The "Good Neighbor Tax Credit”: Helping Those Who Help Others

Nossaman eAlert

Responding to the winter storms of 2023 that have battered California, Assembly Member Dawn Addis has introduced Assembly Bill 877, the “Good Neighbor Tax Credit,” that, if enacted, would provide a tax incentive to qualified owners of transient lodging that make rooms available, free of charge, in support of the bill’s stated goal of “increasing access to shelter for displaced persons during declared emergencies, including natural disasters.”

For the 2023 through 2028 tax years, AB 877 would provide a credit against a taxpayer’s net owed tax equal to 50% of “qualified expenses.” As defined in the bill, qualified expenses are an amount equal to “the rate of each room in qualified lodging provided free of charge to displaced persons during a state of emergency declared by the Governor or President, times the number of nights displaced persons occupied the room.” Qualified expenses would not include meals or other amenities and room rates would equal “the average price per night over the prior 12-month period of a standard room at that qualified lodging.” Excess credits would be eligible for a seven-year carryforward.

As currently drafted, the Good Neighbor Tax Credit would be available to any “hotel, motel, inn, bed and breakfast, or other similar transient lodging located in the state.” In announcing the bill, Assembly Member Addis referred to additional qualifications not presently in the text of the bill, namely, a requirement that “the establishment would need to be located in a county that was in a state of emergency” and limiting the credit to “establishments with under 50 total rooms, ensuring that small businesses are the target of this relief.” Future revisions to the bill are likely.

AB 877, which has the support of the California Hotel & Lodging Association, has been referred to the California Assembly’s Committee on Revenue and Taxation.

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