One Big, Beautiful Bill Act to Include a Moratorium on State A.I. Regulation

While certainly not an original focal point of Congressional Republicans’ reconciliation bill, federal preemption of state and local AI regulation is a great last-minute addition to the package. As we have argued to the Trump administration and to the public, federal preemption of state AI regulation is necessary to ensure innovation and human flourishing.

Thousands of proposals have been introduced in state legislatures to regulate or discourage the development of A.I.; even if they are not totally egregious, it is impossible for deployers to comply with a patchwork of 50 state laws. AI is plainly interstate commerce, and Congress should preempt its regulation like they did internet taxes through the Internet Tax Freedom Act.

Including preemption in a reconciliation bill, along with a $500 million appropriation to modernize government systems with AI, is a welcome surprise. Without standardized regulatory guidelines, A.I. tech companies will be held back and surely surpassed by foreign countries. If A.I. regulation is decided on a state-by-state basis, innovative developers will fall to the sidelines. A lack of federal regulation is not an invitation for states to implement their own rules, but an intentional policy to allow for innovation and competition.

Next Steps of the A.I. State Law Moratorium

Now that this ten-year moratorium on state level A.I. regulation has successfully passed through the House in the One Big, Beautiful Bill Act, it heads to the Senate where its fate is far less certain. The bill is being considered under budget reconciliation, which is one of the few processes by which Congress can bypass the Senate filibuster to pass legislation. The Senate’s standing rules usually allow any Senator to speak as long as they want to without time limits, and debate on any measure usually continues indefinitely until a supermajority of 60 Senators votes to “invoke cloture” – that is, end debate and proceed to a final vote. Since winning a 60-vote majority in the Senate is rare for either party, most measures must have bipartisan support to pass the Senate. The only alternative is to use the budget reconciliation process with all of its rules and limitations.

The Byrd Rule

The concern stems from a possible violation of the Byrd rule. The budget reconciliation process was created by the Congressional Budget Act of 1974. For the first several years that reconciliation was used, much of the policy passed through reconciliation did not have any budgetary impact.

The Byrd Rule, codified in 1990, establishes the criteria for legislation under consideration through budget reconciliation. For provisions to pass the “Byrd bath” – the exercise where provisions are either ruled in or out by the Senate Parliamentarian – it must change spending or revenue, and these changes must not be “merely incidental” to a policy change. They must intentionally have an impact on the budget. The legislation cannot include changes to Social Security and cannot increase the deficit for a fiscal year beyond the ten-year budget window.

The Senate Parliamentarian analyses legislation and gives an opinion based on precedent as to whether the legislation passes the Byrd Rule. Most often, the Presiding Officer accepts the opinion of the Parliamentarian. If not, then the opinion of the Parliamentarian can be overruled by 60 votes, but is extremely rare.

This provision could be considered extraneous, not impactful from a revenue or spending standpoint. This would disqualify the provision from being passed through budget reconciliation.

Regardless of the procedural concerns, this moratorium has received criticism from both sides of the aisle. With no Democrats advocating for the moratorium and a few Republican Senators voicing reservations, the future of this provision in the final passage of the One Big, Beautiful Bill Act is shaky at best.

While the future of this state moratorium on A.I. regulation is uncertain, A.I. regulatory policy must be standardized and come from a federal level so that American A.I. companies may continue to excel and innovate.