Uncertainty Abounds Regarding Compliance with the California Climate Laws: Recent Delay on Enforcement of Impending Reporting Deadline and Updated (But Potentially Moot) CARB Guidance

At the same time the Ninth Circuit issued its order, CARB staff was hosting its third public workshop on the California Climate Laws, continuing its ongoing public participation process to provide program updates and solicit stakeholder feedback. Additionally, CARB published updates to its previously issued guidance documents: Frequently Asked Questions About Regulatory Development and Initial Reports and Climate Related Financial Risk Disclosures: Checklist. The November workshop advanced CARB’s initial rulemaking to set first‑year administrative parameters (including fees and an updated, one-time Scope 1 and Scope 2 greenhouse gas (“GHG”) emissions reporting deadline of August 10, 2026) and previewed definitional proposals, several new exemptions, and timing for near‑term compliance under SB 261. CARB also described plans to improve entity‑identification for fee and applicability purposes, including expanded reliance on California Franchise Tax Board (“FTB”) tax filing data. Below we describe notable developments from the November workshop. However, given the Ninth Circuit’s injunction on enforcement of SB 261, there is uncertainty regarding the appropriate next steps for reporting under that law. As of this writing, we have no indication that CARB will not post its docket for companies to submit links to their SB 261 compliant disclosures, so it is possible that companies that already have compliant disclosure or have been working towards the January 1, 2026 deadline may elect to post their SB 261 disclosures on a voluntary basis. The Ninth Circuit’s ruling appears to only enjoin the enforcement of the law for the time being. We will continue to monitor developments and recommended next steps for companies that are considering making their disclosures notwithstanding this development. Below, we describe some of the key takeaways from CARB’s workshop on November 18, 2025.

Initial Regulation: First‑Year SB 253 Reporting Deadline and Enforcement Discretion

CARB plans to propose a first‑year only SB 253 deadline of August 10, 2026, for Scope 1 and Scope 2 GHG emissions reporting.¹ CARB staff noted that it extended this deadline from the previously proposed deadline of June 30, 2026 in response to stakeholder feedback. Reporting deadlines for subsequent years will be determined in a subsequent rulemaking.

Consistent with CARB’s December 2024 enforcement notice, CARB staff reiterated that it will exercise enforcement discretion to support good‑faith first‑year submissions. In furtherance of supporting SB 253 compliance, CARB confirmed that use of CARB’s draft Scope 1 and Scope 2 template is optional in 2026, companies may submit existing GHG reports that cover Scope 1 and Scope 2 for purposes of SB 253 compliance, and limited assurance is not required for 2026 submissions. CARB also confirmed that only entities that were collecting or planning to collect data at the time of the enforcement notice are expected to submit Scope 1 and Scope 2 data in 2026; other subject entities should submit a statement on company letterhead explaining the absence of a report in light of the notice.

Applicability: Preliminary List of Reporting/Covered Entities

As we have previously discussed, CARB has published a Preliminary List of Reporting/Covered Entities, listing those companies that it believes are subject to the requirements of SB 253 and SB 261. CARB staff noted that the list—constructed primarily from California Secretary of State data and a proprietary revenue dataset—led to significant stakeholder feedback regarding duplicative and missing entries, imprecise revenue estimates, and outdated or incomplete records. Recognizing these limitations, CARB is evaluating expanded use of FTB tax‑filing data to verify revenue and whether an entity is “doing business” in California. Notably, CARB staff reiterated that the list was intended to provide an estimate of total reporting and covered entities to support development of fee calculation, not as a compliance tool to determine applicability of the California Climate Laws.

Applicability: Proposed Definitions of “Total Annual Revenue,” “Doing Business in California,” and Parent-Subsidiary Relationships

CARB’s definitional proposals aim to promote verifiability and alignment with existing California tax concepts. Specifically, CARB proposes to define “total annual revenue” by reference to “gross receipts” as defined in the California Revenue and Taxation Code—that is, the gross amounts realized from the sale or exchange of property, the performance of services, or the use of property or capital (including rents, royalties, interest, and dividends), without reduction for the cost of goods sold or basis.² To address year‑to‑year variability, applicability would be determined using the lesser of the entity’s two previous fiscal years’ revenues.

CARB proposes to define “doing business in California” based on the definition applied in the California Revenue and Taxation Code, including the general test for “actively engaging in transactions for pecuniary gain or profit” and the sales‑based nexus standard.³ Notably, CARB’s proposed definition does not include those entities whose nexus to California is based on payment of property tax in the state or payment of employees in the state. According to CARB, these updates to the scope of “doing business in California” are intended to capture entities with a significant economic nexus to California without overreliance on factors that are less indicative of market engagement.

CARB also proposes to align parent-subsidiary concepts with the “direct corporate association” standard used in the state’s cap-and-trade program. Specifically, a business entity is a subsidiary if another business entity has ownership interest in or control of the first entity by direct corporate association—which includes any indicia of control described in the state’s cap-and-trade regulation that is greater than 50%.⁴ A subsidiary may request that a parent report on its behalf. However, CARB continues to reiterate that parent-subsidiary relationships do not affect whether an entity is regulated; each entity must independently assess applicability based on the statutory thresholds and proposed definitions. In response to public comment, CARB clarified that a subsidiary’s total annual revenues will be included in a parent company’s total annual revenue for purposes of revenue thresholds if the companies file a unitary tax filing to the FTB.

Exemptions and Statutory Exclusions

In response to stakeholder feedback, CARB proposes exemptions for non‑profit or charitable organizations that are tax‑exempt under the Internal Revenue Code and for entities whose only business in California is the presence of teleworking employees. Statutory exclusions remain in place for federal, state, and local government entities (including companies majority‑owned by such entities) and for entities subject to regulation by the California Department of Insurance or in the business of insurance in any state.

SB 261 Climate‑Related Financial Risk Reports: Minimum Content and Timing

During the November workshop, CARB confirmed that SB 261 reports must be posted on the reporting entity’s public website by January 1, 2026, and updated biennially thereafter, though this does not account for the Ninth Circuit’s recent order. As CARB discussed in the August workshop, CARB will maintain a public docket for links to SB 261 reports and entities must submit the link to their report by July 1, 2026. Prior to the November workshop, CARB published an updated checklist to guide companies’ initial SB 261 reports. When asked if there will be additional guidance or a regulation on SB 261 during the November workshop, CARB confirmed it has published the necessary guidance to support compliance with SB 261.

Next Steps and Anticipated Rulemakings

It is not clear how the Ninth Circuit’s order and preliminary injunction will impact CARB’s plans regarding the California Climate Laws. According to the November workshop, CARB staff anticipated presenting the initial regulation for board consideration in the first quarter of 2026, although that does not take into account the Ninth Circuit’s order. As previewed, the initial regulation would set the SB 253 Scope 1 and Scope 2 reporting deadline for the first year of reporting (August 10, 2026) and the fee framework. CARB anticipates sending initial fee assessments by September 10, 2026. There will be a 45-day comment period following the publication of the notice package for the initial rulemaking. A subsequent rulemaking is expected to address SB 253 data assurance requirements, enforcement provisions, recurring reporting deadlines, and reporting templates.

CARB has already received extensive public comment on the draft Scope 1 and Scope 2 reporting template and is currently assessing this feedback. CARB continues to solicit input on the Scope 3 categories most commonly used and most decision‑useful for investors and consumers.

As noted above, the Ninth Circuit’s order delays enforcement of SB 261, at least until oral argument is held on January 9, 2026. Notwithstanding this introduction of new uncertainty as to if and when covered entities must be prepared to comply with the law’s requirements, it may be prudent for companies to continue preparations in the event they are forced to quickly secure compliance. Therefore, companies subject to the law should consider CARB’s recent guidance, including the November workshop and the available resources. Additionally, efforts to prepare for SB 253’s August 10, 2026, deadline should continue, as that deadline is not immediately affected by the Ninth Circuit’s order. Entities with a potential California nexus should consider CARB’s proposed updated definitions and deadlines against their organizational structures, fiscal calendars, tax filings, revenue profiles, and existing climate‑related disclosures to determine whether, when, and how they may be subject to the California Climate Laws as CARB finalizes the initial SB 253 regulation and the ongoing legal challenges progress.

We will continue monitoring developments regarding climate-related disclosure laws. Please reach out to your Vinson & Elkins team to discuss these matters and their implications for your business.

¹ For entities with fiscal year ends between January 1 and February 1, 2026, the report would cover the fiscal year ending in 2026; for fiscal year ends between February 2 and December 31, 2026, the report would cover the fiscal year ending in 2025. CARB emphasized that, under this approach, each reporting entity would have at least six months after its respective fiscal year end to submit its initial report.

² Cal. Rev. & Tax Code § 25120(f)(2).

³ Id. § 23101(a)-(b).

⁴ Cal. Code of Regs. tit. 17, § 95833(a)(1). “The following indicia of control determine ownership or control:

(A) [Greater than 50%] ownership of any class of listed shares, the right to acquire such shares, or any option to purchase such shares of the other entity; (B) [Greater than 50%] of common owners, directors, or officers of the other entity; (C) [Greater than 50%] of the voting power of the other entity; (D) In the case of a partnership other than a limited partnership, [greater than 50%] of the interests of the partnership; (E) In the case of a limited partnership, [greater than 50%] control over the general partner or the percent of the voting rights to select the general partner; and (F) In the case of a limited liability corporation, [greater than 50%] of ownership in the other entity regardless of how the interest is held.” Id.