Key Points

• On May 21, 2025, Bill HR 1, One Big Beautiful Bill Act was introduced into the 119th Congress.

  
  

• Section 43201 of the bill is concerning, as it would allow for a 10-year Moratorium on state enforcement of their own AI legislation

  
  

• At this point, the bill has passed in the House, and needs to still pass in the Senate

On May 21, 2025, Bill HR 1, One Big Beautiful Bill Act was introduced into the 119th Congress. This is a very lengthy and dense bill—the focus of this article is on Part 2--Artificial Intelligence and Information Technology Modernization.

More specifically, under Subtitle C—Communications, Part 2 contains a few AI provisions that need to be discussed, as they are very concerning.

What is in Part 2?

Section 43201 states that:

• There would be funds 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, 2035, to modernize and secure Federal information technology systems through the deployment of commercial AI, the deployment of automation technologies, and the replacement of antiquated business systems in accordance with the next provision dealing with authorized uses

  
  

• The Secretary of Commerce would be required to use the funds for the following: to replace or modernize, within the Department of Commerce, legacy business systems with state-of-the-art commercial AI systems and automated decision systems; to facilitate, within the Department of Commerce, the adoption of AI models that increase operational efficiency and service delivery; to improve, within the Department of Commerce, the cybersecurity posture of Federal information technology systems through modernized architecture, automated threat detection, and integrated AI solutions

  
  

• No state or political subdivision would be allowed to enforce any law or regulation regulating AI models, AI systems, or automated decision systems during the 10-year period beginning on the date of the enactment of this Act. The exception to this is the Rule of Construction: the law would not prohibit the enforcement of any law that:

-removes legal impediments to, or facilitates the deployment or operation of, an AI model, AI system, or automated decision system

-streamlines licensing, permitting, routing, zoning, procurement, or reporting procedures in a manner that facilitates the adoption of AI models, AI systems, or automated decision systems

-does not impose any substantive design, performance, data-handling, documentation, civil liability, taxation, fee, or other requirement on AI models, systems, or automated decision systems unless such requirement is imposed under Federal law, or in the case of a requirement imposed under a generally applicable law, is imposed in the same manner on models and systems, other than AI models, AI systems, and automated decision systems, that provide comparable functions to AI models, AI systems, or automated decision systems; and does not impose a fee or bond unless that fee or bond is reasonable and cost-based, and under such fee or bond, AI models, AI systems, and automated decision systems are treated in the same manner as other models and systems that perform comparable functions

Why is Section 43201 Concerning?

In the context of AI, while it is encouraging that section 43201 sets aside funds to modernize and secure Federal information technology systems through the deployment of commercial AI, the deployment of automation technologies, and the replacement of antiquated business systems, the proposed provision is troubling because it suggests that there would be a 10-year Moratorium: states would be prevented from enacting AI legislation for 10 years unless they show that they fall under the exception, involving the Rule of Construction.

More precisely, state AI laws would not be allowed to be enforced unless they:

• Remove legal impediments regarding a AI models, AI systems, or automated decision systems

  
  

• Streamline licensing, permitting, routing, zoning, procurement, or reporting procedures in a manner that facilitates the adoption of AI models, AI systems, or automated decision systems

  
  

• Do not impose any substantive design, performance, data-handling, documentation, civil liability, taxation, fee, or other requirement on AI models, AI systems, or automated decision systems unless that requirement is imposed under Federal law or if under a general law, is imposed in the same manner on models and systems, other than AI models, AI systems, and automated decision systems, that provide comparable functions to AI models, AI systems, or automated decision systems, and

  
  

• Do not impose a fee or bond unless it is reasonable and cost-based, and under the fee or bond, AI models, AI systems, and automated decision systems are treated in the same manner as other models and systems that perform comparable functions

  
  

Essentially, all of the progressive AI laws that have been created by forward-thinking states may ultimately be unenforceable, unless the states can jump the hoops and show that their laws fall within the exception.

What could passing a federal AI bill like this mean? The implications of states not being able to pass and enforce their own AI laws could be very risky: no other jurisdiction is doing this. Just ask the EU, a jurisdiction that has already created cutting-edge privacy and AI legislation, which is known by the world as the golden standard.

Just recently at the AI Summit in Paris, Vice President JD Vance on Tuesday warned global leaders and tech industry executives that “excessive regulation” could cripple the rapidly growing AI industry in a rebuke to European efforts to curb AI’s risks. Yes, when giving the AI policy speech, he pretty much said that unfettered innovation should trump AI regulation (pun intended).

This move came in stark contrast to what was being decided at the AI Summit—over 60 countries pledging to:

• Promote AI accessibility to reduce digital divides

  
  

• Ensure AI is open, inclusive, transparent, ethical, safe, secure and trustworthy, taking into account international frameworks for all

  
  

• Make innovation in AI thrive by enabling conditions for its development and avoid market concentration driving industrial recovery and development

  
  

• Encourage AI deployment that positively shapes the future of work and labour markets and delivers opportunity for sustainable growth

  
  

• Make AI sustainable for people and the planet

  
  

• Reinforce international cooperation to promote coordination in international governance

On the other hand, Vance called all of this “excessive regulation”. Unfortunately for VP Vance, he will need to take some time to reflect on why certain laws are created when there are rapid, potentially risky advances that could cause harm.

Criticism by Musk and Pelosi—“Robinhood in reverse”

If we zoom out, we see that there are several other troubling proposed provisions, including those that aggravate wealth inequality in the United States. In fact, Nancy Pelosi has referred to the bill as “Republican Robinhood in reverse”. Moreover, with cuts to Medicare and Medicaid, it is not surprising that Pelosi would question what is being proposed.

Even Elon Musk has criticized the recent move as “disappointing”. Why? All of the things that are included in the bill are cuts that can help fund tax cuts for the rich and secure the border. More specifically, Musk made a point of saying that the massive spending bill would undermine his work at the Department of Government Efficiency (DOGE).

What is the Status of the Bill?

At this point, the bill has passed in the House but still needs to pass in the Senate. President Donald Trump and Speaker Mike Johnson are hopeful for minimal modifications in the Senate to the bill; however, some believe that there is enough resistance to halt the bill unless there are significant changes. For example, Republican Senator Rand Paul told "Fox News Sunday" that he will not vote for the legislation unless the debt ceiling increase is stripped, since he stated that it would "explode deficits."

The main sticking points right now involve the numerous tax cuts, cuts to Medicaid and requirements that disabled people work, tax deductions at the state and local levels, and cuts to food assistance programs like the Supplemental Nutrition Assistance Program.

It is hard to tell whether the bill will pass as is in the Senate; we will keep you posted on the 10- year Moratorium that is proposed.