JONESBOROUGH, Tenn. (WJHL) — A cryptocurrency mining company at the center of a pending lawsuit is working to get Washington County property taxes paid after a News Channel 11 inquiry led to the county discovering the company hadn’t filed a tax card for 2020.

Red Dog Technologies operates a Bitcoin “mine” next to a BrightRidge substation in Limestone’s New Salem community. Red Dog leases land from BrightRidge and uses power from the public utility.

As a private company, Red Dog is liable for personal property taxes on what is now determined to be $14 million worth of equipment. The majority of that is computer equipment — the Bitcoin “mining” machines themselves — that solves complex equations in a race to “unearth” new Bitcoin.

Red Dog has spent nearly $14 million on personal property at its Bitcoin mine in Limestone according to tax records.

“My client is very eager to become compliant with its tax obligations …” Shannan Cuddy, an attorney with the Boston office of BakerTilly wrote in a Feb. 21 email to Cody Goins, a Washington County deputy property assessor charged with personal property taxes.

According to a tax card from Feb. 28, Red Dog had a total appraisal for personal property of $7,456,631 in place by the end of 2021, an amount that accounts for depreciation. The tax on that, due this year, is a little over $48,000.

Late taxes from 2020 values, which would have been due last year, are likely to be about $24,000 if Red Dog uses the same depreciation method as it did for its equipment that was installed in 2021.

News Channel 11 inquired in early December about the value of Red Dog’s personal property after the company said in a lawsuit filing that it was “fully operational” by November 2020. That would have made Red Dog liable for 2020 taxes on whatever personal property it had in use by Dec. 31, 2020.

Red Dog has been added as a defendant in the county’s lawsuit that aims to get the mine shut down, claiming it is not an approved usage under the A-3 (agriculture business) zoning designation. That lawsuit was initially filed in November against BrightRidge, which initially sought and received the rezoning in February 2020.

That lawsuit came months after New Salem residents complained about excessive noise from the mine in mid-May. That led the county’s planning director, Angie Charles, to discover that a private company, not BrightRidge, was operating the mine and that no permit had been granted for the operation. Charles then made the determination that the use violated the zoning, but commissioners weren’t aware until September that she had recommended to County Mayor Joe Grandy in late May that a shutdown order be sent to BrightRidge.

Uncovering the tax delinquency

Emails obtained in a public records request show that the property assessor’s office began checking into the operation and any potential tax liability around Dec. 13 — six days after News Channel 11’s first information request about Red Dog’s personal property.

Goins documented that another deputy assessor called him that day about Red Dog and GRIID, the company that owns Red Dog. The other assessor “wanted to know if we had picked them up (gotten them on the tax rolls) and when told we did not, they asked why we did not,” Goins documented in an email to himself Dec. 15.

Goins wrote that he called the county clerk’s office the same day to see whether Red Dog or GRIID had a business license, which they did not. Property Assessor Scott Buckingham told News Channel 11 in December the county usually adds new companies by checking business licenses. He added that when his office inquired about construction at the site earlier in 2021 they were told it was a BrightRidge project, which would be tax-exempt.

Goins reached a representative for Red Dog in early January and first heard from Cuddy Jan. 18. She wrote that Red Dog “recently engaged me to understand their state tax footprint in states, including Tennessee.”

Noise mitigation efforts including construction of a fence were under way Sept. 24 at a Bitcoin mine in rural Washington County, Tenn.

BakerTilly’s analysis had discovered what had already been reported Dec. 21: “that my client should have filed a Personal Property Tax Schedule for 2021 that should have been filed by March 1, 2021.”

For the first time, Cuddy also noted that Red Dog was “eager to get compliant.” She wrote Red Dog was working with BakerTilly to prepare 2022 and 2021 schedules (for the 2020 and 2021 values).

Just over a month later (Feb. 21) Cuddy emailed Goins to say the property tax schedules, which show value of all taxable personal property on a line item basis, were ready to send.

That was the email noting that Red Dog was “very eager” to get compliant and wanted to expedite the process for identifying any taxes due from the 2021 schedule (for equipment in place in 2020).

“We respectfully request any assistance in mitigating any penalties that may be due,” Cuddy added.

The bulk of the taxable personal property from 2021’s $8.6 million consists of the “mining” equipment. The paperwork submitted shows Red Dog was invoiced $6,250,000 on Nov. 30, 2021 for 1,000 “miners.” The filing lists them as M31S miners with a “terrahash” rate of 80 per second, meaning each one can perform 80 trillion “hashes” each second — the calculations that are essential to mining Bitcoin.

The fans that keep those machines from overheating are loud and initially led to the complaints. The tax card also shows Red Dog paid about $185,000 for sound insulation in August and another $96,000-plus for “silencer fencing” and installation in October and November.

Before county commissioners authorized Charles to order a shutdown of the mine in September 2021, Red Dog and BrightRidge had been working to find ways to mitigate the noise.

Chancellor John Rambo is scheduled to decide March 14 whether the use violates the zoning ordinance. If he finds in favor of the county, a two-day jury trial is scheduled for March 15-16. Grandy, Charles and planning office employee Chris Pape are among those who have been subpoenaed to testify.