The Artificial Intelligence Tax Non-Discrimination Act

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Policy Status

  • Type: Model Policy
  • Status: Draft
  • Date Introduced: July 17, 2025

Issues

  • Innovation

    • Task Forces

  • Tax and Fiscal Policy
  • Communications and Technology

    • Tags

  • 2025 Annual Meeting

    • Summary

    Artificial intelligence and automated decision technologies are significant drivers of innovation and growth throughout the American economy. However, discriminatory taxes on AI products and services levied by federal, state, and local governments would distort the market, stifle innovation, and undermine American competitiveness. Tax policy must remain neutral toward the mode of delivery or technological implementation of services.  This Act prohibits discriminatory tax measures unfairly targeting artificial intelligence, algorithms, and automated decision systems, including taxes on computing power, a remote-only access sales tax, differential treatment of AI subscriptions, differential treatment of AI-derived income, and any other discriminatory tax as defined. The Act clarifies that AI services shall not be treated as telecommunications services for the purposes of taxation unless uniformly applied to all software or digital applications providing similar functionalities.  Finally, this Act expresses the sense of the State that Congress should act to prohibit the imposition of discriminatory federal taxes on AI systems, algorithms, and automated decision-making technologies, and that municipal, county, and other forms of local government shall not enact similar discriminatory taxes of their own. 
    Draft

    The Artificial Intelligence Tax Non-Discrimination Act

    Section 1. Definitions 

    For the purposes of this Act, the following terms shall have the meanings ascribed below. These definitions shall conform, where applicable, to definitions already existing in state law. 

    A. Algorithm: A finite sequence of well-defined instructions or rules designed to perform a task or solve a problem, especially as implemented in a computer system or software application. 

    B. Artificial Intelligence: As defined in state law; 

    C. Automated Decision System: Any algorithmic or artificial intelligence-based software, platform, or process that assists or replaces human decision-making in part or in full. 

    D. Discriminatory Tax: A tax that meets one or more of the following criteria: 

    • (i) A tax that applies only to artificial intelligence products, services, or systems and not to equivalent non-artificial intelligence digital or software products. 
    • (ii) A tax that imposes a higher rate or additional category of tax burden on artificial intelligence services, subscriptions, or software compared to equivalent software-as-a-service (SaaS) or digital content offerings. 
    • (iii) A tax that singles out end-use artificial intelligence-related activities—such as computing power, development, or deployment—for differential treatment not applied to comparable technology sectors. 
    • (iv) A tax that classifies or treats artificial intelligence services as telecommunications services when such classification would not apply to other digital or software-based services. 

    E. Computing Power: The capacity of a computer system to process data or execute computational tasks, measured by factors including, but not limited to processing speed, memory capacity, data throughput, and energy consumption. 

    Section 2. Findings 

    The Legislature finds and declares the following: 

    A. Artificial intelligence and algorithmic technologies represent a critical component of innovation and economic growth. 

    B. Discriminatory taxes on artificial intelligence products and services distort market dynamics, disincentivize innovation, and threaten the competitiveness of local industries. 

    C. It is the sense of the State that Congress should act to prohibit the imposition of discriminatory federal taxes on artificial intelligence systems, algorithms, and automated decision-making technologies. 

    E. It is the sense of this State that municipal, county, and other forms of local government with the power to levy and collect taxes shall not enact discriminatory taxes on the use artificial intelligence systems, algorithms, and automated decision systems. 

    F. Tax policy must remain neutral toward the mode of delivery or technological implementation of services—whether artificial intelligence-based or not—to maintain fairness and encourage technological development. 

    Section 3. Prohibited Taxes 

    The following tax measures are hereby prohibited and shall be deemed discriminatory under this Act: 

    A. Tax on Computing Power: No tax shall be levied specifically on the computing power used in the development or operation of artificial intelligence systems. 

    B. Remote-Only Access Sales Tax: No sales, use, or similar tax shall be imposed solely on artificial intelligence products or services that are accessed exclusively through electronic or remote means unless such tax applies equally to all software or digital services accessed in the same manner. 

    C. Differential Treatment of Artificial Intelligence Subscriptions: No additional tax shall be imposed on a subscription to an artificial intelligence service beyond the tax applied to comparable software-as-a-service (SaaS) or digital content subscriptions. 

    D. Artificial Intelligence-Derived Income: Income derived from the development, sale, licensing, or provision of artificial intelligence products and services shall not be taxed differently than income derived from other digital services. 

    E. Telecommunications Classification: Artificial intelligence services shall not be treated as telecommunications services for purposes of taxation unless such classification is uniformly applied to all software or digital applications providing similar functionalities. 

    F. Any other “Discriminatory Tax” as defined in Section 1(D).  

    Section 4. Severability 

    If any provision of this Act, or the application of any provision to any person or circumstance, is found to be invalid, the remainder of this Act and the application of its provisions to any other persons or circumstances shall not be affected.