Shipping 2026

USA – CALIFORNIA Trends and Developments Contributed by: Bradley Rose and Clint Mead, Kaye, Rose and Partners LLP

reported to the FTB, to avoid including companies that might otherwise fall under the requirements some years and not on others. Exemptions By statute, the following entities are excluded from the Acts’ requirements: federal, state and local gov - ernment entities, and companies that are majority- owned by government entities, as well as companies regulated by the California Department of Insurance or engaged in the business of insurance of any other state. In addition to the governmental entities and insurance companies that are exempt by statute, CARB has pro - posed exempting non-profit or charitable organisa - tions, defined as tax-exempt under the Internal Reve - nue Code. CARB will also exempt entities whose only business in California is the presence of teleworking employees. Subsidiaries of parent companies CARB has recently clarified issues surrounding the application of the Acts to subsidiaries of parent com - panies. CARB has clarified that the revenue thresholds are those of each individual entity and the revenue of a parent should not be included in the calculation of the revenue of a subsidiary or vice versa. CARB will allow companies to disclose data in one single parent-level disclosure rather than requiring individual subsidiary disclosures. The parent-level disclosure can be used for a subsidiary regardless of whether the parent com - pany is required to file a report under the Acts, for example if a parent company already reports GHG emissions under European regulations. As clarification, CARB has provided definitions of “parent” and “subsidiary” for determination of whether a joint report is allowed only. Whether a parent or sub - sidiary is required to file a report under either Act is still determined based solely on the individual entity’s country of organisation and revenue, without consid - ering the revenue or country of incorporation of an entity’s parent or subsidiary. Each entity, whether a parent, subsidiary or other - wise, should determine: (i) Is it organised under the laws of the United States? If yes, (ii) Is it categorically

exempted (non-profit or insurance company)? If no, (iii) Is it doing business in California (sales in California exceeding USD735,019 in 2024, or 25% of its over - all sales)? If yes, (iv) Does its gross revenue exceed USD500 million or USD1 billion? If yes, only then must the entity file a report under one or both of the Acts. If that particular entity is a subsidiary then the parent entity may file a report covering the subsidiary, but the country of origin and revenue of a parent or sub - sidiary does not impact the other for determination of whether the Acts apply. Annual fees In addition to the reporting requirements, the Acts authorise CARB to assess an annual fee for the imple - mentation and administration of the new programmes. CARB is considering a flat fee to be calculated as the total annual programme cost for each Act divided by the number of covered entities, estimating a fee of USD3,106 for SB 253 and USD1,403 for SB 261 based on initial estimates of the number of entities subject to the Acts. Companies that must report under both Acts will be subject to the fee for each. Fee assessment is estimated to take place in September 2026. Timeline and requirements As for the timeline, despite CARB’s delays in the rule- making process, initial reports under SB 261 were required to be posted on the company’s website by the statutory reporting deadline of 1 January 2026 (and every two years thereafter), and a link to that report was required to be submitted to the CARB docket by 1 July 2026. This January 1st deadline, however, has been temporarily stayed by the Ninth Circuit and the deadlines no longer apply while the injunction is in place. CARB will issue a new deadline after the appel - late stay has been lifted. Reports for SB 253 Scope 1 and 2 disclosures are due 10 August 2026. Scope 3 reporting begins in 2027. Entities must also submit a public link to CARB’s docket. CARB’s updated guidance emphasises that good faith efforts will be a key factor in early compli - ance, especially while the rule-making process con - tinues.

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