“I’ve Got Some Good News, I’ve Got Some Bad News”: Important Updates from CARB’s Latest Public Workshop

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On November 18, 2025, the California Air Resources Board (“CARB”) held its third virtual public workshop on California’s climate reporting laws, Senate Bill 253 (The Climate Corporate Data Accountability Act) and Senate Bill 261 (The Climate-related Financial Risk Act), as amended by Senate Bill 219.  Please see our initial summary of those laws here. This third workshop provided an update from CARB on the development of the programs under SB 253 and SB 261, including proposed updates to definitions and the announcement of the first reporting deadline for SB 253.  Like George Strait and Lee Ann Womack said in their 2005 duet, “I’ve got some good news” and “I’ve got some bad news.” 

First, the Bad News:  (Another!) Updated Definition of “Doing Business” in California

During CARB’s first virtual workshop on California’s climate laws held on May 29, 2025 (please see our summary of that workshop here), one of CARB’s “initial staff concepts” was that a company would be “doing business” in California if it satisfied Sections 23101(a) and (b) of the California Revenue and Taxation Code (the “Tax Code”).  However, during the second workshop on August 21, 2025 (please see our summary of that workshop here), CARB announced an alternative definition of “doing business” in California:  Companies would be “in scope” if they were qualified to do business in the state under the California Corporations Code.  On September 24, 2025, CARB published a preliminary list of companies that would be subject to the climate laws under this definition, which was created by cross-checking businesses qualified with the Secretary of State against a list of U.S.-based companies with global annual sales of $500 million or $1 billion, as applicable.  According to CARB, this preliminary list reflected “major holes,” “imprecise revenue estimates” and “outdated information,” leading CARB to announce during the third workshop on November 18^th that it was reverting to the Tax Code definition of what it means to be “doing business” in California.

Consistent with the first workshop on May 29^th, a company will be “doing business” in California if it is “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit” (Section 23101(a) of the Tax Code) and, during any part of a reporting year, the company either (i) is organized or commercially domiciled in California or (ii) has sales in California exceeding an inflation-adjusted threshold ($735,019 for 2024).  However, in a departure from the definition announced during the first workshop, CARB announced on November 18^th that it was omitting the additional criteria in Sections 23101(b)(3) and (4) relating to property holdings and payroll, noting that in-scope entities “should have significant economic nexus” within California.

In order to determine whether a company is in scope for purposes of the California climate laws, it should examine its tax filings with the California Franchise Tax Board (“FTB”), and slide 21 in CARB’s presentation linked here directs entities to specific places in their FTB filings in order to determine their total revenue and California sales.  The definition of “revenue” now mirrors the definition presented by CARB during the initial May 29^th workshop – “gross receipts” as defined under the Tax Code – instead of the alternative definition presented during the August 21^st workshop. CARB noted that using the tax filing data from the FTB should streamline data collection and verification and reduce program implementation costs. 

Despite the title of this subsection, there was some good news presented by CARB related to the revenue thresholds:  In order to account for annual fluctuations in revenue, the applicability of SB 253 and SB 261 to a given company will be determined by the lesser of the company’s two previous fiscal years of revenue. CARB staff confirmed during the Q&A session following the November 18^th workshop that a company therefore must cross the relevant revenue threshold for two consecutive years before it is subject to either SB 253 or SB 261.

On to the Good News:  Temporary Injunction of SB 261 and Accommodations for Initial SB 253 Reports

If your company is subject to SB 261 and not quite ready to publish your initial climate-related financial risk report by the January 1, 2026 deadline, then the announcement of the order issued on November 18^th by the U.S. Court of Appeals for the Ninth Circuit indeed qualifies as good news.  The Ninth Circuit’s order temporarily enjoined enforcement of SB 261 while the Ninth Circuit considers the plaintiffs’ appeal of the district court’s denial of a motion to enjoin SB 253 and SB 261.  Oral arguments are scheduled for January 9, 2026, so it is possible that the Ninth Circuit could uphold the district court’s decision in the first quarter of 2026 and lift the injunction.  It is unclear whether initial SB 261 reports would be due when the injunction is lifted, and how CARB would approach enforcement related to a new deadline.  Notably, the Ninth Circuit’s order on November 18^th denied the plaintiffs’ request to enjoin SB 253 pending appeal.

During the third workshop, CARB announced a new proposed deadline of August 10, 2026 (instead of June 30, 2026) for initial SB 253 reports on Scopes 1 and 2 emissions.  If a company’s fiscal year ends between January 1 and February 1, 2026, the company must report data from its fiscal year ending in 2026 by the August 10, 2026 deadline.  If a company’s fiscal year ends between February 2 and December 31, 2026, the company must report data from its fiscal year ending in 2025 by the August 10, 2026 deadline. This timeline is meant to give companies at least six months after the end of their fiscal year to submit their initial SB 253 report. 

CARB also provided answers to a number of questions that it has received regarding its December 2024 Enforcement Notice, in which CARB announced that it would exercise enforcement discretion under SB 253 so long as companies demonstrated good faith efforts to comply with the law’s requirements.  During the November 18^th workshop, CARB clarified the following:

• Most importantly, if a company was not collecting or planning to collect Scopes 1 and 2 emissions data when the December 2024 Enforcement Notice was issued on December 5, 2024, the company is not required to submit emissions data in 2026.
  • Instead, the company should submit a statement on company letterhead, stating that it did not submit a report because, in accordance with the Enforcement Notice, the company was not collecting or planning to collect emissions data when the Enforcement Notice was issued.
• Companies with initial emissions reports due by August 10, 2026 do not have to use the draft Scopes 1 and 2 GHG Reporting Template that CARB posted on October 10, 2025 for their initial reports. Companies can submit an existing or proprietary report covering their Scopes 1 and 2 emissions.
• Limited assurance is not required for the 2026 report. However, during the Q&A session following the November 18^th workshop, CARB staff clarified that if a company had already obtained or was in the process of obtaining assurance for its Scopes 1 and 2 emissions data, then it should submit that assurance information.

Other Updates and Open Issues

Additional updates from the November 18^th workshop, as well as some questions that remain following the workshop, are summarized below:

1. Program Fees

• During the August 21^st workshop, CARB proposed an annual “flat fee” per regulated entity, which is calculated by dividing the annual program costs by the number of covered entities. This “flat fee” concept is unchanged and will be reflected in the proposed regulations despite CARB’s receipt of feedback that this is unfair to companies with complex corporate structures and multiple in-scope subsidiaries.
• CARB reiterated that each covered subsidiary is still assessed its own fee, but a parent company may pay all fees in one combined payment. CARB announced September 10, 2026 as the proposed payment date for the initial SB 253 and SB 261 fee assessment.

2. Exemptions

• CARB is proposing to exempt tax-exempt entities under the Internal Revenue Code (non-profit or charitable organizations), companies whose only business in California is the presence of teleworking employees, government entities and certain insurance companies.
• During the Q&A session following the November 18^th workshop, CARB staff confirmed that certain wholesale electricity companies are also exempt, as previously proposed.

3. Parent-Subsidiary Relationships

• CARB’s presentation repeatedly emphasized that parent-subsidiary relationships do not determine which entities are regulated, and each company should assess its own compliance obligations based on the proposed definitions. The example on slide 28 of the presentation linked here illustrates that a U.S.-based parent of an in-scope subsidiary is not automatically deemed to be doing business in California. 
• However, a number of workshop participants raised concerns during the Q&A session regarding the impact of relying on FTB tax filings for determining which entities are in scope. Commenters noted that if an in-scope subsidiary’s revenue and California sales are included in the parent’s unitary tax filing, then the parent will always automatically be in scope.

4. SB 261 Report Revisions

• CARB reiterated that the first climate-related financial risk reports are due on January 1, 2026, but there are a few logistical details that remain murky. A company must post its report on its company website by January 1^st, and then submit a link to that report to the CARB docket by July 1, 2026.  The docket opens on December 1, 2025.
• During the Q&A session following the November 18^th workshop, a number of participants asked whether companies had to post their reports by January 1, 2026 if the docket remained open until July 1, 2026, and whether companies could post their initial reports but continue to revise them prior to the July 1^st deadline. CARB staff said that January 1^st was a firm deadline and companies should consider their reports final once they are linked via the docket, but it remains to be seen whether and how CARB will enforce this.

Conclusion

The coming months will hopefully deliver answers to a number of these questions, as CARB indicated it will be proposing regulations on certain topics during the first quarter of 2026 and issuing guidance in response to the Ninth Circuit’s order enjoining enforcement of SB 261.  In the meantime, we would advise companies that are working on their SB 261 reports to continue doing so, as the injunction could be lifted in early 2026.  CARB updated its FAQs and Climate Related Financial Risk Disclosures Checklist on November 17, 2025, which are helpful resources for companies preparing their initial SB 261 reports.  We would also advise companies that are in scope for purposes of SB 253 to continue to make progress on their emissions-gathering activities and reporting, although substantial open issues remain, including the form of the report that will eventually be required and the outcome of various legal challenges.  We will continue to closely monitor these developments.  “You never know what time will do, All I know is I’ve got some good news” (or some bad news, depending how you look at it).