California Air Resources Board

We appreciate the opportunity to comment on some of the Initial Staff Concepts presented by the California Air Resources Board (“CARB”) during the public workshop held on May 29, 2025 [,as described in the Summary Memorandum provided by the Verdani Regulatory and Resilience Teams].

We are concerned that the choices of certain definitional terms, without further clarification, could lead to uncertainty for businesses in determining their filing obligations and result in the State allocating resources to monitor, regulate and enforce climate disclosures of entities not intended to be subject to SB 253 and SB 261. We do not believe CARB should adopt the definition of doing “business in California” provided in Section 23101 of the California Revenue and Taxation Code (“RTC”). This statute provides that entities are considered to be doing business in California if they have sales in California of approximately $735k or more (there are thresholds below $100k for property and payroll). Given the $500M and $1B gross receipts thresholds for being subject to the reporting requirements, using a such a low threshold for doing business would seem to require the State monitoring a substantial number of entities that will not be subject to the reporting requirements and would also impose reporting requirements on entities with little connection to California.

In addition, the definition of “Gross Receipts” in RTC Section 25120(f)(2). is contained in Article 2 of Chapter 17 of the Corporation Tax Law, which deals with division of income among California and other states. The statutes and regulations prescribing how income and revenue are allocated within and without California are extremely complicated. Absent clarification or additional guidance, relying on Section 25120(f)(2) to determine the gross receipts of organizations will create significant inconsistencies for organizations determining which subsidiaries or affiliate entities should be combined in order to determine gross receipts. Accordingly, we recommend additional guidance be issued to ensure that A) the standards for determining which entities to combine for purposes of testing gross revenue are consistent with the “Corporate Relationships” for combined reporting and B) gross receipts reported by a subsidiary and/or affiliate are not required to be included in more than one group for purposes of the $500M and $1B revenue thresholds.

In addition, reporting deadlines in SB 261 could present challenges to covered entities. While data availability varies by sector, a Q4 deadline in the following year would provide sufficient time for organizations to compile and verify their prior-year emissions data before submitting climate-related financial risk disclosures.

Lastly, we would also recommend that if Section 25120(f)(2) of the RTC is going to be used as the starting point for the definition of “gross receipts”, that items constituting “Non-Business Income”, as defined in RTC Section 25120(d) and occasional sales of assets, as described in RTC 25137(c) be excluded from the definition so as not to cause one-off reporting obligations for entities that otherwise would not have a filing obligation.

We appreciate your consideration of the foregoing.