California Air Resources Board Third Public Workshop on Climate Reporting Under SB 253 and SB 261

Summary

On November 18, 2025, the California Air Resources Board (“CARB”) held its third public workshop regarding the development of California’s climate reporting programs under Senate Bill 253 and Senate Bill 261.[1] In connection with the workshop, CARB updated its previously published FAQs on SB 253 and SB 261 reporting to align with the latest guidance presented at the workshop, and made a few updates to clarify and finalize its Climate-Related Financial Risk Report Checklist, which sets forth the minimum reporting requirements for the initial reports under SB 261.

Key updates from the workshop and the updated guidance include:

• Rulemaking Plans: Announcing CARB’s plans to (1) publish a notice of proposed initial rulemaking and present this proposed rulemaking to the CARB Board in Q1 2026, which would establish a first-year only reporting deadline for SB 253 and fee-related requirements under both SB 253 and SB 261, and (2) undergo a public process for a second rulemaking in 2026, which would address climate reporting requirements in 2027 and beyond;
• “Revenue” Definition: Reverting to an earlier proposed definition that is based on the definition of “gross receipts” in the California Revenue and Taxation Code (“RTC”), and proposing to assess whether an entity meets the annual revenue threshold based on the lesser of its annual revenue for the two previous fiscal years;
• “Doing Business in California” Definition: Reverting to an earlier proposed definition that is based on the definition of “doing business in California” in the RTC, while proposing certain modifications and exemptions;
• Parent-Level Consolidated Reporting: Confirming that a parent company can report on a consolidated basis on behalf of all in-scope subsidiaries, even if the parent company is not in scope of SB 253 or SB 261;
• SB 253 Initial Reporting Requirements:
  • Proposing August 10, 2026 as the deadline for initial Scope 1 and 2 GHG emissions reporting;
  • Clarifying that an entity is not expected to submit Scope 1 and 2 GHG data for 2026 reporting if the entity was not collecting data or was not planning to collect data in December 2024, but requiring the entity to submit a statement to CARB stating so;
  • Clarifying that limited assurance is not required for 2026 reporting; and
  • Clarifying that the use of the Scope 1 and 2 GHG emissions reporting template, a draft of which was published on October 10, 2025 and remains subject to CARB review, is not required for 2026 reporting.

Both SB 253 and SB 261 are subject to ongoing litigation challenging the validity of the laws, including on the ground that they violate the U.S. Constitution’s First Amendment. On the same day as the CARB workshop, the U.S. Court of Appeals for the Ninth Circuit issued an order granting an injunction pending appeal against SB 261, but denied an injunction pending appeal against SB 253. As discussed in our publication regarding the order, the order means that the January 1, 2026 initial reporting deadline under SB 261 will be unenforceable while the Ninth Circuit considers the appeal, but the order does not affect entities’ obligations to report under SB 253. Oral arguments on the merits of the appeal are currently scheduled for January 9, 2026. It remains to be seen whether and how the injunction pending appeal with respect to SB 261 and the ongoing litigation with respect to both laws will affect CARB’s rulemaking process.

Key Updates Applicable to Both Laws

A. In-Scope Entities

CARB presented significant updates to proposed concepts for identifying in-scope entities—i.e., U.S. entities “doing business in California” with total annual “revenue” in excess of $500 million (in the case of SB 261) or $1 billion (in the case of SB 253).

Two-Year Lookback for Assessing Annual Revenue. For the first time, CARB proposed assessing whether an entity meets the applicable annual revenue threshold using a two-year lookback period “to account for annual changes in revenue.” An entity would only be required to report if “the lesser of [its] annual revenue for the two previous fiscal years” exceeded the applicable revenue threshold.

Definition of “Revenue.” At its second public workshop held in August 2025, CARB had proposed to define “revenue” to mean “the total global amount of money or sales a company receives from its business activities, such as selling products or providing services,” because the definition is consistent with metrics used by major data tracking and reporting industries (e.g., Dunn & Bradstreet, S&P, etc.). At the third public workshop, CARB reverted to the revenue definition it initially proposed at the first public workshop, which is based on the concept of “gross receipts” under RTC § 25120(f)(2). CARB indicated that gross receipts are verifiable in California Franchise Tax Board (“FTB”) filings, referencing specific line items of entities’ California tax filings (i.e., Schedule F, Line 1a of corporations’ and S-corporations’ tax filings on Form 100 and Form 100S, respectively, Line 1a of partnerships’ tax filings on Form 565, and Schedule B, Line 1a of LLCs’ tax filings on Form 568) as showing the amount of “total revenue.”

Definition of “Doing Business in California.” At its second public workshop, CARB had proposed to define entities “doing business in California” as the entities listed on the California Secretary of State Business Entity database with “Active” status. Citing concerns that the California Secretary of State may be incomplete or outdated, however, CARB reverted to its initial approach of using a definition that is based on the definition of “doing business in California” under RTC § 23101 as presented at its initial public workshop, [2] but proposed certain modifications to narrow the definition. Specifically, CARB proposed to omit the sections of the RTC § 23101(b) definition relating to property holdings and payroll, because entities subject to SB 253 and SB 261 “should have significant economic nexus within the state of California”. Under this new proposed definition, an entity would be deemed to be “doing business in California” if it is “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit” and, during any part of a reporting year, (1) the entity is organized or commercially domiciled in California, or (2) sales of the entity in California exceeded $735,019 (for 2024, to be inflation adjusted). CARB indicated that whether a company has sufficient in-state sales to be deemed to be “doing business in California” can be verified in California FTB filings, referencing Schedule R-1, column (b) of entities’ California tax filings (i.e., Form 100, Form 100S, Form 565 and Form 568 for corporations, S-corporations, partnerships and LLCs, respectively) for the amount of in-state sales.

Exemptions. CARB also proposed several exemptions from the SB 253 and SB 261 reporting requirements, which largely align with those proposed at the second public workshop. These exemptions include (1) non-profit or charitable organizations that are tax-exempt entities under the Internal Revenue Code, (2) entities whose only business in California is “the presence of teleworking employees,” and (3) entities excluded by statute.[3] One notable update is CARB’s proposal to exempt insurance companies from both laws, even though the exemption for insurance companies is only explicit in the text of SB 261.[4]

B. Parent-Subsidiary Relationships

Parent-Level Consolidated Reporting. CARB reiterated that a subsidiary may comply with SB 253 and SB 261 through a parent submitting a consolidated report that covers the subsidiary. During the Q&A session, CARB staff confirmed that this is the case even if the parent making the consolidated report is not itself in-scope of the applicable law. The FAQs further specify that a “foreign parent company that is not based in the U.S. (and therefore likely not subject to the requirements of [SB 253] and [SB 261]) may submit a consolidated report which provides the required reporting on behalf of its U.S.-based subsidiaries to satisfy reporting requirements for the in-scope subsidiaries.”[5]

Assessment of Revenue. CARB noted that, while reporting can be made on a consolidated basis, revenue thresholds (for purposes of identifying in-scope entities) should be assessed on an “individual company basis.”[6] However, according to the FAQs, “if a parent company and its subsidiaries file California taxes as a unitary business, then the revenue of the subsidiaries counts towards the revenue of the parent company as part of its gross receipts.”[7]

Reporting Fees. CARB maintained its proposal to assess annual fees for SB 261 and SB 253 reporting using a flat, per-entity fee structure. This means that, if a parent company is paying for all subsidiaries covered by a consolidated report, it will be invoiced based on the total number of in-scope entities in its corporate structure. CARB stated that it will invoice companies after they file their first reports and after CARB finalizes its rulemaking on concepts such as “doing business in California” and “revenue.” CARB also noted that, while the estimated fees announced at the second public workshop may help companies to “ballpark” their potential filing fees,[8] CARB will not be able to determine the exact fees until entities have filed their first reports because the fees will be assessed based on the number of reporting entities. CARB announced that it intends to make its SB 253 and SB 261 fee assessment on September 10, 2026.

Key Updates Regarding SB 253

A. Timing

Deadline for First Reports. SB 253 provides CARB with discretion to set a deadline in 2026 for the initial report, which must cover Scope 1 and 2 emissions but not Scope 3 emissions. At the second public workshop, CARB proposed a June 30, 2026 deadline for the initial report. At the latest workshop, CARB proposed delaying the deadline to August 10, 2026.[9]  

Reporting Period for First Reports. SB 253 requires companies to report on GHG emissions for “the reporting entity’s prior fiscal year.” Because “prior fiscal year” is undefined, CARB has received feedback that there is uncertainty regarding the reporting period covered by the reports due in 2026, particularly for companies whose fiscal years do not align with the calendar year. To provide in-scope entities (regardless of their fiscal year) at least six months after the end of a fiscal year to report on that fiscal year, CARB proposed to bifurcate the requirement for the fiscal year that should be covered in the first SB 253 report as follows:

 B. Content of First Reports

Lack of Data. CARB issued an Enforcement Notice on December 5, 2024 “to support initial implementation and reduce uncertainty,” recognizing that “some reporting entities may require lead time to develop or refine their data collection processes to ensure complete and accurate reporting of Scope 1 and Scope 2 emissions.”[10] In the FAQs, CARB clarified that if an entity “was not collecting data or was not planning to collect data at the time the Enforcement Notice was issued,” then the entity is “not expected to submit Scope 1 and 2 reporting data in 2026.”[11] However, if an in-scope entity intends to avail itself of this relief, the entity must submit to CARB a statement on company letterhead stating that “it did not submit a report” and “indicating that in accordance with the Enforcement Notice, [it] was not collecting data or planning to collect data at the time the Notice was issued.”[12]

Assurance Requirement for First Reports. CARB stated that, notwithstanding the statutory requirement for companies to obtain limited assurance over their Scope 1 and 2 emissions reporting in 2026, pursuant to the Enforcement Notice, CARB will exercise enforcement discretion for the first report due in 2026 and will not require limited assurance for data submission with respect to 2026 reporting under SB 253.[13]

Use of Reporting Template. CARB has been developing a reporting template for Scope 1 and 2 GHG emissions reporting, and has solicited public feedback on a draft template published on October 10, 2025.[14] However, CARB has stated that in-scope companies will not be required to use the reporting template for the first reports due in 2026.[15] 

C. Scope 3 GHG Emissions Reporting

Although in-scope companies are not required to report Scope 3 GHG emissions until 2027, CARB presented initial categories of Scope 3 upstream and downstream emissions for public feedback. Specifically, CARB asked commenters which of the 15 Scope 3 categories are most used by companies today and are most helpful for investors or consumers.

D. Future Rulemaking

The FAQs state that CARB staff is expected to conduct an additional rulemaking process in 2026 that will address program requirements for reporting Scope 1, 2, and 3 emissions and create recurring annual reporting deadlines and data assurance requirements that will apply in 2027 and beyond.[16]