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On December 9, 2025, the California Air Resources Board (CARB) released its proposed  for the initial regulations implementing Senate Bills (SB) 261 and 253. SB 261 requires covered entities to publish biennial, climate-related financial risk reports, and SB 253 requires reporting entities to disclose scope 1, 2, and 3 greenhouse gas emissions. While the proposed regulations provide some additional information on, and limit, the scope of applicability, as well as information related to the required compliance fees, they provide little guidance on the substance of the information that is required to be included in the reports that must be prepared and submitted under these laws. 

Key Takeaways

• CARB is proposing to define “doing business in California” to mean an entity that is (1) organized or commercially domiciled in California or (2) has sales in California exceeding an inflation-adjusted threshold (approximately $760,000 for 2025).
• CARB is proposing to exempt from SB 261 and 253 coverage:
  • Non-profits,
  • Entities subject to regulation by state departments of insurance,
  • Government entities or companies majority-owned by government entities,
  • Entities that only have California activity consisting of wholesale electricity transactions, or
  • Entities whose only business in California is payroll expenses, including teleworking employees.
• CARB is proposing an initial SB 253 reporting deadline for scope 1 and 2 greenhouse gas emissions of August 10, 2026.
• The proposed regulations are scheduled to be officially published on December 26, 2025, triggering a 45-day comment period ending February 9, 2026.
• CARB will hold a public hearing on the proposed regulations on February 26, 2026.
• SB 261 enforcement is still stayed, pending the outcome of the ongoing appeal before the U.S. Court of Appeals for the Ninth Circuit. See our previous client alerts for more information on the Ninth Circuit decision and CARB’s response.

Proposed Regulatory Text

Doing business. As anticipated, CARB is proposing a definition of “doing business” as “the same definition as set forth in section 23101(a) of the California Revenue and Taxation Code.” However, as recently signaled by CARB in its November 2025 workshop, CARB will limit the definition of “doing business in California” for purposes of the climate disclosure laws to only include those entities “doing business and meeting either of the criteria set forth in subsections 23101(b)(1) or 23101(b)(2) of the California Revenue and Taxation Code.”

Accordingly, an entity is “doing business” in California if it is (1) organized or commercially domiciled in California or (2) has sales in California exceeding approximately $760,000 (adjusted annually for inflation) for the applicable reporting year (here, 2025). Consistent with recent guidance, CARB will not require reporting simply for property ownership in California or wages paid in California. 

Exempted Entities. CARB is proposing to exempt five categories of entities from SB 261 and 253 coverage: 

1. Non-profit or charitable organizations that are tax-exempt under the Internal Revenue Code;
2. A business entity that is subject to regulation by the Department of Insurance in California, or that is in the business of insurance in any other state;
3. Federal, state, and local government entities, and companies that are majority-owned by government entities (>50.00%);
4. A business entity whose only activity within California consists of wholesale electricity transactions; and
5. A business entity whose only business in California is employee compensation or payroll expenses, including teleworking employees.

SB 253 Initial Deadline. CARB is proposing a deadline for SB 253 reporting entities to report their scope 1 and 2 emissions for the applicable preceding fiscal year on or before August 10, 2026.

For determining the “applicable preceding fiscal year,” CARB is proposing that if the reporting entity’s fiscal year ends on or before February 1, the applicable preceding fiscal year is the fiscal year ending in the current calendar year. For reporting entities with a fiscal year ending after February 1, the applicable preceding fiscal year is the fiscal year ending in the previous calendar year, though these entities may choose to report based on available data from their most recent preceding fiscal year.

Other Provisions. CARB has also proposed a number of definitions and has expanded on the statutory definitions of “covered entity” and “reporting entity” to clarify that the lesser of the entity’s two previous fiscal years of revenue will be used to determine whether it meets the threshold revenue for program coverage. While CARB has included definitions for terms such as “parent” and “subsidiary,” they do not appear to at all narrow the applicability of either SB 261 or SB 253 to only a single entity in a corporate structure. CARB also details its calculations for administering program fees and its processes for payment and collection of those fees. 

Upcoming Implementation Schedule

• December 26, 2025: official publication of the proposed regulations
• December 26, 2025 – February 9, 2026: comment period
• January 9, 2026: Ninth Circuit oral argument in challenge to SB 261 and 253
• February 26, 2026: public hearing

If you have questions about SB 261, SB 253, or CARB’s proposed rulemaking, contact the authors of this article or your �鶹ֱ�� & Lardner attorney.