*The big budget bill currently moving on Capitol Hill contains a clause that would effectively nullify all state laws around artificial intelligence for the next ten years.* *(Image by* *Sean Robertson* *for Unsplash+)*

June 4, 2025 — As the federal budget bill continues to be discussed in the U.S. Senate, more members of Congress and the public have become aware of a powerful non-budgetary clause inserted within it: A ten-year moratorium on all state and local laws related to artificial intelligence.

At the Transparency Coalition we are alarmed by the dramatic overreach of this proposal. Artificial intelligence is many things: An evolving technology, a burgeoning industry, and a powerful tool. Above all it is a technology that requires good-faith discussion, healthy policy debate, and governance that encourages innovation while guiding the technology to benefit society and minimize harm.

We welcome that discussion on both the state and federal level with interested members of both parties.

The proposed budget-bill clause would profoundly undermine the healthy discussion and policymaking currently taking place at the state level. The letter released yesterday, signed by 260 Republican state lawmakers, 259 Democratic state lawmakers, and one Independent state legislator, attests to the bipartisan determination to get it right when it comes to the appropriate governance of AI.

In the interest of spreading accurate information about the proposed 10-year moratorium, we’ve created this resource page to bring daylight to this pressing issue.

where the proposal can be found

The proposed federal budget is a massive document that runs to 1,038 pages.

The proposed moratorium can be found within TITLE IV - ENERGY AND COMMERCE, Subtitle C - Communications, Part 2 - Artificial Intelligence and Information Technology Modernization.

Within the full budget document, available below, it’s easiest to find by searching for Sec. 43201. It is located on page 277.

full budget, as approved by the House, available below

This is the latest version of the budget bill, as approved by the House on May 22, 2025:

*Click on image to access the full budget.*

full text of the proposed moratorium

The moratorium begins at Section 8(c) below:

Subtitle C—Communications
PART 2—ARTIFICIAL INTELLIGENCE AND INFORMATION TECHNOLOGY MODERNIZATION
SEC. 43201. ARTIFICIAL INTELLIGENCE AND INFORMATION TECHNOLOGY MODERNIZATION INITIATIVE.
8 (a) APPROPRIATION OF FUNDS.—There is hereby appropriated to the Department of Commerce for fiscal year 2025, out of any funds in the Treasury not otherwise appropriated, $500,000,000, to remain available until September 30, 2034, to modernize and secure Federal infor1mation technology systems through the deployment of commercial artificial intelligence, the deployment of automation technologies, and the replacement of antiquated business systems in accordance with subsection (b).
(b) AUTHORIZED USES.—The Secretary of Commerce shall use the funds appropriated under subsection(a) for the following:
(1) To replace or modernize, within the Department of Commerce, legacy business systems with state-of-the-art commercial artificial intelligence systems and automated decision systems.
(2) To facilitate, within the Department of Commerce, the adoption of artificial intelligence models that increase operational efficiency and service delivery.
(3) To improve, within the Department of Commerce, the cybersecurity posture of Federal information technology systems through modernized architecture, automated threat detection, and integrated artificial intelligence solutions.
8 (c) MORATORIUM.—
9 (1) IN GENERAL.—Except as provided in paragraph (2), no State or political subdivision thereof may enforce, during the 10-year period beginning on the date of the enactment of this Act, any law or regulation of that State or a political subdivision thereof limiting, restricting, or otherwise regulating artificial intelligence models, artificial intelligence systems, or automated decision systems entered into nterstate commerce.
18 (2) RULE OF CONSTRUCTION.—Paragraph (1) may not be construed to prohibit the enforcement of:
(A) any law or regulation that—
(i) the primary purpose and effect of which is to—
(I) remove legal impediments to, or facilitate the deployment or operation ation of, an artificial intelligence model, artificial intelligence system, or automated decision system; or
(II) streamline licensing, permitting, routing, zoning, procurement, or reporting procedures in a manner that facilitates the adoption of artificial intelligence models, artificial intelligence systems, or automated decision systems;
(ii) does not impose any substantive design, performance, data-handling, documentation, civil liability, taxation, fee, or other requirement on artificial intelligence models, artificial intelligence systems, or automated decision systems unless such requirement—
(I) is imposed under Federal law; or
(II) in the case of a requirement imposed under a generally applicable law, is imposed in the same manner on models and systems, other than artificial intelligence models, artificial intelligence systems, and automated decision systems, that provide comparable functions to artificial intelligence models, artificial intelligence systems, or automated decision systems; and
(iii) does not impose a fee or bond unless—
(I) such fee or bond is reasonable and cost-based; and
(II) under such fee or bond, artificial intelligence models, artificial intelligence systems, and automated decision systems are treated in the same manner as other models and systems that perform comparable functions; or
(B) any provision of a law or regulation to the extent that the violation of such provision carries a criminal penalty.
(d) DEFINITIONS.—In this section:
(1) ARTIFICIAL INTELLIGENCE.—The term ‘‘artificial intelligence’’ has the meaning given such term in section 5002 of the National Artificial Intelligence Initiative Act of 2020 (15 U.S.C. 9401).
(2) ARTIFICIAL INTELLIGENCE MODEL.—The term ‘‘artificial intelligence model” means a software component of an information system that implements artificial intelligence technology and uses computational, statistical, or machine-learning techniques to produce outputs from a defined set of inputs.
(3) ARTIFICIAL INTELLIGENCE SYSTEM.—The term ‘‘artificial intelligence system’’ means any datamsystem, hardware, tool, or utility that operates, in whole or in part, using artificial intelligence.
(4) AUTOMATED DECISION SYSTEM.—The term ‘‘automated decision system’’ means any computational process derived from machine learning, statistical modeling, data analytics, or artificial intelligence that issues a simplified output, including a score, classification, or recommendation, to materially influence or replace human decision making.

potential ramifications

The proposed moratorium would prohibit states from enforcing any AI-related laws for a decade, including state regulations regarding:

Algorithmic bias in employment or housing decisions;
AI-generated deepfakes in political campaigns;
Automated decision-making in healthcare or insurance;
AI surveillance systems;
Transparency requirements for AI use in consumer applications; and
Data protection measures specific to AI systems.

A number of legal experts have been digging into the potential ramifications:

The National Law Journal found that the moratorium would preempt over 1,000 active AI-related bills in state capitals and dozens that have already been signed into law.

potential constitutional challenges

Legal experts have also noted that the moratorium, if adopted, could face significant court challenges.

“The likelihood of its passage is uncertain,” observed the law firm Hinshaw & Culbertson, “and if passed, legal challenges are expected based on state rights and preemption.”

The firm DLA Piper noted that the proposal, if adopted, could face challenges under the argument that “a moratorium of this nature would be in contravention of the 10th Amendment on the basis that Congress does not have the power to act in this way. Others have argued that the moratorium does not relate to budgetary matters and should be removed, leaving the provisions providing for funding to enable AI modernization in government.”

the senate ‘byrd rule’

A number of observers have noted that the proposed moratorium seems to contradict the Senate’s long-held Byrd Rule.

The Byrd Rule, named for the late Senator Robert Byrd (D-WV), is a provision of the Congressional Budget Act that restricts the inclusion of non-budgetary “extraneous” policy provisions in reconciliation bills.

Any senator may raise a point of order against a provision for violation of the Byrd Rule, which is ruled on by the presiding officer of the Senate based on the advice of the Senate Parliamentarian. If the Parliamentarian deems the provision to be out of order, that ruling can be waived by a 60-vote supermajority of senators, which may be unlikely given the 53-seat Republican majority. The Vice President (in his capacity as President of the Senate) can also overrule the parliamentarian. Such an overrule has not happened in 50 years, but these are extraordinary times in which many such political traditions have been overruled.

deadlines for passage

The deadline for the current budget reconciliation bill is September 30, 2025. That’s when the instructions included in the budget resolution passed in April 2025 expire.

Republican leaders and President Trump have said they would like to pass the budget reconciliation bill no later than July 4, 2025.

further resources

The National Conference of State Legislatures (NCSL) has created a tracking page for the 2025 Budget Reconciliation Process.

The Conference Board has also created an informative overview and tracking page.

Guide to Congress’ proposed 10-year moratorium on state AI laws