9th Circuit Issued Preliminary Injunction Delaying Enforcement Of California's SB 261 Climate Based Risk Disclosure Law

Mid-week last week on November 18, 2025, SB 261 was put on official HOLD as the US Court of Appeals for the 9^th Circuit issued a one page preliminary injunction which halted enforcement of California's Climate Related Financial Risk based disclosure law known as SB 261. Oral arguments have been scheduled for January 9, 2026.

As discussed previously, SB 261 and SB 253 have been effective in California for over a year but CARB (the applicable regulatory body) continues to slow walk applicable regulation to assist potential reporting entities on what to report and how.¹

The challenger, the Chamber of Commerce, filed an emergency application to the US Supreme Court requesting an injunction prohibiting the enforcement of SB 261 and SB 253 (the required reporting of Scope 1, 2 and 3 emissions) pending resolution of the appeal of a denial of a preliminary injunction in the 9^th Circuit. Once the preliminary injunction was granted for SB 261, the appellants withdrew their petition with prejudice to the Supreme court.

For those who like being in the weeds, the 9^th Circuit granted the plaintiff's request for preliminary injunction on the enforcement of SB 251 where reporting was due on January 1, 2026 while denying the plaintiff's request for preliminary injunction on the enforcement of SB 253 – likely due to the fact that the reporting requirement under SB 253 is not until August 10, 2026 for Scope 1 and 2. The ruling does NOT repeal SB 261 but it does delay its filing requirement implementation.

During this past week's listening session with CARB, CARB reviewed with the audience the following:

1. SB 253 Deadline – CARB confirmed that the reporting deadline for SB 253 of August 10, 2026 for Scope 1 and 2;
2. Preliminary List of Reporting/Covered Entities – despite its previously issued list of applicable covered entities, CARB is evaluating the use of tax filing data to verify revenue and whether an entity is "doing business" in California;
3. Total Annual Revenues – for purposes of determining what is "total annual revenue" for SB 253 and SB 261, CARB advised that it would use "gross receipts" from an entity as defined under the CA Revenue and Taxation Code, without reduction for cost of goods sold or basis;
4. Doing Business – CARB updated its proposed definition of "doing business "in CA as that of "actively engaging in transactions for pecuniary gain or profit" and the sales based nexus standard under the CA Revenue and Tax Code. This change clarifies a bit CARB's definition such that it appears CARB will not include an entity within its definition merely for paying property taxes in CA or for paying employees in CA. CARB also provided some updated clarification regarding what a "direct corporate association" in the parent-subsidiary context is;
5. Exemptions – clarification was provided confirming that charitable organizations and non-profits are not required to report along with those in the insurance industry who are also exempt; and
6. SB 261 Reporting – notwithstanding the 9^th Circuit's ruling noted above, CARB provided guidance that posting results on a corporate website regarding 261 reporting is sufficient. CARB noted that it will continue to maintain a public link for reporting even if reported on the company's own website and that the link filing is due by July 1, 2026.

Footnote

1. CARB did host a public discussion on November 18, 2025, to further discuss SB 253 and SB 261.

Green Spouts – Depending on your perspective, the Preliminary Injunction delaying the enforcement of required reporting is a good thing or merely a stall tactic by those opposed to climate disclosure reporting. Moreover, I find it ironic that the same week the injunction was granted which in and of itself will create confusion in the CA marketplace on what to do and when, CARB continues to, in my view, show no sign of moving more quickly to issue necessary guidance to those who are potentially required to report. Both SB 261 and 253 gave CARB plenty of time to issue rules that could have led to an orderly reporting regime, instead, unfortunately, they continue to take an overly long time period to solicit input and provide critical guidance thereby creating added stress and confusion in a challenged marketplace given the federal roll back of various federal environmental regulations and the SEC's Climate Disclosure rules.

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