Master Fund in exchange for Master Fund LP interests. The aggregate fair market value of the contributed assets is $1.16 billion (€1.07 billion), with an aggregate adjusted tax basis of $844.6 million (€782 million), resulting in aggregate BIG of approximately $311 million (€288 million). This contribution is also intended to qualify under IRC § 721(a).
Step 4 — Fund V-A Cayman and Fund V-B Luxembourg Contributions (November 1, 2025): Fund V-A (Cayman) LP will contribute all of its portfolio assets — including its interests in Veridian Edge Computing Corp., Helix SaaS Holdings Ltd., and all other Fund V-A portfolio investments — to the Master Fund in exchange for Master Fund LP interests. The aggregate fair market value of Fund V-A's contributed assets is $2.89 billion, with an aggregate adjusted tax basis of $2.34 billion, resulting in aggregate BIG of approximately $550 million. Simultaneously, Fund V-B (Luxembourg) SCSp will contribute all of its portfolio assets to the Master Fund in exchange for Master Fund LP interests, with aggregate fair market value of $1.39 billion (€1.29 billion), aggregate adjusted tax basis of $1.23 billion (€1.14 billion), and aggregate BIG of approximately $162 million (€150 million). Both contributions are intended to qualify under IRC § 721(a).
Step 5 — Dissolution and Distribution (December 1, 2025): All 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 be dissolved. The Master Fund LP interests held by each dissolving vehicle will be distributed to the existing limited partners of that vehicle. Non-U.S. limited partners will roll their Master Fund LP interests into the International Feeder, and U.S. tax-exempt limited partners will roll their Master Fund LP interests into the Tax-Exempt Feeder. These distributions are intended to qualify for nonrecognition treatment under IRC § 731(a).
In the aggregate, the Reorganization involves the transfer of $7.75 billion in fair market value of portfolio assets (with an aggregate adjusted tax basis of $6.03 billion and aggregate BIG of $1.72 billion), together with $1.34 billion of aggregate liabilities assumed by the Master Fund. A total of twenty-three (23) portfolio companies are being contributed to the Master Fund — eleven (11) from the Fund IV vehicles and twelve (12) from the Fund V vehicles.
C. Key Non-U.S. Investors Affected by FIRPTA Analysis
The FIRPTA analysis is of particular significance to the following non-U.S. investors in the Solara offshore vehicles:
Nordhaven Sovereign Wealth Fund (the "Nordhaven SWF"). The Nordhaven SWF is the sovereign wealth fund of the Kingdom of Nordhaven, a Nordic country, and is one of the largest single investors in the Solara platform. The Nordhaven SWF has committed $380 million to Fund IV-A (Cayman) LP and $500 million to Fund V-A (Cayman) LP, for total commitments of $880 million across the two Cayman vehicles. The primary contact at the Nordhaven SWF is Anders Bjørkman, Head of Alternative Investments. The Nordhaven SWF is independently advised by Bramhall & Quelwick LLP (Jason Tremaine, Partner, San Francisco). The Nordhaven SWF's FIRPTA exposure is of particular concern because of the interaction between IRC § 892 (which provides a general exemption from U.S. taxation for income of foreign governments) and IRC § 897 (which overrides that exemption with respect to gains from USRPIs). We have been in contact with Mr. Tremaine regarding the Nordhaven SWF's FIRPTA position and anticipate coordinating closely with Bramhall & Quelwick on the FIRPTA disclosures in the LP Tax Impact Summary Letter.
Kestrel Pacific Insurance Group ("Kestrel Pacific"). Kestrel Pacific is a Singapore-based insurance holding company that has committed €200 million to Fund IV-B (Luxembourg) SCSp and €275 million to Fund V-B (Luxembourg) SCSp, for total commitments of €475 million (approximately $513 million at 1.08 EUR/USD) across the two Luxembourg vehicles. The primary contact at Kestrel Pacific is Christine Leung, Senior Portfolio Manager. The Singapore-U.S. income tax treaty does not override FIRPTA, and Kestrel Pacific's FIRPTA exposure on gains attributable to USRPIs will need to be addressed in connection with the Reorganization and any subsequent portfolio company dispositions.
In addition to the Nordhaven SWF and Kestrel Pacific, numerous other non-U.S. limited partners invest through the Cayman and Luxembourg vehicles. While the specific FIRPTA exposure of each non-U.S. limited partner will depend on its individual facts and circumstances (including any applicable treaty positions), the analysis set forth in this memorandum applies generally to all non-U.S. limited partners in the Solara offshore vehicles.
IV. Legal Framework — IRC § 897 and FIRPTA
A. Overview of FIRPTA Regime
The Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") was enacted to address the perceived inequity in the taxation of foreign persons' gains from dispositions of U.S. real property. Prior to FIRPTA's enactment, non-U.S. persons could often dispose of U.S. real property interests without incurring U.S. income tax liability, either because such gains were treated as capital gains not effectively connected with a U.S. trade or business or because applicable income tax treaties exempted such gains from U.S. taxation. FIRPTA fundamentally altered this framework by treating gains from the disposition of USRPIs as effectively connected income ("ECI") subject to U.S. income tax, regardless of whether the non-U.S. person was engaged in a U.S. trade or business.
FIRPTA is codified principally in IRC § 897, which establishes the substantive rule treating gains from USRPI dispositions as ECI, and IRC § 1445, which establishes the withholding mechanism to ensure collection of the resulting tax liability. The statutory framework has been supplemented by extensive Treasury Regulations, including the permanent regulations under Treas. Reg. §§ 1.897-1 through 1.897-9 and the temporary regulations under Treas. Reg. §§ 1.897-5T through 1.897-7T, as well as by judicial authority and published IRS guidance.
Under IRC § 897(a)(1), any gain or loss of a nonresident alien individual or foreign corporation from the disposition of a USRPI is taken into account as if the taxpayer were engaged in a trade or business within the United States during the taxable year and as if such gain or loss were effectively connected with such trade or business. The term "disposition" for purposes of IRC § 897(a)(1) includes any disposition within the meaning of IRC § 1001 — i.e., a sale, exchange, or other disposition — as well as any other transaction treated as a disposition under the Treasury Regulations, including certain distributions, liquidations, and other transfers.
B. Definition of USRPI — IRC § 897(c)
The definition of "United States real property interest" under IRC § 897(c) is the cornerstone of the FIRPTA analysis. Under IRC § 897(c)(1)(A), the term USRPI includes two categories of interests:
(i) An "interest in real property located in the United States" (as defined in the Treasury Regulations), including land, improvements, and associated personal property; and
(ii) Any interest (other than an interest solely as a creditor) in a domestic corporation that is a "United States real property holding corporation" ("USRPHC").
The first category — interests in real property located in the United States — encompasses direct ownership of, and other interests in, U.S. real property. Under Treas. Reg. § 1.897-1(b), an "interest in real property" includes fee ownership interests, co-ownership interests, leaseholds, options to acquire real property, and any interest other than an interest solely as a creditor in any entity (whether domestic or foreign) to the extent such entity holds USRPIs.
The term "real property" is defined in Treas. Reg. § 1.897-1(b)(1) to include: (a) land; (b) unsevered natural products of the land (e.g., growing crops, timber, mines, wells, and other natural deposits); (c) improvements, meaning buildings, other inherently permanent structures, and their structural components; and (d) personal property associated with the use of real property. The definition of "improvements" and "inherently permanent structures" is critical to the analysis of data center facilities, fiber-optic networks, and other digital infrastructure assets, as discussed in detail in Section V below.
The second category — interests in USRPHCs — is defined by reference to the asset composition test set forth in IRC § 897(c)(2). Under IRC § 897(c)(2), a corporation is a USRPHC if the fair market value of its USRPIs equals or exceeds fifty percent (50%) of the aggregate fair market value of three categories of assets: (a) its USRPIs, (b) its interests in real property located outside the United States, and (c) its other assets used or held for use in a trade or business (the "50% asset test"). This test is applied on a determination date, which generally is the date on which the corporation last acquired or disposed of a USRPI or, if later, the last date on which the fair market value of its assets was determined for another purpose.
The significance of the USRPHC classification is that any interest in a domestic corporation that is a USRPHC — including stock in such corporation — is itself a USRPI. Accordingly, a non-U.S. person who disposes of stock in a USRPHC is treated as disposing of a USRPI, and the resulting gain or loss is treated as ECI under IRC § 897(a)(1).
C. Look-Through Rules for Partnerships — § 897(g) and Treas. Reg. § 1.897-7T
Partnerships are treated as look-through entities for purposes of FIRPTA. Under IRC § 897(g), any gain recognized by a non-U.S. person on the disposition of an interest in a partnership is treated as gain from the disposition of a USRPI to the extent that such gain is attributable to USRPIs held by the partnership. This look-through treatment reflects the general principle that partnerships are not separate taxpaying entities for U.S. federal income tax purposes; rather, each partner is treated as owning a proportionate share of the partnership's underlying assets.
The temporary regulations under Treas. Reg. § 1.897-7T elaborate on the look-through treatment of partnerships. Under these regulations, a non-U.S. partner's share of gain or loss on USRPIs held by the partnership (whether from the partnership's direct disposition of the USRPI or from the partner's disposition of its partnership interest) is subject to FIRPTA. The regulations provide that the gain attributable to USRPIs is determined by reference to the partner's share of the partnership's unrealized gain in its USRPIs, determined under the principles of IRC § 704.
The look-through treatment of partnerships has been supplemented by the enactment of IRC § 864(c)(8), which was added by the Tax Cuts and Jobs Act of 2017 (Pub. L. 115-97). Under IRC § 864(c)(8), gain or loss recognized by a non-U.S. person on the sale, exchange, or other disposition of an interest in a partnership engaged in a U.S. trade or business is treated as ECI to the extent the gain or loss is attributable to assets of the partnership that are used or held for use in connection with the conduct of such trade or business. The scope of IRC § 864(c)(8) is broader than FIRPTA alone, as it applies to all assets used in a U.S. trade or business (not merely USRPIs). However, the FIRPTA provisions and IRC § 864(c)(8) overlap with respect to USRPIs held by partnerships engaged in a U.S. trade or business.
The interaction between IRC § 897(g) and IRC § 864(c)(8) is relevant to the Solara Reorganization because the Master Fund — as a Delaware limited partnership holding portfolio company investments in U.S. businesses — may be treated as engaged in a U.S. trade or business, in which case both the FIRPTA provisions and IRC § 864(c)(8) would apply to dispositions of partnership interests by non-U.S. limited partners. For purposes of this memorandum, however, we focus on the FIRPTA analysis under IRC § 897 and reference IRC § 864(c)(8) only to the extent it interacts with the FIRPTA framework.
D. Interaction with § 1446 Withholding
The FIRPTA regime is enforced through withholding mechanisms established under IRC §§ 1445 and 1446. The withholding analysis is addressed in detail in the separate Tax Memorandum — IRC § 1446 Withholding Analysis prepared as part of this engagement. For purposes of this memorandum, we note the following key provisions:
IRC § 1446(a) requires a partnership engaged in a U.S. trade or business to withhold tax on the effectively connected taxable income ("ECTI") allocable to its foreign partners. To the extent that a partnership recognizes gain from the disposition of a USRPI, such gain constitutes ECI under IRC § 897(a)(1), and the allocable share of such gain to foreign partners is subject to withholding under IRC § 1446(a).
IRC § 1446(f), enacted by the Tax Cuts and Jobs Act of 2017, imposes withholding obligations on transfers of interests in partnerships engaged in a U.S. trade or business. Under IRC § 1446(f)(1), the transferee of a partnership interest is required to withhold ten percent (10%) of the amount realized on the transfer if any portion of the gain on the transfer would be treated as ECI under IRC § 864(c)(8). This withholding obligation extends to transfers that trigger FIRPTA gain under IRC § 897(g).
The interplay between FIRPTA dispositions generating ECI and the resulting withholding obligations under both IRC §§ 1445 and 1446 is a critical compliance consideration for the post-Reorganization structure, as discussed in Section VI.C below.
E. Nonrecognition Exceptions — § 897(e)
IRC § 897(e)(1) provides that, to the extent that a nonrecognition provision of the Code would otherwise apply to a transaction involving a USRPI, the nonrecognition treatment is preserved — but only to the extent provided in regulations. This provision reflects Congress's intent that FIRPTA should not, in general, override the nonrecognition provisions of the Code, but that the Treasury Department should have authority to prescribe rules ensuring that the USRPI character is preserved through nonrecognition transactions, thereby preventing the use of such transactions to strip USRPIs of their FIRPTA taint.
The temporary regulations under Treas. Reg. § 1.897-6T address specific nonrecognition transactions and their treatment under FIRPTA. Of particular relevance to the Reorganization are the provisions governing contributions to partnerships under IRC § 721 and distributions from partnerships under IRC § 731.
Under Treas. Reg. § 1.897-6T(b), a transfer of a USRPI to a partnership in exchange for a partnership interest under IRC § 721(a) is generally treated as a nonrecognition transaction for FIRPTA purposes. Gain is not recognized on the contribution, but the contributing partner's interest in the partnership is treated as a USRPI to the extent attributable to the USRPIs contributed. In other words, the USRPI taint "carries through" the nonrecognition transaction and attaches to the partnership interest received by the contributing partner.
Similarly, distributions of USRPIs (or interests tainted as USRPIs) by a partnership to its partners under IRC § 731 are generally treated as nonrecognition transactions for FIRPTA purposes. The distributed property retains its USRPI character in the hands of the distributee partner.
The key analytical question for the Reorganization is whether the nonrecognition framework of IRC §§ 721 and 731, as implemented by IRC § 897(e) and Treas. Reg. § 1.897-6T, applies to prevent the recognition of FIRPTA gain at each step of the five-step transaction. As discussed in Section VI below, we conclude that the nonrecognition framework does apply, but that the USRPI taint carries through the Reorganization to the Master Fund LP interests and ultimately to the International Feeder LP interests held by non-U.S. limited partners.
V. Analysis of Specific Portfolio Company Interests as USRPIs
A. Analytical Framework
The USRPI analysis for each portfolio company involves a two-part inquiry:
First, does the portfolio company hold "interests in real property located in the United States" within the meaning of IRC § 897(c)(1)(A)(i) and Treas. Reg. § 1.897-1(b)? This inquiry requires examination of the specific assets held by the portfolio company — including land, buildings, structural components, leasehold interests, easements, and associated personal property — to determine whether and to what extent they constitute interests in U.S. real property.
Second, if the portfolio company is a domestic corporation, does it qualify as a USRPHC under the 50% asset test of IRC § 897(c)(2)? This inquiry requires a comparison of the fair market value of the corporation's USRPIs against the aggregate fair market value of all three asset categories (USRPIs, foreign real property interests, and other business assets).
For portfolio companies organized as partnerships (or as disregarded entities), the analysis applies a look-through approach, examining the partnership's or entity's underlying assets to determine the extent of USRPI exposure.
A critical threshold question that pervades the analysis of Solara's portfolio is whether data center facilities and fiber-optic network infrastructure constitute "real property" under FIRPTA. This question arises because the FIRPTA regulations' definition of "real property" — while broadly construed to include land, improvements, inherently permanent structures, and structural components — was drafted primarily with traditional real estate in mind and does not specifically address the technology-intensive infrastructure assets that characterize Solara's portfolio. As discussed in the individual portfolio company analyses below, the classification of these assets requires careful application of the regulatory definitions and analogies to IRS guidance in related contexts.
B. NovaBright Data Systems Inc.
Entity Type: Delaware corporation.
Business: NovaBright is a data center operator that owns and operates multiple data center facilities across the United States. NovaBright's facilities house servers, networking equipment, and related IT infrastructure for enterprise clients, providing colocation, managed hosting, and cloud computing services.
Valuation and Holding: NovaBright has an aggregate fair market value of $890 million, an aggregate adjusted tax basis of $520 million, and a resulting aggregate built-in gain of $370 million. Fund IV-A (Cayman) LP holds a sixty percent (60%) equity interest in NovaBright, representing $534 million of the $890 million FMV. Fund IV LP (the domestic Delaware vehicle) holds the remaining forty percent (40%) equity interest.
Real Property Analysis:
NovaBright's data center operations involve significant physical real property assets that must be analyzed under the USRPI framework.
Data Center Buildings. NovaBright operates data center facilities that consist of purpose-built or renovated buildings designed to house computing equipment, including server halls, control rooms, mechanical and electrical plant rooms, administrative offices, and loading docks. These buildings are permanent structures affixed to land and clearly constitute "improvements" within the meaning of Treas. Reg. § 1.897-1(b)(1). The classification of data center buildings as real property for FIRPTA purposes is well-established and not in dispute.
Land Underlying Data Centers. To the extent NovaBright owns the land on which its data center facilities are situated, such land constitutes an "interest in real property located in the United States" under IRC § 897(c)(1)(A)(i). Based on information provided by Caldwell Pierce & Co. LLP, NovaBright owns the land underlying at least four of its principal data center campuses, with the remaining facilities located on leased land. The owned land interests are unquestionably USRPIs.
Structural Components and Associated Infrastructure. A more nuanced question arises with respect to the infrastructure systems integral to NovaBright's data center operations, including cooling systems (CRAC units, chillers, cooling towers), power distribution systems (uninterruptible power supplies, transformers, switchgear, backup generators), raised flooring systems, fire suppression systems, and physical security infrastructure. The analysis turns on whether these systems constitute "structural components" of the data center buildings — in which case they would be part of the "improvements" that are real property under FIRPTA — or whether they constitute personal property that is merely associated with the buildings.
By analogy to the definition of "structural components" under Treas. Reg. § 1.48-1(e)(2) (applicable in the investment tax credit context), structural components include items such as walls, partitions, floors, ceilings, stairways, plumbing, central heating and cooling systems, electrical wiring, and other components relating to the operation or maintenance of a building. Under this framework, data center cooling systems, power distribution infrastructure, and raised flooring systems are likely "structural components" of the data center buildings to the extent they are permanently installed and integral to the building's function. However, certain modular or readily removable systems — such as portable cooling units or temporary power distribution equipment — may be classified as personal property rather than structural components.
The classification of these infrastructure systems is significant because it directly affects the numerator of the 50% asset test under IRC § 897(c)(2). Systems classified as structural components are included in the fair market value of NovaBright's USRPIs; systems classified as personal property are excluded from the USRPI category and counted as "other assets used or held for use in a trade or business."
Servers, Networking Equipment, and IT Hardware. NovaBright owns a substantial inventory of servers, networking switches, routers, storage arrays, and other IT hardware deployed within its data center facilities. These assets are generally treated as personal property for tax purposes — they are tangible personal property depreciable under IRC § 1245 — and do not constitute "real property" for FIRPTA purposes. Accordingly, the fair market value of NovaBright's IT hardware is excluded from the USRPI numerator in the 50% asset test.
Leasehold Interests. To the extent NovaBright leases (rather than owns) any of its data center facilities or the land underlying such facilities, the leasehold interests in such U.S. real property constitute USRPIs under Treas. Reg. § 1.897-1(b). The characterization of NovaBright's leasehold interests will depend on the specific terms and duration of the applicable leases, but long-term leases of real property are generally treated as interests in real property for FIRPTA purposes.
USRPHC Test (50% Asset Test):
The critical question for NovaBright is whether the fair market value of its USRPIs — including owned land, data center buildings, structural components, and leasehold interests — equals or exceeds fifty percent (50%) of the aggregate fair market value of all three categories of assets under IRC § 897(c)(2).
The Redstone Advisory Group LLC appraisal, when completed, will provide the asset-level breakdown necessary to apply the 50% asset test. The allocation methodology is expected to assign separate fair market values to: (a) land and inherently permanent structures (real property); (b) structural components that are integral to the buildings (real property); (c) IT equipment, servers, and networking hardware (personal property); (d) customer contracts and customer relationships (intangible assets); (e) intellectual property and proprietary technology (intangible assets); (f) goodwill and going-concern value (intangible assets); and (g) working capital and other assets.
Our preliminary assessment, based on discussions with Marco DeLuca at Redstone Advisory Group and a review of publicly available valuation benchmarks for data center companies, is that NovaBright likely qualifies as a USRPHC. Data center companies typically derive a significant portion of their enterprise value from the physical data center infrastructure — land, buildings, and structural components — which can constitute well in excess of fifty percent of total asset value, particularly for operators that own (rather than lease) their facilities. However, we note that data center companies also frequently possess substantial intangible asset values, including customer relationships, contractual backlog, proprietary management software, and going-concern goodwill. In certain cases, particularly for data center operators with significant technology differentiation or large recurring revenue streams, the intangible asset values may be sufficient to push the USRPI ratio below the fifty percent threshold.
Until the Redstone appraisal is finalized, we cannot definitively determine NovaBright's USRPHC status. However, for purposes of this memorandum and the PLR submission, we recommend assuming that NovaBright is a USRPHC and that the stock interest held by Fund IV-A Cayman is a USRPI. This conservative approach ensures that the PLR representations and the LP Tax Impact Summary Letter adequately address the FIRPTA exposure.
Significance for the Reorganization: If NovaBright is a USRPHC, then the sixty percent (60%) stock interest held by Fund IV-A (Cayman) LP constitutes a USRPI under IRC § 897(c)(1)(A)(ii). The contribution of this interest by Fund IV-A Cayman to the Consolidated Master Fund LP in Step 2 of the Reorganization triggers the IRC § 897(e) nonrecognition exception analysis. As discussed in Section VI.A below, the contribution qualifies for nonrecognition under IRC § 721(a), and the nonrecognition treatment is preserved by IRC § 897(e)(1) and Treas. Reg. § 1.897-6T(b). However, the USRPI taint carries through to the Master Fund LP interest received by Fund IV-A Cayman, and ultimately to the interests in the International Feeder held by non-U.S. limited partners of Fund IV-A Cayman (including the Nordhaven SWF).
C. Thorngate Fiber Networks LP
Entity Type: Delaware limited partnership.
Business: Thorngate is a fiber-optic network operator that owns and operates a regional fiber-optic network spanning approximately 12,000 route miles across the mid-Atlantic and southeastern United States. Thorngate's network consists of underground and aerial fiber-optic cables, conduit, splice boxes, repeater stations (also known as regeneration huts), optical line amplifiers, and associated physical infrastructure. Thorngate provides dark fiber and lit fiber services to enterprise customers, wireless carriers, and government agencies.
Valuation and Holding: Thorngate has an aggregate fair market value of $670 million, an aggregate adjusted tax basis of $490 million, and a resulting aggregate built-in gain of $180 million. Fund IV-A (Cayman) LP holds a one hundred percent (100%) interest in Thorngate.
Real Property Analysis:
The real property analysis for Thorngate is more complex than for NovaBright because the assets at issue — fiber-optic cables, conduit, and associated telecommunications infrastructure — do not fit neatly into the traditional FIRPTA categories of land, buildings, and improvements. The analysis requires careful consideration of regulatory definitions, analogies to IRS guidance in related contexts, and the evolving understanding of "real property" in the context of modern telecommunications infrastructure.
Fiber-Optic Cables and Conduit. The core question is whether fiber-optic cables — consisting of glass or plastic optical fibers housed in protective conduit — constitute "interests in real property" under FIRPTA. Fiber-optic cables are physical assets that are typically installed underground (in buried conduit or direct-buried configurations) or aerially (strung on utility poles pursuant to pole attachment agreements). Once installed, they are intended to remain in place for the useful life of the network and are not readily removable without significant cost and disruption. Conduit — the protective tubing through which fiber-optic cables are threaded — is similarly a permanent underground installation.
Under Treas. Reg. § 1.897-1(b)(1), "improvements" include "inherently permanent structures" and their structural components. The question is whether fiber-optic cables and conduit constitute "inherently permanent structures." The regulations do not specifically enumerate fiber-optic cables or conduit among the examples of inherently permanent structures (which include buildings, bridges, tunnels, roadbeds, and similar structures), but the list is illustrative rather than exhaustive.
An important cross-reference is to the classification of fiber-optic cable under the depreciation provisions. Fiber-optic cable has historically been treated as IRC § 1245 property (tangible personal property) for depreciation purposes, rather than as IRC § 1250 property (real property). This classification reflects the IRS's longstanding treatment of utility distribution infrastructure as personal property in the depreciation context. The § 1245 classification, while not dispositive for FIRPTA purposes, is a significant factor weighing against the characterization of fiber-optic cable as real property for FIRPTA. As a general matter, the IRS has been reluctant to treat property as "real property" for one purpose and "personal property" for another purpose within the same statutory framework, although the FIRPTA regulations are not expressly linked to the depreciation classification.
IRS Guidance on Telecommunications Infrastructure. In Rev. Rul. 2011-15, the IRS addressed the classification of certain cell tower structures for purposes of the REIT provisions, concluding that cell towers constituted "real property" under the REIT rules. While Rev. Rul. 2011-15 was issued in the REIT context and not the FIRPTA context, the analysis provides useful analogies. The ruling considered whether cell towers — which are permanently affixed to the ground and not designed to be moved — constitute "inherently permanent structures." The IRS concluded that they do, based on the structures' permanence, the manner of their affixation, and the expectation that they would remain in place indefinitely.
Extending this analysis to fiber-optic networks, underground conduit and fiber-optic cable that is permanently installed and not intended to be moved might similarly be characterized as an "inherently permanent structure." However, the analogy is imperfect: cell towers are freestanding vertical structures visible from the surface, while fiber-optic cable is a linear underground utility asset more akin to pipelines or electrical wiring.
Expanded "Real Property" Definition Under IRC § 1031 Regulations. The 2020 final regulations under IRC § 1031 (Treas. Reg. § 1.1031(a)-3(a)(2)) adopted an expanded definition of "real property" for purposes of the like-kind exchange provisions. Under these regulations, "inherently permanent structures" include buildings, parking facilities, bridges, tunnels, roadways, swimming pools, stationary and permanently installed industrial equipment, and other structures that are "ordinarily attached to real property permanently, and ordinarily will remain affixed for an indefinite period of time." The regulations also identify "structural components" of inherently permanent structures, including wiring, plumbing, central heating and air-conditioning systems, fire suppression systems, and similar components.
While the § 1031 regulations are not directly applicable to the FIRPTA analysis, they provide a useful analytical framework. Fiber-optic conduit installed underground, particularly in owned rights-of-way, might be characterized as an "inherently permanent structure" under this broader definition. However, the fiber-optic cable threaded through the conduit — as a discrete asset that can be replaced, upgraded, or removed independently of the conduit — is more difficult to classify as real property.
Rights-of-Way and Easements. Thorngate's fiber-optic network traverses thousands of miles of public and private land, and Thorngate holds range property interests that provide the legal right to install and maintain its network. These interests include:
(a) Fee ownership of land on which network operations centers ("NOCs"), regeneration huts, and equipment shelters are sited;
(b) Permanent easements across private land, granting Thorngate the right to install, maintain, and operate fiber-optic cables and conduit;
(c) Indefeasible rights of use ("IRUs") — long-term (typically 20- to 30-year) contractual rights to use fiber strands within a third-party conduit system, which may or may not constitute interests in real property depending on their characterization under state and federal law; and
(d) Government franchise agreements and right-of-way permits authorizing Thorngate to install infrastructure in public rights-of-way (e.g., along highways and roadways).
Fee ownership of land and permanent easements across private land are unquestionably "interests in real property located in the United States" under IRC § 897(c)(1)(A)(i). These interests constitute USRPIs regardless of whether the fiber-optic cable itself is classified as real or personal property.
The classification of IRUs is more complex. An IRU that conveys a possessory interest in real property — i.e., an interest in the conduit itself, as opposed to a mere service agreement — may constitute a leasehold interest in real property and therefore a USRPI. However, an IRU structured as a capacity agreement (granting the right to use specific fiber strands without conveying any possessory interest in the underlying infrastructure) may be classified as a service contract or intangible asset rather than an interest in real property. The specific terms of Thorngate's IRU agreements will need to be reviewed to make this determination.
Government franchise agreements and right-of-way permits, while they grant Thorngate the right to access and use public land, may not constitute "interests in real property" under FIRPTA because they are typically revocable licenses or permits rather than possessory interests. However, the analysis depends on the specific terms and duration of each agreement.
Regeneration Facilities and Network Operations Centers. Thorngate owns a number of physical facilities associated with its fiber-optic network, including regeneration huts (small buildings housing optical amplification and regeneration equipment), network operations centers, and equipment shelters. To the extent Thorngate owns the land and buildings associated with these facilities, they constitute USRPIs. The equipment housed within these facilities (optical amplifiers, regenerators, routers, switches) is generally treated as personal property for FIRPTA purposes.
Partnership Look-Through Analysis:
Because Thorngate is organized as a Delaware limited partnership, the USRPI analysis applies a look-through approach under IRC § 897(g) and Treas. Reg. § 1.897-7T. Rather than applying the 50% asset test applicable to corporations, the analysis examines the aggregate value of real property interests held by the partnership and compares them to the partnership's total asset value.
The aggregate value of Thorngate's real property interests includes: (a) owned land; (b) permanent easements; (c) buildings and permanent structures (regeneration huts, NOCs); and (d) to the extent classified as real property, underground conduit infrastructure. The aggregate value of Thorngate's non-real-property assets includes: (a) fiber-optic cable (to the extent classified as personal property); (b) telecommunications equipment; (c) customer contracts and customer relationships; (d) intellectual property; (e) goodwill and going-concern value; and (f) working capital.
Our preliminary assessment is that the real property component of Thorngate's assets — while material — likely does not predominate over the personal property and intangible asset components. Fiber-optic network operators derive significant value from their customer relationships, contractual backlog, network design and topology (Intellectual property), and the going-concern value of the assembled network as a functioning system. These intangible asset values, combined with the personal property classification of the fiber-optic cable itself, are likely to result in a real property ratio below fifty percent. However, the relative proportions will depend heavily on the Redstone Advisory Group appraisal, and we cannot reach a definitive conclusion until that appraisal is completed.
Significance for the Reorganization: Fund IV-A (Cayman) LP's one hundred percent (100%) interest in Thorngate is being contributed to the Master Fund in Step 2 of the Reorganization. To the extent Thorngate's underlying assets include USRPIs, the contributing partner's interest in the Master Fund will be tainted as a USRPI under IRC § 897(e) and Treas. Reg. § 1.897-6T(b), as discussed in Section VI.A. The contribution itself qualifies for nonrecognition under IRC § 721(a) and IRC § 897(e), and no current gain recognition results.
D. Veridian Edge Computing Corp.
Entity Type: Delaware corporation.
Business: Veridian Edge Computing Corp. ("Veridian") designs, deploys, and operates edge computing infrastructure, including micro data centers, network nodes deployed at cell tower base stations, and small-footprint computing facilities located in close proximity to end users. Veridian's business model emphasizes rapid deployment of modular computing infrastructure at the network edge, leveraging partnerships with wireless carriers and internet service providers.
Valuation and Holding: Veridian has an aggregate fair market value of $1.12 billion, an aggregate adjusted tax basis of $780 million, and a resulting aggregate built-in gain of $340 million. Fund V-A (Cayman) LP holds a fifty-five percent (55%) equity interest in Veridian, representing approximately $616 million of the $1.12 billion FMV. Fund V LP (the domestic Delaware vehicle) holds the remaining forty-five percent (45%) equity interest.
Real Property Analysis:
Veridian's edge computing business model is significantly more asset-light than NovaBright's data center operations. Veridian's computing infrastructure consists of micro data centers and network nodes that are typically installed at third-party cell tower base stations, in leased space within telecommunications facilities, or in small modular enclosures that may or may not be permanently affixed to real property.
Leased vs. Owned Facilities. Based on available information, Veridian does not own significant real property. Its edge computing nodes are deployed at leased locations, typically under short- to medium-term lease agreements with wireless carriers, tower companies, and commercial landlords. Veridian's headquarters and administrative offices are also leased. The leasehold interests held by Veridian may constitute interests in real property, but the short-term nature and limited value of these interests relative to Veridian's total asset base suggest that they do not represent a significant portion of enterprise value.
Equipment and Technology. Veridian's primary assets consist of: (a) servers, networking equipment, and power systems deployed at edge computing nodes; (b) proprietary edge computing software and orchestration platforms; (c) customer contracts and service agreements; (d) intellectual property and patents related to edge computing technology; and (e) goodwill and going-concern value. These assets are predominantly personal property and intangible assets, not real property for FIRPTA purposes.
USRPHC Test:
Our preliminary expectation is that Veridian is less likely to qualify as a USRPHC than NovaBright. The asset-light edge computing model, with its emphasis on leased locations and proportionally greater technology and intellectual property value, suggests that the fair market value of Veridian's USRPIs is well below the fifty percent threshold. However, as with NovaBright and Thorngate, the final determination requires the asset-level appraisal from Redstone Advisory Group.
Significance for the Reorganization: Veridian's fifty-five percent (55%) interest held by Fund V-A (Cayman) LP is being contributed to the Master Fund in Step 4 of the Reorganization. If Veridian is not a USRPHC, its stock does not constitute a USRPI, and the FIRPTA implications of the contribution are minimal. If, contrary to our preliminary expectation, Veridian is a USRPHC, the analysis and conclusions would mirror those applicable to NovaBright.
E. Crestline Cloud Solutions LLC
Entity Type: Delaware limited liability company, classified as a disregarded entity for U.S. federal income tax purposes (wholly owned by Fund IV-B (Luxembourg) SCSp).
Business: Crestline Cloud Solutions LLC ("Crestline") operates a SaaS platform providing cloud-based enterprise resource planning and workflow automation solutions to mid-market commercial clients.
Valuation and Holding: Crestline has an aggregate fair market value of €340 million (approximately $367 million at a 1.08 EUR/USD exchange rate), an aggregate adjusted tax basis of €195 million (approximately $211 million), and a resulting aggregate built-in gain of €145 million (approximately $156 million). Fund IV-B (Luxembourg) SCSp holds a one hundred percent (100%) interest in Crestline.
Real Property Analysis:
As a SaaS platform operator, Crestline's assets consist primarily of: (a) proprietary software and technology platforms; (b) customer contracts, customer relationships, and subscription revenue streams; (c) intellectual property, including patents, trademarks, and copyrights; (d) working capital; and (e) goodwill and going-concern value. Crestline does not own significant real property. Its computing infrastructure is cloud-hosted (using third-party cloud providers), and its office space is leased under conventional commercial leases. The minimal real property interests (if any) held by Crestline — limited to minor leasehold interests in office space — are de minimis relative to total asset value.
Preliminary Conclusion: Crestline does not hold significant USRPIs and would not qualify as a USRPHC under the fifty percent asset test. Because Crestline is classified as a disregarded entity for U.S. tax purposes, the analysis focuses on the underlying assets rather than on the entity itself. The FIRPTA exposure from Crestline is negligible.
Significance for the Reorganization: The contribution of Crestline by Fund IV-B Luxembourg SCSp to the Master Fund in Step 3 does not give rise to any meaningful FIRPTA exposure. The resulting Master Fund LP interest received by Fund IV-B Luxembourg is not tainted as a USRPI by reason of the Crestline contribution.
F. Helix SaaS Holdings Ltd.
Entity Type: Cayman Islands exempted company.
Business: Helix SaaS Holdings Ltd. ("Helix") is a holding company that owns interests in multiple SaaS operating subsidiaries, primarily focused on cybersecurity, data analytics, and digital marketing technology platforms.
Valuation and Holding: Helix has an aggregate fair market value of $445 million, an aggregate adjusted tax basis of $310 million, and a resulting aggregate built-in gain of $135 million. Fund V-A (Cayman) LP holds a one hundred percent (100%) interest in Helix.
Real Property Analysis:
As a threshold matter, Helix is a foreign corporation organized under the laws of the Cayman Islands. Under IRC § 897(c)(1)(A)(ii), only interests in domestic corporations that are USRPHCs are treated as USRPIs. An interest in a foreign corporation is not itself a USRPI, regardless of whether the foreign corporation holds USRPIs. Accordingly, the stock of Helix is not a USRPI.
However, the analysis does not end there. If Helix holds interests in U.S. subsidiaries that are themselves USRPHCs, the look-through principles of FIRPTA may apply to the extent of Helix's indirect ownership of USRPIs through its U.S. subsidiaries. Based on available information, Helix's operating subsidiaries are primarily SaaS businesses with minimal real property holdings. Their assets consist predominantly of software, intellectual property, customer contracts, and working capital. We do not expect any of Helix's U.S. subsidiaries to qualify as USRPHCs, but this conclusion is subject to confirmation through the Redstone Advisory Group appraisal process.
Preliminary Conclusion: Helix itself is not a USRPI because it is a foreign corporation. Its underlying SaaS-focused assets and subsidiaries are unlikely to hold significant USRPIs or to qualify as USRPHCs. The FIRPTA exposure from Helix is negligible.
Significance for the Reorganization: The contribution of Helix by Fund V-A (Cayman) LP to the Master Fund in Step 4 does not give rise to any meaningful FIRPTA exposure.
G. Remaining 18 Portfolio Companies
Across the remaining eighteen (18) portfolio companies in the Solara platform — six (6) ad

MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

Record

Parties

Dates

Amounts