NCSL warns House reconciliation provision would bar states from enforcing AI laws for 10 years

At a House Energy and Digital Infrastructure Committee hearing on May 21, Barry Taben, legislative director for state and federal affairs at the National Conference of State Legislatures, told Vermont lawmakers that a provision in the U.S. House budget reconciliation bill — cited in testimony as section 43201(c) — would prevent states from enforcing “any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems” for 10 years after enactment.

Taben said the most recent version of the provision adds the phrase “entered into interstate commerce,” but that, in his reading and that of other state advocates, the moratorium would still “foreclose the state's ability to enact and enforce a host of significant AI laws for the next 10 years.” He said the scope of state laws potentially affected could be “enormous,” including statutes aimed at mitigating algorithmic bias, requiring transparency, establishing consumer protections, curtailing scams and frauds against older Vermonters and children, and limiting harms from deepfakes or local data-center impacts.

The moratorium, as described in testimony, does include narrow exceptions. Taben outlined that states could still adopt laws whose “primary purpose and effect is to streamline licensing, permitting, zoning, or procurement processes in ways that support AI adoption,” generally applicable technology-neutral laws that treat AI the same as non-AI systems performing similar functions, and “reasonable cost based fees or bonds on AI systems” so long as they are applied uniformly to comparable technologies. He also said a recently added carve-out would preserve state criminal statutes that target AI-generated child sexual abuse material (CSAM).

Why this matters: State legislatures have been active drafting AI-related protections, and the NCSL resolution adopted last August urges Congress and federal agencies to consult with states before adopting federal rules. If enacted as written, the reconciliation provision would, according to Taben, remove states’ ability to enforce many existing and future protections while there is no comprehensive federal replacement in place.

Committee members asked about the likelihood of the moratorium surviving the congressional process. Taben said the provision faces “mounting opposition and procedural challenges,” noting that the Byrd rule in the U.S. Senate allows senators to challenge reconciliation provisions that lack direct budgetary impact. “Given that the AI moratorium primarily serves as a regulatory measure ... it could be found ineligible for inclusion in a reconciliation package,” he said, adding that waiving the Byrd rule would require a large affirmative vote in the Senate.

Representative Scott Campbell asked whether there is movement in Congress toward a comprehensive federal AI law; Taben replied that there is not a comprehensive bill in play and that legislative activity has been “piecemeal,” with individual bills focused on education, research funding and other topics rather than a single federal framework.

Representative Sebelius pointed to past federal-state clashes over policy, saying, “we have seen this with net neutrality,” and noting that states, including Vermont, have relied on their police powers and legislative counsel in the past to defend state-level protections. Taben acknowledged those precedents but said the reconciliation moratorium, as written, “doesn't really say anything. It doesn't give guardrails. It doesn't give parameters. It doesn't give instructions,” creating uncertainty for states and for consumers.

Taben and committee members also described the political landscape: the provision has backing from some Republican lawmakers and industry groups seeking a uniform federal framework, while it has drawn opposition from a bipartisan coalition including NCSL, about 40 state attorneys general, the Council of State Governments, the National Association of State Chief Information Officers, and other state-level organizations.

The testimony closed with Taben saying NCSL has sent a letter to the House Energy and Commerce Committee and planned further outreach. He said that if the provision is stripped from reconciliation he would notify the committee, and he encouraged members to contact NCSL staff with follow-up questions.

Less critical details: Taben described the reconciliation timeline as compressed in the House — with a rules committee vote and a goal of a full House vote before Memorial Day — but noted that reconciliation and the Senate process may take months if the Senate chooses a different path. He said legal challenges could arise if the moratorium were enacted, but that litigation would depend on the statute's final language and the timing of enactment.

For committee members and state officials, the immediate takeaway from the hearing was that the proposed reconciliation language, if enacted as described in testimony, would create a significant and unusual preemption of state authority over a rapidly evolving technology landscape, and that states and state organizations are mobilizing to press Congress for either removal of the provision or much narrower, clearly defined exceptions.