House Republicans Include AI Regulation Preemption in Budget Reconciliation Bill

House Republicans have introduced a provision in the Budget Reconciliation bill that would prevent states from regulating artificial intelligence systems for a decade. This provision appears in Part 2 of Subtitle C under Title IV (Energy and Commerce) of the bill, which is scheduled for markup on May 13, 2025.

This move represents a striking departure from traditional Republican advocacy for states' rights, as the party now seeks to impose federal preemption over state-level AI safety and accountability measures—not so much technological accelerationism as regulatory abandonment at a crucial moment for AI governance.

The AI Regulation Moratorium

Section 43201(c)(1) of the bill states: "No State or political subdivision thereof may enforce any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems during the 10-year period beginning on the date of the enactment of this Act."

Exceptions to the Moratorium

The bill does include several exceptions in subsection (c)(2). States may still enforce laws that:

• Remove legal impediments to AI deployment or operation
• Streamline licensing, permitting, or other procedures to facilitate AI adoption
• Do not impose substantive design, performance, data-handling, documentation, or liability requirements unless such requirements are imposed under federal law or apply equally to non-AI systems providing comparable functions
• Only impose reasonable and cost-based fees that treat AI systems the same as comparable non-AI systems

Potential Impact on Existing State Laws

According to 404 Media, if passed, this provision could affect several existing state AI regulations, including:

• California's law requiring healthcare providers to disclose when generative AI is used to communicate clinical information to patients
• New York's 2021 law requiring employers to conduct bias audits of AI tools used for employment decisions
• California's law set to take effect in 2026 requiring AI developers to publish documentation about training data

Other Elements of the AI Provision

The same section of the bill appropriates $500 million to the Department of Commerce for modernizing federal information technology systems through AI deployment, automation technologies, and replacement of antiquated business systems. These funds would remain available until September 30, 2035.

The bill specifies that the Commerce Department can use these funds to:

1. Replace legacy business systems with commercial AI and automated decision systems
2. Adopt AI models that increase operational efficiency and service delivery
3. Improve cybersecurity through modernized architecture and AI solutions

If enacted, this federal preemption of state AI regulation represents a significant shift in how artificial intelligence may be governed in the United States over the next decade.