On November 9, 2026, the Ninth Circuit held in Chamber of Commerce v. Sanchez that parts of California’s climate disclosure laws likely violate the First Amendment. The court let Scope 1 and Scope 2 emissions reporting under Senate Bill (SB) 253 go forward but found that SB 253’s Scope 3 requirement and the climate-related financial risk reports required by SB 261 are likely unconstitutional.
The decision came one day before the first SB 253 emissions reporting deadline on November 10, 2026. Meanwhile, the California Air Resources Board (CARB) has finalized its initial implementing regulations, issued first-year reporting guidance, and set up an annual fee program.
Companies now face a framework that is more settled and more uncertain than when we last wrote about it in August. The first SB 253 reporting requirements are in effect, but the litigation leaves the rest of California’s disclosure mandates in doubt.
This article summarizes the latest developments and what affected businesses should do now.
Ninth Circuit Allows Scope 1 and Scope 2 Reporting but Finds Scope 3 and SB 261 Likely Unconstitutional
The U.S. Chamber of Commerce and other business groups sued to block SB 253 and SB 261, arguing that the laws violate the First Amendment by compelling speech. The district court denied a preliminary injunction. On November 18, 2025, the Ninth Circuit enjoined enforcement of SB 261 while the appeal was pending but declined to do the same for SB 253. The panel’s published opinion, issued November 9, affirmed in part and reversed in part.
The two statutes impose different disclosure obligations:
- SB 253, the Climate Corporate Data Accountability Act, generally applies to U.S.-formed businesses with more than $1 billion in annual revenue that do business in California. It requires them to report Scope 1 emissions from company-owned or controlled sources, Scope 2 emissions from purchased energy, and Scope 3 emissions across the company’s value chain, under Health and Safety Code section 38532.
- SB 261, the Climate-Related Financial Risk Act, generally applies to U.S.-formed businesses with more than $500 million in annual revenue that do business in California. It requires them to publish biennial reports on their climate-related financial risks and the measures they have taken to address those risks, under Health and Safety Code section 38533.
Scope 1 and Scope 2 Reporting May Proceed
The court held that the Scope 1 and Scope 2 requirements regulate commercial speech because they call for factual emissions data from a company’s own operations, and investors, insurers, and other capital market participants rely on that data in deciding whether to transact and on what terms.
Applying intermediate First Amendment scrutiny, the court found that, for purposes of preliminary relief, California has shown substantial interests in giving investors better information and in reducing emissions. It also found that the requirements likely advance those interests and are no more extensive than necessary. The court therefore affirmed the denial of a preliminary injunction as to Scope 1 and Scope 2.
As a result, the Scope 1 and Scope 2 reporting obligations remain in effect. The decision did not excuse anyone from the November 10 deadline.
Scope 3 and SB 261 Likely Violate the First Amendment
The Scope 3 analysis differs. Those emissions arise from suppliers, customers, and other third parties across a company’s value chain. The court held that this reporting is too far removed from a company’s own operations and capital transactions to qualify as commercial speech. Applying the more demanding strict scrutiny standard, the court found that the requirement likely violates the First Amendment.
The court treated SB 261 the same way. Unlike emissions data, the climate-related financial risk reports require companies to make predictive and subjective judgments about future risks and economic conditions. The court held that this is noncommercial speech and that SB 261 likely fails strict scrutiny because California could have used less restrictive means, such as publicizing existing voluntary disclosures. The Ninth Circuit therefore reversed the denial of a preliminary injunction as to SB 253’s Scope 3 requirement and as to SB 261 in its entirety.
Because the ruling addresses only preliminary relief, neither law has been struck down. The court remanded for the district court to decide, in the first instance, whether SB 253’s Scope 3 requirement can be severed from the rest of the statute, which contains a severability clause. Further review is also possible.
SB 261 has been enjoined since November 18, 2025, and CARB has said it will not enforce the statute while the injunction remains in place. The opinion now holds that SB 261 likely violates the First Amendment.
For now, companies should separate the Scope 1 and Scope 2 requirements, which remain in force, from the Scope 3 and SB 261 obligations, whose future is unresolved.
CARB’s Initial Regulations Are Now Final, and the First Reporting Deadline Has Passed
As we discussed in our August update, CARB approved initial regulations in February 2026 but later withdrew the package to make revisions, including moving the first SB 253 reporting deadline from August 10 to November 10, 2026. On October 12, 2026, the California Office of Administrative Law approved CARB’s initial regulations, codified at Title 17, California Code of Regulations, sections 96070 through 96077. They took effect the same day.
The final regulations set the November 10 deadline, define which businesses are covered, specify the initial reporting requirements, and create the fee program.
The regulations retain the applicability rules we described in earlier updates:
- Revenue is measured using worldwide gross receipts, including those outside California, and is tested for each business entity separately. CARB uses the lesser of the entity’s revenue for its two preceding fiscal years and excludes qualifying intercompany transactions within the same combined reporting group.
- Doing business in California generally means engaging in a transaction for financial or pecuniary gain and either being organized or commercially domiciled in California or having California sales above the lesser of an inflation-adjusted threshold or 25 percent of total sales, as the Franchise Tax Board describes.
- A parent may submit a consolidated report, but each subsidiary must still be evaluated separately to determine whether it independently meets the thresholds.
The regulations also exclude certain entities, including qualifying nonprofits, government entities, and businesses with limited categories of California activity. Insurers are excluded from the 2026 emissions reporting requirement, but CARB staff has indicated that the exclusion may not continue in 2027.
These rules matter most for companies with complex corporate structures, foreign parents, or substantial California sales but little physical presence in the state.
CARB Clarifies First-Year Reporting Flexibility
CARB’s September 1, 2026 guidance explains the options for the initial SB 253 filing.
Under the final regulations, a reporting entity has three options for its first-year submission:
- Standard reporting: Scope 1 and Scope 2 emissions for the applicable preceding fiscal year.
- Existing-data alternative: Scope 1 and Scope 2 emissions for the prior fiscal year, to the extent they can be determined from information the company possessed or was collecting on or before December 5, 2024.
- Statement of non-reporting: A statement on company letterhead explaining that the entity is not submitting an emissions report because it did not possess, and was not collecting, Scope 1 or Scope 2 emissions information on or before December 5, 2024.
The second and third options apply only to the 2026 reporting cycle.
As a matter of first-year enforcement discretion, CARB will also accept emissions submissions whether or not they have received independent limited assurance.
CARB also opened an online reporting platform, but its use is voluntary. Reporting entities may instead submit directly to CARB by email.
The November 10 deadline has now passed. A business that was required to report but has not yet done so should promptly evaluate its compliance status and options. Companies relying on the first-year flexibility should preserve documentation of what they possessed or were collecting as of December 5, 2024.
Implementation Fees Are the Next Immediate Compliance Issue
The final regulations also establish annual implementation fees to recover CARB’s costs of administering the programs. CARB must issue written fee determination notices by December 10, 2026. An entity that receives a notice generally must pay within 60 calendar days of the notice date.
CARB calculates the fees separately for each program, based on program costs and the number of entities subject to it. A parent company may consolidate fee payments for qualifying subsidiaries.
Eligibility for reduced first-year reporting does not excuse an entity from the fee. A business that was not collecting emissions data by December 5, 2024, may still be a reporting entity subject to the fee program, as CARB confirmed in its October 2026 mailer to potentially affected companies.
Covered businesses must also keep California tax records showing their revenue and California business status for five years. CARB may coordinate with California tax authorities on fee audits and collection.
The injunction against SB 261 adds uncertainty about fees for that program. Whether, and to what extent, the injunction limits SB 261 implementation fees is a separate legal question. A business that receives a fee notice should evaluate both its coverage status and the effect of the court orders.
The Future of 2027 Reporting Remains Uncertain
CARB is developing a second set of regulations for more detailed emissions reporting beginning in 2027.
As discussed in our August update, CARB staff proposed at its July 21 workshop to phase in Scope 3 reporting, require more disclosure about calculation methods and data quality, and require independent limited assurance of Scope 1 and Scope 2 emissions for reports submitted in 2027.
The Ninth Circuit’s decision complicates Scope 3 reporting, which the statute schedules to begin in 2027. SB 253 still calls for Scope 3 disclosures, but the court’s conclusion that the requirement likely violates the First Amendment puts its enforceability in doubt.
Scope 1 and Scope 2 reporting remains operative, and companies should keep preparing for more detailed reporting and assurance requirements in future years.
Federal Banking Regulator Raises Additional Objections
On October 29, 2026, the Office of the Comptroller of the Currency (OCC) sent a letter to CARB asking it to exempt national banks and federal savings associations from SB 253 and SB 261, or to clarify that the statutes do not apply to them.
The OCC cited federal preemption under the Supremacy Clause, its exclusive visitorial authority over national banks, and the compliance burden and potential interference with the operations of federally chartered banks.
The letter does not create an exemption, and CARB’s regulations contain no general exclusion for banks. The letter also covers only national banks and federal savings associations, not state-chartered banks or bank holding companies. Still, it raises legal questions that could affect how the laws apply to financial institutions.
What Companies Should Do Now
The latest developments clarify the immediate SB 253 obligations, but much remains uncertain about the broader programs.
Companies should consider the following steps:
- Confirm SB 253 applicability and first-year compliance. Companies should evaluate their revenue, California business activity, and corporate structure to determine whether reporting was required by November 10, 2026. Those that have not completed a required submission should promptly assess their options and document their compliance efforts.
- Prepare for implementation fees. Potentially covered companies should expect CARB fee notices by December 10, identify which entities in their corporate structures may be assessed, and review any notice against the regulations and the court orders.
- Keep building Scope 1 and Scope 2 reporting systems. The Ninth Circuit left these requirements intact. Companies should continue improving data collection, documentation, and internal controls so they can support future reports and independent assurance.
- Monitor Scope 3 and SB 261. The Ninth Circuit found these requirements likely unconstitutional, but the litigation is not over. Companies should watch the district court proceedings on remand, any further appellate review, and CARB’s response before making longer-term compliance decisions.
- Revisit your applicability analysis as the framework changes. Companies with complicated ownership structures or industry-specific regulatory issues should revisit their analyses as CARB finalizes more regulations and the courts clarify which obligations are enforceable.
The Bottom Line
CARB has completed its initial rulemaking, and the first Scope 1 and Scope 2 reporting deadline has passed. At the same time, the Ninth Circuit has found that the Scope 3 and climate-related financial risk requirements likely violate the First Amendment.
The future of California’s broader climate disclosure mandates is uncertain, but the Scope 1 and Scope 2 obligations under SB 253 remain in force.
Companies should meet their existing reporting and fee obligations while following the litigation and CARB’s ongoing rulemaking.
Miller Nash’s environmental and business attorneys can assist companies in evaluating their reporting obligations, assessing corporate applicability, responding to fee notices, and following further regulatory developments.
This article is part of our ongoing coverage of California’s SB 253 and SB 261.
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This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
