The answer to your first question is it depends. Different states have different standards for requiring workers to file tax returns when they work for periods of time in a state where they don't live. The rules also dictate how employers withhold income tax for those employees. Some states have a “first day” rule, which means if you work there for one day, you owe that state income tax. Other states have varying periods of time when the nonresident income tax kicks in, ranging from 10 days to 60 days. So if your friend worked more than 60 days the answer is probably yes.
If the rent was reimbursed on an "actual basis" whereby the employee reported the expense and the employer reimbursed that amount, or if the employer paid the rent directly, then it would not have to be reported.
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