AI on Capitol Hill: Federal Preemption, Small Business Support, and the Slow March Toward Regulation

Congress is grappling with artificial intelligence policy on multiple fronts — but the dominant tension right now is between the White House's aggressive push to override state AI laws and lawmakers' own fragmented efforts to build a federal framework from scratch. Meanwhile, a handful of narrowly targeted AI legislation bills are actually moving through the House, focused on helping small businesses adopt the technology. And a growing roster of industries — from healthcare to defense to real estate — are spending heavily to shape whatever AI regulation Congress ultimately produces.

Here's what you need to know:

  • Federal vs. state AI rules: President Trump's December executive order directing agencies to challenge state AI regulations has put Congress on the clock to decide whether to enact a uniform national AI framework — or let the patchwork grow.
  • Small business AI bills advance: The House passed legislation directing NIST to develop AI resources for small businesses, part of a cluster of narrowly scoped bills that represent Congress's most tangible AI legislative output so far.
  • Lobbying is surging: Organizations from the U.S. Chamber of Commerce to Meta to Google are spending millions quarterly as Congress weighs generative AI governance, algorithmic accountability, and sector-specific rules.

Federal Preemption of State AI Laws: The White House Forces Congress's Hand

The single biggest force shaping AI regulation Congress is dealing with right now didn't originate on Capitol Hill. President Trump's December 11, 2025 executive order — titled "Ensuring a National Policy Framework for Artificial Intelligence" — directed federal agencies to identify and challenge state AI regulations deemed "onerous," and called on Congress to enact a uniform federal AI framework that would preempt conflicting state laws.

The order mobilizes the Department of Justice to potentially sue over state laws, conditions federal broadband funding on policy alignment, and tasks presidential advisors with preparing a legislative recommendation to Congress. Colorado's SB 205, one of the most comprehensive state-level algorithmic accountability laws, has been widely cited as a likely target.

This has created a charged dynamic. Some members welcome the push toward a national standard, arguing that a patchwork of state rules will stifle innovation. Others see it as federal overreach that strips states of the ability to protect consumers from AI-driven harms in housing, credit, insurance, and hiring.

Rep. Glenn Ivey (D-MD-4) has framed the challenge in terms of balancing competitiveness with consumer protection: "Maintaining our position as a world leader in AI systems is paramount to America's competitiveness. The Responsible AI Symposium was a meaningful discussion that emphasized that people could benefit greatly from AI solutions in housing, credit, and insurance, but only if Congress develops compliance standards to ensure safe, secure, and responsible AI systems."

That framing captures the core tension: whether a federal AI framework should prioritize clearing the runway for industry or building guardrails for consumers. The executive order leans firmly toward the former, but Congress has not yet coalesced around a specific legislative vehicle.

As Politico reported, a Trump aide indicated the administration is pushing ahead on a potential AI moratorium in Congress — effectively pausing state-level crackdowns while federal rules are developed. A separate Politico analysis argued the administration's approach risks setting the U.S. back in the global AI race by prioritizing deregulation over strategic investment.

The National Association of Counties flagged the order's potential impact on local governments, while MultiState detailed how the order could reshape state legislatures' approach to AI governance in 2026 and beyond.

On the lobbying front, the organizations with the most at stake are spending accordingly. The U.S. Chamber of Commerce reported $17.96 million in fourth quarter 2025 lobbying, while Business Roundtable Inc. spent $9.93 million. Both organizations have been vocal proponents of a federal preemption approach. Meta Platforms Inc. spent $6.5 million, and Google Client Services LLC reported $3.35 million — underscoring how the companies building generative AI systems are investing heavily to influence the rules that will govern them.

No specific preemption bill has been introduced yet, but the executive order's directive for a legislative recommendation means one could land soon. The House Science, Space and Technology Committee's January 14 hearing on "Assessing America's AI Action Plan" examined the administration's strategic approach, with member statements from Rep. Jay Obernolte, Rep. Zoe Lofgren, Rep. Haley Stevens, and Rep. Brian Babin — though no transcript is publicly available.

Small Business AI Legislation: The Bills Actually Moving

While the big-picture debate over AI regulation stalls, Congress has found a lane where it can act: helping small businesses navigate AI adoption.

The House passed H.R. 3679, the Small Business Artificial Intelligence Advancement Act, which directs the National Institute of Standards and Technology to develop resources helping small businesses understand and utilize AI systems. The bill was championed by Rep. Brian Babin (R-TX), chair of the House Science, Space and Technology Committee, who emphasized the need for practical guidance around privacy and cybersecurity for smaller firms that lack the compliance infrastructure of major corporations.

This isn't an isolated effort. Two additional small-business-focused AI bills recently passed the House: the AI for Main Street Act (H.R. 5764) and the AI Wisdom for Innovative Small Enterprises (AI-WISE) Act. Together, they represent the most concrete AI federal funding and support mechanisms Congress has produced.

A separate bipartisan House bill would create AI workforce tax credits capped at $2,500 per employee annually, covering in-house instruction on topics including AI ethics, data literacy, machine-learning fundamentals, and prompt engineering. The bill also calls for agency-led outreach to help workers build AI skills — a recognition that generative AI governance isn't just about regulating the technology, but preparing the workforce for it.

These narrowly scoped bills have bipartisan appeal precisely because they avoid the harder questions about liability, algorithmic accountability, and sector-specific mandates. They represent the path of least resistance in a Congress that has introduced 145 AI-related bills but passed only one.

The lobbying data reflects broad interest in these workforce and small business provisions. Amazon Corporate LLC spent $4.59 million in fourth quarter lobbying, and CTIA — the wireless industry association — reported $5.46 million. Both have interests in shaping how AI adoption resources are designed and distributed.

The Comprehensive AI Regulation Bills Still Waiting in Committee

Beyond the small-bore wins, several more ambitious AI legislation proposals remain stuck in committee — reflecting the difficulty of building consensus on harder questions about accountability, intellectual property, and national security.

As IPWatchdog reported, the key bills still in play include:

  • The CREATE AI Act of 2025 (H.R. 2385) — introduced by Rep. Jay Obernolte (R-CA) with bipartisan co-sponsors, pending in the House Science, Space and Technology Committee. The bill focuses on AI research infrastructure and competitiveness.
  • The AI Accountability Act (H.R. 1694) — introduced by Rep. Josh Harder (D-CA), pending in the House Energy and Commerce Committee. This bill targets algorithmic accountability and transparency requirements.
  • The Protection Against Foreign Adversarial Artificial Intelligence Act (S. 1638) — in the Senate, focused on national security dimensions of AI competition with China.

The House has held extensive hearings across multiple committees — 28 tagged to the AI issue area — covering everything from AI chatbot risks to mental health, to nuclear energy solutions for AI data centers, to biosecurity at the intersection of AI and biology, to the U.S.-China AI competition. The Energy and Commerce Committee alone has held hearings on AI regulation and U.S. leadership, AI in communications technology, and energy demands of AI infrastructure.

Yet none of these hearings have produced a bill that has advanced out of committee toward a floor vote. The 145-bills-introduced, one-bill-passed ratio tells the story: Congress is generating enormous volume on artificial intelligence policy but struggling to convert oversight into law on the harder regulatory questions.

The lobbying spending reflects the stakes. Healthcare organizations — the American Hospital Association at $6.57 million and the American Medical Association at $5.48 million in fourth quarter spending — are deeply engaged as AI applications in diagnostics and treatment face potential regulation. Defense contractors Lockheed Martin ($3.91 million) and General Dynamics ($3.75 million) are lobbying as AI's role in national security expands. Even the National Association of Realtors, at $15.85 million, has a stake as AI tools reshape housing markets and face scrutiny under fair lending and housing discrimination laws.

The bottom line: Congress has the hearings, the bills, and the lobbying pressure. What it doesn't have yet is the votes — or the consensus — to pass comprehensive AI regulation. The White House's preemption push may force the issue, but for now, the gap between congressional attention and congressional action on AI remains wide.

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