Gov. Newsom announced the signing of Senate Bill 253, which mandates the California Air Resources Board (CARB) to establish greenhouse gas emissions disclosure regulations by Jan. 1, 2025, for businesses with annual revenue exceeding $1 billion in California.
The governor also announced that he signed Senate Bill 261, which mandates businesses with annual revenue over $500 million in California to report their climate-related financial risks biennially starting in January 2026.
In a signing message for both bills, the governor underscored California’s commitment to a bold policy for corporate climate disclosure, promoting risk mitigation practices among businesses and being a leader in addressing climate change.
However, he did note some concerns regarding the feasibility of the implementation deadlines, the financial impact on the state and businesses, and the potential for inconsistent reporting across affected businesses. We expect that the governor will work with the authors of the bills and the Legislature to address these concerns through clean-up legislation in 2024. We also expect that CARB will monitor implementation and work to streamline compliance and financial impact on businesses.
California is already a leader in how emissions will be reported and tracked. Now, there will be extra eyes looking to us for how to effectively implement and set the standard for the rest of the country in the licensure process. Keep an eye out for more on this in the coming months.
Legislative Session Concludes
The first year of the 2023-24 legislative session came to a close in October and included 2,661 bills introduced in 2023. Of the 1,046 bills that reached the governor’s desk, he ultimately signed 890 of them and vetoed 156.
In looking at the governor’s actions, it seems he has signaled a move toward the political center on certain key issues. For example, he vetoed some of labor’s priority bills and sided with law enforcement on key bills. He also exhibited a focus on fiscal responsibility by vetoing bills that requested funding not included in the budget, signaling a cautious approach to new spending.
There are several hundred bills that can be re-examined by the Legislature next year, and in January, legislators can start to introduce new legislation to start the process again.
Governor Makes Appointments to CBA
CalCPA member Patricia Batchelor of Redondo Beach, a solo practitioner CPA, has been appointed to the California Board of Accountancy. She holds a master’s degree in taxation from Golden Gate University and a bachelor’s degree in business administration from the University of Redlands. And CalCPA member Theresa Thompson, also from Redondo Beach and a partner at PwC, has also been appointed to the CBA. She has a background at PwC spanning over a decade and holds a bachelor’s degree in accounting from Santa Clara University.
PCAOB and NOCLAR
The Public Company Accounting Oversight Board (PCAOB) has proposed an update to AS 2405, Illegal Acts by Clients, to incorporate a broad inclusion of Noncompliance with Laws and Regulations (NOCLAR).
The intent is to encourage auditors to be on the lookout for signs of fraud and rule-breaking at the companies they audit. However, the profession and business groups have pushed back during the public comment period with concern that this drastically transforms the nature and scope of auditor responsibilities.
Further, the proposed amendments could expand the role of auditors beyond their core competencies and substantially increase audit costs without a proportional benefit.
The PCAOB is reviewing the comments it receives and the proposal seeks to strengthen audit practices related to noncompliance with laws and regulations. CalCPA is closely following the discussions and proposal for what it may mean for auditors in this space.
Most CA Taxpayers Have Until November 16 To File
Tax filing and tax payment deadlines are being extended by an additional month for taxpayers impacted by last winter’s storms. As a result, most individuals and businesses in the state will now have until Nov. 16 to file their 2022 returns and pay any tax due.
Taxpayers in all California counties—except Lassen, Modoc and Shasta counties—qualify for the extension.
The postponement follows a late and largely unexpected IRS announcement outlining the extension and the eligible returns and payments. California, which generally conforms to disaster-related postponements, issued guidance for related state tax deadlines.
This is the third adjustment to the tax deadlines in the state, which has created confusion and challenges for practitioners and taxpayers. CalCPA continues to work with state and federal tax agencies to explore opportunities to address the challenges created and how to resolve them.
Jason Fox is CalCPA’s vice president of advocacy and government affairs.