California Climate Disclosure Update: Ninth Circuit Enjoins SB 261 Enforcement While CARB Continues to Workshop

On November 18, 2025, the US Court of Appeals for the Ninth Circuit issued an order granting a motion to enjoin enforcement of Senate Bill (SB) 261, California’s climate-related financial risk disclosure law, while allowing implementation of SB 253 to proceed. The decision followed an emergency application to the Supreme Court of the United States filed by the US Chamber of Commerce and other business groups. Importantly, the Ninth Circuit’s order enjoins enforcement of SB 261 only during the pendency of the chamber’s appeal—not SB 253—and covered companies must continue preparing to comply with SB 253’s requirements.

At the same time, the California Air Resources Board (CARB) held a public workshop and issued updated FAQs for SB 253 (the state’s mandatory greenhouse gas emissions disclosure law) and SB 261. These updates included pushing the reporting deadline for first-year SB 253 Scope 1–2 emissions disclosure to August 10, 2026 and clarifying key statutory definitions and forthcoming fee regulations.

While the Ninth Circuit order creates some uncertainty around the future of SB 261, including the associated compliance timeline, CARB’s workshop materials and FAQs provide useful guidance on compliance with SB 253 and remain relevant to planning for climate-related reporting obligations.

For more information on SB 253 and 261, see our LawFlashes of September 17 and October 20.

NINTH CIRCUIT HALTS IMPLEMENTATION OF SB 261

On November 18, the Ninth Circuit granted a temporary injunction prohibiting California from enforcing SB 261 (while denying the injunction request with respect to SB 253, allowing enforcement of SB 253 to proceed). The ruling came after business groups, including the US Chamber of Commerce, filed an emergency application with the US Supreme Court seeking to block enforcement of SB 261 and SB 253 given the impending January 1, 2026 deadline for SB 261 reporting and the Ninth Circuit’s indication that it would not act prior to that deadline.

In August 2025, the business group plaintiffs had sought a preliminary injunction in the District Court for the Central District of California to halt enforcement of SB 253 and SB 261, which the court denied, finding that the laws were likely to withstand First Amendment challenges because they furthered substantial governmental interests and did not compel ideological or controversial speech.

That decision was appealed to the Ninth Circuit, which scheduled oral argument for January 2026. That date was after the January 1, 2026 compliance deadline, and any decision would likely have been forthcoming well into 2026.

Nonetheless, the Ninth Circuit will hear the previously scheduled oral argument in January, with the January 1, 2026 reporting deadline for SB 261 being enjoined during the pendency of the appeal. In the event the Ninth Circuit ultimately affirms the district court’s ruling denying an injunction, it would seem reasonable to anticipate that either the Ninth Circuit or CARB will permit some time for covered entities to provide the required disclosures following the Ninth Circuit’s decision.

CARB WORKSHOP UPDATE: KEY TAKEAWAYS FOR SB 253 AND SB 261

CARB used its November 2025 workshop to present updates on SB 253 and SB 261 developments and responses to public comments. These updates affect coverage determinations, first-year reporting expectations, and initial compliance preparation. At the time of the workshop the Ninth Circuit had not yet issued its ruling, so there was no opportunity to address related timing issues.

SB 253: First-Year Scope 1–2 Disclosure Deadline Extended to August 10, 2026

CARB announced that it is proposing an August 10, 2026 reporting deadline for initial Scope 1 and Scope 2 emissions reporting under SB 253. This is a material update from the previously anticipated June 30, 2026 deadline and is intended to provide entities at least six months after the close of their fiscal year to prepare required disclosures.

CARB outlined the following framework:

• If an entity’s fiscal year ends January 1–February 1, 2026: The entity must report FY 2026 data
• If an entity’s fiscal year ends February 2–December 31, 2026: The entity must report FY 2025 data

Limited Assurance Not Required for 2026 Reporting

CARB confirmed that if a reporting entity does not already have limited assurance with respect to current reportable information, it will not be required for the first year (2026) Scope 1–2 filings to obtain such assurance. Instead, the agency will accept good-faith first year submissions, under which entities should provide the best data currently available.

Limited assurance requirements will begin with 2027 reporting.

Entities Not Collecting Data As of CARB’s December 2024 Enforcement Notice

CARB stated that entities that were not collecting emissions data when its December 2024 enforcement notice was issued are not expected to file Scope 1–2 data in 2026 and should instead submit a short letter on company letterhead to CARB confirming their lack of emissions data collection.

CARB did not prescribe a format but advised that the letter should be brief and factual.

Initial Fee Regulation: CARB Reaffirms Flat-Fee Approach

CARB provided new details on its fee regulation under both SB 253 and SB 261. CARB continues to pursue a flat-fee model, calculated as:

Annual Program Cost ÷ Number of Regulated Entities

To estimate the number of regulated entities, CARB proposes relying on:

• California Franchise Tax Board tax-filing data; and
• CARB’s preliminary list of potentially covered entities. While not a compliance tool, the list will be used to estimate entities subject to SB 253 and 261. Each potentially regulated entity remains independently responsible for determining whether it is subject to SB 253 and 261 based on applicable standards.

This marks a shift from CARB’s August 2025 proposal to rely on California Secretary of State data—a method that stakeholders criticized as underinclusive and inconsistent with traditional revenue and nexus-based tests.

CARB is targeting September 10, 2026 as the initial fee assessment date.

CARB Reverts to Statutory Definitions for ‘Revenue’ and ‘Doing Business in California’

CARB confirmed that it is now proposing to revert to statutory definitions that align with existing California tax law, providing companies with greater predictability for coverage assessments.

“Revenue” will be based on gross receipts, consistent with the California Revenue and Taxation Code (RTC). This definition aligns with business income apportionment rules and departs from earlier workshop discussions suggesting alternative formulations.

CARB confirmed that under its proposed approach a company will be deemed to be “doing business” in California if

• the entity satisfies the active engagement test under RTC § 23101(a), i.e., it “actively engag[es] in any transaction for the purpose of financial or pecuniary gain or profit” in California; and
• the entity either is organized or commercially domiciled in California or has sales in California that exceeded $735,019 in 2025, as set forth in RTC § 23101(b); this amount is adjusted annually for inflation.

However, the staff is proposing to eliminate reliance on the property holdings and payroll “triggers” set forth in Section 23101(b)(3-4).

CARB acknowledged stakeholder feedback regarding application of these tests to multinational and complex corporate structures.

Parent-Subsidiary

CARB reiterated that where parent and subsidiary entities exist each corporate entity should independently evaluate whether it is subject to SB 253 and 261. That is, inclusion criteria should be evaluated on an individual company basis: parent-subsidiary relationships do not dictate which entities are regulated.

Nonetheless, CARB affirmed that, where a subsidiary is covered by SB 253 or 261, the subsidiary may satisfy its reporting obligations by having its corporate parent report on its behalf.

WHAT COMPANIES SHOULD DO NOW

Whether or not they remain subject to SB 261 during the pendency of litigation, companies should reassess the implications of CARB’s updated guidance.

For Entities Potentially Covered by SB 253

• Reevaluate coverage under the updated “revenue” and “doing business” definitions.
• Determine which fiscal-year bucket applies for first-year reporting.
• Assess whether the entity was collecting emissions data as of December 2024 and whether a “no-data” letter is appropriate.
• Prepare for limited assurance obligations beginning in 2027.
• Consider governance enhancements to support ongoing emissions measurement and reporting.

For Entities Potentially Covered by SB 261

Notwithstanding the Ninth Circuit’s temporary injunction, entities may wish to:

• Review the SB 261 reporting checklist to understand CARB’s substantive updated guidance.
• Align climate-risk governance, transition-risk analysis, and scenario development with ISSB/TCFD-aligned frameworks.
• Prepare for eventual integration of climate-related financial disclosures into broader ESG, SEC, or investor reporting programs.
• Plan for the possibility that, should the injunction be lifted following oral argument, the Ninth Circuit and CARB may provide a reasonable—but presently unknown—period of time for covered entities to comply.

For All Potentially Regulated Entities

• Monitor the litigation and CARB rulemaking closely.
• Budget for 2026 fee assessments based on CARB’s proposed flat-fee model.
• Engage cross-functional teams (legal, finance, sustainability, risk, internal audit) to manage compliance planning efficiently.
• Track CARB’s anticipated Q1 2026 publication of draft regulations.

LOOKING AHEAD

Despite ongoing litigation over SB 261 and continued delays in the rulemaking process, CARB continues to pursue the implementation of California’s climate disclosure laws. The Ninth Circuit injunction introduces uncertainty as to the implementation and timing of SB 261, but at least for the time being there appears to be more certainty on the applicable reporting deadline under SB 253, now set for August 10, 2026.

Companies with potential reporting obligations—particularly those with significant California nexus or multinational operations—should remain engaged in the process and be prepared to pivot based on court rulings and future guidance by CARB.

We will continue to track developments in the litigation, CARB’s draft regulations expected in Q1 2026, and any additional workshops or guidance.

Legal practice assistants Brian Harbaugh and Mia Deck contributed to this Lawflash.