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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

This memorandum is a privileged and confidential communication prepared by Calderwood & Harkness LLP at the request of its client, Solara Digital Infrastructure LP, and is protected from disclosure by the attorney-client privilege and the work product doctrine. This memorandum is not intended to be used, and may not be used, by any other party for any purpose, including but not limited to the avoidance of penalties that may be imposed under the Internal Revenue Code.

TAX MEMORANDUM

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I. Executive Summary

This memorandum analyzes whether any withholding obligation arises under Section 1446(a) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), in connection with the proposed five-step reorganization of the Solara Digital Infrastructure LP fund platform (the "Reorganization"), with particular focus on Steps 2 through 5 of the Reorganization. This memorandum also addresses the potential applicability of IRC § 1446(f), which was added to the Code by the Tax Cuts and Jobs Act of 2017 (the "TCJA"), to the various steps of the Reorganization. This analysis supports Ruling 7 as requested in the private letter ruling ("PLR") submission to the Internal Revenue Service ("IRS") Office of the Associate Chief Counsel (International) ("CC:INTL"), with secondary jurisdiction in the Office of the Associate Chief Counsel (Passthroughs and Special Industries) ("CC:PSI").

Conclusion. Based on the analysis set forth herein, and subject to the assumptions, qualifications, and contingencies described in this memorandum, we conclude that no withholding under IRC § 1446(a) is required on:

(i) The contributions of portfolio assets by the four Legacy Offshore Vehicles (as defined below) to Solara Consolidated Master Fund LP (the "Consolidated Master Fund LP") described in Steps 2 through 4 of the Reorganization, because these contributions constitute nonrecognition transactions under IRC § 721(a) that generate no effectively connected taxable income ("ECTI") allocable to any foreign partner; and

(ii) The distributions by the Legacy Offshore Vehicles of their respective partnership interests in the Consolidated Master Fund LP to their respective limited partners in Step 5 of the Reorganization, because these distributions are not "amounts subject to withholding" under the Treasury Regulations promulgated under § 1446 (Treas. Reg. §§ 1.1446-1 through -6) and do not generate gain under IRC § 731(a).

We further conclude that IRC § 1446(f) is not triggered by any step of the Reorganization because no gain is recognized in connection with any contribution or distribution, and therefore no gain exists that would be treated as ECTI under IRC § 864(c)(8).

This analysis has direct implications for all non-U.S. limited partners in the Legacy Offshore Vehicles, including two key non-U.S. investors: (a) the Nordhaven Sovereign Wealth Fund (domiciled in the Kingdom of Nordhaven, a Nordic sovereign state), which has committed an aggregate of $880 million to Fund IV-A (Cayman) LP ($380 million) and Fund V-A (Cayman) LP ($500 million); and (b) Kestrel Pacific Insurance Group (domiciled in Singapore), which has committed an aggregate of €475 million (approximately $513 million at 1.08 EUR/USD) to Fund IV-B (Luxembourg) SCSp (€200 million) and Fund V-B (Luxembourg) SCSp (€275 million). Neither of these investors, nor any other foreign partner of the Legacy Offshore Vehicles, will be subject to § 1446 withholding as a result of the Reorganization transactions.

This conclusion is contingent on the correctness of the nonrecognition analyses set forth in the companion memoranda analyzing IRC §§ 721(a), 721(b), 731(a), 731(c), and 752, each of which is incorporated herein by reference. In particular, the nonwithholding conclusion under § 1446 depends on: (a) the qualification of the Step 2–4 contributions for nonrecognition treatment under § 721(a); (b) the inapplicability of the investment company exception under § 721(b); (c) the qualification of the Step 5 distributions for nonrecognition treatment under § 731(a); (d) the non-marketable-security status of the distributed Consolidated Master Fund LP interests under § 731(c)(2); and (e) the absence of gain recognition from § 752 liability netting. Should any of these conclusions prove incorrect, the § 1446 withholding analysis set forth herein would need to be revisited.

II. Background and Factual Summary

A. The Solara Fund Platform — Current Structure

Solara Digital Infrastructure LP ("Solara" or the "Sponsor") is a Delaware limited partnership formed on March 17, 2014, pursuant to the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101 et seq. Solara operates as a leading private equity manager focused on digital infrastructure and enterprise software-as-a-service ("SaaS") assets. As of March 31, 2025, Solara manages approximately $14.7 billion in aggregate assets under management ("AUM") across its fund vehicles.

The Solara fund platform is managed by Solara Digital Infrastructure GP LLC, a Delaware limited liability company (EIN 82-4917365), which serves as the general partner of each of the domestic fund vehicles and, through its offshore subsidiaries, as the general partner or gérant of each of the offshore fund vehicles. The managing member and principal of Solara Digital Infrastructure GP LLC is Viktor Raines, who serves as Chief Investment Officer and Chairman of the Investment Committee.

To accommodate the distinct regulatory, tax, and structuring requirements of its U.S. taxable, U.S. tax-exempt, and non-U.S. investor pools, Solara currently operates six parallel fund vehicles across three jurisdictions (Delaware, the Cayman Islands, and the Grand Duchy of Luxembourg), organized into two vintage groups (Fund IV, vintage 2021, and Fund V, vintage 2023). These six vehicles are collectively referred to herein as the "Current Fund Vehicles," and the four offshore vehicles (identified below) are referred to herein as the "Legacy Offshore Vehicles." The Current Fund Vehicles are as follows:

Fund IV Vehicles (Vintage 2021):

1. Fund IV LP — A Delaware limited partnership (EIN 85-2103748) with approximately $4.2 billion in committed capital, of which approximately 72% has been deployed as of March 31, 2025. Fund IV LP is the primary vehicle for U.S. taxable investors. Its general partner is Solara Digital Infrastructure GP LLC.

2. Fund IV-A (Cayman) LP — A Cayman Islands exempted limited partnership (EIN 98-6241503) with approximately $1.85 billion in committed capital. The general partner is Solara Offshore GP Ltd., a Cayman Islands exempted company. The registered office is Harborstone Corporate Services Ltd., P.O. Box 2714, 94 Solaris Avenue, George Town, Grand Cayman KY1-1111. Fund IV-A (Cayman) LP is registered with the Cayman Islands Monetary Authority ("CIMA") under registration number MF-72491. This vehicle serves primarily non-U.S. investors and certain U.S. tax-exempt investors.

3. Fund IV-B (Luxembourg) SCSp — A Luxembourg société en commandite spéciale (EIN 98-6241571) with approximately €1.15 billion in committed capital (approximately $1.24 billion at an exchange rate of 1.08 EUR/USD). The gérant is Solara Luxembourg Management S.à r.l. (Luxembourg Register of Commerce and Companies ("RCS") No. B 248194). The registered office is 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg. The SCSp is registered with the RCS under number B 248193. This vehicle serves primarily European institutional investors, including EU-regulated insurance companies and pension funds that require a European-domiciled vehicle.

Fund V Vehicles (Vintage 2023):

4. Fund V LP — A Delaware limited partnership (EIN 88-3467219) with approximately $5.6 billion in committed capital, of which approximately 38% has been deployed as of March 31, 2025. Fund V LP is the primary vehicle for U.S. taxable investors in the more recent vintage. Its general partner is Solara Digital Infrastructure GP LLC.

5. Fund V-A (Cayman) LP — A Cayman Islands exempted limited partnership (EIN 98-7891234) with approximately $2.45 billion in committed capital. The general partner is Solara Offshore GP Ltd. Fund V-A (Cayman) LP is registered with CIMA under registration number MF-89103. This vehicle serves non-U.S. investors and certain U.S. tax-exempt investors.

6. Fund V-B (Luxembourg) SCSp — A Luxembourg société en commandite spéciale (EIN 98-7891267) with approximately €1.38 billion in committed capital (approximately $1.49 billion at 1.08 EUR/USD). The gérant is Solara Luxembourg Management S.à r.l. The SCSp is registered with the Luxembourg RCS under number B 271056. This vehicle serves European institutional investors.

Each of the four Legacy Offshore Vehicles — Fund IV-A (Cayman) LP, Fund IV-B (Luxembourg) SCSp, Fund V-A (Cayman) LP, and Fund V-B (Luxembourg) SCSp — has elected (or will be treated as having elected) to be classified as a partnership for U.S. federal income tax purposes. The two domestic vehicles — Fund IV LP and Fund V LP — are classified as partnerships by default under their state law formation. The domestic vehicles are not directly implicated by the § 1446 analysis, as their limited partners consist predominantly of U.S. taxable persons; however, the domestic vehicles will separately contribute their portfolio assets to the Consolidated Master Fund LP as part of the overall Reorganization, and those contributions will be analyzed in the companion § 721(a) memorandum.

B. Key Non-U.S. Investors Affected

Two non-U.S. investors have been specifically identified by the Sponsor as requiring particular attention in the withholding tax analysis due to the size of their commitments, the sensitivity of their tax positions, and their engagement of independent tax counsel. These investors are representative of the broader population of non-U.S. limited partners in the Legacy Offshore Vehicles, all of whom are affected by the § 1446 analysis.

Nordhaven Sovereign Wealth Fund. The Nordhaven Sovereign Wealth Fund ("Nordhaven SWF") is a non-U.S. sovereign wealth fund domiciled in and wholly owned by the Kingdom of Nordhaven, a Nordic country. Nordhaven SWF has committed $380 million to Fund IV-A (Cayman) LP and $500 million to Fund V-A (Cayman) LP, for a total aggregate commitment of $880 million across the Solara platform. The primary contact at Nordhaven SWF is Anders Bjørkman, Head of Alternative Investments. Nordhaven SWF has retained independent U.S. tax counsel, Bramhall & Quelwick LLP, to advise on its U.S. withholding tax and income tax treaty positions. The responsible partner at Bramhall & Quelwick LLP is Jason Tremaine, Partner, International Tax, whose offices are located at 44 Montgomery Street, Suite 3600, San Francisco, California 94104. Bramhall & Quelwick LLP is conducting an independent analysis of the potential applicability of IRC § 892 (income of foreign governments) and the U.S.-Nordhaven income tax treaty to Nordhaven SWF's allocable share of the Consolidated Master Fund LP's income in future periods. Coordination between Calderwood & Harkness LLP's § 1446 analysis and Bramhall & Quelwick LLP's treaty and § 892 analysis is discussed in Section XI below.

Kestrel Pacific Insurance Group. Kestrel Pacific Insurance Group ("Kestrel Pacific") is a non-U.S. insurance company domiciled in Singapore and regulated by the Monetary Authority of Singapore ("MAS"). Kestrel Pacific has committed €200 million to Fund IV-B (Luxembourg) SCSp and €275 million to Fund V-B (Luxembourg) SCSp, for a total aggregate commitment of €475 million (approximately $513 million at 1.08 EUR/USD) across the Solara platform. The primary contact at Kestrel Pacific is Christine Leung, Senior Portfolio Manager, Alternative Investments.

In addition to Nordhaven SWF and Kestrel Pacific, the Legacy Offshore Vehicles collectively have numerous other non-U.S. limited partners, including sovereign wealth funds, pension funds, insurance companies, family offices, and other institutional investors domiciled in various jurisdictions outside the United States. While these additional non-U.S. limited partners are not individually identified for purposes of this memorandum, the § 1446 analysis set forth herein applies with equal force to all foreign partners of the Legacy Offshore Vehicles.

C. The Proposed Reorganization — Steps Relevant to § 1446 Analysis

The Reorganization consists of five sequential steps, the first of which involves the formation of new entities and the remaining four of which involve the contribution of portfolio assets to, and distribution of interests in, the Consolidated Master Fund LP. The following summary describes each step as relevant to the § 1446 withholding analysis. A complete description of the Reorganization, including business purposes, structural diagrams, and entity formation details, is set forth in the master PLR submission and in the companion entity classification memorandum.

Step 1 — Formation of New Entities (September 15, 2025). On or about September 15, 2025, the following new entities will be formed:

(a) Solara Consolidated Master Fund GP LLC — A Delaware limited liability company that will serve as the general partner of the Consolidated Master Fund LP.

(b) Solara Consolidated Master Fund LP — A Delaware limited partnership that will serve as the single consolidated operating partnership holding all portfolio company interests across the Solara platform.

(c) Solara International Feeder (Cayman) LP — A Cayman Islands exempted limited partnership that will serve as the feeder vehicle for all non-U.S. investors post-Reorganization.

(d) Solara Tax-Exempt Feeder (Cayman) LP — A Cayman Islands exempted limited partnership that will serve as the feeder vehicle for all U.S. tax-exempt investors post-Reorganization.

Each of these entities will file IRS Form 8832 (Entity Classification Election) under Treas. Reg. § 301.7701-3 to elect classification as a partnership for U.S. federal income tax purposes, or will be classified as a partnership by default under the applicable default classification rules. Step 1 does not itself involve any transfer of assets or any recognition of income or gain, and therefore does not directly implicate § 1446 withholding. Step 1 is included here for completeness and to establish the entities that participate in the subsequent steps.

Step 2 — Fund IV-A (Cayman) Contribution (October 1, 2025). On or about October 1, 2025, Fund IV-A (Cayman) LP will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for a partnership interest in the Consolidated Master Fund LP. The aggregate fair market value ("FMV") of the contributed assets is approximately $2.31 billion, with an aggregate adjusted tax basis of approximately $1.62 billion, resulting in aggregate built-in gain of approximately $690 million. Representative assets include:

(a) NovaBright Data Systems Inc. — Fund IV-A (Cayman) LP holds a 60% interest in NovaBright Data Systems Inc., a Delaware corporation operating a network of hyperscale data centers. The total FMV of the 60% interest is $890 million, with an adjusted tax basis of $520 million, resulting in built-in gain of $370 million. Fund IV-A (Cayman) LP's proportional share of this interest (attributable to the Cayman vehicle) has an FMV of $534 million, a basis of $312 million, and built-in gain of $222 million.

(b) Thorngate Fiber Networks LP — Fund IV-A (Cayman) LP holds a 100% interest in Thorngate Fiber Networks LP, a Delaware limited partnership that operates a fiber-optic transmission network. The FMV of this interest is $670 million, with an adjusted tax basis of $490 million, resulting in built-in gain of $180 million. We note that Thorngate Fiber Networks LP is itself a partnership for U.S. federal income tax purposes, which raises a discrete § 1446(f) issue discussed in Section IV.F below.

Step 3 — Fund IV-B (Luxembourg) Contribution (October 15, 2025). On or about October 15, 2025, Fund IV-B (Luxembourg) SCSp will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for a partnership interest in the Consolidated Master Fund LP. The aggregate FMV of the contributed assets is approximately €1.07 billion (approximately $1.16 billion at 1.08 EUR/USD), with an aggregate adjusted tax basis of approximately €782 million (approximately $844.6 million), resulting in aggregate built-in gain of approximately €288 million (approximately $311 million). Representative assets include:

(a) Crestline Cloud Solutions LLC — Fund IV-B (Luxembourg) SCSp holds a 100% interest in Crestline Cloud Solutions LLC, a Delaware limited liability company classified as a disregarded entity for U.S. federal income tax purposes, which provides enterprise cloud computing and infrastructure management services. The FMV of this interest is €340 million (approximately $367 million), with an adjusted tax basis of €195 million (approximately $211 million), resulting in built-in gain of €145 million (approximately $156 million).

Step 4 — Fund V-A (Cayman) and Fund V-B (Luxembourg) Contributions (November 1, 2025). On or about November 1, 2025, the two Fund V offshore vehicles will simultaneously contribute all of their respective portfolio assets to the Consolidated Master Fund LP in exchange for partnership interests in the Consolidated Master Fund LP. The financial parameters of these contributions are as follows:

(a) Fund V-A (Cayman) LP: Aggregate FMV of approximately $2.89 billion; aggregate adjusted tax basis of approximately $2.34 billion; aggregate built-in gain of approximately $550 million.

(b) Fund V-B (Luxembourg) SCSp: Aggregate FMV of approximately €1.29 billion (approximately $1.39 billion at 1.08 EUR/USD); aggregate adjusted tax basis of approximately €1.14 billion (approximately $1.23 billion); aggregate built-in gain of approximately €150 million (approximately $162 million).

Representative assets contributed in Step 4 include:

(a) Veridian Edge Computing Corp. — Fund V-A (Cayman) LP holds a 55% interest in Veridian Edge Computing Corp., a Delaware corporation that develops and deploys edge computing hardware and software solutions for telecommunications carriers. The FMV of the 55% interest is $1.12 billion, with an adjusted tax basis of $780 million, resulting in built-in gain of $340 million.

(b) Helix SaaS Holdings Ltd. — Fund V-A (Cayman) LP holds a 100% interest in Helix SaaS Holdings Ltd., a Cayman Islands company classified as a corporation for U.S. federal income tax purposes, which operates a portfolio of enterprise SaaS platforms. The FMV of this interest is $445 million, with an adjusted tax basis of $310 million, resulting in built-in gain of $135 million.

Step 5 — Distributions by Legacy Offshore Vehicles and LP Migration (December 1, 2025). On or about December 1, 2025, each of the four Legacy Offshore Vehicles will dissolve and distribute its partnership interest in the Consolidated Master Fund LP (received in Steps 2–4) to its existing limited partners, pro rata in accordance with each limited partner's partnership interest in the dissolving vehicle. Following these distributions:

(a) Non-U.S. limited partners (including Nordhaven SWF and Kestrel Pacific) will contribute their newly received Consolidated Master Fund LP interests to Solara International Feeder (Cayman) LP in exchange for partnership interests in the Feeder, thereby "rolling" into the post-Reorganization feeder structure.

(b) U.S. tax-exempt limited partners (including, for example, the Pinnacle State Employees' Retirement System and the Grandview University Endowment) will contribute their newly received Consolidated Master Fund LP interests to Solara Tax-Exempt Feeder (Cayman) LP in exchange for partnership interests in the Feeder.

The Legacy Offshore Vehicles will thereafter be wound up and their registrations canceled in the Cayman Islands and Luxembourg, respectively.

D. Aggregate Financial Summary

The following table summarizes the aggregate financial parameters of the Reorganization transactions relevant to the § 1446 analysis:

The $1.72 billion in aggregate built-in gain will be tracked under IRC § 704(c) and allocated to the contributing partners (and, ultimately, their foreign partners) only upon subsequent taxable dispositions of the contributed assets or through depreciation and amortization allocations in future periods. As discussed more fully in Section IV.D below, this deferred built-in gain does not give rise to current ECTI and does not trigger current § 1446 withholding obligations.

III. Applicable Legal Framework — IRC § 1446

A. Overview of IRC § 1446(a)

Section 1446(a) of the Code provides that, if a partnership has effectively connected taxable income for any taxable year, and if any portion of such income is allocable under IRC § 704 to a partner who is a foreign person, the partnership shall pay a withholding tax under § 1446(a) on behalf of such foreign partner. The statute was enacted to ensure that the U.S. collects withholding tax on income earned by foreign persons through partnerships engaged in a U.S. trade or business, thereby addressing the difficulty of collecting tax directly from foreign partners who may have no other U.S. presence or filing obligation.

The rate of withholding under § 1446(a) is generally equal to the highest rate of tax specified in IRC § 1 (for non-corporate foreign partners) or IRC § 11 (for corporate foreign partners). Under current law, these rates are 37% for non-corporate foreign partners and 21% for corporate foreign partners. The withholding tax is imposed on the partnership itself — not on the foreign partner — and the partnership is the party responsible for computing, withholding, and remitting the tax to the IRS. The partnership must pay the withholding tax on either an installment basis (using Forms 8804, 8805, and 8813) or on an annual basis, in accordance with the rules set forth in Treas. Reg. § 1.1446-3.

The withholding obligation under § 1446(a) is triggered by the allocation of ECTI to a foreign partner — not by the distribution of cash or property to a foreign partner. Accordingly, a partnership may have a § 1446(a) withholding obligation even if it makes no distributions to its foreign partners during the taxable year, so long as ECTI is allocable to such partners under IRC § 704. Conversely, if a partnership has no ECTI, or if no ECTI is allocable to foreign partners, no withholding obligation arises under § 1446(a), regardless of whether distributions are made.

B. Key Definitions Under Treas. Reg. § 1.1446-1 Through -6

The Treasury Regulations promulgated under § 1446 elaborate on the mechanics of the withholding obligation and define the key terms relevant to the analysis. The following definitions are particularly pertinent:

Foreign partner. Under Treas. Reg. § 1.1446-1(c)(2), a "foreign partner" is any partner of a partnership that is not a "United States person" as defined in IRC § 7701(a)(30). This includes, without limitation, nonresident alien individuals, foreign corporations, foreign partnerships, foreign estates, and foreign trusts. Both the Nordhaven Sovereign Wealth Fund (a sovereign wealth fund established under the laws of the Kingdom of Nordhaven) and Kestrel Pacific Insurance Group (a corporation organized under the laws of Singapore) are "foreign partners" within the meaning of this definition. For purposes of § 1446, a partnership determines the status of its partners based on the certifications provided by such partners (generally, IRS Forms W-8BEN, W-8BEN-E, or W-8IMY, as applicable).

Effectively connected taxable income (ECTI). Under Treas. Reg. § 1.1446-2, ECTI is the partnership's taxable income that is, or would be (if the partner were a nonresident alien individual), treated as effectively connected with the conduct of a trade or business within the United States under IRC §§ 871(b) or 882. ECTI is computed at the partnership level and then allocated to each partner in accordance with the partnership agreement, subject to the allocation rules of IRC § 704(b) and (c). Items of income, gain, deduction, and loss that are not effectively connected with a U.S. trade or business are excluded from the ECTI computation. A partnership determines its ECTI by reference to all items of income, gain, deduction, and loss that are, or would be, treated as effectively connected, taking into account the rules of IRC §§ 864(c)(2) and (c)(3) for determining effective connection.

Amounts subject to withholding. Under Treas. Reg. § 1.1446-1(c), the partnership must determine the amount of ECTI allocable to each foreign partner and withhold the applicable percentage of such amount. The term "amounts subject to withholding" under § 1446(a) thus refers specifically to ECTI allocations — not to distributions, contributions, or other non-income events.

The Treasury Regulations under § 1446 are organized as follows:

• Treas. Reg. § 1.1446-1: General rules for determining a partnership's obligation to pay withholding tax under § 1446, including identification of foreign partners and required documentation.

• Treas. Reg. § 1.1446-2: Rules for determining a partnership's ECTI for purposes of computing the § 1446 withholding obligation, including the treatment of specific categories of income and gain.

• Treas. Reg. § 1.1446-3: Time and manner of paying and reporting the § 1446 withholding tax, including installment payment requirements, annual reporting on Form 8804, and the issuance of Forms 8805 to foreign partners.

• Treas. Reg. § 1.1446-4: Special rules applicable to publicly traded partnerships, which are not relevant to the Solara fund platform.

• Treas. Reg. § 1.1446-5: Rules governing tiered partnership structures, including the "look-through" requirement for upper-tier partnerships that have foreign partners. This regulation is relevant to the post-Reorganization structure, as discussed in Section VII below.

• Treas. Reg. § 1.1446-6: Special rules permitting a partnership to rely on a foreign partner's certification of its allocable share of deductions and losses to reduce the partnership's § 1446 withholding obligation.

C. Relationship Between § 1446 and Nonrecognition Provisions

The withholding obligation under § 1446(a) is fundamentally predicated on the existence of ECTI allocable to a foreign partner. If a transaction does not generate taxable income or gain — because it qualifies for nonrecognition treatment under an applicable provision of the Code — there is no ECTI, and therefore no § 1446(a) withholding obligation arises.

This principle is implicit in the structure of § 1446(a) and the regulations thereunder, which require the partnership to compute its ECTI by reference to its taxable income. A transaction that is subject to a nonrecognition provision — such as a tax-free contribution under IRC § 721(a) or a tax-free distribution under IRC § 731(a) — produces no taxable income or gain at the partnership or partner level, and therefore produces no ECTI to which the § 1446(a) withholding obligation could attach. The § 1446 regulations do not contain any separate withholding requirement applicable to nonrecognition transactions; the regulations look solely to the partnership's taxable income for the period in question.

This memorandum relies on the nonrecognition analyses set forth in the companion memoranda addressing IRC §§ 721(a) and 731(a), which conclude that the contributions in Steps 2–4 and the distributions in Step 5, respectively, qualify for nonrecognition treatment. Those analyses are incorporated herein by reference and summarized in the relevant sections below.

D. Relationship Between § 1446 and IRC § 1446(f) (Enacted by TCJA)

Section 1446(f) of the Code, added by Section 13501 of the TCJA (Pub. L. No. 115-97, 131 Stat. 2054 (2017)), imposes a withholding obligation on the transfer of a partnership interest by a foreign person to the extent that gain on the transfer would be treated as effectively connected income under IRC § 864(c)(8). Section 1446(f) is distinct from § 1446(a) in both scope and operation:

• IRC § 1446(a) imposes withholding on the partnership when it allocates ECTI to foreign partners. The withholding is based on ongoing allocations of income and gain, and the obligation falls on the partnership.

• IRC § 1446(f) imposes withholding on the transferee when a foreign person transfers (i.e., sells, exchanges, or otherwise disposes of) a partnership interest. The withholding is equal to 10% of the amount realized by the transferor on the transfer. Under § 1446(f)(4), if the transferee fails to withhold, the partnership itself may be required to withhold from subsequent distributions to the transferee.

Section 1446(f) was enacted in conjunction with IRC § 864(c)(8), which provides that gain or loss of a foreign person from the sale or exchange of a partnership interest is treated as effectively connected with the conduct of a trade or business within the United States to the extent such gain or loss does not exceed the foreign person's distributive share of the partnership's effectively connected gain or loss that would have been allocated to such person if the partnership had sold all of its assets at fair market value at the time of the transfer.

For purposes of this memorandum, the key question under § 1446(f) is whether any step of the Reorganization constitutes a "transfer" of a partnership interest by a foreign person that would trigger the § 1446(f) withholding obligation. This analysis is set forth in Sections IV.F and V.C below.

IV. Analysis of Steps 2–4: Contributions of Portfolio Assets to the Consolidated Master Fund LP

A. Nonrecognition Treatment Under IRC § 721(a)

As analyzed in detail in the companion memorandum addressing IRC § 721(a) (Calderwood & Harkness LLP Memorandum, "Analysis of IRC § 721(a) Nonrecognition Treatment for Contributions to the Consolidated Master Fund LP," dated June 16, 2025, Engagement No. 20250527-SDILP-PLR), each of the four Legacy Offshore Vehicles' contributions of portfolio assets to the Consolidated Master Fund LP in Steps 2–4 qualifies as a tax-free contribution of property to a partnership in exchange for an interest in such partnership under IRC § 721(a).

Section 721(a) provides that "[n]o gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership." The companion memorandum concludes that each of the following contributions satisfies the requirements of § 721(a):

(a) The contribution by Fund IV-A (Cayman) LP of its portfolio assets (FMV $2.31 billion; basis $1.62 billion) to the Consolidated Master Fund LP on October 1, 2025 (Step 2);

(b) The contribution by Fund IV-B (Luxembourg) SCSp of its portfolio assets (FMV $1.16 billion; basis $844.6 million) to the Consolidated Master Fund LP on October 15, 2025 (Step 3);

(c) The contribution by Fund V-A (Cayman) LP of its portfolio assets (FMV $2.89 billion; basis $2.34 billion) to the Consolidated Master Fund LP on November 1, 2025 (Step 4); and

(d) The contribution by Fund V-B (Luxembourg) SCSp of its portfolio assets (FMV $1.39 billion; basis $1.23 billion) to the Consolidated Master Fund LP on November 1, 2025 (Step 4).

Under IRC § 723, the Consolidated Master Fund LP's basis in the contributed assets will equal the contributing partnership's adjusted basis in such assets immediately prior to the contribution (i.e., carryover basis). Under IRC § 1223(2), the Consolidated Master Fund LP's holding period in the contributed assets will include the contributing partnership's holding period.

Conclusion for § 1446 Purposes: Because no gain or loss is recognized by the contributing partnerships or by any of their partners as a result of the Step 2–4 contributions, no ECTI is generated, and no withholding obligation arises under IRC § 1446(a) with respect to these transactions.

B. Application of Treas. Reg. § 1.1446-2 — No ECTI from Nonrecognition Contributions

The analysis of the § 1446(a) withholding obligation for Steps 2–4 turns on the determination of ECTI under Treas. Reg. § 1.1446-2. Under this regulation, ECTI is computed by reference to the partnership's items of taxable income and gain that are effectively connected with the conduct of a trade or business within the United States. For the partnership to have an ECTI-based withholding obligation, there must be taxable income or gain that is allocable to a foreign partner.

A contribution of property to a partnership that qualifies for nonrecognition under IRC § 721(a) does not produce taxable income or gain at any level — neither the contributing partner nor the receiving partnership recognizes income on the transaction. Accordingly, under Treas. Reg. § 1.1446-2, there is no amount includable in the partnership's ECTI computation as a result of a § 721(a) contribution. Specifically:

(a) The Legacy Offshore Vehicles (as the contributing partnerships) do not recognize gain on the contribution of their portfolio assets. Because no gain is recognized, the Legacy Offshore Vehicles have no income to allocate to their respective foreign partners from the contribution transactions themselves. There is therefore no ECTI allocable to any foreign partner of the Legacy Offshore Vehicles, and no § 1446(a) withholding obligation arises at the Legacy Offshore Vehicle level.

(b) The Consolidated Master Fund LP (as the receiving partnership) similarly does not recognize income or gain upon receipt of the contributed assets. Section 721(a) by its terms provides that no gain or loss is recognized "to a partnership" in the case of a contribution of property in exchange for a partnership interest. The Consolidated Master Fund LP therefore has no income from the receipt of the contributed assets, and no ECTI is generated at the Consolidated Master Fund LP level from the contribution transactions.

Because no ECTI is generated at either the contributing-partnership level or the receiving-partnership level, there is no amount on which § 1446(a) withholding could be imposed with respect to Steps 2–4.

C. § 721(b) Investment Company Exception — Impact on § 1446 Analysis

Section 721(b) of the Code provides an exception to the general nonrecognition rule of § 721(a) for contributions to a partnership that would be treated as an "investment company" (within the meaning of IRC § 351) if the partnership were incorporated. Under § 721(b), if the transfer results in a "diversification" of the transferors' interests, gain is recognized to the contributing partner as if the contribution were a taxable exchange. Treasury Regulation § 1.351-1(c)(1)(ii) defines an "investment company" for this purpose as a company more than 80% of the value of whose assets (excluding cash and nonconvertible debt obligations) consists of certain enumerated categories of passive investment assets, including stocks, securities, money, and similar assets.

The companion memorandum analyzing IRC § 721(b) (Calderwood & Harkness LLP Memorandum, "Analysis of IRC § 721(b) Investment Company Exception," dated June 16, 2025, Engagement No. 20250527-SDILP-PLR) concludes that the Consolidated Master Fund LP does not constitute an "investment company" within the meaning of § 721(b) and Treas. Reg. § 1.351-1(c)(1)(ii). This conclusion is based on the fact that the Consolidated Master Fund LP's portfolio consists entirely of interests in 23 operating companies in the digital infrastructure and enterprise SaaS sectors — including data center operators, fiber-optic network operators, edge computing companies, and SaaS platform companies — none of which constitutes a passive investment asset of the type enumerated in Treas. Reg. § 1.351-1(c)(1)(ii). The portfolio companies are actively managed businesses that generate operating income, employ hundreds or thousands of employees, and own substantial operating assets. They are not stocks, securities, or other passive financial instruments.

The significance of the § 721(b) analysis for the § 1446 withholding determination is direct and material. If § 721(b) were to apply — which we do not believe it does — the contributing partnerships would recognize gain on their contributions to the Consolidated Master Fund LP. That gain, to the extent effectively connected with a U.S. trade or business, would constitute ECTI allocable to the foreign partners of the contributing partnerships. Section 1446(a) withholding would then be required on such ECTI at the applicable rates (37% for non-corporate foreign partners; 21% for corporate foreign partners).

Given the magnitude of the aggregate built-in gain ($1.72 billion), the potential § 1446(a) withholding exposure in the event § 721(b) were to apply would be substantial. By way of illustration, if the full $690 million of built-in gain in the Fund IV-A (Cayman) LP portfolio were recognized and treated as ECTI allocable to foreign partners, the § 1446(a) withholding liability could approach $145 million to $255 million (depending on the mix of corporate and non-corporate foreign partners), before taking into account any treaty benefits or § 892 exemptions. This underscores the importance of the § 721(b) nonrecognition analysis to the overall withholding tax position.

The PLR request specifically seeks Ruling 2, confirming that the Consolidated Master Fund LP does not constitute an investment company under § 721(b). The favorable resolution of Ruling 2 directly underpins the § 1446 nonwithholding conclusion set forth in this memorandum.

D. § 704(c) Built-In Gain — Deferred, Not Current

Although no gain is recognized at the time of the Step 2–4 contributions, the $1.72 billion in aggregate built-in gain inherent in the contributed portfolio assets is not eliminated. Rather, under IRC § 704(c)(1)(A), the built-in gain is preserved and tracked in the Consolidated Master Fund LP's § 704(c) accounts. Section 704(c) requires that, upon a subsequent taxable disposition of the contributed property (or through depreciation and amortization allocations), the built-in gain be allocated to the contributing partner (i.e., the Legacy Offshore Vehicle, or its successors) to account for the difference between the property's fair market value and its adjusted tax basis at the time of contribution.

For purposes of the § 1446 analysis, the critical point is that § 704(c) built-in gain is deferred, not current. The built-in gain does not constitute ECTI in the taxable year of the contribution; it will constitute ECTI only when and if it is actually recognized through a future taxable event — such as a sale of the contributed assets — or through annual depreciation or amortization allocations that give rise to differences between book and tax income allocable to the contributing and non-contributing partners.

Accordingly, § 1446 withholding will apply in future periods when and if ECTI is actually generated from the § 704(c) accounts and allocated to foreign partners. The companion memorandum analyzing IRC § 704(c) (Calderwood & Harkness LLP Memorandum, "Analysis of § 704(c) Built-In Gain Carryover and Continuation of Remedial Allocation Method," dated June 16, 2025, Engagement No. 20250527-SDILP-PLR) addresses the proper method for tracking and allocating built-in gain in the post-Reorganization structure, including the continuation of the remedial allocation method under Treas. Reg. § 1.704-3(d). The ongoing § 1446 withholding obligations associated with future § 704(c) allocations are discussed briefly in Section VII.B below, but are not the subject of the PLR request.

E. § 752 Liability Shifts — No Gain Recognition Triggering § 1446

The Step 2–4 contributions involve the assumption by the Consolidated Master Fund LP of approximately $1.34 billion in aggregate liabilities associated with the contributed portfolio assets. Under IRC § 752(b), a decrease in a partner's share of partnership liabilities is treated as a distribution of money to the partner, and under IRC § 752(a), an increase in a partner's share of partnership liabilities is treated as a contribution of money by the partner. When both a decrease and an increase in liabilities occur simultaneously (as in the case of a contribution of encumbered property to a new partnership), Treas. Reg. § 1.752-1(f) provides that the increases and decreases are netted to determine the net effect on each partner.

The companion memorandum analyzing IRC § 752 (Calderwood & Harkness LLP Memorandum, "Analysis of § 752 Liability Shifts in Connection with the Proposed Reorganization," dated June 16, 2025, Engagement No. 20250527-SDILP-PLR) models the $1.34 billion in aggregate liabilities and concludes that the netting of deemed contributions and deemed distributions under §§ 752(a) and 752(b), as applied through Treas. Reg. § 1.752-1(f), does not result in any net deemed money distribution to any partner that exceeds such partner's adjusted basis in its partnership interest. Because no partner's basis is exceeded, no gain is recognized under IRC § 731(a)(1) as a result of the liability shifts.

Because no gain is recognized from the liability assumption component of the Reorganization, no ECTI is generated, and no § 1446(a) withholding obligation arises from the liability shifts. If, contrary to our analysis, the netting of liabilities under Treas. Reg. § 1.752-1(f) were to result in a net deemed distribution exceeding a foreign partner's basis, gain would be recognized under § 731(a)(1), and such gain (to the extent effectively connected) could constitute ECTI subject to § 1446(a) withholding. As discussed in Section X.D below, we view this risk as remote based on the modeling performed in the companion § 752 memorandum.

F. § 1446(f) Analysis — Transfers of Partnership Interests

Steps 2–4 involve contributions of portfolio company interests — i.e., interests in operating companies such as NovaBright Data Systems Inc., Crestline Cloud Solutions LLC, and Veridian Edge Computing Corp. — by the Legacy Offshore Vehicles to the Consolidated Master Fund LP. These contributions are contributions of property to a partnership in exchange for a partnership interest, governed by IRC § 721(a). They are not, in the first instance, "transfers" of partnership interests subject to IRC § 1446(f).

Section 1446(f) applies specifically to the transfer of a partnership interest by a foreign person. In the context of Steps 2–4, the Legacy Offshore Vehicles are transferring portfolio company interests — not partnership interests — to the Consolidated Master Fund LP. Accordingly, § 1446(f) is not directly implicated by the contributions.

However, there is a discrete issue arising from the fact that at least one of the contributed assets — the 100% interest in Thorngate Fiber Networks LP, a Delaware limited partnership — is itself a partnership interest. To the extent the contribution of the Thorngate Fiber Networks LP interest by Fund IV-A (Cayman) LP to the Consolidated Master Fund LP could be characterized as a "transfer" of a partnership interest for purposes of § 1446(f), the question arises whether § 1446(f) withholding would apply.

We conclude that even if § 1446(f) were technically applicable to the contribution of a partnership interest (such as the Thorngate Fiber Networks LP interest) within the broader § 721(a) nonrecognition transaction, no withholding obligation would arise under § 1446(f)(1). Section 1446(f)(1) requires withholding on the "amount realized" by the transferor to the extent that gain on the transfer would be treated as ECTI under IRC § 864(c)(8). In a § 721(a) nonrecognition transaction, no gain is recognized by the contributing partner — and therefore no gain exists that would be treated as ECTI under § 864(c)(8). The withholding obligation under § 1446(f) is predicated on the existence of gain; where there is no gain, there is no amount on which withholding can be computed.

Moreover, the regulations under § 1446(f), including Treas. Reg. § 1.1446(f)-2, generally contemplate withholding in the context of a taxable transfer of a partnership interest (such as a sale or exchange), not in the context of a nonrecognition contribution. While the regulations do not contain an express exemption for § 721(a) contributions, the mechanical operation of the withholding computation — which is tied to the amount of gain recognized on the transfer — effectively produces a zero withholding amount in a nonrecognition context.

Accordingly, we conclude that § 1446(f) does not require withholding on any contribution made in Steps 2–4, including the contribution of the Thorngate Fiber Networks LP partnership interest.

V. Analysis of Step 5: Distributions by Legacy Offshore Vehicles and LP Migration

A. Nonrecognition Treatment Under IRC § 731(a)

As analyzed in detail in the companion memorandum addressing IRC § 731(a) (Calderwood & Harkness LLP Memorandum, "Analysis of IRC § 731(a) Nonrecognition Treatment for Distributions in Liquidation of Legacy Offshore Vehicles," dated June 16, 2025, Engagement No. 20250527-SDILP-PLR), the distributions by the Legacy Offshore Vehicles of their partnership interests in the Consolidated Master Fund LP to their respective limited partners in Step 5 constitute tax-free distributions under IRC § 731(a).

Section 731(a)(1) provides that, in the case of a distribution by a partnership to a partner, gain shall not be recognized to such partner except to the extent that any money distributed exceeds the adjusted basis of such partner's interest in the partnership immediately before the distribution. In Step 5, the Legacy Offshore Vehicles distribute partnership interests in the Consolidated Master Fund LP — not money or cash — to their respective limited partners. Because no money is distributed (and no money is deemed distributed under § 752(b) in excess of any partner's basis), no gain is recognized under § 731(a)(1).

The companion memorandum also addresses the potential application of IRC § 731(c), which treats certain "marketable securities" as money for purposes of § 731(a). As discussed in Section V.A.1 of the companion § 731(c) memorandum (Calderwood & Harkness LLP Memorandum, "Analysis of IRC § 731(c) — Non-Applicability to Consolidated Master Fund LP Interests," dated June 16, 2025, Engagement No. 20250527-SDILP-PLR), the distributed Consolidated Master Fund LP interests do not constitute "marketable securities" within the meaning of § 731(c)(2). Section 731(c)(2) defines "marketable securities" as financial instruments that are "actively traded" within the meaning of IRC § 1092(d)(1). The Consolidated Master Fund LP interests are not listed on any exchange, not registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, and not otherwise actively traded or readily tradable on an established securities market. Accordingly, § 731(c) does not apply, and the distributed interests are not treated as money for purposes of § 731(a).

Conclusion for § 1446 Purposes: Because no gain is recognized by the Legacy Offshore Vehicles or by any of their partners as a result of the Step 5 distributions, no ECTI is generated, and no withholding obligation arises under IRC § 1446(a) with respect to these transactions.

B. No ECTI Generated from Nonrecognition Distributions

The application of Treas. Reg. § 1.1446-2 to the Step 5 distributions follows the same analytical framework applied to the Step 2–4 contributions. Under Treas. Reg. § 1.1446-2, ECTI is determined by reference to the partnership's items of taxable income and gain. Because no gain or income is recognized by the distributing partnerships (the Legacy Offshore Vehicles) or by their partners under IRC § 731(a), no amount is includable in any partnership's ECTI computation for the taxable year in which the distributions occur.

The Legacy Offshore Vehicles have no obligation to withhold under IRC § 1446(a) on the Step 5 distributions. The distributions are not "amounts subject to withholding" within the meaning of Treas. Reg. §§ 1.1446-1 through -6. The term "amounts subject to withholding" under the § 1446 regulations refers exclusively to ECTI allocations; it does not encompass distributions of property in nonrecognition transactions that do not generate taxable income or gain.

It is worth noting that, even if the distributions were considered to give rise to some form of economic benefit to the foreign partners (by virtue of receiving a direct interest in the Consolidated Master Fund LP in place of an indirect interest through the Legacy Offshore Vehicle), this economic benefit does not constitute taxable income or gain under § 731(a). The § 1446 regulations do not impose withholding on unrealized economic benefits; they impose withholding only on ECTI that is allocated to foreign partners under IRC § 704.

C. § 1446(f) Analysis — Distribution of Partnership Interests

Step 5 involves the distribution of Consolidated Master Fund LP interests by the Legacy Offshore Vehicles to their limited partners, followed by the dissolution of the Legacy Offshore Vehicles. This raises the question whether these distributions constitute "transfers" of partnership interests subject to withholding under IRC § 1446(f).

Section 1446(f) imposes a withholding obligation when a "transferee" acquires a partnership interest from a foreign "transferor." In the context of a partnership distribution, the distributing partnership is distributing its own property (its interest in the Consolidated Master Fund LP) to its partners. The distributing partnership is not itself a "transferor" of a partnership interest in the traditional § 1446(f) sense; rather, it is a partnership making a liquidating distribution to its partners. The regulations under § 1446(f) generally contemplate arm's-length transfers of partnership interests between unrelated parties, not partnership distributions.

Moreover, even if § 1446(f) were construed to apply to the Step 5 distributions, the withholding computation would yield a zero amount. Section 1446(f)(1) requires withholding to the extent that gain on the transfer would be treated as ECTI under IRC § 864(c)(8). As established in the companion § 731(a) memorandum, no gain is recognized by any partner on the Step 5 distributions. If no gain is recognized, there is no gain to be treated as ECTI under § 864(c)(8), and therefore no amount is subject to withholding under § 1446(f)(1).

The interaction between § 1446(f) and § 864(c)(8) in the distribution context further supports this conclusion. Section 864(c)(8) treats gain from the sale or exchange of a partnership interest as ECTI. A distribution under § 731 is not a "sale or exchange" of a partnership interest; it is a distribution of property by a partnership to a partner. Section 864(c)(8) does not, by its terms, apply to distributions governed by § 731. Even if the distribution were recharacterized as an exchange, no gain would be recognized under the nonrecognition provisions of § 731(a).

Accordingly, we conclude that § 1446(f) does not require withholding on the distributions made in Step 5.

D. LP Migration into Feeder Vehicles

Following the Step 5 distributions, the non-U.S. limited partners (including Nordhaven SWF and Kestrel Pacific) will contribute their newly received Consolidated Master Fund LP interests to Solara International Feeder (Cayman) LP in exchange for partnership interests in the Feeder. Similarly, U.S. tax-exempt limited partners (including the Pinnacle State Employees' Retirement System and the Grandview University Endowment) will contribute their Consolidated Master Fund LP interests to Solara Tax-Exempt Feeder (Cayman) LP.

These roll-in contributions are structured as tax-free contributions of property (Consolidated Master Fund LP partnership interests) to a partnership (the applicable Feeder) in exchange for partnership interests in such Feeder, qualifying for nonrecognition treatment under IRC § 721(a). The companion § 721(a) memorandum analyzes these roll-in contributions and concludes that they qualify for § 721(a) nonrecognition treatment.

Because no gain is recognized on the roll-in contributions, no ECTI is generated, and no § 1446(a) withholding obligation arises in connection with the LP migration into the Feeder vehicles.

The § 1446(f) analysis for the roll-in contributions involves the contribution of Consolidated Master Fund LP partnership interests by foreign partners to the Feeder vehicles. These contributions could be characterized as "transfers" of partnership interests by foreign persons. However, as with the Step 2–4 contributions analyzed in Section IV.F above, no gain is recognized under § 721(a), and therefore no gain exists that would be treated as ECTI under § 864(c)(8). The § 1446(f) withholding computation yields a zero amount. Accordingly, no § 1446(f) withholding is required in connection with the LP migration.

We note, however, that the roll-in contributions involve foreign persons (the non-U.S. limited partners) contributing partnership interests (their Consolidated Master Fund LP interests) to a partnership (the International Feeder). Under Treas. Reg. § 1.1446(f)-2(b), the transferee (the International Feeder) would generally be required to withhold 10% of the amount realized by the transferor on the transfer, unless an exception applies. Because no gain is recognized under § 721(a), and because the amount realized on a § 721(a) contribution is generally equal to the transferor's basis in the contributed property (resulting in zero gain), no withholding obligation arises. As an additional practical matter, the partnership should maintain contemporaneous documentation of the § 721(a) nonrecognition treatment to support the position that no § 1446(f) withholding was required.

VI. Specific Implications for Key Non-U.S. Investors

A. Nordhaven Sovereign Wealth Fund

Status and Commitments. The Nordhaven Sovereign Wealth Fund is a non-U.S. sovereign wealth fund wholly owned by the Kingdom of Nordhaven, a Nordic sovereign state. Nordhaven SWF is classified as a "foreign partner" for purposes of IRC § 1446 because it is not a United States person within the meaning of IRC § 7701(a)(30). Nordhaven SWF has committed an aggregate of $880 million to the Solara platform: $380 million to Fund IV-A (Cayman) LP and $500 million to Fund V-A (Cayman) LP.

Current and Post-Reorganization Structure. Nordhaven SWF is currently a limited partner in Fund IV-A (Cayman) LP and Fund V-A (Cayman) LP. Under the Reorganization, Nordhaven SWF will receive its pro rata share of the Consolidated Master Fund LP interests distributed by Fund IV-A (Cayman) LP and Fund V-A (Cayman) LP in Step 5, and will thereafter contribute those interests to Solara International Feeder (Cayman) LP. Post-Reorganization, Nordhaven SWF will hold its economic interest in the Solara portfolio through its partnership interest in the International Feeder, which in turn will hold a partnership interest in the Consolidated Master Fund LP.

Sovereign Immunity Analysis — IRC § 892. We note, but do not address in detail in this memorandum, the potential applicability of IRC § 892 to Nordhaven SWF's income from the Solara platform. Section 892 provides that income of a foreign government from investments in the United States in stocks, bonds, and other domestic securities, and in financial instruments held in the execution of governmental financial or monetary policy, is exempt from U.S. taxation and withholding. If Nordhaven SWF qualifies for the § 892 exemption, it may be exempt from U.S. tax on certain categories of income (including, potentially, certain categories of ECTI), which would independently eliminate or reduce the § 1446 withholding obligation on ECTI allocable to Nordhaven SWF even in future periods — regardless of whether ECTI is generated.

A detailed § 892 analysis is beyond the scope of this memorandum but is highly relevant to Nordhaven SWF's overall U.S. withholding tax position. Bramhall & Quelwick LLP (Jason Tremaine, Partner, International Tax) has been retained by Nordhaven SWF to conduct an independent analysis of § 892 and applicable income tax treaty benefits. Calderwood & Harkness LLP's § 1446 analysis should be coordinated with Bramhall & Quelwick LLP's independent analysis to ensure consistency, subject to appropriate client authorizations. The coordination process is discussed in Section XI below.

Treaty Analysis. The Kingdom of Nordhaven may be a party to an income tax treaty with the United States that provides reduced withholding rates or exemptions for certain categories of income. The potential treaty benefits are being analyzed by Bramhall & Quelwick LLP and may affect the ongoing § 1446 withholding rates applicable to Nordhaven SWF's share of ECTI in future periods. However, treaty benefits do not affect the nonrecognition analysis for the Reorganization transactions: because no ECTI is generated by Steps 2–5, the treaty analysis is relevant only to future periods and not to the Reorganization itself.

Conclusion for the Reorganization. No § 1446 withholding obligation is triggered by Steps 2 through 5 of the Reorganization with respect to Nordhaven SWF's allocable share of any income or gain, because no ECTI is generated by any step of the Reorganization. This conclusion applies regardless of whether Nordhaven SWF qualifies for benefits under IRC § 892 or under an applicable income tax treaty, because the absence of ECTI eliminates the predicate for § 1446 withholding entirely.

B. Kestrel Pacific Insurance Group

Status and Commitments. Kestrel Pacific Insurance Group is a non-U.S. insurance company domiciled in Singapore and regulated by the Monetary Authority of Singapore. Kestrel Pacific is classified as a "foreign partner" for purposes of IRC § 1446 because it is a foreign corporation that is not a United States person within the meaning of IRC § 7701(a)(30). As a corporate foreign partner, Kestrel Pacific would be subject to withholding at the 21% rate specified in IRC § 11 (rather than the 37% rate applicable to non-corporate foreign partners) to the extent any ECTI were allocable to it. Kestrel Pacific has committed an aggregate of €475 million (approximately $513 million at 1.08 EUR/USD) to the Solara platform: €200 million to Fund IV-B (Luxembourg) SCSp and €275 million to Fund V-B (Luxembourg) SCSp.

Current and Post-Reorganization Structure. Kestrel Pacific is currently a limited partner in Fund IV-B (Luxembourg) SCSp and Fund V-B (Luxembourg) SCSp. Under the Reorganization, Kestrel Pacific will receive its pro rata share of the Consolidated Master Fund LP interests distributed by Fund IV-B (Luxembourg) SCSp and Fund V-B (Luxembourg) SCSp in Step 5, and will thereafter contribute those interests to Solara International Feeder (Cayman) LP. Post-Reorganization, Kestrel Pacific will hold its economic interest in the Solara portfolio through its partnership interest in the International Feeder, which in turn will hold a partnership interest in the Consolidated Master Fund LP.

Treaty Analysis. The United States and Singapore have entered into an income tax treaty (the "U.S.-Singapore Treaty"), which may provide reduced withholding rates or other benefits with respect to certain categories of income allocable to Kestrel Pacific. A detailed analysis of the U.S.-Singapore Treaty is beyond the scope of this memorandum. To the extent the U.S.-Singapore Treaty provides benefits that are relevant to Kestrel Pacific's ongoing § 1446 withholding position, such benefits would be applicable only in future periods when ECTI is actually allocated to Kestrel Pacific, not to the Reorganization transactions themselves.

Conclusion for the Reorganization. N

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
This memorandum is a privileged and confidential communication prepared by Calderwood & Harkness LLP at the request of its client, Solara Digital Infrastructure LP, and is protected from disclosure by the attorney-client privilege and the work product doctrine. This memorandum is not intended to be used, and may not be used, by any other party for any purpose, including but not limited to the avoidance of penalties that may be imposed under the Internal Revenue Code.
TAX MEMORANDUM
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I. Executive Summary
This memorandum analyzes whether any withholding obligation arises under Section 1446(a) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), in connection with the proposed five-step reorganization of the Solara Digital Infrastructure LP fund platform (the "Reorganization"), with particular focus on Steps 2 through 5 of the Reorganization. This memorandum also addresses the potential applicability of IRC § 1446(f), which was added to the Code by the Tax Cuts and Jobs Act of 2017 (the "TCJA"), to the various steps of the Reorganization. This analysis supports Ruling 7 as requested in the private letter ruling ("PLR") submission to the Internal Revenue Service ("IRS") Office of the Associate Chief Counsel (International) ("CC:INTL"), with secondary jurisdiction in the Office of the Associate Chief Counsel (Passthroughs and Special Industries) ("CC:PSI").
Conclusion. Based on the analysis set forth herein, and subject to the assumptions, qualifications, and contingencies described in this memorandum, we conclude that no withholding under IRC § 1446(a) is required on:
(i) The contributions of portfolio assets by the four Legacy Offshore Vehicles (as defined below) to Solara Consolidated Master Fund LP (the "Consolidated Master Fund LP") described in Steps 2 through 4 of the Reorganization, because these contributions constitute nonrecognition transactions under IRC § 721(a) that generate no effectively connected taxable income ("ECTI") allocable to any foreign partner; and
(ii) The distributions by the Legacy Offshore Vehicles of their respective partnership interests in the Consolidated Master Fund LP to their respective limited partners in Step 5 of the Reorganization, because these distributions are not "amounts subject to withholding" under the Treasury Regulations promulgated under § 1446 (Treas. Reg. §§ 1.1446-1 through -6) and do not generate gain under IRC § 731(a).
We further conclude that IRC § 1446(f) is not triggered by any step of the Reorganization because no gain is recognized in connection with any contribution or distribution, and therefore no gain exists that would be treated as ECTI under IRC § 864(c)(8).
This analysis has direct implications for all non-U.S. limited partners in the Legacy Offshore Vehicles, including two key non-U.S. investors: (a) the Nordhaven Sovereign Wealth Fund (domiciled in the Kingdom of Nordhaven, a Nordic sovereign state), which has committed an aggregate of $880 million to Fund IV-A (Cayman) LP ($380 million) and Fund V-A (Cayman) LP ($500 million); and (b) Kestrel Pacific Insurance Group (domiciled in Singapore), which has committed an aggregate of €475 million (approximately $513 million at 1.08 EUR/USD) to Fund IV-B (Luxembourg) SCSp (€200 million) and Fund V-B (Luxembourg) SCSp (€275 million). Neither of these investors, nor any other foreign partner of the Legacy Offshore Vehicles, will be subject to § 1446 withholding as a result of the Reorganization transactions.
This conclusion is contingent on the correctness of the nonrecognition analyses set forth in the companion memoranda analyzing IRC §§ 721(a), 721(b), 731(a), 731(c), and 752, each of which is incorporated herein by reference. In particular, the nonwithholding conclusion under § 1446 depends on: (a) the qualification of the Step 2–4 contributions for nonrecognition treatment under § 721(a); (b) the inapplicability of the investment company exception under § 721(b); (c) the qualification of the Step 5 distributions for nonrecognition treatment under § 731(a); (d) the non-marketable-security status of the distributed Consolidated Master Fund LP interests under § 731(c)(2); and (e) the absence of gain recognition from § 752 liability netting. Should any of these conclusions prove incorrect, the § 1446 withholding analysis set forth herein would need to be revisited.
II. Background and Factual Summary
A. The Solara Fund Platform — Current Structure
Solara Digital Infrastructure LP ("Solara" or the "Sponsor") is a Delaware limited partnership formed on March 17, 2014, pursuant to the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101 et seq. Solara operates as a leading private equity manager focused on digital infrastructure and enterprise software-as-a-service ("SaaS") assets. As of March 31, 2025, Solara manages approximately $14.7 billion in aggregate assets under management ("AUM") across its fund vehicles.
The Solara fund platform is managed by Solara Digital Infrastructure GP LLC, a Delaware limited liability company (EIN 82-4917365), which serves as the general partner of each of the domestic fund vehicles and, through its offshore subsidiaries, as the general partner or gérant of each of the offshore fund vehicles. The managing member and principal of Solara Digital Infrastructure GP LLC is Viktor Raines, who serves as Chief Investment Officer and Chairman of the Investment Committee.
To accommodate the distinct regulatory, tax, and structuring requirements of its U.S. taxable, U.S. tax-exempt, and non-U.S. investor pools, Solara currently operates six parallel fund vehicles across three jurisdictions (Delaware, the Cayman Islands, and the Grand Duchy of Luxembourg), organized into two vintage groups (Fund IV, vintage 2021, and Fund V, vintage 2023). These six vehicles are collectively referred to herein as the "Current Fund Vehicles," and the four offshore vehicles (identified below) are referred to herein as the "Legacy Offshore Vehicles." The Current Fund Vehicles are as follows:
Fund IV Vehicles (Vintage 2021):
1. Fund IV LP — A Delaware limited partnership (EIN 85-2103748) with approximately $4.2 billion in committed capital, of which approximately 72% has been deployed as of March 31, 2025. Fund IV LP is the primary vehicle for U.S. taxable investors. Its general partner is Solara Digital Infrastructure GP LLC.
2. Fund IV-A (Cayman) LP — A Cayman Islands exempted limited partnership (EIN 98-6241503) with approximately $1.85 billion in committed capital. The general partner is Solara Offshore GP Ltd., a Cayman Islands exempted company. The registered office is Harborstone Corporate Services Ltd., P.O. Box 2714, 94 Solaris Avenue, George Town, Grand Cayman KY1-1111. Fund IV-A (Cayman) LP is registered with the Cayman Islands Monetary Authority ("CIMA") under registration number MF-72491. This vehicle serves primarily non-U.S. investors and certain U.S. tax-exempt investors.
3. Fund IV-B (Luxembourg) SCSp — A Luxembourg société en commandite spéciale (EIN 98-6241571) with approximately €1.15 billion in committed capital (approximately $1.24 billion at an exchange rate of 1.08 EUR/USD). The gérant is Solara Luxembourg Management S.à r.l. (Luxembourg Register of Commerce and Companies ("RCS") No. B 248194). The registered office is 14, rue Jean-Pierre Brasseur, L-1258 Luxembourg. The SCSp is registered with the RCS under number B 248193. This vehicle serves primarily European institutional investors, including EU-regulated insurance companies and pension funds that require a European-domiciled vehicle.
Fund V Vehicles (Vintage 2023):
4. Fund V LP — A Delaware limited partnership (EIN 88-3467219) with approximately $5.6 billion in committed capital, of which approximately 38% has been deployed as of March 31, 2025. Fund V LP is the primary vehicle for U.S. taxable investors in the more recent vintage. Its general partner is Solara Digital Infrastructure GP LLC.
5. Fund V-A (Cayman) LP — A Cayman Islands exempted limited partnership (EIN 98-7891234) with approximately $2.45 billion in committed capital. The general partner is Solara Offshore GP Ltd. Fund V-A (Cayman) LP is registered with CIMA under registration number MF-89103. This vehicle serves non-U.S. investors and certain U.S. tax-exempt investors.
6. Fund V-B (Luxembourg) SCSp — A Luxembourg société en commandite spéciale (EIN 98-7891267) with approximately €1.38 billion in committed capital (approximately $1.49 billion at 1.08 EUR/USD). The gérant is Solara Luxembourg Management S.à r.l. The SCSp is registered with the Luxembourg RCS under number B 271056. This vehicle serves European institutional investors.
Each of the four Legacy Offshore Vehicles — Fund IV-A (Cayman) LP, Fund IV-B (Luxembourg) SCSp, Fund V-A (Cayman) LP, and Fund V-B (Luxembourg) SCSp — has elected (or will be treated as having elected) to be classified as a partnership for U.S. federal income tax purposes. The two domestic vehicles — Fund IV LP and Fund V LP — are classified as partnerships by default under their state law formation. The domestic vehicles are not directly implicated by the § 1446 analysis, as their limited partners consist predominantly of U.S. taxable persons; however, the domestic vehicles will separately contribute their portfolio assets to the Consolidated Master Fund LP as part of the overall Reorganization, and those contributions will be analyzed in the companion § 721(a) memorandum.
B. Key Non-U.S. Investors Affected
Two non-U.S. investors have been specifically identified by the Sponsor as requiring particular attention in the withholding tax analysis due to the size of their commitments, the sensitivity of their tax positions, and their engagement of independent tax counsel. These investors are representative of the broader population of non-U.S. limited partners in the Legacy Offshore Vehicles, all of whom are affected by the § 1446 analysis.
Nordhaven Sovereign Wealth Fund. The Nordhaven Sovereign Wealth Fund ("Nordhaven SWF") is a non-U.S. sovereign wealth fund domiciled in and wholly owned by the Kingdom of Nordhaven, a Nordic country. Nordhaven SWF has committed $380 million to Fund IV-A (Cayman) LP and $500 million to Fund V-A (Cayman) LP, for a total aggregate commitment of $880 million across the Solara platform. The primary contact at Nordhaven SWF is Anders Bjørkman, Head of Alternative Investments. Nordhaven SWF has retained independent U.S. tax counsel, Bramhall & Quelwick LLP, to advise on its U.S. withholding tax and income tax treaty positions. The responsible partner at Bramhall & Quelwick LLP is Jason Tremaine, Partner, International Tax, whose offices are located at 44 Montgomery Street, Suite 3600, San Francisco, California 94104. Bramhall & Quelwick LLP is conducting an independent analysis of the potential applicability of IRC § 892 (income of foreign governments) and the U.S.-Nordhaven income tax treaty to Nordhaven SWF's allocable share of the Consolidated Master Fund LP's income in future periods. Coordination between Calderwood & Harkness LLP's § 1446 analysis and Bramhall & Quelwick LLP's treaty and § 892 analysis is discussed in Section XI below.
Kestrel Pacific Insurance Group. Kestrel Pacific Insurance Group ("Kestrel Pacific") is a non-U.S. insurance company domiciled in Singapore and regulated by the Monetary Authority of Singapore ("MAS"). Kestrel Pacific has committed €200 million to Fund IV-B (Luxembourg) SCSp and €275 million to Fund V-B (Luxembourg) SCSp, for a total aggregate commitment of €475 million (approximately $513 million at 1.08 EUR/USD) across the Solara platform. The primary contact at Kestrel Pacific is Christine Leung, Senior Portfolio Manager, Alternative Investments.
In addition to Nordhaven SWF and Kestrel Pacific, the Legacy Offshore Vehicles collectively have numerous other non-U.S. limited partners, including sovereign wealth funds, pension funds, insurance companies, family offices, and other institutional investors domiciled in various jurisdictions outside the United States. While these additional non-U.S. limited partners are not individually identified for purposes of this memorandum, the § 1446 analysis set forth herein applies with equal force to all foreign partners of the Legacy Offshore Vehicles.
C. The Proposed Reorganization — Steps Relevant to § 1446 Analysis
The Reorganization consists of five sequential steps, the first of which involves the formation of new entities and the remaining four of which involve the contribution of portfolio assets to, and distribution of interests in, the Consolidated Master Fund LP. The following summary describes each step as relevant to the § 1446 withholding analysis. A complete description of the Reorganization, including business purposes, structural diagrams, and entity formation details, is set forth in the master PLR submission and in the companion entity classification memorandum.
Step 1 — Formation of New Entities (September 15, 2025). On or about September 15, 2025, the following new entities will be formed:
(a) Solara Consolidated Master Fund GP LLC — A Delaware limited liability company that will serve as the general partner of the Consolidated Master Fund LP.
(b) Solara Consolidated Master Fund LP — A Delaware limited partnership that will serve as the single consolidated operating partnership holding all portfolio company interests across the Solara platform.
(c) Solara International Feeder (Cayman) LP — A Cayman Islands exempted limited partnership that will serve as the feeder vehicle for all non-U.S. investors post-Reorganization.
(d) Solara Tax-Exempt Feeder (Cayman) LP — A Cayman Islands exempted limited partnership that will serve as the feeder vehicle for all U.S. tax-exempt investors post-Reorganization.
Each of these entities will file IRS Form 8832 (Entity Classification Election) under Treas. Reg. § 301.7701-3 to elect classification as a partnership for U.S. federal income tax purposes, or will be classified as a partnership by default under the applicable default classification rules. Step 1 does not itself involve any transfer of assets or any recognition of income or gain, and therefore does not directly implicate § 1446 withholding. Step 1 is included here for completeness and to establish the entities that participate in the subsequent steps.
Step 2 — Fund IV-A (Cayman) Contribution (October 1, 2025). On or about October 1, 2025, Fund IV-A (Cayman) LP will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for a partnership interest in the Consolidated Master Fund LP. The aggregate fair market value ("FMV") of the contributed assets is approximately $2.31 billion, with an aggregate adjusted tax basis of approximately $1.62 billion, resulting in aggregate built-in gain of approximately $690 million. Representative assets include:
(a) NovaBright Data Systems Inc. — Fund IV-A (Cayman) LP holds a 60% interest in NovaBright Data Systems Inc., a Delaware corporation operating a network of hyperscale data centers. The total FMV of the 60% interest is $890 million, with an adjusted tax basis of $520 million, resulting in built-in gain of $370 million. Fund IV-A (Cayman) LP's proportional share of this interest (attributable to the Cayman vehicle) has an FMV of $534 million, a basis of $312 million, and built-in gain of $222 million.
(b) Thorngate Fiber Networks LP — Fund IV-A (Cayman) LP holds a 100% interest in Thorngate Fiber Networks LP, a Delaware limited partnership that operates a fiber-optic transmission network. The FMV of this interest is $670 million, with an adjusted tax basis of $490 million, resulting in built-in gain of $180 million. We note that Thorngate Fiber Networks LP is itself a partnership for U.S. federal income tax purposes, which raises a discrete § 1446(f) issue discussed in Section IV.F below.
Step 3 — Fund IV-B (Luxembourg) Contribution (October 15, 2025). On or about October 15, 2025, Fund IV-B (Luxembourg) SCSp will contribute all of its portfolio assets to the Consolidated Master Fund LP in exchange for a partnership interest in the Consolidated Master Fund LP. The aggregate FMV of the contributed assets is approximately €1.07 billion (approximately $1.16 billion at 1.08 EUR/USD), with an aggregate adjusted tax basis of approximately €782 million (approximately $844.6 million), resulting in aggregate built-in gain of approximately €288 million (approximately $311 million). Representative assets include:
(a) Crestline Cloud Solutions LLC — Fund IV-B (Luxembourg) SCSp holds a 100% interest in Crestline Cloud Solutions LLC, a Delaware limited liability company classified as a disregarded entity for U.S. federal income tax purposes, which provides enterprise cloud computing and infrastructure management services. The FMV of this interest is €340 million (approximately $367 million), with an adjusted tax basis of €195 million (approximately $211 million), resulting in built-in gain of €145 million (approximately $156 million).
Step 4 — Fund V-A (Cayman) and Fund V-B (Luxembourg) Contributions (November 1, 2025). On or about November 1, 2025, the two Fund V offshore vehicles will simultaneously contribute all of their respective portfolio assets to the Consolidated Master Fund LP in exchange for partnership interests in the Consolidated Master Fund LP. The financial parameters of these contributions are as follows:
(a) Fund V-A (Cayman) LP: Aggregate FMV of approximately $2.89 billion; aggregate adjusted tax basis of approximately $2.34 billion; aggregate built-in gain of approximately $550 million.
(b) Fund V-B (Luxembourg) SCSp: Aggregate FMV of approximately €1.29 billion (approximately $1.39 billion at 1.08 EUR/USD); aggregate adjusted tax basis of approximately €1.14 billion (approximately $1.23 billion); aggregate built-in gain of approximately €150 million (approximately $162 million).
Representative assets contributed in Step 4 include:
(a) Veridian Edge Computing Corp. — Fund V-A (Cayman) LP holds a 55% interest in Veridian Edge Computing Corp., a Delaware corporation that develops and deploys edge computing hardware and software solutions for telecommunications carriers. The FMV of the 55% interest is $1.12 billion, with an adjusted tax basis of $780 million, resulting in built-in gain of $340 million.
(b) Helix SaaS Holdings Ltd. — Fund V-A (Cayman) LP holds a 100% interest in Helix SaaS Holdings Ltd., a Cayman Islands company classified as a corporation for U.S. federal income tax purposes, which operates a portfolio of enterprise SaaS platforms. The FMV of this interest is $445 million, with an adjusted tax basis of $310 million, resulting in built-in gain of $135 million.
Step 5 — Distributions by Legacy Offshore Vehicles and LP Migration (December 1, 2025). On or about December 1, 2025, each of the four Legacy Offshore Vehicles will dissolve and distribute its partnership interest in the Consolidated Master Fund LP (received in Steps 2–4) to its existing limited partners, pro rata in accordance with each limited partner's partnership interest in the dissolving vehicle. Following these distributions:
(a) Non-U.S. limited partners (including Nordhaven SWF and Kestrel Pacific) will contribute their newly received Consolidated Master Fund LP interests to Solara International Feeder (Cayman) LP in exchange for partnership interests in the Feeder, thereby "rolling" into the post-Reorganization feeder structure.
(b) U.S. tax-exempt limited partners (including, for example, the Pinnacle State Employees' Retirement System and the Grandview University Endowment) will contribute their newly received Consolidated Master Fund LP interests to Solara Tax-Exempt Feeder (Cayman) LP in exchange for partnership interests in the Feeder.
The Legacy Offshore Vehicles will thereafter be wound up and their registrations canceled in the Cayman Islands and Luxembourg, respectively.
D. Aggregate Financial Summary
The following table summarizes the aggregate financial parameters of the Reorganization transactions relevant to the § 1446 analysis:
The $1.72 billion in aggregate built-in gain will be tracked under IRC § 704(c) and allocated to the contributing partners (and, ultimately, their foreign partners) only upon subsequent taxable dispositions of the contributed assets or through depreciation and amortization allocations in future periods. As discussed more fully in Section IV.D below, this deferred built-in gain does not give rise to current ECTI and does not trigger current § 1446 withholding obligations.
III. Applicable Legal Framework — IRC § 1446
A. Overview of IRC § 1446(a)
Section 1446(a) of the Code provides that, if a partnership has effectively connected taxable income for any taxable year, and if any portion of such income is allocable under IRC § 704 to a partner who is a foreign person, the partnership shall pay a withholding tax under § 1446(a) on behalf of such foreign partner. The statute was enacted to ensure that the U.S. collects withholding tax on income earned by foreign persons through partnerships engaged in a U.S. trade or business, thereby addressing the difficulty of collecting tax directly from foreign partners who may have no other U.S. presence or filing obligation.
The rate of withholding under § 1446(a) is generally equal to the highest rate of tax specified in IRC § 1 (for non-corporate foreign partners) or IRC § 11 (for corporate foreign partners). Under current law, these rates are 37% for non-corporate foreign partners and 21% for corporate foreign partners. The withholding tax is imposed on the partnership itself — not on the foreign partner — and the partnership is the party responsible for computing, withholding, and remitting the tax to the IRS. The partnership must pay the withholding tax on either an installment basis (using Forms 8804, 8805, and 8813) or on an annual basis, in accordance with the rules set forth in Treas. Reg. § 1.1446-3.
The withholding obligation under § 1446(a) is triggered by the allocation of ECTI to a foreign partner — not by the distribution of cash or property to a foreign partner. Accordingly, a partnership may have a § 1446(a) withholding obligation even if it makes no distributions to its foreign partners during the taxable year, so long as ECTI is allocable to such partners under IRC § 704. Conversely, if a partnership has no ECTI, or if no ECTI is allocable to foreign partners, no withholding obligation arises under § 1446(a), regardless of whether distributions are made.
B. Key Definitions Under Treas. Reg. § 1.1446-1 Through -6
The Treasury Regulations promulgated under § 1446 elaborate on the mechanics of the withholding obligation and define the key terms relevant to the analysis. The following definitions are particularly pertinent:
Foreign partner. Under Treas. Reg. § 1.1446-1(c)(2), a "foreign partner" is any partner of a partnership that is not a "United States person" as defined in IRC § 7701(a)(30). This includes, without limitation, nonresident alien individuals, foreign corporations, foreign partnerships, foreign estates, and foreign trusts. Both the Nordhaven Sovereign Wealth Fund (a sovereign wealth fund established under the laws of the Kingdom of Nordhaven) and Kestrel Pacific Insurance Group (a corporation organized under the laws of Singapore) are "foreign partners" within the meaning of this definition. For purposes of § 1446, a partnership determines the status of its partners based on the certifications provided by such partners (generally, IRS Forms W-8BEN, W-8BEN-E, or W-8IMY, as applicable).
Effectively connected taxable income (ECTI). Under Treas. Reg. § 1.1446-2, ECTI is the partnership's taxable income that is, or would be (if the partner were a nonresident alien individual), treated as effectively connected with the conduct of a trade or business within the United States under IRC §§ 871(b) or 882. ECTI is computed at the partnership level and then allocated to each partner in accordance with the partnership agreement, subject to the allocation rules of IRC § 704(b) and (c). Items of income, gain, deduction, and loss that are not effectively connected with a U.S. trade or business are excluded from the ECTI computation. A partnership determines its ECTI by reference to all items of income, gain, deduction, and loss that are, or would be, treated as effectively connected, taking into account the rules of IRC §§ 864(c)(2) and (c)(3) for determining effective connection.
Amounts subject to withholding. Under Treas. Reg. § 1.1446-1(c), the partnership must determine the amount of ECTI allocable to each foreign partner and withhold the applicable percentage of such amount. The term "amounts subject to withholding" under § 1446(a) thus refers specifically to ECTI allocations — not to distributions, contributions, or other non-income events.
The Treasury Regulations under § 1446 are organized as follows:
• Treas. Reg. § 1.1446-1: General rules for determining a partnership's obligation to pay withholding tax under § 1446, including identification of foreign partners and required documentation.
• Treas. Reg. § 1.1446-2: Rules for determining a partnership's ECTI for purposes of computing the § 1446 withholding obligation, including the treatment of specific categories of income and gain.
• Treas. Reg. § 1.1446-3: Time and manner of paying and reporting the § 1446 withholding tax, including installment payment requirements, annual reporting on Form 8804, and the issuance of Forms 8805 to foreign partners.
• Treas. Reg. § 1.1446-4: Special rules applicable to publicly traded partnerships, which are not relevant to the Solara fund platform.
• Treas. Reg. § 1.1446-5: Rules governing tiered partnership structures, including the "look-through" requirement for upper-tier partnerships that have foreign partners. This regulation is relevant to the post-Reorganization structure, as discussed in Section VII below.
• Treas. Reg. § 1.1446-6: Special rules permitting a partnership to rely on a foreign partner's certification of its allocable share of deductions and losses to reduce the partnership's § 1446 withholding obligation.
C. Relationship Between § 1446 and Nonrecognition Provisions
The withholding obligation under § 1446(a) is fundamentally predicated on the existence of ECTI allocable to a foreign partner. If a transaction does not generate taxable income or gain — because it qualifies for nonrecognition treatment under an applicable provision of the Code — there is no ECTI, and therefore no § 1446(a) withholding obligation arises.
This principle is implicit in the structure of § 1446(a) and the regulations thereunder, which require the partnership to compute its ECTI by reference to its taxable income. A transaction that is subject to a nonrecognition provision — such as a tax-free contribution under IRC § 721(a) or a tax-free distribution under IRC § 731(a) — produces no taxable income or gain at the partnership or partner level, and therefore produces no ECTI to which the § 1446(a) withholding obligation could attach. The § 1446 regulations do not contain any separate withholding requirement applicable to nonrecognition transactions; the regulations look solely to the partnership's taxable income for the period in question.
This memorandum relies on the nonrecognition analyses set forth in the companion memoranda addressing IRC §§ 721(a) and 731(a), which conclude that the contributions in Steps 2–4 and the distributions in Step 5, respectively, qualify for nonrecognition treatment. Those analyses are incorporated herein by reference and summarized in the relevant sections below.
D. Relationship Between § 1446 and IRC § 1446(f) (Enacted by TCJA)
Section 1446(f) of the Code, added by Section 13501 of the TCJA (Pub. L. No. 115-97, 131 Stat. 2054 (2017)), imposes a withholding obligation on the transfer of a partnership interest by a foreign person to the extent that gain on the transfer would be treated as effectively connected income under IRC § 864(c)(8). Section 1446(f) is distinct from § 1446(a) in both scope and operation:
• IRC § 1446(a) imposes withholding on the partnership when it allocates ECTI to foreign partners. The withholding is based on ongoing allocations of income and gain, and the obligation falls on the partnership.
• IRC § 1446(f) imposes withholding on the transferee when a foreign person transfers (i.e., sells, exchanges, or otherwise disposes of) a partnership interest. The withholding is equal to 10% of the amount realized by the transferor on the transfer. Under § 1446(f)(4), if the transferee fails to withhold, the partnership itself may be required to withhold from subsequent distributions to the transferee.
Section 1446(f) was enacted in conjunction with IRC § 864(c)(8), which provides that gain or loss of a foreign person from the sale or exchange of a partnership interest is treated as effectively connected with the conduct of a trade or business within the United States to the extent such gain or loss does not exceed the foreign person's distributive share of the partnership's effectively connected gain or loss that would have been allocated to such person if the partnership had sold all of its assets at fair market value at the time of the transfer.
For purposes of this memorandum, the key question under § 1446(f) is whether any step of the Reorganization constitutes a "transfer" of a partnership interest by a foreign person that would trigger the § 1446(f) withholding obligation. This analysis is set forth in Sections IV.F and V.C below.
IV. Analysis of Steps 2–4: Contributions of Portfolio Assets to the Consolidated Master Fund LP
A. Nonrecognition Treatment Under IRC § 721(a)
As analyzed in detail in the companion memorandum addressing IRC § 721(a) (Calderwood & Harkness LLP Memorandum, "Analysis of IRC § 721(a) Nonrecognition Treatment for Contributions to the Consolidated Master Fund LP," dated June 16, 2025, Engagement No. 20250527-SDILP-PLR), each of the four Legacy Offshore Vehicles' contributions of portfolio assets to the Consolidated Master Fund LP in Steps 2–4 qualifies as a tax-free contribution of property to a partnership in exchange for an interest in such partnership under IRC § 721(a).
Section 721(a) provides that "[n]o gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership." The companion memorandum concludes that each of the following contributions satisfies the requirements of § 721(a):
(a) The contribution by Fund IV-A (Cayman) LP of its portfolio assets (FMV $2.31 billion; basis $1.62 billion) to the Consolidated Master Fund LP on October 1, 2025 (Step 2);
(b) The contribution by Fund IV-B (Luxembourg) SCSp of its portfolio assets (FMV $1.16 billion; basis $844.6 million) to the Consolidated Master Fund LP on October 15, 2025 (Step 3);
(c) The contribution by Fund V-A (Cayman) LP of its portfolio assets (FMV $2.89 billion; basis $2.34 billion) to the Consolidated Master Fund LP on November 1, 2025 (Step 4); and
(d) The contribution by Fund V-B (Luxembourg) SCSp of its portfolio assets (FMV $1.39 billion; basis $1.23 billion) to the Consolidated Master Fund LP on November 1, 2025 (Step 4).
Under IRC § 723, the Consolidated Master Fund LP's basis in the contributed assets will equal the contributing partnership's adjusted basis in such assets immediately prior to the contribution (i.e., carryover basis). Under IRC § 1223(2), the Consolidated Master Fund LP's holding period in the contributed assets will include the contributing partnership's holding period.
Conclusion for § 1446 Purposes: Because no gain or loss is recognized by the contributing partnerships or by any of their partners as a result of the Step 2–4 contributions, no ECTI is generated, and no withholding obligation arises under IRC § 1446(a) with respect to these transactions.
B. Application of Treas. Reg. § 1.1446-2 — No ECTI from Nonrecognition Contributions
The analysis of the § 1446(a) withholding obligation for Steps 2–4 turns on the determination of ECTI under Treas. Reg. § 1.1446-2. Under this regulation, ECTI is computed by reference to the partnership's items of taxable income and gain that are effectively connected with the conduct of a trade or business within the United States. For the partnership to have an ECTI-based withholding obligation, there must be taxable income or gain that is allocable to a foreign partner.
A contribution of property to a partnership that qualifies for nonrecognition under IRC § 721(a) does not produce taxable income or gain at any level — neither the contributing partner nor the receiving partnership recognizes income on the transaction. Accordingly, under Treas. Reg. § 1.1446-2, there is no amount includable in the partnership's ECTI computation as a result of a § 721(a) contribution. Specifically:
(a) The Legacy Offshore Vehicles (as the contributing partnerships) do not recognize gain on the contribution of their portfolio assets. Because no gain is recognized, the Legacy Offshore Vehicles have no income to allocate to their respective foreign partners from the contribution transactions themselves. There is therefore no ECTI allocable to any foreign partner of the Legacy Offshore Vehicles, and no § 1446(a) withholding obligation arises at the Legacy Offshore Vehicle level.
(b) The Consolidated Master Fund LP (as the receiving partnership) similarly does not recognize income or gain upon receipt of the contributed assets. Section 721(a) by its terms provides that no gain or loss is recognized "to a partnership" in the case of a contribution of property in exchange for a partnership interest. The Consolidated Master Fund LP therefore has no income from the receipt of the contributed assets, and no ECTI is generated at the Consolidated Master Fund LP level from the contribution transactions.
Because no ECTI is generated at either the contributing-partnership level or the receiving-partnership level, there is no amount on which § 1446(a) withholding could be imposed with respect to Steps 2–4.
C. § 721(b) Investment Company Exception — Impact on § 1446 Analysis
Section 721(b) of the Code provides an exception to the general nonrecognition rule of § 721(a) for contributions to a partnership that would be treated as an "investment company" (within the meaning of IRC § 351) if the partnership were incorporated. Under § 721(b), if the transfer results in a "diversification" of the transferors' interests, gain is recognized to the contributing partner as if the contribution were a taxable exchange. Treasury Regulation § 1.351-1(c)(1)(ii) defines an "investment company" for this purpose as a company more than 80% of the value of whose assets (excluding cash and nonconvertible debt obligations) consists of certain enumerated categories of passive investment assets, including stocks, securities, money, and similar assets.
The companion memorandum analyzing IRC § 721(b) (Calderwood & Harkness LLP Memorandum, "Analysis of IRC § 721(b) Investment Company Exception," dated June 16, 2025, Engagement No. 20250527-SDILP-PLR) concludes that the Consolidated Master Fund LP does not constitute an "investment company" within the meaning of § 721(b) and Treas. Reg. § 1.351-1(c)(1)(ii). This conclusion is based on the fact that the Consolidated Master Fund LP's portfolio consists entirely of interests in 23 operating companies in the digital infrastructure and enterprise SaaS sectors — including data center operators, fiber-optic network operators, edge computing companies, and SaaS platform companies — none of which constitutes a passive investment asset of the type enumerated in Treas. Reg. § 1.351-1(c)(1)(ii). The portfolio companies are actively managed businesses that generate operating income, employ hundreds or thousands of employees, and own substantial operating assets. They are not stocks, securities, or other passive financial instruments.
The significance of the § 721(b) analysis for the § 1446 withholding determination is direct and material. If § 721(b) were to apply — which we do not believe it does — the contributing partnerships would recognize gain on their contributions to the Consolidated Master Fund LP. That gain, to the extent effectively connected with a U.S. trade or business, would constitute ECTI allocable to the foreign partners of the contributing partnerships. Section 1446(a) withholding would then be required on such ECTI at the applicable rates (37% for non-corporate foreign partners; 21% for corporate foreign partners).
Given the magnitude of the aggregate built-in gain ($1.72 billion), the potential § 1446(a) withholding exposure in the event § 721(b) were to apply would be substantial. By way of illustration, if the full $690 million of built-in gain in the Fund IV-A (Cayman) LP portfolio were recognized and treated as ECTI allocable to foreign partners, the § 1446(a) withholding liability could approach $145 million to $255 million (depending on the mix of corporate and non-corporate foreign partners), before taking into account any treaty benefits or § 892 exemptions. This underscores the importance of the § 721(b) nonrecognition analysis to the overall withholding tax position.
The PLR request specifically seeks Ruling 2, confirming that the Consolidated Master Fund LP does not constitute an investment company under § 721(b). The favorable resolution of Ruling 2 directly underpins the § 1446 nonwithholding conclusion set forth in this memorandum.
D. § 704(c) Built-In Gain — Deferred, Not Current
Although no gain is recognized at the time of the Step 2–4 contributions, the $1.72 billion in aggregate built-in gain inherent in the contributed portfolio assets is not eliminated. Rather, under IRC § 704(c)(1)(A), the built-in gain is preserved and tracked in the Consolidated Master Fund LP's § 704(c) accounts. Section 704(c) requires that, upon a subsequent taxable disposition of the contributed property (or through depreciation and amortization allocations), the built-in gain be allocated to the contributing partner (i.e., the Legacy Offshore Vehicle, or its successors) to account for the difference between the property's fair market value and its adjusted tax basis at the time of contribution.
For purposes of the § 1446 analysis, the critical point is that § 704(c) built-in gain is deferred, not current. The built-in gain does not constitute ECTI in the taxable year of the contribution; it will constitute ECTI only when and if it is actually recognized through a future taxable event — such as a sale of the contributed assets — or through annual depreciation or amortization allocations that give rise to differences between book and tax income allocable to the contributing and non-contributing partners.
Accordingly, § 1446 withholding will apply in future periods when and if ECTI is actually generated from the § 704(c) accounts and allocated to foreign partners. The companion memorandum analyzing IRC § 704(c) (Calderwood & Harkness LLP Memorandum, "Analysis of § 704(c) Built-In Gain Carryover and Continuation of Remedial Allocation Method," dated June 16, 2025, Engagement No. 20250527-SDILP-PLR) addresses the proper method for tracking and allocating built-in gain in the post-Reorganization structure, including the continuation of the remedial allocation method under Treas. Reg. § 1.704-3(d). The ongoing § 1446 withholding obligations associated with future § 704(c) allocations are discussed briefly in Section VII.B below, but are not the subject of the PLR request.
E. § 752 Liability Shifts — No Gain Recognition Triggering § 1446
The Step 2–4 contributions involve the assumption by the Consolidated Master Fund LP of approximately $1.34 billion in aggregate liabilities associated with the contributed portfolio assets. Under IRC § 752(b), a decrease in a partner's share of partnership liabilities is treated as a distribution of money to the partner, and under IRC § 752(a), an increase in a partner's share of partnership liabilities is treated as a contribution of money by the partner. When both a decrease and an increase in liabilities occur simultaneously (as in the case of a contribution of encumbered property to a new partnership), Treas. Reg. § 1.752-1(f) provides that the increases and decreases are netted to determine the net effect on each partner.
The companion memorandum analyzing IRC § 752 (Calderwood & Harkness LLP Memorandum, "Analysis of § 752 Liability Shifts in Connection with the Proposed Reorganization," dated June 16, 2025, Engagement No. 20250527-SDILP-PLR) models the $1.34 billion in aggregate liabilities and concludes that the netting of deemed contributions and deemed distributions under §§ 752(a) and 752(b), as applied through Treas. Reg. § 1.752-1(f), does not result in any net deemed money distribution to any partner that exceeds such partner's adjusted basis in its partnership interest. Because no partner's basis is exceeded, no gain is recognized under IRC § 731(a)(1) as a result of the liability shifts.
Because no gain is recognized from the liability assumption component of the Reorganization, no ECTI is generated, and no § 1446(a) withholding obligation arises from the liability shifts. If, contrary to our analysis, the netting of liabilities under Treas. Reg. § 1.752-1(f) were to result in a net deemed distribution exceeding a foreign partner's basis, gain would be recognized under § 731(a)(1), and such gain (to the extent effectively connected) could constitute ECTI subject to § 1446(a) withholding. As discussed in Section X.D below, we view this risk as remote based on the modeling performed in the companion § 752 memorandum.
F. § 1446(f) Analysis — Transfers of Partnership Interests
Steps 2–4 involve contributions of portfolio company interests — i.e., interests in operating companies such as NovaBright Data Systems Inc., Crestline Cloud Solutions LLC, and Veridian Edge Computing Corp. — by the Legacy Offshore Vehicles to the Consolidated Master Fund LP. These contributions are contributions of property to a partnership in exchange for a partnership interest, governed by IRC § 721(a). They are not, in the first instance, "transfers" of partnership interests subject to IRC § 1446(f).
Section 1446(f) applies specifically to the transfer of a partnership interest by a foreign person. In the context of Steps 2–4, the Legacy Offshore Vehicles are transferring portfolio company interests — not partnership interests — to the Consolidated Master Fund LP. Accordingly, § 1446(f) is not directly implicated by the contributions.
However, there is a discrete issue arising from the fact that at least one of the contributed assets — the 100% interest in Thorngate Fiber Networks LP, a Delaware limited partnership — is itself a partnership interest. To the extent the contribution of the Thorngate Fiber Networks LP interest by Fund IV-A (Cayman) LP to the Consolidated Master Fund LP could be characterized as a "transfer" of a partnership interest for purposes of § 1446(f), the question arises whether § 1446(f) withholding would apply.
We conclude that even if § 1446(f) were technically applicable to the contribution of a partnership interest (such as the Thorngate Fiber Networks LP interest) within the broader § 721(a) nonrecognition transaction, no withholding obligation would arise under § 1446(f)(1). Section 1446(f)(1) requires withholding on the "amount realized" by the transferor to the extent that gain on the transfer would be treated as ECTI under IRC § 864(c)(8). In a § 721(a) nonrecognition transaction, no gain is recognized by the contributing partner — and therefore no gain exists that would be treated as ECTI under § 864(c)(8). The withholding obligation under § 1446(f) is predicated on the existence of gain; where there is no gain, there is no amount on which withholding can be computed.
Moreover, the regulations under § 1446(f), including Treas. Reg. § 1.1446(f)-2, generally contemplate withholding in the context of a taxable transfer of a partnership interest (such as a sale or exchange), not in the context of a nonrecognition contribution. While the regulations do not contain an express exemption for § 721(a) contributions, the mechanical operation of the withholding computation — which is tied to the amount of gain recognized on the transfer — effectively produces a zero withholding amount in a nonrecognition context.
Accordingly, we conclude that § 1446(f) does not require withholding on any contribution made in Steps 2–4, including the contribution of the Thorngate Fiber Networks LP partnership interest.
V. Analysis of Step 5: Distributions by Legacy Offshore Vehicles and LP Migration
A. Nonrecognition Treatment Under IRC § 731(a)
As analyzed in detail in the companion memorandum addressing IRC § 731(a) (Calderwood & Harkness LLP Memorandum, "Analysis of IRC § 731(a) Nonrecognition Treatment for Distributions in Liquidation of Legacy Offshore Vehicles," dated June 16, 2025, Engagement No. 20250527-SDILP-PLR), the distributions by the Legacy Offshore Vehicles of their partnership interests in the Consolidated Master Fund LP to their respective limited partners in Step 5 constitute tax-free distributions under IRC § 731(a).
Section 731(a)(1) provides that, in the case of a distribution by a partnership to a partner, gain shall not be recognized to such partner except to the extent that any money distributed exceeds the adjusted basis of such partner's interest in the partnership immediately before the distribution. In Step 5, the Legacy Offshore Vehicles distribute partnership interests in the Consolidated Master Fund LP — not money or cash — to their respective limited partners. Because no money is distributed (and no money is deemed distributed under § 752(b) in excess of any partner's basis), no gain is recognized under § 731(a)(1).
The companion memorandum also addresses the potential application of IRC § 731(c), which treats certain "marketable securities" as money for purposes of § 731(a). As discussed in Section V.A.1 of the companion § 731(c) memorandum (Calderwood & Harkness LLP Memorandum, "Analysis of IRC § 731(c) — Non-Applicability to Consolidated Master Fund LP Interests," dated June 16, 2025, Engagement No. 20250527-SDILP-PLR), the distributed Consolidated Master Fund LP interests do not constitute "marketable securities" within the meaning of § 731(c)(2). Section 731(c)(2) defines "marketable securities" as financial instruments that are "actively traded" within the meaning of IRC § 1092(d)(1). The Consolidated Master Fund LP interests are not listed on any exchange, not registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, and not otherwise actively traded or readily tradable on an established securities market. Accordingly, § 731(c) does not apply, and the distributed interests are not treated as money for purposes of § 731(a).
Conclusion for § 1446 Purposes: Because no gain is recognized by the Legacy Offshore Vehicles or by any of their partners as a result of the Step 5 distributions, no ECTI is generated, and no withholding obligation arises under IRC § 1446(a) with respect to these transactions.
B. No ECTI Generated from Nonrecognition Distributions
The application of Treas. Reg. § 1.1446-2 to the Step 5 distributions follows the same analytical framework applied to the Step 2–4 contributions. Under Treas. Reg. § 1.1446-2, ECTI is determined by reference to the partnership's items of taxable income and gain. Because no gain or income is recognized by the distributing partnerships (the Legacy Offshore Vehicles) or by their partners under IRC § 731(a), no amount is includable in any partnership's ECTI computation for the taxable year in which the distributions occur.
The Legacy Offshore Vehicles have no obligation to withhold under IRC § 1446(a) on the Step 5 distributions. The distributions are not "amounts subject to withholding" within the meaning of Treas. Reg. §§ 1.1446-1 through -6. The term "amounts subject to withholding" under the § 1446 regulations refers exclusively to ECTI allocations; it does not encompass distributions of property in nonrecognition transactions that do not generate taxable income or gain.
It is worth noting that, even if the distributions were considered to give rise to some form of economic benefit to the foreign partners (by virtue of receiving a direct interest in the Consolidated Master Fund LP in place of an indirect interest through the Legacy Offshore Vehicle), this economic benefit does not constitute taxable income or gain under § 731(a). The § 1446 regulations do not impose withholding on unrealized economic benefits; they impose withholding only on ECTI that is allocated to foreign partners under IRC § 704.
C. § 1446(f) Analysis — Distribution of Partnership Interests
Step 5 involves the distribution of Consolidated Master Fund LP interests by the Legacy Offshore Vehicles to their limited partners, followed by the dissolution of the Legacy Offshore Vehicles. This raises the question whether these distributions constitute "transfers" of partnership interests subject to withholding under IRC § 1446(f).
Section 1446(f) imposes a withholding obligation when a "transferee" acquires a partnership interest from a foreign "transferor." In the context of a partnership distribution, the distributing partnership is distributing its own property (its interest in the Consolidated Master Fund LP) to its partners. The distributing partnership is not itself a "transferor" of a partnership interest in the traditional § 1446(f) sense; rather, it is a partnership making a liquidating distribution to its partners. The regulations under § 1446(f) generally contemplate arm's-length transfers of partnership interests between unrelated parties, not partnership distributions.
Moreover, even if § 1446(f) were construed to apply to the Step 5 distributions, the withholding computation would yield a zero amount. Section 1446(f)(1) requires withholding to the extent that gain on the transfer would be treated as ECTI under IRC § 864(c)(8). As established in the companion § 731(a) memorandum, no gain is recognized by any partner on the Step 5 distributions. If no gain is recognized, there is no gain to be treated as ECTI under § 864(c)(8), and therefore no amount is subject to withholding under § 1446(f)(1).
The interaction between § 1446(f) and § 864(c)(8) in the distribution context further supports this conclusion. Section 864(c)(8) treats gain from the sale or exchange of a partnership interest as ECTI. A distribution under § 731 is not a "sale or exchange" of a partnership interest; it is a distribution of property by a partnership to a partner. Section 864(c)(8) does not, by its terms, apply to distributions governed by § 731. Even if the distribution were recharacterized as an exchange, no gain would be recognized under the nonrecognition provisions of § 731(a).
Accordingly, we conclude that § 1446(f) does not require withholding on the distributions made in Step 5.
D. LP Migration into Feeder Vehicles
Following the Step 5 distributions, the non-U.S. limited partners (including Nordhaven SWF and Kestrel Pacific) will contribute their newly received Consolidated Master Fund LP interests to Solara International Feeder (Cayman) LP in exchange for partnership interests in the Feeder. Similarly, U.S. tax-exempt limited partners (including the Pinnacle State Employees' Retirement System and the Grandview University Endowment) will contribute their Consolidated Master Fund LP interests to Solara Tax-Exempt Feeder (Cayman) LP.
These roll-in contributions are structured as tax-free contributions of property (Consolidated Master Fund LP partnership interests) to a partnership (the applicable Feeder) in exchange for partnership interests in such Feeder, qualifying for nonrecognition treatment under IRC § 721(a). The companion § 721(a) memorandum analyzes these roll-in contributions and concludes that they qualify for § 721(a) nonrecognition treatment.
Because no gain is recognized on the roll-in contributions, no ECTI is generated, and no § 1446(a) withholding obligation arises in connection with the LP migration into the Feeder vehicles.
The § 1446(f) analysis for the roll-in contributions involves the contribution of Consolidated Master Fund LP partnership interests by foreign partners to the Feeder vehicles. These contributions could be characterized as "transfers" of partnership interests by foreign persons. However, as with the Step 2–4 contributions analyzed in Section IV.F above, no gain is recognized under § 721(a), and therefore no gain exists that would be treated as ECTI under § 864(c)(8). The § 1446(f) withholding computation yields a zero amount. Accordingly, no § 1446(f) withholding is required in connection with the LP migration.
We note, however, that the roll-in contributions involve foreign persons (the non-U.S. limited partners) contributing partnership interests (their Consolidated Master Fund LP interests) to a partnership (the International Feeder). Under Treas. Reg. § 1.1446(f)-2(b), the transferee (the International Feeder) would generally be required to withhold 10% of the amount realized by the transferor on the transfer, unless an exception applies. Because no gain is recognized under § 721(a), and because the amount realized on a § 721(a) contribution is generally equal to the transferor's basis in the contributed property (resulting in zero gain), no withholding obligation arises. As an additional practical matter, the partnership should maintain contemporaneous documentation of the § 721(a) nonrecognition treatment to support the position that no § 1446(f) withholding was required.
VI. Specific Implications for Key Non-U.S. Investors
A. Nordhaven Sovereign Wealth Fund
Status and Commitments. The Nordhaven Sovereign Wealth Fund is a non-U.S. sovereign wealth fund wholly owned by the Kingdom of Nordhaven, a Nordic sovereign state. Nordhaven SWF is classified as a "foreign partner" for purposes of IRC § 1446 because it is not a United States person within the meaning of IRC § 7701(a)(30). Nordhaven SWF has committed an aggregate of $880 million to the Solara platform: $380 million to Fund IV-A (Cayman) LP and $500 million to Fund V-A (Cayman) LP.
Current and Post-Reorganization Structure. Nordhaven SWF is currently a limited partner in Fund IV-A (Cayman) LP and Fund V-A (Cayman) LP. Under the Reorganization, Nordhaven SWF will receive its pro rata share of the Consolidated Master Fund LP interests distributed by Fund IV-A (Cayman) LP and Fund V-A (Cayman) LP in Step 5, and will thereafter contribute those interests to Solara International Feeder (Cayman) LP. Post-Reorganization, Nordhaven SWF will hold its economic interest in the Solara portfolio through its partnership interest in the International Feeder, which in turn will hold a partnership interest in the Consolidated Master Fund LP.
Sovereign Immunity Analysis — IRC § 892. We note, but do not address in detail in this memorandum, the potential applicability of IRC § 892 to Nordhaven SWF's income from the Solara platform. Section 892 provides that income of a foreign government from investments in the United States in stocks, bonds, and other domestic securities, and in financial instruments held in the execution of governmental financial or monetary policy, is exempt from U.S. taxation and withholding. If Nordhaven SWF qualifies for the § 892 exemption, it may be exempt from U.S. tax on certain categories of income (including, potentially, certain categories of ECTI), which would independently eliminate or reduce the § 1446 withholding obligation on ECTI allocable to Nordhaven SWF even in future periods — regardless of whether ECTI is generated.
A detailed § 892 analysis is beyond the scope of this memorandum but is highly relevant to Nordhaven SWF's overall U.S. withholding tax position. Bramhall & Quelwick LLP (Jason Tremaine, Partner, International Tax) has been retained by Nordhaven SWF to conduct an independent analysis of § 892 and applicable income tax treaty benefits. Calderwood & Harkness LLP's § 1446 analysis should be coordinated with Bramhall & Quelwick LLP's independent analysis to ensure consistency, subject to appropriate client authorizations. The coordination process is discussed in Section XI below.
Treaty Analysis. The Kingdom of Nordhaven may be a party to an income tax treaty with the United States that provides reduced withholding rates or exemptions for certain categories of income. The potential treaty benefits are being analyzed by Bramhall & Quelwick LLP and may affect the ongoing § 1446 withholding rates applicable to Nordhaven SWF's share of ECTI in future periods. However, treaty benefits do not affect the nonrecognition analysis for the Reorganization transactions: because no ECTI is generated by Steps 2–5, the treaty analysis is relevant only to future periods and not to the Reorganization itself.
Conclusion for the Reorganization. No § 1446 withholding obligation is triggered by Steps 2 through 5 of the Reorganization with respect to Nordhaven SWF's allocable share of any income or gain, because no ECTI is generated by any step of the Reorganization. This conclusion applies regardless of whether Nordhaven SWF qualifies for benefits under IRC § 892 or under an applicable income tax treaty, because the absence of ECTI eliminates the predicate for § 1446 withholding entirely.
B. Kestrel Pacific Insurance Group
Status and Commitments. Kestrel Pacific Insurance Group is a non-U.S. insurance company domiciled in Singapore and regulated by the Monetary Authority of Singapore. Kestrel Pacific is classified as a "foreign partner" for purposes of IRC § 1446 because it is a foreign corporation that is not a United States person within the meaning of IRC § 7701(a)(30). As a corporate foreign partner, Kestrel Pacific would be subject to withholding at the 21% rate specified in IRC § 11 (rather than the 37% rate applicable to non-corporate foreign partners) to the extent any ECTI were allocable to it. Kestrel Pacific has committed an aggregate of €475 million (approximately $513 million at 1.08 EUR/USD) to the Solara platform: €200 million to Fund IV-B (Luxembourg) SCSp and €275 million to Fund V-B (Luxembourg) SCSp.
Current and Post-Reorganization Structure. Kestrel Pacific is currently a limited partner in Fund IV-B (Luxembourg) SCSp and Fund V-B (Luxembourg) SCSp. Under the Reorganization, Kestrel Pacific will receive its pro rata share of the Consolidated Master Fund LP interests distributed by Fund IV-B (Luxembourg) SCSp and Fund V-B (Luxembourg) SCSp in Step 5, and will thereafter contribute those interests to Solara International Feeder (Cayman) LP. Post-Reorganization, Kestrel Pacific will hold its economic interest in the Solara portfolio through its partnership interest in the International Feeder, which in turn will hold a partnership interest in the Consolidated Master Fund LP.
Treaty Analysis. The United States and Singapore have entered into an income tax treaty (the "U.S.-Singapore Treaty"), which may provide reduced withholding rates or other benefits with respect to certain categories of income allocable to Kestrel Pacific. A detailed analysis of the U.S.-Singapore Treaty is beyond the scope of this memorandum. To the extent the U.S.-Singapore Treaty provides benefits that are relevant to Kestrel Pacific's ongoing § 1446 withholding position, such benefits would be applicable only in future periods when ECTI is actually allocated to Kestrel Pacific, not to the Reorganization transactions themselves.
Conclusion for the Reorganization. N

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