California Air Resources Board Approves Initial Regulations for SB 253 and SB 261

Summary

During a public hearing on February 26, 2026, members (the “Board”) of the California Air Resources Board (“CARB”) unanimously voted to approve initial regulations (the “Regulations”) implementing California’s climate reporting programs under Senate Bill 253 and Senate Bill 261.[1] The Board approved the Regulations as proposed by CARB staff in December 2025, provided that CARB staff commits to further assess the appropriateness of the Regulations’ exemption for insurance companies under SB 253. CARB will need to submit the Regulations in a final regulatory package to California’s Office of Administrative Law before the Regulations become effective.

The Regulations establish CARB’s fee structure for SB 253 and SB 261 and define key concepts relevant to determining the entities in-scope of the laws. In addition, the Regulations set an August 10, 2026 deadline for the first greenhouse gas (“GHG”) reports under SB 253, as well as the period to be covered in the initial reports. CARB announced that it will begin a separate rulemaking on GHG emission reporting requirements for 2027 and onwards, and on the assurance requirements associated with such reporting.[2]

Both SB 253 and SB 261 remain subject to ongoing litigation. A coalition led by the U.S. Chamber of Commerce is seeking to preliminarily enjoin CARB and the California state attorney general from implementing, applying or enforcing both laws while a lawsuit challenging their legal validity is pending. The injunction is on appeal before the U.S. Court of Appeals for the Ninth Circuit, which heard oral arguments in January 2026 and has not yet issued a decision. In the meantime, the Ninth Circuit granted an injunction pending appeal in November 2025 with respect to SB 261, but declined to do so with respect to SB 253. This means that, as of the date of this publication, in-scope entities’ obligations to report Scope 1 and Scope 2 GHG emissions by August 10, 2026 as contemplated by the Regulations remain unaffected, even though CARB has temporarily halted the enforcement of SB 261, which would have required in-scope companies to publicly disclose their first climate-related financial risk reports by January 1, 2026.

Initial Reporting Deadline and Covered Period under SB 253

Deadline for Initial Reports. Under the Regulations, entities subject to SB 253 must report their Scope 1 and Scope 2 emissions for the applicable reporting year on or before August 10, 2026. In response to questions from the Board and the public regarding how CARB plans to work with companies to address potential challenges for meeting the August 10 deadline, CARB staff stated during the hearing that they expect all in-scope companies to report by the deadline, but may provide relief on a “one-on-one basis” upon request.

Reporting Period. Under the Regulations, the period to be covered by an in-scope company’s SB 253 reports due in 2026 will depend on its fiscal year-end date as follows:

* However, a reporting entity may choose to report its Scope 1 and Scope 2 GHG emissions from its fiscal year ending in 2026, where that data is available.

Key Definitions Under Both Laws

A. In-Scope Entities

The Regulations apply to 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).

Definition of “Revenue.” The Regulations define “revenue” based on the definition of “gross receipts” in Section 25120(f)(2) of the California Revenue and Taxation Code (“RTC”).[3] The revenue threshold is determined by the lesser of the entity’s two previous fiscal years of revenue.[4]

Definition of “Doing Business in California.” The Regulations define “doing business” based on the definition under RTC § 23101(a) and “doing business in California” based on the definition under RTC § 23101(b), but omits the sections of the RTC § 23101(b) definition relating to property holdings and payroll.[5] As a result, an entity is considered 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 exceed the lesser of $500,000 (to be inflation adjusted annually under RTC § 23101(c)(1)) or 25% of the taxpayer’s total sales. For 2025, the inflation-adjusted amount for the $500,000 threshold is $757,070.[6] The definition of “doing business in California” also excludes wholesale sales of electricity in determining an entity’s sales in California under RTC § 23101(b)(2).

Recordkeeping Requirements. The Regulations require all in-scope entities to maintain records demonstrating that they meet the “revenue” and “doing business in California” definitions under SB 253 and SB 261. Entities must retain these records for five years and must provide these records to CARB if requested.[7]

B. Exempt Entities

Under the Regulations, the following categories of entities are exempted from both SB 253 and SB 261:

1. Non-profit or charitable organizations that are tax-exempt under the Internal Revenue Code;
2. A business entity that is subject to regulation by the Department of Insurance in this state, or that is in the business of insurance in any other state;
3. Federal, State and local government entities, and companies that are majority-owned by government entities (>50.00%);
4. A business entity whose only activity within California consists of wholesale electricity transactions; and
5. A business entity whose only business in California is employee compensation or payroll expenses, including teleworking employees.

During the hearing, in response to comments made by SB 253’s bill author, Senator Scott Wiener, and other stakeholders, the Board directed CARB staff to adopt a resolution that the Executive Officer of CARB (or such officer’s designee) will coordinate with the California Department of Insurance in order to evaluate and propose future regulatory requirements appropriate to include insurance companies within the scope of SB 253; provided that such companies are not otherwise required to submit such emissions data to the California Department of Insurance and CARB will strive to minimize any duplicative reporting burden to the extent feasible.

C. Parent-Subsidiary Relationships

Both SB 253 and SB 261 permit reports to be consolidated at the parent level, providing that, if a subsidiary of a parent company is in scope, the subsidiary is not required to prepare a separate report.[8]

Fee Structure and Payment Timeline

A. Annual Fees and Payment Timeline

The Regulations would require in-scope companies to pay annual fees under both SB 253 and SB 261, even though SB 261 reports are due on a biennial basis. Beginning in 2026 and for each year thereafter, on or by September 10, the Executive Officer of CARB will be required to provide a written fee determination notice to each “affected entity” of the amount due. Entities must remit the assessed fee to CARB within 60 days of receipt of the pay determination notice, or be subject to a late fee. In addition, a failure to pay the assessed fee constitutes a regulatory violation and entities will be penalized for each day they are in violation.[9]

B. Amount of Fees

Under the Regulations, CARB will determine annual fees for companies on a per-entity, flat fee basis. CARB will invoice companies using a formula based on its estimated total annual costs for implementing SB 253 or SB 261 divided by the total number of entities in scope of the applicable law.[10]

This means that, for a company that is planning to submit a single consolidated report for covering all in-scope entities, the total amount of fees due in connection with such a report depend on the number of individual entities that are in scope.