New Updates To California’s Climate Disclosure Laws – Climate Change

On December 9, 2025, the California Air Resources Board (CARB)
issued draft regulations for implementing California’s climate
disclosure laws, SB 253 (the Climate Corporate Data Accountability
Act) and SB 261 (the Climate‑Related Financial Risk Act). On
December 23, 2025, CARB made some minor updates to the proposed regulation
text.

The proposed regulation is limited to establishing a fee
structure for SB 253 and SB 261 and the first year reporting
deadline of August 10, 2026 for SB 253, but also defines key terms
necessary for both SB 253 and SB 261, such as “doing business
in California” and “revenue,” to clearly determine
which entities will be covered by these programs. For a more in
depth review of California’s climate disclosure laws and their
compliance requirements, please refer to our prior alerts.

Key definitions under the proposed regulations are largely
consistent with the definitions proposed at CARB’s November
2025 workshop, with some modifications:

“Doing business in
California” means actively engaging in any
transaction for the purpose of financial or pecuniary gain or
profit and meeting either of the following
criteria:¹

• The entity is organized or commercially domiciled in
  California; or




• The entity has sales in California that exceed (i) $735,019
  (2024), which includes sales by the entity’s agent or
  independent contractor, or (ii) 25% of the entity’s total
  sales.²

“Revenue“

• Has the same meaning as “gross receipts” under
  section 25120(f)(2) of the California Revenue and Taxation
  Code.³




• Revenue is determined by the lesser of the entity’s two
  previous fiscal years of revenue.

“Parent‑Subsidiary”
Relationship

• “Parent” means a business entity
  that has ownership interest in or control of another business
  entity by direct corporate association.⁴




• “Subsidiary” means a business entity
  that another business entity has ownership interest in or control
  of by direct corporate association.^5,6

Additional proposed provisions:

• Fees and Fee Enforcement




• Beginning in 2026 and every year thereafter, each covered
  entity will receive a written fee determination by September 10,
  and the covered entity will be required to pay that fee within 60
  days of the fee determination notice date.




• If the fees are not paid within the 60‑day timeframe,
  entities will be subject to a late fee to be set by CARB, in
  addition to any penalty that may be assessed. Each day the full
  amount of the fee is not paid will be considered a separate
  violation.




• CARB can seek an injunction for any fee‑related
  violation.




• Recordkeeping




• Entities are required to maintain records demonstrating that
  they meet the “doing business in California” and
  “revenue” thresholds for five years and provide those
  records to CARB if requested.

CARB’s Next Steps:

In addition to a staff report on the rationale for the proposed
regulation, CARB posted a notice of public hearing to be held on February 26, 2026
to consider adoption of the initial proposed regulation. The public
comment period for the proposed regulation began on December 26,
2025, and the 45-day public comment period will end on February 9,
2026 for written comments not submitted during the hearing.
Following the public hearing, CARB may take action to approve the
proposed regulation for adoption as is or with
non‑substantial modifications. If there are more substantive
modifications made, the revised proposed regulation will be
published for public written comment for at least 15 days before
final adoption.

SB 261 Compliance Timing:

In light of the injunction issued by the Ninth Circuit Court of
Appeals against SB 261, CARB issued an enforcement advisory confirming that it will
not enforce SB 261 against covered entities for failing to post and
submit reports by the January 1, 2026 statutory deadline. CARB will
provide an alternate deadline for SB 261 reporting after the appeal
in the Ninth Circuit case is resolved, which is anticipated after
January 9, 2026, the date set for oral argument on the appeal. In
the meantime, CARB opened a public docket for entities to voluntarily
submit SB 261 reports if they so choose.

Stakeholders should:

• Continue to monitor developments concerning CARB’s final
  rulemaking; and




• Continue to monitor litigation developments and their impact on
  the enforceability of SB 261 and SB 253.

We will continue to keep you updated as developments concerning
California’s climate disclosure laws unfold.

Footnotes

1 As set forth in §23101(b)(1) or §23101(b)(2)
of the California Revenue and Taxation Code.

2 Wholesale sales of electricity do not count for
purposes of determining an entity’s sales in
California.

3 Under §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.
Amounts realized on the sale or exchange of property shall not be
reduced by the cost of the goods sold or the basis of property
sold.”

4 See Title 17, CA Code of Regulations
§95833.

5 Id.

6 A parent corporate entity has an ownership interest or
control over a second entity if it owns more than 50% of a
subsidiary’s shares (or has a right to acquire more than 50% of
the subsidiary’s shares), or voting power, or there is greater
than 50% of common owners, directors, or officers among the parent
and subsidiary.

New Updates To California’s Climate Disclosure
Laws

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.