The regulations for the California Climate Corporate Data Accountability Act (SB253), which applies to entities with annual revenue in excess of $1 billion, have been delayed until the end of 2025.
The California Air Resources Board (CARB), which made the announcement at is workshop on May 29, 2025, said the reporting deadline remains unchanged for SB253 and the California Climate-Related Financial Risk Disclosure Law (SB261), which applies to entities with annual revenue in excess of $500 million.
As we have previously reported, companies doing business in California that meet certain revenue thresholds may soon be required to prepare reports on their greenhouse gas emissions and/or climate-related financial risk.
Meeting the deadlines will be a challenge with the limited amount of guidance available to companies as they gather data and prepare reports. CARB's initial staff concepts on how the laws will be implemented indicates that sales in California of just $735,019 may be sufficient for companies to be considered “doing business in California,” one of the key requirements under both laws.
The CARB workshop provided insights on how the laws will be implemented but did not provide much, if any, definitive new information.The materials presented in the workshop can be found here.
SB253
SB 253 applies to public and private entities doing business in California with annual revenue in excess of $1 billion. The law requires disclosure of scope 1 and 2 emissions in 2026 (for 2025 emissions) and disclosure of scope 3 emissions in 2027 (for 2026 emissions). The disclosure requires third-party limited assurance in 2026 and reasonable assurance by 2030. In December 2024, CARB issued an enforcement notice indicating that CARB will exercise its enforcement discretion and not pursue enforcement against entities that make a good faith effort to comply with the law’s reporting obligations in 2026. The notice also indicates that reporting entities may submit scope 1 and scope 2 emission data in the 2026 report from information the reporting entity already possessed or was in the process of collecting as of the date of the notice.
SB261
Companies doing business in California with annual revenues in excess of $500 million are required to report biennially, beginning on Jan. 1, 2026, on their climate-related financial risks and the measures the company has implemented to adapt to those risks. If a company’s report does not include all of the required information, the company is required to provide a detailed explanation of any reporting gaps and describe the steps the company will take to prepare a complete report in the future. The reports must be made publicly available on the company’s website. During the workshop CARB reported that it is considering whether the program implementing SB261 will be through regulation or guidance.
Initial Staff Concepts
CARB indicated that public comments on the rulemaking process focused on certain key terms that are not yet defined, including “doing business in California,” “revenue” and “corporate relationships.” CARB provided initial staff concepts on how these terms will be defined but cautioned that these positions are not final and are subject to change.
Doing Business in California
Many commenters suggested that the term “doing business in California” needed to be defined for companies to determine if they are within the scope of the laws. Many companies suggested that the definition should require a material nexus between the company and its activities and emissions in California. At this time, CARB reported that the initial staff concept to define this term is to adopt that interpretation of “doing business in California” found in the California Revenue and Tax Code Section 23101 (a) and (b) (see below). CARB noted that certain modifications may be needed to address the specific circumstances of the climate disclosure laws.
§ 23101(a): “Doing business” means actively engaging in any transaction for the purpose of financial or pecuniary gain or profit.
§ 23101(b): An entity is considered to be “doing business in California” for purposes of the reporting regulation if the entity is doing business (as defined in section 23101(a)), 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 … of the entity in this state exceed the inflation adjusted thresholds of $735,019 (2024). For purposes of this paragraph, sales of the entity include sales by an agent or independent contractor of the entity. …
- The real property and tangible personal property of the entity in this state exceed the lesser of the inflation adjusted thresholds of $73,502 (2024) or 25% of the entity's real property and tangible personal property. …
- The amount paid in this state by the entity for compensation … exceeds the inflation adjusted thresholds of $73,502 (2024) or 25% of the total compensation paid by the entity.
Revenue
CARB reported that the initial staff concept for defining “revenue” is to use the definition of “gross receipts” under the California Revenue and Taxation Code § 25120(f)(2):
“Gross receipts” means 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…
Corporate Relationships
CARB reported that the initial staff concept regarding defining corporate relationships is to leverage the California Cap-and-Trade program. Under the California Cap-and-Trade program, a corporate association exists when one entity has a degree of ownership or control over another entity. Specifically, a level of ownership or control of 50% or greater requires establishment of a Corporate Association in the Cap-and-Trade program.
CARB indicated it would communicate further updates throughout the year.
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