Client Alert: CARB Issues Draft Regulations for SB 253 and SB 261 on December 9, 2025
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The California Air Resources Board (CARB) released draft regulations on December 9, 2025, as part of its initial rulemaking to implement California’s corporate climate disclosure laws: SB 253 (greenhouse gas emissions reporting) and SB 261 (climate-related financial risk reporting). The draft regulations focus on program administration, including applicability determinations, fee assessment and payment procedures, recordkeeping requirements, and enforcement mechanics. A Notice of Public Hearing was also issued by CARB.
Key Takeaways
CARB’s draft regulations establish specific administrative and timing requirements relevant to compliance planning, including annual fee notices beginning in fiscal year 2026, a 60-day payment window following notice, and a five-year record retention requirement. CARB has also initiated the formal rulemaking process through a noticed public hearing and comment period and has opened a voluntary submission docket for SB 261 reports while enforcement remains paused.
KERAMIDA will continue to monitor CARB’s rulemaking process and provide updates as the proposed regulations move toward Board consideration and potential adoption.
Applicability and Entity Classification
The draft regulations distinguish between “reporting entities” under SB 253 and “covered entities” under SB 261. For both categories, revenue thresholds are determined using the lesser of the entity’s two previous fiscal years of revenue.
To determine whether an entity is “doing business in California,” the draft regulations rely on existing California tax standards ($737,000 in state sales) and specify that wholesale electricity sales are excluded from the California sales factor used for this purpose. The draft also identifies categories of entities excluded from coverage, including nonprofit organizations, government entities, and entities that are majority-owned by a government entity (more than 50 percent ownership).
Recordkeeping Requirements
Entities subject to SB 253 or SB 261 would be required to retain records supporting applicability determinations, revenue calculations, and disclosures for five years after submission and to provide those records to CARB upon request.
Fee Notices and Payment Timing
The draft regulations establish an annual fee process for both SB 253 and SB 261. Beginning in fiscal year 2026 and each year thereafter, CARB’s Executive Officer would issue a written fee determination notice on or before September 10 to each entity subject to one or both programs. The notice would identify the applicable program and the fee amount.
Fees would be due within 60 days of the fee determination notice date. Failure to remit payment within that period constitutes a violation of the regulations. The draft provides that each day after the payment deadline may be treated as a separate violation and authorizes CARB to assess a late fee to recover additional administrative costs related to late payment.
The draft also describes how CARB would calculate annual fees. Fees are designed to recover CARB’s program costs approved through the state budget, including staffing and contracting costs, a 10 percent contingency adjustment, and any required debt repayment. The regulations allow for carryover of over- or under-collections into future fiscal years.
SB 253 and SB 261 Administrative Provisions
For SB 253, the draft regulations explain how the “applicable preceding fiscal year” is determined for emissions reporting using a February 1 fiscal year-end cutoff, with flexibility for entities whose fiscal year ends after that date where data is available.
For SB 261, the draft regulations describe a biennial reporting structure for climate-related financial risk disclosures and establish administrative provisions related to applicability determinations, fee assessment, and recordkeeping during the enforcement pause.
Enforcement of SB 261 remains paused due to ongoing litigation. During this period, CARB has opened a public docket that allows entities to voluntarily submit climate-related financial risk reports under SB 261.
The voluntary SB 261 reporting docket is available here.
Public Hearing and Comment Period
CARB has opened a written public comment period from December 26, 2025, through February 9, 2026, and has issued a formal Notice of Public Hearing to consider the proposed regulations on February 26, 2026. We will continue to monitor developments and submit comments as appropriate throughout the regulatory process.
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