In September, we provided a Bracewell Update discussing the California Air Resources Board’s (CARB’s) Preliminary List of Reporting/Covered Entities relating to the state’s climate disclosure laws—the California Corporate Greenhouse Gas Reporting Program (SB 253) and the Climate Related Financial Risk Disclosure Program (SB 261). As detailed in our prior article, SB 253 requires US companies with total annual revenues in excess of $1 billion that do business in California to annually disclose their scope 1, 2 and 3 greenhouse gas (GHG) emissions for the prior fiscal year. SB 261 requires US companies with total annual revenues exceeding $500 million that do business in California to publish biennial climate-related financial risk reports.
On Tuesday, November 18, 2025, CARB hosted a third public workshop to address comments received regarding applicability, deadlines, reporting requirements and other topics ahead of the upcoming initial reporting deadlines. The same day, the Ninth Circuit enjoined enforcement of the SB 261 Climate Related Financial Risk Disclosure requirements pending an appeal of a challenge to those requirements.[1] The Court did not enjoin enforcement of the SB 253 requirements.
Ninth Circuit Order Pauses SB 261 Enforcement
The US Chamber of Commerce and other business groups challenged both SB 253 and SB 261 in January 2024, arguing that both laws violated the First Amendment.[2] The District Court denied plaintiffs’ request for preliminary injunction,[3] and plaintiffs appealed the denial to the Ninth Circuit and requested an injunction pending appeal. Without providing any reasoning, the Ninth Circuit granted the injunction request for SB 261 and denied the request for SB 253.[4] This means California may not enforce the requirements of the Climate Related Financial Risk Disclosure Program until the Court has made a ruling on appeal. Oral argument is currently scheduled for January 9, 2026, after the initial SB 261 reports are due on January 1. During the public workshop, CARB staff indicated they were still reviewing the order and provided the guidance discussed below. Bracewell will continue to monitor for litigation updates and additional guidance published by CARB that takes this decision into account.
CARB Changes Direction on “Doing Business in California”
CARB acknowledged significant shortcomings during the public workshop related to its published list of reporting/covered entities. CARB’s acknowledgements included recognizing that the California Secretary of State database fails to include revenue and may include incomplete or outdated data, and that several major companies are missing from the database list that CARB believes meet the eligibility thresholds for SB 261 and SB 253. In turn, CARB emphasized that the list should not be used as a compliance tool and reiterated that “[e]ach potentially regulated entity remains responsible for compliance.”[5]
CARB stated that it is turning back to the California Revenue and Tax Code (“RTC”) for defining “doing business in California” and “revenue” for purposes of applicability. In doing so, CARB explained that corporate tax filings contain the most up-to-date data. Accordingly, CARB has proposed the following definition of “doing business in California” in accordance with RTC § 23101 (but omitting § 23101 (b)(3)-(4) related to property holdings and payroll):
Actively engaging in any transaction for the purpose of financial gain or profit and any of the following conditions is met during any part of a reporting year:
- The entity is organized or commercially domiciled in this state;
- Sales, as defined in The Revenue and Taxation Code subdivision (e) or (f) of Section 25120 as applicable for the reporting year, of the entity in this state exceed the inflation adjusted thresholds of seven hundred thirty-five thousand and nineteen ($735,019) (2024). For purposes of this paragraph, sales of the entity include sales by an agent or independent contractor of the entity. For purposes of this paragraph, sales in this state shall be determined using the rules for assigning sales under Sections 25135 and 25136, and the regulations thereunder, as modified by regulations under Section 25137.
CARB stated that if a company files tax returns with the California Franchise Tax Board, then it “automatically” meets the above requirements provided in the definition of “doing business in California” for the purposes of SB 253 and 261.[6] Further, CARB maintains that it will utilize the RTC definition of “gross receipts” at RTC § 25120(f)(2) for defining “revenue” for purposes of SB 261 and SB 253 because gross receipts is verifiable on FTB tax filings. Accordingly, “revenue” is proposed to mean:
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 (including rents, royalties, interest, and dividends) in a transaction that produces business income, in which the income, gain, or loss is recognized (or would be recognized if the transaction were in the United States) under the Internal Revenue Code, as applicable for purposes of this part. Amounts realized on the sale or exchange of property shall not be reduced by the cost of goods sold or the basis of property sold.
CARB noted that “applicability would be determined by the lesser of the entity’s two previous fiscal years of revenue” in order “[t]o account for annual changes in revenue.”[7]
CARB Clarifies that Parent and Subsidiaries Determine Applicability Separately
Recognizing the many comments received regarding parent-subsidiary relationships, CARB clarified that “[i]nclusion criteria should be assessed on an individual company basis.”[8] While a parent company may report on behalf of its subsidiary, the parent-subsidiary relationships do not determine which entities are regulated. It is possible that a subsidiary could be subject to reporting requirements while a parent company is not, and vice versa.
Deadlines and Guidance for SB 261 Reporting Requirements
Deadlines. CARB maintained that reports should be posted to entities’ websites and links to reports on the CARB docket by January 1, 2026. CARB stated that the docket will open December 1, 2025 so that entities can meet the January 1 deadline. CARB may issue further guidance regarding deadlines in light of the Ninth Circuit decision.
Reporting Frameworks: CARB continued to state that companies may use one of several frameworks, including TCFD Final Report of Recommendations from 2017 or later versions, International Financial Reporting Standards (IFRS) Disclosure Schedules, or any “report developed in accordance with a regulated exchange, national government, or other governmental entity.”[9]
Requirements: CARB has not updated the draft checklist posted on September 2, 2025 and discussed in our last update. Reporting entities are expected to use “best efforts” in complying with the checklist, including providing the best available data, explaining their process, and identifying any gaps in data, key assumptions, and difficulties faced in generating reports. Additionally, CARB expects that each report should: “contain a statement on which reporting framework is being applied; discuss which recommendations and disclosures have been compiled and which have not; and provide a short summary of the reasons why recommendations/disclosures have not been included as well as discussion of any plans for future disclosures.”[10]
Deadlines and Guidance for SB 253 Reporting Requirements
Deadlines: CARB has pushed back anticipated deadlines for reporting Scope 1 and Scope 2 emissions to August 10, 2026. Reporting Scope 3 emissions data will not be required until at least 2027.
Reporting Templates: CARB published a template for Scope 1 and 2 emissions on October 10, but CARB stated that use of the template is optional for initial 2026 reporting. If companies already generate reports that cover Scope 1 and 2 emissions, then CARB is allowing submittal of those reports.
Requirements: If the reporting entity’s fiscal year ends between January 1st and February 1st, 2026, then the entity will report data from the fiscal year ending in 2026. However, if the reporting entity’s fiscal year ends between February 2nd and December 31st, 2026, then the reporting entity will report data from the fiscal year ending in 2025.[11] In any event, CARB intends to give each reporting entity at least six months after end of their fiscal year to submit their report.
CARB maintained that if companies were not collecting data in December 2024, when CARB’s Enforcement Notice was issued, they are not required to submit Scope 1 and 2 reports but must submit a statement on company letterhead indicating that they were not collecting data at the time the notice was issued.[12] Additionally, CARB confirmed that data assurance is not required for 2026 reporting.
CARB Continues to Welcome Public Comment
While the comment period for CARB’s Draft Reporting Template for Scope 1 and Scope 2 GHG Emissions closed on October 27, 2025, CARB indicated they are still welcoming and evaluating stakeholder feedback to inform subsequent rulemaking for SB 253 and SB 261 to take place in Q1 2026. Additionally, CARB has invited feedback on Scope 3 reporting categories.
CARB indicated that the public comment period will be open for the 45-day comment period upon publication of the notice package for the initial rulemaking.
The authors of this article are Shailesh Sahay, Brittany Pemberton, Stephen Wald and Lily Walton.
[1] US Chamber of Com., et al. v. Randolph, No. 25-5327 (9th Cir. Nov. 18, 2025) (order granting injunction pending appeal in part).
[2] See Complaint for Declaratory and Injunctive Relief, US Chamber of Com., et al. v. Randolph, No. 2:24-cv-00801 (C.D. Cal. Jan. 30, 2024).
[3] See US Chamber of Com., et al. v. Randolph, No. 2:24-cv-00801-ODW (PVCx) (C.D. Cal. Sept. 11, 2025) (order denying plaintiffs’ motion for preliminary injunction).
[4] US Chamber of Com., No. 25-5327.
[5] CARB, SB 253/261/219 Public Workshop: Update on California Corporate Greenhouse Gas Reporting and Climate-Relate Financial Risk Disclosure Programs (Nov. 18, 2025) at 18 (available at https://ww2.arb.ca.gov/sites/default/files/classic/SB%20253%20261%20Nov%20Workshop%20slides_v2.pdf) (“Public Workshop Presentation”).
[6] Public Workshop Presentation at 21.
[7] Id. at 23.
[8] Id. at 28.
[9]Id. at 35.
[10] Id. at 36.
[11] Id. at 11.
[12] Id. at 12.
