California Climate Disclosure Regulations Update: CARB Provides Additional Clarifications on Implementation and Ninth Circuit Stay of SB 261 Enforcement

Significant recent developments will affect reporting requirements under California’s climate reporting statutes, SB 253 and SB 261. On 18 November 2025:

• The California Air Resources Board (CARB) provided extensive clarifications on first-year reporting requirements, how it will determine which entities are subject to these regulations, and previewed the upcoming rulemaking for these regulations.
• The Ninth Circuit issued a significant ruling in California Chamber of Commerce v. California Air Resources Board, temporarily staying enforcement of SB 261. 

Combined, these developments provide clarity in some respects and greater uncertainty in others, continuing to leave potentially regulated entities without clear guidance as to how to comply as they prepare for upcoming reporting deadlines. Below we summarize CARB’s latest guidance, the Ninth Circuit decision and key considerations for covered and potentially covered entities as they prepare for the first year of reporting.

SB 253: Greenhouse Gas (GHG) Emissions Disclosure

Initial Reporting Deadline and Applicable Reporting Year

CARB proposed an initial SB 253 reporting deadline of 10 August 2026, applicable only to the first reporting year. The company’s fiscal year will dictate which year of emissions data should be reported:

• Fiscal years ending between 1 January 2026 and 1 February 2026 → Report using data from the fiscal year ending in 2026
• Fiscal years ending 2 February 2026 and 31 December 2026 → Report using data from the fiscal year ending in 2025 (can report using data from the fiscal year ending in 2026 if such data exists)

This framework ensures companies would have at least six months after the end of their fiscal year to prepare their GHG emissions disclosures.

Reporting Requirements

CARB provided several important clarifications concerning how to report under SB 253:

• Companies that were not collecting or planning to collect emissions data at the time CARB issued its 5 December 2024 enforcement notice are not required to report emissions within the first reporting cycle in 2026. These companies should submit a letter to CARB stating they did not submit a report and confirming they were not collecting data or planning to collect data at the time the enforcement notice was issued.
• Use of the Scope 1–2 reporting template circulated by CARB on 10 October 2025 is voluntary for the first reporting cycle in 2026. Templates will be updated during subsequent rulemaking discussed below.
• CARB will accept a report prepared annually by the company that includes GHG Scope 1 and 2 emissions disclosures to comply with initial 2026 reporting requirements.

Assurance Requirements

CARB confirmed that assurance is not required for the first reporting cycle in 2026; however, there are some outstanding questions that were not specifically addressed, including:

• Whether a company must submit a letter if it reports emissions but omits assurance; and
• Whether entities that initially did not plan to obtain assurance in December 2024 but subsequently began assurance efforts must obtain assurance for 2026 reporting.

Overall, CARB appears to be generally focused on companies’ efforts and planned efforts existing on the date of its December 2024 enforcement notice for first-year reporting under SB 253. It is likely that additional guidance and regulations will dictate subsequent reporting requirements.

SB 261: Climate-Related Financial Risk Disclosure

Reporting Requirements

CARB issued updated minimum disclosure requirements guidance on 18 November 2025, largely reiterating its expectations for initial reports and emphasizing consistency with the TCFD framework. Companies may satisfy SB 261 reporting requirements by linking to an existing TCFD-compliant report, even if not drafted specifically for SB 261 purposes. Although SB 261 centers on climate-related risks, CARB stated entities may voluntarily include disclosures on climate-related opportunities at their discretion. CARB encouraged companies still developing their climate-risk programs to disclose how climate-related risks may relate to the business and any gaps, limitations, or assumptions in their assessment processes.

Reporting Timeline and Procedure

CARB confirmed that the extended regulatory rulemaking timeline does not affect first-year reporting. Although CARB will keep the docket open from 1 December 2025 to 1 July 2026, reports are expected to be final as of 1 January 2026. The extended docket is intended as an administrative accommodation for submitting links—not for substantive amendments. On 1 December 2025, CARB posted the link to the docket on its website. However, as further discussed below, this reporting deadline is subject to further refinement based upon the Ninth Circuit US Chamber of Commerce decision.

Proposed CARB Rulemaking and Reporting Thresholds

CARB confirmed that its proposed rulemaking will address (1) the SB 253 first-year reporting deadline, (2) key definitions that will govern which entities must report under both SB 253 and SB 261, and (3) fee provisions.

Reporting Thresholds: Who Must Report

CARB confirmed that it will incorporate the definitions of “revenue” and “doing business in California” that it initially proposed in the summer 2025. It will incorporate the definition of revenue from California Revenue and Taxation Code § 25120(f)(2), which generally includes the “gross amounts realized (the sum of money and the fair market value of other property or services received) on the sale or exchange of property, the performance of services, or the use of property or capital... in a transaction that produces business income... recognized... under the Internal Revenue Code...” This definition is not limited to revenue generated in California but covers the total gross annual revenue generated by the company. Revenue will be verified based upon tax returns submitted to the California Franchise Tax Board (FTB). For SB 261, which requires reporting once every two years, applicability will be determined using the lower revenue figure of the prior two fiscal years.

“Doing business in California” is partially based upon California Revenue and Taxation Code § 23101(b)(1)–(2). A company will be found to be “doing business in California” if:

• It is organized or commercially domiciled in California; or
• It has annual sales in California exceeding the inflation-adjusted $735,019 threshold (2024), using standard sales-assignment rules and including sales made by an agent or independent contractor of the company.

Parent/Subsidiary Considerations

Parent–subsidiary relationships do not determine regulatory applicability. Each entity will be reviewed independently. When evaluating revenue, if a subsidiary and parent submit a unitary tax filing to the FTB, its revenue will be considered jointly. Conversely, each entity’s revenue will be considered separately if they file separately. Subsidiaries may request a parent to report on their behalf, but CARB did not clarify:

• Whether a subsidiary may rely on a parent’s report when the parent is not itself in scope; 
• How multiple subsidiaries using a parent’s report should alert CARB for docketing; and
• Whether a parent that is subject to reporting requirements must report for all subsidiaries as well (i.e. subsidiary emissions under SB 253).

CARB will consider a company a “subsidiary” if the company has an ownership interest in or control of the first entity by direct corporate association. CARB also referenced the GHG Protocol Corporate Standard to guide the scope of organizational boundaries subject to reporting requirements under SB 253.

Proposed Exemptions

CARB confirmed that the following exemptions will be included in the proposed rulemaking:

• Non-profit or charitable organizations (IRC tax-exempt)
• Entities whose only California contact consists of teleworking employees
• A business entity whose only business within California consists of wholesale electricity transactions

This is in addition to the following statutory exemptions:

• Government entities (including majority-owned enterprises)
• Foreign entities
• Insurance companies (regulated by the California Department of Insurance or out-of-state equivalents)

Fee Regulations

CARB will also include fee regulations in the proposed rulemaking and provided a general update regarding the proposed fee structure:

• CARB intends to use a flat fee structure, dividing program costs among regulated entities.
• Fee invoices will be issued in 2026, with fee assessments occurring 10 September 2026.
• Entities subject to both SB 253 and SB 261 must pay two separate fees.
• Each covered subsidiary will receive its own assessment, though a parent may make a consolidated payment.

Process and Timing

Rulemaking will be considered by the CARB Board for approval at a hearing in the first quarter of 2026. CARB will release its draft rulemaking at least 45 days prior to the hearing. For purposes of SB 261 reporting, companies within the scope of that regulation should consider the information from the 18 November 2025 CARB workshop as the final regulations for the initial reporting period. After review and approval of this preliminary rulemaking, CARB will consider additional regulatory updates in subsequent rulemaking to address, at a minimum, the following issues under SB 253:

• Data assurance requirements
• Further enforcement provisions
• Recurring reporting deadline beyond 2026
• Reporting templates

CARB is also soliciting feedback on the 15 Scope 3 categories that are most used by companies today or most helpful for investors and consumers.

Ninth Circuit Ruling

In California Chamber of Commerce v. California Air Resources Board, the Ninth Circuit granted an injunction to the enforcement of SB 261 until it rules on the pending appeal. Notably, the Ninth Circuit did not grant the requested injunction concerning SB 253. This means that California cannot enforce SB 261 until the Ninth Circuit decides the appeal of the lower court’s decision, which denied issuance of a preliminary injunction. The Ninth Circuit is currently scheduled to hear oral arguments on 9 January 2026. This will provide at least a temporary reprieve of reporting requirements. However, this pause may only last as long as it takes for the Ninth Circuit to issue an opinion. The length of any pause will depend upon (1) how long it takes for the Ninth Circuit to issue a final decision on the preliminary injunction; (2) the result of the decision; (3) whether the decision is appealed to the U.S. Supreme Court; and (4) whether the U.S. Supreme Court issues a stay pending appeal in the event of any such appeal. On 1 December 2025 and in response to the injunction granted by the Ninth Circuit, CARB posted on its website that it will not enforce SB 261 against companies that do not post and submit climate-related financial risk reports by the 1 January 1 2026 statutory deadline.

Conclusion

Given the significance of the developments regarding SB 253 and SB 261 over the past few weeks alone, entities should continue to monitor any guidance and regulations from CARB and follow the pending appeal before the Ninth Circuit as a new SB 261 reporting deadline could follow shortly after a decision. The firm is positioned to help companies navigate these complex and evolving regulations and assist throughout the reporting process.