California Air Resources Board

I am reaching out on behalf of LEK Partners, an advisory firm specializing in Risk and Compliance, with expertise in ESG Management, Internal Control, and Regulatory Resilience, backed by consultants and CPAs with U.S. and Korean credentials.

We would like to inquire with you about a couple of details that would significantly help us to build awareness and readiness among our existing/potential clients to abide by the Code § 38532 and § 38533 ("Codes"). Please find our inquiries below:

Inquiry 1.
Many of our client businesses are US subsidiaries of multi-national enterprises, of which many are still confused about whether their 'annual total revenue' is greater than the applicability threshold of the Codes. Considering your latest guidance of referring to the 'California Revenue and Taxation Code § 25120(f)(2)("CRTC"),' would it be reasonable advice for them to start with checking whether the company's latest federal income tax filing?
• We supposed that the revenue can be recognized as 'Gross Receipts' under the CRTC should not be so far from the revenue filed for the federal income tax.
• Also, we reckon that, for the sake of awareness and readiness building, it would be better to attract more 'possibly-applicable' businesses to keep their attention on the Codes, by providing them a quick self-check criterion and leading them to further investigation of their applicability.

Inquiry 2.
Some entities that are multi-layered subsidiaries (e.g., a sales entity operating in CA, held by a US holdings company incorporated in another state) are confused about whether they should include the CA entity, when the CA entity's total annual revenue is less than the applicability threshold of the Codes, but the holdings company's consolidated revenue is greater than the threshold. Is it acceptable for the holdings company (in another state) to decide whether to include a CA entity in their disclosure boundary based on the guidance of the GHG protocol? Not mandatorily including/excluding the CA entity?
• We interpreted that, even if an entity is 'doing business in CA', it is not mandated by the Codes to conduct its GHG and/or TCFD disclosures, if their revenue is under the requirements.
• Yet, if a holding company of a CA entity is required to conduct GHG and/or TCFD disclosures, we deemed that the GHG Protocol or TCFD guidance on determining the reporting boundary may supersede the requirements of the Codes and, therefore, the CA entity that may be exempt from disclosure under the Codes could be still included in the holdings company's disclosures.

Thank you.