Bitcoin mine operator paid no taxes on its taxable equipment in 2021

Investigations

JOHNSON CITY, Tenn. (WJHL) – The company that operates a controversial Bitcoin mine in rural Washington County did not pay taxes on millions of dollars worth of personal property in 2021, a News Channel 11 investigation has revealed.

Red Dog Technologies, which is embroiled in a lawsuit with Washington County, said in a recent court filing that it was fully operational next to a BrightRidge substation in November 2020.

That meant the company, which also referenced $14 million in operational investment — the kind of equipment subject to personal property taxes — would be required to submit a tax schedule in early 2021.

Paragraphs from Red Dog Technologies’ countersuit against Washington County indicate the value of equipment it has operated at its Bitcoin mine since late 2020.

No such schedule was filed. Property Assessor Scott Buckingham told News Channel 11 his office had been told the equipment was part of a BrightRidge project when they noticed the construction next to the electricity provider’s substation on Bailey Bridge Road in the New Salem community.

Because BrightRidge is tax exempt as a utility, Buckingham’s office hadn’t sent out a tax schedule, he said.

Within the past week or so — driven in part by News Channel 11’s questions directed to the Tennessee Comptroller’s Office — Buckingham’s office has sent a tax schedule to Red Dog in care of BrightRidge. They haven’t been able to find a business license or address for Red Dog, formerly known as GRIID.

“We’re going to try to get our taxes, that’s for sure,” Buckingham said Monday. “We’re going to put in to collect for last year (2021) as well.”

If Red Dog’s equipment was assessed at $14 million, it would generate just over $90,000 in personal property tax revenue for the county.

That revenue was one community benefit BrightRidge CEO Jeff Dykes touted when he spoke to News Channel 11 in May, just after neighbors began complaining vociferously about the noise Red Dog’s site was generating, especially at night.

Red Dog Technologies did not file a tax schedule or pay personal property taxes on its millions of dollars in computer equipment in Limestone, Tennessee. (WJHL Photo)

Dykes primarily pointed to the advantage of massive power sales to help keep overall rates lower, but he also brought up taxes.

“Not only are they a great customer but they’re great for the community from this standpoint,” Dykes said. “Not only does it help BrightRidge and our customers, but they pay county taxes and state taxes.

“Their equipment, they pay taxes on those, which they own, and say if it was a $10 million investment that’s around $260,000, $270,000 in taxes that’s shared between the county and the state.”

The state gets involved

When Red Dog countersued Washington County, which is trying to get the Bitcoin operation shut down for violating the county’s zoning ordinance, its counterclaim included the reference to starting operations in late 2020.

Thinking it could provide data on the specifics of the personal property value and the taxes that yielded, News Channel 11 filed a public records request for that information. The county’s record custodian said no such record existed.

A call to the property assessor’s office drew mention of OSAP — the Office of State Assessed Property, which figures taxes on private utilities and their equipment.

But Tennessee Comptroller Director of Communications John Dunn checked on whether Red Dog would fall under OSAP and said they would not. He also said the comptroller’s property tax division was checking into a situation that presented some new wrinkles.

“This provided us with a level of uniqueness and certainly there was a bit of an unusual aspect to this whole situation,” Dunn said.

By December 17, he said the office had taken a keen interest in the project, including several communications with Buckingham’s office. Monday, he confirmed Red Dog did owe personal property taxes — and that the issue was one that’s important to a state office that oversees the state’s 95 property assessor offices.

“The whole system of property taxes is based on fairness and equity,” Dunn said.

“For every taxpayer that’s out there, they want to know that their neighbors are also being taxed just like they are, and if one entity is left off the tax roll or isn’t paying taxes that year, it increases the tax burden on everyone else.

“So when you have a significant property with a lot of value on it it’s important to get that assessed so that they can do their part for the fairness.” 

Dunn said it’s become clear to the comptroller’s office that Buckingham and the property assessor’s office as a whole wasn’t negligent.

Dunn said Buckingham’s office may have had conversations about the property to try to learn about it “and just didn’t get the answers that would have maybe led them down the path of knowing that this was a privately owned operation.” 

“We don’t find fault with anything the assessor has done,” Dunn said. “These kinds of things happen all over the state all the time. What’s important now is that the property be assessed, be added to the tax roll and if any back assessment needs to be taken care of that that’s done as well.” 

Burden not just on the assessor

When it comes to responsibility for submitting tax schedules, Dunn said businesses are obligated to make sure it happens. If an assessor can’t find them, they should find the assessor, in other words.

“Most businesses are aware of the tax structure within the states and local governments that they operate, so it wouldn’t be surprising to know that a company would be aware of the need to pay taxes,” he said.

The lease between Red Dog and BrightRidge requires Red Dog to pay any applicable taxes.

And after reviewing the BrightRidge-Red Dog lease, Dunn said that certainly appeared to be the case in this scenario. Section 7 of the lease specifically deals with taxes, saying “tenant shall pay any real estate taxes … and all other tax imposed upon or levied against the Tenant’s operations, equipment and improvements on the Premises.”

“Clearly both Red Dog and BrightRidge were under an understanding that taxes needed to be paid,” Dunn said. “There weren’t exempt portions of the personal property here, so we believe that clearly this is a very cut and dry situation that personal property taxes need to be paid on the equipment at that site.”

Insult to injury for mine’s neighbors

Preston Holley owns a house and farmland directly across Lola Humphreys Road from the substation and Red Dog operation. He said the mine continues to emit high noise levels at night and when he learned of the tax situation he didn’t hold back.

Preston Holley says paying its taxes is one of the few things Red Dog Technologies can do to help offset the Bitcoin mine’s noise levels and disruption to his community.

“That’s also very troubling,” Holley said. “I pay my taxes on a regular basis – I know that I have to, I know that it helps to provide services for our county where we live.”

Holley said he was preparing to mail a pretty sizeable check to the county trustee and that Red Dog’s claims it wants to be a good community partner rang hollow to him.

“If a business such as this wants to come into a community and wants to be a good neighbor and wants to provide a benefit to that community … the only thing I see as a small benefit to our community is whatever they pay in property taxes, because they’re not providing any other benefits,” Holley said. 

“There’s not a lot of jobs, there’s not any other way for them to provide a benefit for our community. So, of all things, that should be the first thing they do.”

Red Dog did not respond to requests for comment about the tax issue.

The lawsuit to determine whether the mine operation is an unpermitted use according to the Washington County Zoning Resolution and can be forced to shut down is set for mid-March.

“That would be the ultimate goal, would be to see this business somewhere else,” Holley said.

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