The Ultimate Guide to AB-1606: Everything You Need to Succeed with Encampment Tax Credits
For commercial property owners and managers, unauthorized encampments represent more than just a logistical headache: they are a significant financial burden. Between biohazard cleanup, property restoration, and the need for increased security, the costs can escalate into the tens of thousands in a matter of days.
However, as of 2026, California’s legislative landscape has shifted in favor of the property owner. Assembly Bill 1606 (AB-1606) introduces a critical tax credit designed to offset the expenses associated with encampment removal and property restoration. While this bill offers a financial lifeline, it comes with a strict set of compliance requirements, narrow definitions of "qualified expenses," and a heavy emphasis on professional documentation.
At BFTS Company, we specialize in the comprehensive security solutions required to not only manage these sensitive situations but to provide the verifiable records necessary to secure your tax credits. This guide breaks down everything you need to know to leverage AB-1606 effectively.
What is AB-1606?
AB-1606 is a targeted legislative response to the rising costs of maintaining commercial real estate in impacted urban areas. The bill establishes a tax credit for "qualified cleanup expenses" incurred due to unauthorized encampments, illegal dumping, or abandoned property.
Starting in the 2027 taxable year, eligible business entities and property owners can claim credits for 100% of their qualified costs, subject to specific caps. For many small-to-mid-sized commercial entities, this credit is capped at $20,000 per year, providing a substantial rebate on the essential work required to keep properties safe and functional.
Why This Matters for 2026 Planning
Although the primary tax credits take full effect for the 2027 filing year, the "discovery" and "cleanup" windows are already critical for property managers. Understanding the distinction between a "security service" and a "cleanup expense" is vital for your current budget and future tax strategy.
Are You a "Qualified Taxpayer"?
Before allocating funds, you must determine if your entity meets the state's criteria for the credit. Under AB-1606, a qualified taxpayer is generally defined as:
Commercial Property Owners: Individuals or corporations that own real property used strictly for commercial purposes.
Business Tenants: Lessees who are contractually responsible for the maintenance and cleanup of the property they occupy.
Small Business Cap: Many versions of the bill prioritize businesses with gross receipts of $5 million or less, though larger corporations may still qualify under the Corporate Tax (CT) provisions with different scaling.
The core requirement is that the property must be actively impacted by unauthorized encampments or illegal dumping. Routine maintenance: such as standard landscaping or weekly trash pickup: does not qualify.
Qualified vs. Non-Qualified Expenses: The Security Distinction
One of the most common mistakes property managers make is assuming all security-related costs are tax-deductible under AB-1606. This is not the case. The legislation is very specific about what constitutes a "cleanup expense."
What Counts (Qualified)
To be eligible for the credit, security measures must be temporary, non-permanent, and directly related to the immediate cleanup. This includes:
Temporary Fencing: Rental and installation of perimeter fencing to secure a site immediately after a cleanup.
Temporary Security Gates: Short-term access control installed to prevent re-entry during the restoration phase.
Passive Deterrents: Non-permanent measures such as riprap (large stones) or specific landscaping designed to discourage re-encampment without building new permanent structures.
Sanitization and Restoration: The actual labor and equipment costs of removing waste and restoring the property to its original condition.
What Does NOT Count (Non-Qualified)
The state excludes ongoing operational costs from the tax credit. This includes:
Continuous Surveillance: Permanent camera systems or monthly monitoring fees.
Long-Term Guard Contracts: Standard, ongoing security patrol contracts that are not tied to a specific "one-time" cleanup event.
Capital Improvements: Building permanent walls, installing high-intensity lighting systems, or any upgrades that go beyond "restoring" the property.
The BFTS Advantage: We understand this distinction. When we provide encampment removal support, we structure our services and billing to differentiate between immediate, incident-based security and ongoing protection, ensuring your documentation aligns with AB-1606 standards.
The 60-Day Clock: Timing is Everything
AB-1606 is built on a "discovery to action" model. For an expense to qualify, it must be incurred within 60 days of the discovery of the encampment or dumping incident.
This makes rapid response essential. If you discover an encampment on June 1st but do not begin the professional cleanup and temporary securing of the site until September, those costs will likely be disqualified.
Professional Incident Reporting
To prove the 60-day window, you need more than just a timestamped photo. You need a professional audit trail. BFTS Company provides:
Detailed Incident Reports: Documentation of the initial discovery by our mobile roving patrols.
Service Logs: Precise dates and times showing when security was deployed specifically for the cleanup effort.
Photographic Evidence: Before, during, and after photos of the site, establishing the "pre-encampment condition" required for restoration claims.
Compliance and the "Perjury" Clause
Claiming the AB-1606 credit requires the taxpayer to certify their expenses under penalty of perjury. This is a high bar for legal compliance. The state expects verifiable records, including:
Invoices: Itemized by service type (distinguishing between "waste hauling" and "temporary security").
Proof of Payment: Receipts and bank records matching the 60-day window.
Affidavits: In some cases, a professional security assessment may be required to justify why certain temporary measures were necessary for safety during the cleanup.
Working with a fly-by-night security provider or an uncertified cleanup crew puts your tax credit: and your legal standing: at risk. You need a partner who operates with integrity and excellence.
How BFTS Company Supports Your AB-1606 Strategy
Navigating encampment issues is a complex task that requires a balance of safety, legality, and respect. BFTS Company provides a full-spectrum solution tailored for commercial clients who need to satisfy AB-1606 requirements.
1. Rapid Discovery via Mobile Patrol
Our mobile roving patrols ensure that unauthorized activity is identified immediately. This starts the 60-day clock as soon as possible, giving you the maximum window to coordinate cleanup and maximize your credit.
2. Tactical Site Security During Removal
Encampment removals can be volatile. Our team provides a strong physical presence to ensure the safety of cleanup crews and property staff. We maintain a professional, respectful, and authoritative stance to ensure the process remains lawful and compliant.
3. Compliant Documentation Packages
We don't just provide security; we provide data. Our clients receive a comprehensive documentation package for every incident, specifically designed to be handed off to your tax professional. This includes time-stamped logs, GPS-verified patrol data, and itemized billing for temporary deterrent measures.
4. Integration with Surveillance
While continuous surveillance isn't covered by the tax credit, it is essential for preventing the next incident. We help you integrate video surveillance into your broader property management strategy, using the savings from your AB-1606 credits to fund permanent security upgrades.
Final Steps for Property Managers
If you are currently managing a property in an area prone to encampments, your strategy for 2026 and 2027 should be proactive:
Audit Your Perimeter: Identify areas where "passive deterrents" could be installed under the cleanup credit.
Review Your Security Vendor: Ensure they are capable of providing the level of documentation required for state tax audits.
Establish a Response Protocol: Know exactly who to call the moment an encampment is discovered to keep your 60-day window open.
AB-1606 is a powerful tool for maintaining property value and safety, but it rewards only those who are disciplined and well-documented.
Secure Your Property and Your Tax Credit Today
Don't leave your compliance to chance. Partner with a security firm that understands the intersection of safety and state legislation.
Contact BFTS Company today for a comprehensive site assessment.
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