On December 9, 2025, CARB posted initial proposed regulations concerning SB 253 and SB 261. As a reminder:
CARB also posted a Notice of Public Hearing to Consider the Proposed California Corporate Greenhouse Gas Reporting and Climate-Related Financial Risk Disclosure Initial Regulation (Notice) and a Staff Report: Initial Statement of Reasons (Staff Report), which were concurrently delivered to the California Office of Administrative Law (OAL) along with the proposed regulations.
While limited in scope, the proposed regulations (along with the Notice and Staff Report) address certain key issues, as described below.
The proposed regulations provide certain key definitions, necessary to understand which entities will be in scope of California’s new climate disclosure laws.
CARB is proposing that entities must meet the revenue threshold for two consecutive years to be included in the staff’s assessment of annual fees. This is generally consistent with CARB’s previously issued FAQs, which indicate that if an entity’s revenues are below the applicable threshold for one of the two previously completed fiscal years, the entity will not be in scope and need not report at the next applicable reporting deadline. CARB explains in the Staff Report that this accommodation is meant to mitigate the potential for entities to cycle in and out of the reporting program due to unforeseeable or “on-off” type scenarios.
CARB is proposing that “doing business” will have the same definition as set forth in § 23101(a) of the California Revenue and Taxation Code (RTC) and that “doing business in California” will mean doing business and meeting either of the criteria in § 23101(b)(1) or § 23101(b)(2) of the RTC (but excluding RTC §§ 23101(b)(3-4) relating to property holdings and payroll). This is consistent with what CARB previously outlined in its FAQs. According to the Staff Report, CARB is excluding RTC §§ 23101(b)(3-4) from the definition to ensure that regulated entities have a significant economic nexus within the state of California.
In addition, CARB is proposing that wholesale electricity transactions will not count for purposes of determining an entity’s sales in California.
Consistent with the FAQs, CARB is proposing to use the definition of “revenue” found in RTC § 25120(f)(2).
Under this approach, revenue would be determined based on “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 (IRC), as applicable for purposes of this part. Amounts realized on the sale or exchange of property shall not be reduced by the costs of goods sold or the basis of property sold.”
According to the Staff Report, CARB has settled on this definition, which does not deduct operating costs or other business expenses, based on its determination that sales is a more appropriate metric for identifying companies that may potentially have large operations and associated carbon footprints. The proposed definition is also consistent with metrics used by major data tracking and reporting industries and is verifiable for all public and private businesses through the California Franchise Tax Board (FTB).
CARB is proposing to define “subsidiary” as a business entity that another business entity has ownership interest in or control of by direct corporate association, with the following indicia determining ownership or control: (i) greater than 50% of ownership of any class of listed shares, the right to acquire such shares, or any option to purchase such shares of the other entity; (ii) greater than 50% of common owners, directors, or officers of the other entity; (iii) greater than 50% of the voting power of the other entity; (iv) in the case of a partnership other than a limited partnership, greater than 50% of the interests of the partnership; (v) in the case of a limited partnership, greater than 50% of control over the general partner or greater than 50% of the voting rights to select the general partner; and (vi) in the case of a limited liability corporation, greater than 50% of ownership in the other entity regardless of how the interest is held.
CARB is proposing to define “parent” as a business entity that has ownership interest in or control of another business entity by direct corporate association. This corporate relationship implies that the parent company has a controlling interest and can influence the subsidiary’s operations, management, and financial decisions, even though the subsidiary may operate as a separate legal entity.
The proposed regulations include a framework for determining the annual fees to be paid under SB 253 and SB 261.
As previously contemplated, CARB is proposing a flat fee structure for each reporting regime, which it argues will reduce the administrative burden associated with calculating, verifying, and managing a variable fee (resulting in lower costs and greater predictability to assessed entities), avoid creating disincentives for full disclosure or for companies with complex supply chains, and ensure equal treatment of all in-scope entities.
Under the proposed regulations, beginning in FY 2026 and for each year thereafter, each in-scope entity would receive a written fee determination notice of the amount due under each disclosure program by September 10. Fees would then be due within 60 days of the fee determination notice date (late payments will be subject to late fees). In-scope entities would be expected to maintain records demonstrating that they meet the revenue and doing business in California thresholds for five years, and they would need to provide these records to CARB if requested.
The proposed regulations also address fee enforcement and the penalties for failing to pay the required fees.
The proposed regulations establish August 10, 2026, as the first reporting deadline for reporting Scopes 1 and 2 emissions data under SB 253.
Consistent with previous guidance, CARB indicates that it will exercise enforcement discretion for the first reports due in 2026, allowing reporting entities to submit their Scope 1 and 2 emissions for their prior fiscal year based on information they already have or were collecting when CARB issued its December 5, 2024, Enforcement Notice. Entities that were not collecting GHG data or planning to collect such data at the time of that notice will not be expected to submit Scope 1 and 2 emissions data for the first reporting cycle in 2026, an accommodation intended to support companies as they transition into complying with these new reporting requirements.
According to CARB, this reporting deadline matches the verification deadline under CARB’s existing Mandatory Reporting Program (MRR) and is intended to streamline reporting for certain entities.
CARB is also proposing February 1, 2026, as the date for determining which fiscal year’s data should be submitted for the first report. Companies whose fiscal year ends on or before this date in a calendar year would report data based on the fiscal year ending in the current calendar year (in this case, FY 2025-2026 data). Companies whose fiscal year ends after this date in a calendar year would report data based on the fiscal year ending in the previous calendar year (in this case, FY 2024-2025 data), while also having the option to report data based on the more recent fiscal year where available.
The Staff Report indicates that CARB will undertake a second rulemaking to establish future reporting dates beyond 2026 and to provide additional details for reporting contents and format, data assurance, and more.
CARB noted on its website that it expects the OAL will publish the Notice on December 26, 2025, which will trigger the 45-day public comment period (ending February 9, 2026), but that given the holiday season and the strong interest in these laws, it is posting the materials now to allow interested parties additional time for public review (prior to the public comment period).
A public hearing will be held on February 26, 2026, at 9 a.m. PT (and may continue at 9 a.m. PT the following day) to consider approving the regulations. According to the Notice, a public agenda for the meeting will be posted 10 days in advance of the meeting (by February 16, 2026).
Interested parties may present comments orally or in writing during the hearing and may provide comments by mail or by electronic submission before the hearing (beginning December 26, 2025, but no later than February 9, 2026).