A provision in President Donald Trump’s proposed tax and spending package that would prevent U.S. states from enacting new artificial intelligence (AI) regulations has survived a key Senate review, drawing praise from major technology firms while raising alarm among lawmakers and advocacy groups.
Senate Parliamentarian Elizabeth MacDonough ruled that the AI-related clause complies with the special budget reconciliation process, a procedural move that allows Republicans to push the bill forward without Democratic support or the threat of a filibuster.
The provision threatens to withhold federal broadband infrastructure funding from states that enforce their own AI regulations. Critics argue that this effectively pressures state governments to forgo AI oversight or risk losing critical funding.
Although the Senate could still vote to remove the provision by a simple majority, its current inclusion signals momentum for Republicans and tech industry allies who have long sought to delay or block state-led AI initiatives.
The measure comes as states like California, New York, and Utah are actively working on AI laws to address algorithmic bias, privacy, and digital safety in the absence of a federal regulatory framework. Industry leaders warn these state-by-state approaches could result in a fragmented and burdensome patchwork of regulations.
The House version of the bill includes a proposed 10-year ban on state-level AI rules and reportedly has strong support from the White House and Trump adviser David Sacks, who oversees technology and digital innovation policy.
More than 200 state legislators from across the political spectrum have called on Congress to remove the provision. The Center for Responsible Innovation, an independent think tank focused on AI and ethics, has warned that the ban could undermine state protections around children’s online safety, algorithmic discrimination, and government AI use.
Not all opposition is partisan. Republican Senator Marsha Blackburn of Tennessee publicly criticized the measure, saying, “We do not need a moratorium that would prohibit our states from stepping up and protecting citizens in their state.”
The full bill is expected to face a Senate vote this week, as Republicans seek to pass the broader fiscal package before the July 4 deadline. Negotiations are ongoing behind closed doors, with updates provided by the Senate Budget Committee.
The Joint Committee on Taxation estimates the tax provisions in the bill could increase the federal deficit by $441 billion by 2034. Other controversial elements in the package include changes to the state and local tax deduction cap and the rollback of green energy tax credits.
The AI regulation clause has become a focal point in the broader debate over how to govern rapidly advancing technologies—highlighting the tension between federal authority, state sovereignty, and the influence of corporate lobbying in shaping the future of AI policy in the United States.