Senate Removes State AI Regulation Limits From Tax Bill

The Senate decisively removed a provision from President Donald Trump's major tax legislation that sought to limit states from regulating artificial intelligence, marking a defeat for efforts to centralize AI regulation at the federal level. A prior compromise between Senators Marsha Blackburn and Ted Cruz would have imposed a five-year moratorium on state AI laws to access $500 million in infrastructure funding, down from an initial 10-year ban, with exceptions for child safety and deceptive practices. Blackburn withdrew her support, arguing the measure insufficiently protected children, creators, and conservatives, and signaled support for an amendment to eliminate the moratorium entirely, reflecting broader GOP opposition to restricting state authority. The bill's AI funding condition would have created disparities, allowing some states to regulate AI but lose federal funds, while others would receive funding without regulation, raising concerns about privacy and job protection. Tech companies and some administration officials supported the moratorium, believing federal oversight would foster innovation, but critics viewed it as an infringement on states' rights and insufficiently protective against Big Tech abuses. The Trump administration plans to release its AI policy soon, but until then, states continue to pursue their own AI regulations amid uncertainty over federal guidance.