Capriglione AI Regulation Bill Also Hands Grants To AI Companies

The text as introduced · 8,684 words

By: Capriglione
H.B. No. 1709

A BILL TO BE ENTITLED

AN ACT

relating to the regulation and reporting on the use of artificial

intelligence systems by certain business entities and state

agencies; providing civil penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. This Act may be cited as the Texas Responsible

Artificial Intelligence Governance Act

SECTION 2. Title 11, Business & Commerce Code, is amended by

adding Subtitle D to read as follows:

SUBTITLE D. ARTIFICIAL INTELLIGENCE PROTECTION

CHAPTER 551. ARTIFICIAL INTELLIGENCE PROTECTION

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 551.001. DEFINITIONS. In this chapter:

(1) "Algorithmic discrimination" means any condition

in which an artificial intelligence system when deployed creates an

unlawful discrimination of a protected classification in violation

of the laws of this state or federal law.

(A) "Algorithmic discrimination" does not

include the offer, license, or use of a high-risk artificial

intelligence system by a developer or deployer for the sole purpose

of the developer's or deployer's self-testing, for a non-deployed

purpose, to identify, mitigate, or prevent discrimination or

otherwise ensure compliance with state and federal law.

(2) "Artificial intelligence system" means the use of

machine learning and related technologies that use data to train

statistical models for the purpose of enabling computer systems to

perform tasks normally associated with human intelligence or

perception, such as computer vision, speech or natural language

processing, and content generation.

(3) "Biometric identifier" means a retina or iris

scan, fingerprint, voiceprint, or record of hand or face geometry.

(4) "Council" means the Artificial Intelligence

Council established under Chapter 553.

(5) "Consequential decision" means any decision that

has a material, legal, or similarly significant, effect on a

consumer's access to, cost of, or terms or conditions of:

(A) a criminal case assessment, a sentencing or

plea agreement analysis, or a pardon, parole, probation, or release

decision;

(B) education enrollment or an education

opportunity;

(C) employment or an employment opportunity;

(D) a financial service;

(E) an essential government service;

(F) residential utility services;

(G) a health-care service or treatment;

(H) housing;

(I) insurance;

(J) a legal service;

(K) a transportation service;

(L) constitutionally protected services or

products; or

(M) elections or voting process.

(6) "Consumer" means an individual who is a resident

of this state acting only in an individual or household context.

The term does not include an individual acting in a commercial or

employment context.

(7) "Deploy" means to put into effect or

commercialize.

(8) "Deployer" means a person doing business in this

state that deploys a high-risk artificial intelligence system.

(9) "Developer" means a person doing business in this

state that develops a high-risk artificial intelligence system or

substantially or intentionally modifies an artificial intelligence

system.

(10) "Digital service" means a website, an

application, a program, or software that collects or processes

personal identifying information with Internet connectivity.

(11) "Digital service provider" means a person who:

(A) owns or operates a digital service;

(B) determines the purpose of collecting and

processing the personal identifying information of users of the

digital service; and

(C) determines the means used to collect and

process the personal identifying information of users of the

digital service.

(12) "Distributor" means a person, other than the

Developer, that makes an artificial intelligence system available

in the market for a commercial purpose.

(13) "Generative artificial intelligence" means

artificial intelligence models that can emulate the structure and

characteristics of input data in order to generate derived

synthetic content. This can include images, videos, audio, text,

and other digital content.

(14) "High-risk artificial intelligence system" means

any artificial intelligence system that is a substantial factor to

a consequential decision. The term does not include:

(A) an artificial intelligence system if the

artificial intelligence system is intended to detect

decision-making patterns or deviations from prior decision-making

patterns and is not intended to replace or influence a previously

completed human assessment without sufficient human review;

(B) an artificial intelligence system that

violates a provision of Subchapter B; or

(C) the following technologies, unless the

technologies, when deployed, make, or are a substantial factor in

making, a consequential decision:

(i) anti-malware;

(ii) anti-virus;

(iii) calculators;

(iv) cybersecurity;

(v) databases;

(vi) data storage;

(vii) firewall;

(viii) fraud detection systems;

(ix) internet domain registration;

(x) internet website loading;

(xi) networking;

(xii) operational technology;

(xiii) spam- and robocall-filtering;

(xiv) spell-checking;

(xv) spreadsheets;

(xvi) web caching;

(xvii) web scraping;

(xviii) web hosting or any similar

technology; or

(xviv) any technology that solely

communicates in natural language for the sole purpose of providing

users with information, making referrals or recommendations

relating to customer service, and answering questions and is

subject to an acceptable use policy that prohibits generating

content that is discriminatory or harmful, as long as the system

does not violate any provision listed in Subchapter B.

(15) "Open source artificial intelligence system"

means an artificial intelligence system that:

(A) can be used or modified for any purpose

without securing permission from the owner or creator of such an

artificial intelligence system;

(B) can be shared for any use with or without

modifications; and

(C) includes information about the data used to

train such system that is sufficiently detailed such that a person

skilled in artificial intelligence could create a substantially

equivalent system when the following are made available freely or

through a non-restrictive license:

(i) the same or similar data;

(ii) the source code used to train and run

such system; and

(iii) the model weights and parameters of

such system.

(16) "Operational technology" means hardware and

software that detects or causes a change through the direct

monitoring or control of physical devices, processes, and events in

the enterprise.

(17) "Personal data" has the meaning assigned to it by

Section 541.001, Business and Commerce Code.

(18) "Risk" means the composite measure of an event's

probability of occurring and the magnitude or degree of the

consequences of the corresponding event.

(19) "Sensitive personal attribute" means race,

political opinions, religious or philosophical beliefs, ethnic

orientation, mental health diagnosis, or sex. The term does not

include conduct that would be classified as an offense under

Chapter 21, Penal Code.

(20) "Social media platform" has the meaning assigned

by Section 120.001, Business and Commerce Code.

(21) "Substantial factor" means a factor that is:

(A) considered when making a consequential

decision;

(B) likely to alter the outcome of a

consequential decision; and

(C) weighed more heavily than any other factor

contributing to the consequential decision.

(22) "Intentional and substantial modification" or

"Substantial modification" means a deliberate change made to an

artificial intelligence system that reasonably increases the risk

of algorithmic discrimination.

Sec. 551.002. APPLICABILITY OF CHAPTER. This chapter

applies only to a person that is not a small business as defined by

the United States Small Business Administration, and:

(1) conducts business, promotes, or advertises in this

state or produces a product or service consumed by residents of this

state; or

(2) engages in the development, distribution, or

deployment of a high-risk artificial intelligence system in this

state.

Sec. 551.003. DEVELOPER DUTIES. (a) A developer of a

high-risk artificial intelligence system shall use reasonable care

to protect consumers from any known or reasonably foreseeable risks

of algorithmic discrimination arising from the intended and

contracted uses of the high-risk artificial intelligence system.

(b) Prior to providing a high-risk artificial intelligence

system to a deployer, a developer shall provide to the deployer, in

writing, a High-Risk Report that consists of:

(1) a statement describing how the high-risk

artificial intelligence system should be used or not be used;

(2) any known limitations of the system that could

lead to algorithmic discrimination, the metrics used to measure the

system's performance, which shall include at a minimum, metrics

related to accuracy, explainability, transparency, reliability,

and security set forth in the most recent version of the "Artificial

Intelligence Risk Management Framework: Generative Artificial

Intelligence Profile" published by the National Institute of

Standards and Technology, and how the system performs under those

metrics in its intended use contexts;

(3) any known or reasonably foreseeable risks of

algorithmic discrimination, arising from its intended or likely

use;

(4) a high-level summary of the type of data used to

program or train the high-risk artificial intelligence system;

(5) the data governance measures used to cover the

training datasets and their collection, and the measures used to

examine the suitability of data sources and prevent unlawful

discriminatory biases; and

(6) appropriate principles, processes, and personnel

for the deployers' risk management policy.

(c) If a high-risk artificial intelligence system is

intentionally or substantially modified after a developer provides

it to a deployer, a developer shall make necessary information in

subsection (b) available to deployers within 30 days of the

modification.

(d) If a developer believes or has reason to believe, that

it deployed a high-risk artificial intelligence system that does

not comply with a requirement of this chapter, the developer shall

immediately take the necessary corrective actions to bring that

system into compliance, including by withdrawing it, disabling it,

and recalling it, as appropriate. Where applicable, the developer

shall inform the distributors or deployers of the high-risk

artificial intelligence system concerned.

(e) Where the high-risk artificial intelligence system

presents risks of algorithmic discrimination, unlawful use or

disclosure of personal data, or deceptive manipulation or coercion

of human behavior and the developer knows or should reasonably know

of that risk, it shall immediately investigate the causes, in

collaboration with the deployer, where applicable, and inform the

attorney general in writing of the nature of the non-compliance and

of any relevant corrective action taken.

(f) Developers shall keep detailed records of any

generative artificial intelligence training data used to develop a

generative artificial intelligence system or service, consistent

with the suggested actions under GV-1.2-007 of the "Artificial

Intelligence Risk Management Framework: Generative Artificial

Intelligence Profile" by the National Institute of Standards and

Technology, or any subsequent versions thereof.

Sec. 551.004. DISTRIBUTOR DUTIES. A distributor of a

high-risk artificial intelligence system shall use reasonable care

to protect consumers from any known or reasonably foreseeable risks

of algorithmic discrimination. If a distributor of a high-risk

artificial intelligence system knows or has reason to know that a

high-risk artificial intelligence system is not in compliance with

any requirement in this chapter, it shall immediately withdraw,

disable, or recall as appropriate, the high-risk artificial

intelligence system from the market until the system has been

brought into compliance with the requirements of this chapter. The

distributor shall inform the developers of the high-risk artificial

intelligence system concerned and, where applicable, the

deployers.

Sec. 551.005. DEPLOYER DUTIES. A deployer of a high-risk

artificial intelligence system shall use reasonable care to protect

consumers from any known or reasonably foreseeable risks of

algorithmic discrimination. If a deployer of a high-risk

artificial intelligence system knows or has reason to know that a

high-risk artificial intelligence system is not in compliance with

any requirement in this chapter, it shall immediately suspend the

use of the high-risk artificial intelligence system from the market

until the system has been brought into compliance with the

requirements of this chapter. The deployer shall inform the

developers of the high-risk artificial intelligence system

concerned and, where applicable, the distributors.

Sec. 551.006. IMPACT ASSESSMENTS. (a) A deployer that

deploys a high-risk artificial intelligence system shall complete

an impact assessment for the high-risk artificial intelligence

system. A deployer, or a third-party contracted by the deployer for

such purposes, shall complete an impact assessment annually and

within ninety days after any intentional and substantial

modification to the high-risk artificial intelligence system is

made available. An impact assessment must include, at a minimum,

and to the extent reasonably known by or available to the deployer:

(1) a statement by the deployer disclosing the

purpose, intended use cases, and deployment context of, and

benefits afforded by, the high-risk artificial intelligence

system;

(2) an analysis of whether the deployment of the

high-risk artificial intelligence system poses any known or

reasonably foreseeable risks of algorithmic discrimination and, if

so, the nature of the algorithmic discrimination and the steps that

have been taken to mitigate the risks;

(3) a description of the categories of data the

high-risk artificial intelligence system processes as inputs and

the outputs the high-risk artificial intelligence system produces;

(4) if the deployer used data to customize the

high-risk artificial intelligence system, an overview of the

categories of data the deployer used to customize the high-risk

artificial intelligence system;

(5) any metrics used to evaluate the performance and

known limitations of the high-risk artificial intelligence system;

(6) a description of any transparency measures taken

concerning the high-risk artificial intelligence system, including

any measures taken to disclose to a consumer that the high-risk

artificial intelligence system will be used;

(7) a description of the post-deployment monitoring

and user safeguards provided concerning the high-risk artificial

intelligence system, including the oversight, use, and learning

process established by the deployer to address issues arising from

the deployment of the high-risk artificial intelligence system; and

(8) a description of cybersecurity measures and threat

modeling conducted on the system.

(b) Following an intentional and substantial modification

to a high-risk artificial intelligence system, a deployer must

disclose the extent to which the high-risk artificial intelligence

system was used in a manner that was consistent with, or varied

from, the developer's intended uses of the high-risk artificial

intelligence system.

(c) A single impact assessment may address a comparable set

of high-risk artificial intelligence systems deployed by a

deployer.

(d) A deployer shall maintain the most recently completed

impact assessment for a high-risk artificial intelligence system,

all records concerning each impact assessment, and all prior impact

assessments, if any, for at least three years following the final

deployment of the high-risk artificial intelligence system.

(e) If a deployer, or a third party contracted by the

deployer, completes an impact assessment for the purpose of

complying with another applicable law or regulation, such impact

assessment shall be deemed to satisfy the requirements established

in this subsection if such impact assessment is reasonably similar

in scope and effect to the impact assessment that would otherwise be

completed pursuant to this subsection.

(f) A deployer may redact any trade secrets as defined by

Section 541.001(33), Business & Commerce Code or information

protected from disclosure by state or federal law.

(g) Except as provided in subsection (e) of this section, a

developer that makes a high-risk artificial intelligence system

available to a deployer shall make available to the deployer the

documentation and information necessary for a deployer to complete

an impact assessment pursuant to this section.

(h) A developer that also serves as a deployer for a

high-risk artificial intelligence system is not required to

generate and store an impact assessment unless the high-risk

artificial intelligence system is provided to an unaffiliated

deployer.

Sec. 551.007. DISCLOSURE OF A HIGH-RISK ARTIFICIAL

INTELLIGENCE SYSTEM TO CONSUMERS. (a) A deployer or developer that

deploys, offers, sells, leases, licenses, gives, or otherwise makes

available a high-risk artificial intelligence system that is

intended to interact with consumers shall disclose to each

consumer, before or at the time of interaction:

(1) that the consumer is interacting with an

artificial intelligence system;

(2) the purpose of the system;

(3) that the system may or will make a consequential

decision affecting the consumer;

(4) the nature of any consequential decision in which

the system is or may be a substantial factor;

(5) the factors to be used in making any consequential

decisions;

(6) contact information of the deployer;

(7) a description of:

(A) any human components of the system;

(B) any automated components of the system; and

(C) how human and automated components are used

to inform a consequential decision; and

(8) a declaration of the consumer's rights under

Section 551.108.

(b) Disclosure is required under subsection (a) of this

section regardless of whether it would be obvious to a reasonable

person that the person is interacting with an artificial

intelligence system.

(c) All disclosures under subsection (a) shall be clear and

conspicuous and written in plain language, and avoid the use of a

dark pattern as defined by 541.001, Business & Commerce Code.

(d) All disclosures under subsection (a) may be linked to a

separate webpage of the developer or deployer.

(e) Any requirement in this section that may conflict with

state or federal law may be exempt.

Sec. 551.008. RISK IDENTIFICATION AND MANAGEMENT POLICY.

(a) A developer or deployer of a high-risk artificial intelligence

system shall, prior to deployment, assess potential risks of

algorithmic discrimination and implement a risk management policy

to govern the development or deployment of the high-risk artificial

intelligence system. The risk management policy shall:

(1) specify and incorporate the principles and

processes that the developer or deployer uses to identify,

document, and mitigate, in the development or deployment of a

high-risk artificial intelligence system:

(A) known or reasonably foreseeable risks of

algorithmic discrimination; and

(B) prohibited uses and unacceptable risks under

Subchapter B; and

(2) be reasonable in size, scope, and breadth,

considering:

(A) guidance and standards set forth in the most

recent version of the "Artificial Intelligence Risk Management

Framework: Generative Artificial Intelligence Profile" published

by the National Institute of Standards and Technology;

(B) any existing risk management guidance,

standards or framework applicable to artificial intelligence

systems designated by the Banking Commissioner or Insurance

Commissioner, if the developer or deployer is regulated by the

Department of Banking or Department of Insurance;

(C) the size and complexity of the developer or

deployer;

(D) the nature, scope, and intended use of the

high-risk artificial intelligence systems developed or deployed;

and

(E) the sensitivity and volume of personal data

processed in connection with the high-risk artificial intelligence

systems.

(b) A risk management policy implemented pursuant to this

section may apply to more than one high-risk artificial

intelligence system developed or deployed, so long as the developer

or deployer complies with all of the forgoing requirements and

considerations in adopting and implementing the risk management

policy with respect to each high-risk artificial intelligence

system covered by the policy.

(c) A developer or deployer may redact or omit any trade

secrets as defined by Section 541.001(33), Business & Commerce Code

or information protected from disclosure by state or federal law.

Sec. 551.009. RELATIONSHIPS BETWEEN ARTIFICIAL

INTELLIGENCE PARTIES. Any distributor or deployer, shall be

considered to be a developer of a high-risk artificial intelligence

system for the purposes of this chapter and shall be subject to the

obligations and duties of a developer under this chapter in any of

the following circumstances:

(1) they put their name or trademark on a high-risk

artificial intelligence system already placed in the market or put

into service;

(2) they intentionally and substantially modify a

high-risk artificial intelligence system that has already been

placed in the market or has already been put into service in such a

way that it remains a high-risk artificial intelligence system

under this chapter; or

(3) they modify the intended purpose of an artificial

intelligence system which has not previously been classified as

high-risk and has already been placed in the market or put into

service in such a way that the artificial intelligence system

concerned becomes a high-risk artificial intelligence system in

accordance with this chapter of a high-risk artificial intelligence

system.

Sec. 551.010. DIGITAL SERVICE PROVIDER AND SOCIAL MEDIA

PLATFORM DUTIES REGARDING ARTIFICIAL INTELLIGENCE SYSTEMS. A

digital service provider as defined by Section 509.001(2), Business &

Commerce Code or a social media platform as defined by Section

120.001(1), Business & Commerce Code, shall require advertisers on

the service or platform to agree to terms preventing the deployment

of a high-risk artificial intelligence system on the service or

platform that could expose the users of the service or platform to

algorithmic discrimination or prohibited uses under Subchapter B.

Sec. 551.011. REPORTING REQUIREMENTS. (a) A deployer must

notify, in writing, the council, the attorney general, or the

director of the appropriate state agency that regulates the

deployer's industry, and affected consumers as soon as practicable

after the date on which the deployer discovers or is made aware that

a deployed high-risk artificial intelligence system has caused

algorithmic discrimination of an individual or group of

individuals.

(b) If a developer discovers or is made aware that a

deployed high-risk artificial intelligence system is using inputs

or providing outputs that constitute a violation of Subchapter B,

the deployer must cease operation of the offending system as soon as

technically feasible and provide notice to the council and the

attorney general as soon as practicable and not later than the 10th

day after the date on which the developer discovers or is made aware

of the unacceptable risk.

Sec. 551.012. SANDBOX PROGRAM EXCEPTION. (a) Excluding

violations of Subchapter B, this chapter does not apply to the

development of an artificial intelligence system that is used

exclusively for research, training, testing, or other

pre-deployment activities performed by active participants of the

sandbox program in compliance with Chapter 552.

SUBCHAPTER B. PROHIBITED USES AND UNACCEPTABLE RISK

Sec. 551.051. MANIPULATION OF HUMAN BEHAVIOR TO CIRCUMVENT

INFORMED DECISION-MAKING. An artificial intelligence system shall

not be developed or deployed that uses subliminal techniques beyond

a person's consciousness, or purposefully manipulative or

deceptive techniques, with the objective or the effect of

materially distorting the behavior of a person or a group of persons

by appreciably impairing their ability to make an informed

decision, thereby causing a person to make a decision that the

person would not have otherwise made, in a manner that causes or is

likely to cause significant harm to that person or another person or

group of persons.

Sec. 551.052. SOCIAL SCORING. An artificial intelligence

system shall not be developed or deployed for the evaluation or

classification of natural persons or groups of natural persons

based on their social behavior or known, inferred, or predicted

personal characteristics with the intent to determine a social

score or similar categorical estimation or valuation of a person or

groups of persons.

Sec. 551.053. CAPTURE OF BIOMETRIC IDENTIFIERS USING

ARTIFICIAL INTELLIGENCE. An artificial intelligence system

developed with biometric identifiers of individuals and the

targeted or untargeted gathering of images or other media from the

internet or any other publicly available source shall not be

deployed for the purpose of uniquely identifying a specific

individual. An individual is not considered to be informed nor to

have provided consent for such purpose pursuant to Section 503.001,

Business and Commerce Code, based solely upon the existence on the

internet, or other publicly available source, of an image or other

media containing one or more biometric identifiers.

Sec. 551.054. CATEGORIZATION BASED ON SENSITIVE

ATTRIBUTES. An artificial intelligence system shall not be

developed or deployed with the specific purpose of inferring or

interpreting, sensitive personal attributes of a person or group of

persons using biometric identifiers, except for the labeling or

filtering of lawfully acquired biometric identifier data.

Sec. 551.055. UTILIZATION OF PERSONAL ATTRIBUTES FOR HARM.

An artificial intelligence system shall not utilize

characteristics of a person or a specific group of persons based on

their race, color, disability, religion, sex, national origin, age,

or a specific social or economic situation, with the objective, or

the effect, of materially distorting the behavior of that person or

a person belonging to that group in a manner that causes or is

reasonably likely to cause that person or another person harm.

Sec. 551.056. CERTAIN SEXUALLY EXPLICIT VIDEOS, IMAGES, AND

CHILD PORNOGRAPHY. An artificial intelligence system shall not be

developed or deployed that produces, assists, or aids in producing,

or is capable of producing unlawful visual material in violation of

Section 43.26, Penal Code or an unlawful deep fake video or image in

violation of Section 21.165, Penal Code.

SUBCHAPTER C. ENFORCEMENT AND CONSUMER PROTECTIONS

Sec. 551.101. CONSTRUCTION AND APPLICATION. (a) This

chapter shall be broadly construed and applied to promote its

underlying purposes, which are:

(1) to facilitate and advance the responsible

development and use of artificial intelligence systems;

(2) to protect individuals and groups of individuals

from known, and unknown but reasonably foreseeable, risks,

including unlawful algorithmic discrimination;

(3) to provide transparency regarding those risks in

the development, deployment, or use of artificial intelligence

systems; and

(4) to provide reasonable notice regarding the use or

considered use of artificial intelligence systems by state

agencies.

(b) this chapter does not apply to the developer of an open

source artificial intelligence system, provided that:

(1) the system is not deployed as a high-risk

artificial intelligence system and the developer has taken

reasonable steps to ensure that the system cannot be used as a

high-risk artificial intelligence system without substantial

modifications; and

(2) the weights and technical architecture of the

system are made publicly available.

Sec. 551.102. ENFORCEMENT AUTHORITY. The attorney general

has authority to enforce this chapter. Excluding violations of

Subchapter B, researching, training, testing, or the conducting of

other pre-deployment activities by active participants of the

sandbox program, in compliance with Chapter 552, does not subject a

developer or deployer to penalties or actions.

Sec. 551.103. INTERNET WEBSITE AND COMPLAINT MECHANISM.

The attorney general shall post on the attorney general's Internet

website:

(1) information relating to:

(A) the responsibilities of a developer,

distributor, and deployer under Subchapter A; and

(B) an online mechanism through which a consumer

may submit a complaint under this chapter to the attorney general.

Sec. 551.104. INVESTIGATIVE AUTHORITY. (a) If the

attorney general has reasonable cause to believe that a person has

engaged in or is engaging in a violation of this chapter, the

attorney general may issue a civil investigative demand. The

attorney general shall issue such demands in accordance with and

under the procedures established under Section 15.10.

(b) The attorney general may request, pursuant to a civil

investigative demand issued under Subsection (a), that a developer

or deployer of a high-risk artificial intelligence system disclose

their risk management policy and impact assessments required under

Subchapter A. The attorney general may evaluate the risk

management policy and impact assessments for compliance with the

requirements set forth in Subchapter A.

(c) The attorney general may not institute an action for a

civil penalty against a developer or deployer for artificial

intelligence systems that remain isolated from customer

interaction in a pre-deployment environment.

Sec. 551.105. NOTICE OF VIOLATION OF CHAPTER; OPPORTUNITY

TO CURE. Before bringing an action under Section 551.106, the

attorney general shall notify a developer, distributor, or deployer

in writing, not later than the 30th day before bringing the action,

identifying the specific provisions of this chapter the attorney

general alleges have been or are being violated. The attorney

general may not bring an action against the developer or deployer

if:

(1) within the 30-day period, the developer or

deployer cures the identified violation; and

(2) the developer or deployer provides the attorney

general a written statement that the developer or deployer:

(A) cured the alleged violation;

(B) notified the consumer, if technically

feasible, and the council that the developer or deployer's

violation was addressed, if the consumer's contact information has

been made available to the developer or deployer and the attorney

general;

(C) provided supportive documentation to show

how the violation was cured; and

(D) made changes to internal policies, if

necessary, to reasonably ensure that no such further violations are

likely to occur.

Sec. 551.106. CIVIL PENALTY; INJUNCTION. (a) The attorney

general may bring an action in the name of this state to restrain or

enjoin the person from violating this chapter and seek injunctive

relief.

(b) The attorney general may recover reasonable attorney's

fees and other reasonable expenses incurred in investigating and

bringing an action under this section.

(c) The attorney general may assess and collect an

administrative fine against a developer or deployer who fails to

timely cure a violation or who breaches a written statement

provided to the attorney general, other than those for a prohibited

use, of not less than $50,000 and not more than $100,000 per uncured

violation.

(d) The attorney general may assess and collect an

administrative fine against a developer or deployer who fails to

timely cure a violation of a prohibited use, or whose violation is

determined to be uncurable, of not less than $80,000 and not more

than $200,000 per violation.

(e) A developer or deployer who was found in violation of

and continues to operate with the provisions of this chapter shall

be assessed an administrative fine of not less than $2,000 and not

more than $40,000 per day.

(f) There is a rebuttable presumption that a developer,

distributor, or deployer used reasonable care as required under

this chapter if the developer, distributor, or deployer complied

with their duties under Subchapter A.

Sec. 551.107. ENFORCEMENT ACTIONS BY STATE AGENCIES. A

state agency may sanction an individual licensed, registered, or

certified by that agency for violations of Subchapter B, including:

(1) the suspension, probation, or revocation of a

license, registration, certificate, or other form of permission to

engage in an activity; and

(2) monetary penalties up to $100,000.

Sec. 551.108. CONSUMER RIGHTS AND REMEDIES. A consumer may

appeal a consequential decision made by a high-risk artificial

intelligence system which has an adverse impact on their health,

safety, or fundamental rights, and shall have the right to obtain

from the deployer clear and meaningful explanations of the role of

the high-risk artificial intelligence system in the

decision-making procedure and the main elements of the decision

taken.

SUBCHAPTER D. CONSTRUCTION OF CHAPTER; LOCAL PREEMPTION

Sec. 551.151. CONSTRUCTION OF CHAPTER. This chapter may

not be construed as imposing a requirement on a developer, a

deployer, or other person that adversely affects the rights or

freedoms of any person, including the right of free speech.

Sec. 551.152. LOCAL PREEMPTION. This chapter supersedes

and preempts any ordinance, resolution, rule, or other regulation

adopted by a political subdivision regarding the use of high-risk

artificial intelligence systems.

CHAPTER 552. ARTIFICIAL INTELLIGENCE REGULATORY SANDBOX PROGRAM

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 552.001. DEFINITIONS. In this chapter:

(1) "Applicable agency" means a state agency

responsible for regulating a specific sector impacted by an

artificial intelligence system.

(2) "Consumer" means a person who engages in

transactions involving an artificial intelligence system or is

directly affected by the use of such a system.

(3) "Council" means the Artificial Intelligence

Council established by Chapter 553.

(4) "Department" means the Texas Department of

Information Resources.

(5) "Program participant" means a person or business

entity approved to participate in the sandbox program.

(6) "Sandbox program" means the regulatory framework

established under this chapter that allows temporary testing of

artificial intelligence systems in a controlled, limited manner

without full regulatory compliance.

SUBCHAPTER B. SANDBOX PROGRAM FRAMEWORK

Sec. 552.051. ESTABLISHMENT OF SANDBOX PROGRAM. (a) The

department, in coordination with the council, shall administer the

Artificial Intelligence Regulatory Sandbox Program to facilitate

the development, testing, and deployment of innovative artificial

intelligence systems in Texas.

(b) The sandbox program is designed to:

(1) promote the safe and innovative use of artificial

intelligence across various sectors including healthcare, finance,

education, and public services;

(2) encourage the responsible deployment of

artificial intelligence systems while balancing the need for

consumer protection, privacy, and public safety; and

(3) provide clear guidelines for artificial

intelligence developers to test systems while temporarily exempt

from certain regulatory requirements.

Sec. 552.052. APPLICATION PROCESS. (a) A person or

business entity seeking to participate in the sandbox program must

submit an application to the council.

(b) The application must include:

(1) a detailed description of the artificial

intelligence system and its intended use;

(2) a risk assessment that addresses potential impacts

on consumers, privacy, and public safety;

(3) a plan for mitigating any adverse consequences

during the testing phase; and

(4) proof of compliance with federal artificial

intelligence laws and regulations, where applicable.

Sec. 552.053. DURATION AND SCOPE OF PARTICIPATION. A

participant may test an artificial intelligence system under the

sandbox program for a period of up to 36 months, unless extended by

the department for good cause.

SUBCHAPTER C. OVERSIGHT AND COMPLIANCE

Sec. 552.101. AGENCY COORDINATION. (a) The department

shall coordinate with all relevant state regulatory agencies to

oversee the operations of the sandbox participants.

(b) A relevant agency may recommend to the department that a

participant's sandbox privileges be revoked if the artificial

intelligence system:

(1) poses undue risk to public safety or welfare;

(2) violates any federal or state laws that the

sandbox program cannot override.

Sec. 552.102. REPORTING REQUIREMENTS. (a) Each sandbox

participant must submit quarterly reports to the department, which

shall include:

(1) system performance metrics;

(2) updates on how the system mitigates any risks

associated with its operation; and

(3) feedback from consumers and affected stakeholders

that are using a product that has been deployed from this section.

(b) The department must submit an annual report to the

legislature detailing:

(1) the number of participants in the sandbox program;

(2) the overall performance and impact of artificial

intelligence systems tested within the program; and

(3) recommendations for future legislative or

regulatory reforms.

CHAPTER 553. TEXAS ARTIFICIAL INTELLIGENCE COUNCIL

SUBCHAPTER A. CREATION AND ORGANIZATION OF COUNCIL

Sec. 553.001. CREATION OF COUNCIL. (a) The Artificial

Intelligence Council is administratively attached to the office of

the governor, and the office of the governor shall provide

administrative support to the council as provided by this section.

(b) The office of the governor and the council shall enter

into a memorandum of understanding detailing:

(1) the administrative support the council requires

from the office of the governor to fulfill the purposes of this

chapter;

(2) the reimbursement of administrative expenses to

the office of the governor; and

(3) any other provisions available by law to ensure

the efficient operation of the council as attached to the office of

the governor.

(c) The purpose of the council is to:

(1) ensure artificial intelligence systems are

ethical and in the public's best interest and do not harm public

safety or undermine individual freedoms by finding gaps in the

Penal Code and Chapter 82, Civil Practice and Remedies Code and

making recommendations to the Legislature.

(2) identify existing laws and regulations that impede

innovation in artificial intelligence development and recommend

appropriate reforms;

(3) analyze opportunities to improve the efficiency

and effectiveness of state government operations through the use of

artificial intelligence systems;

(4) investigate and evaluate potential instances of

regulatory capture, including undue influence by technology

companies or disproportionate burdens on smaller innovators;

(5) investigate and evaluate the influence of

technology companies on other companies and determine the existence

or use of tools or processes designed to censor competitors or

users; and

(6) offer guidance and recommendations to state

agencies including advisory opinions on the ethical and legal use

of artificial intelligence;

Sec. 553.002. COUNCIL MEMBERSHIP. (a) The council is

composed of 10 members as follows:

(1) four members of the public appointed by the

governor;

(2) two members of the public appointed by the

lieutenant governor;

(3) two members of the public appointed by the speaker

of the house of representatives;

(4) one senator appointed by the lieutenant governor

as a nonvoting member; and

(5) one member of the house of representatives

appointed by the speaker of the house of representatives as a

nonvoting member.

(b) Voting members of the council serve staggered four-year

terms, with the terms of four members expiring every two years.

(c) The governor shall appoint a chair from among the

members, and the council shall elect a vice chair from its

membership.

(d) The council may establish an advisory board composed of

individuals from the public who possess expertise directly related

to the council's functions, including technical, ethical,

regulatory, and other relevant areas.

Sec. 553.003. QUALIFICATIONS. (a) Members of the council

must be Texas residents and have knowledge or expertise in one or

more of the following areas:

(1) artificial intelligence technologies;

(2) data privacy and security;

(3) ethics in technology or law;

(4) public policy and regulation; or

(5) risk management or safety related to artificial

intelligence systems.

(b) Members must not hold an office or profit under the

state or federal government at the time of appointment.

Sec. 553.004. STAFF AND ADMINISTRATION. The council may

employ an executive director and other personnel as necessary to

perform its duties.

SUBCHAPTER B. POWERS AND DUTIES OF THE COUNCIL

Sec. 553.101. ISSUANCE OF ADVISORY OPINIONS. (a) A state

agency may request a written advisory opinion from the council

regarding the use of artificial intelligence systems in the state.

(b) The council may issue advisory opinions on state use of

artificial intelligence systems regarding:

(1) the compliance of artificial intelligence systems

with Texas law;

(2) the ethical implications of artificial

intelligence deployments in the state;

(3) data privacy and security concerns related to

artificial intelligence systems; or

(4) potential liability or legal risks associated with

the use of AI.

Sec. 553.102. RULEMAKING AUTHORITY. (a) The council may

adopt rules necessary to administer its duties under this chapter,

including:

(1) procedures for requesting advisory opinions;

(2) standards for ethical artificial intelligence

development and deployment;

(3) guidelines for evaluating the safety, privacy, and

fairness of artificial intelligence systems.

(b) The council's rules shall align with state laws on

artificial intelligence, technology, data security, and consumer

protection.

Sec. 553.103. TRAINING AND EDUCATIONAL OUTREACH. The

council shall conduct training programs for state agencies and

local governments on the ethical use of artificial intelligence

systems.

SECTION 3. Section 503.001, Business & Commerce Code is

amended by adding Subsection (c-3) to read as follows:

(c-3) This section does not apply to the training,

processing, or storage of biometric identifiers involved in machine

learning or artificial intelligence systems, unless performed for

the purpose of uniquely identifying a specific individual. If a

biometric identifier captured for the purpose of training an

artificial intelligence system is subsequently used for a

commercial purpose, the person possessing the biometric identifier

is subject to this section's provisions for the possession and

destruction of a biometric identifier and the associated penalties.

SECTION 4. Sections 541.051(b), 541.101(a), 541.102(a),

and Sec.541.104(a), Business & Commerce Code, are amended to read

as follows:

Sec. 541.051. CONSUMER'S PERSONAL DATA RIGHTS; REQUEST TO

EXERCISE RIGHTS. (a) A consumer is entitled to exercise the

consumer rights authorized by this section at any time by

submitting a request to a controller specifying the consumer rights

the consumer wishes to exercise. With respect to the processing of

personal data belonging to a known child, a parent or legal guardian

of the child may exercise the consumer rights on behalf of the

child.

(b) A controller shall comply with an authenticated

consumer request to exercise the right to:

(1) confirm whether a controller is processing the

consumer's personal data and to access the personal data;

(2) correct inaccuracies in the consumer's personal

data, taking into account the nature of the personal data and the

purposes of the processing of the consumer's personal data;

(3) delete personal data provided by or obtained about

the consumer;

(4) if the data is available in a digital format,

obtain a copy of the consumer's personal data that the consumer

previously provided to the controller in a portable and, to the

extent technically feasible, readily usable format that allows the

consumer to transmit the data to another controller without

hindrance; [ or ]

(5) know if the consumer's personal data is or will be

used in any artificial intelligence system and for what purposes;

or

([ 5 ] 6 ) opt out of the processing of the personal data

for purposes of:

(A) targeted advertising;

(B) the sale of personal data; [ or ]

(C) the sale of personal data for use in

artificial intelligence systems prior to being collected; or

([ C ] D ) profiling in furtherance of a decision

that produces a legal or similarly significant effect concerning

the consumer.

Sec. 541.101. CONTROLLER DUTIES; TRANSPARENCY. (a) A

controller:

(1) shall limit the collection of personal data to

what is adequate, relevant, and reasonably necessary in relation to

the purposes for which that personal data is processed, as

disclosed to the consumer; [ and ]

(2) for purposes of protecting the confidentiality,

integrity, and accessibility of personal data, shall establish,

implement, and maintain reasonable administrative, technical, and

physical data security practices that are appropriate to the volume

and nature of the personal data at issue . ; and

(3) for purposes of protecting the unauthorized

access, disclosure, alteration, or destruction of data collected,

stored, and processed by artificial intelligence systems, shall

establish, implement, and maintain, reasonable administrative,

technical, and physical data security practices that are

appropriate to the volume and nature of the data collected, stored,

and processed by artificial intelligence systems.

Sec.541.102. PRIVACY NOTICE. (a) A controller shall

provide consumers with a reasonably accessible and clear privacy

notice that includes:

(1) the categories of personal data processed by the

controller, including, if applicable, any sensitive data processed

by the controller;

(2) the purpose for processing personal data;

(3) how consumers may exercise their consumer rights

under Subchapter B, including the process by which a consumer may

appeal a controller's decision with regard to the consumer's

request;

(4) if applicable, the categories of personal data

that the controller shares with third parties;

(5) if applicable, the categories of third parties

with whom the controller shares personal data; [ and ]

(6) if applicable, an acknowledgement of the

collection, use, and sharing of personal data for artificial

intelligence purposes; and

([ 6 ] 7 ) a description of the methods required under

Section 541.055 through which consumers can submit requests to

exercise their consumer rights under this chapter.

Sec. 541.104. DUTIES OF PROCESSOR. (a) A processor shall

adhere to the instructions of a controller and shall assist the

controller in meeting or complying with the controller's duties or

requirements under this chapter, including:

(1) assisting the controller in responding to consumer

rights requests submitted under Section 541.051 by using

appropriate technical and organizational measures, as reasonably

practicable, taking into account the nature of processing and the

information available to the processor;

(2) assisting the controller with regard to complying

with the [ requirement ] requirements relating to the security of

processing personal data , and if applicable, the data collected,

stored, and processed by artificial intelligence systems and to the

notification of a breach of security of the processor's system

under Chapter 521, taking into account the nature of processing and

the information available to the processor; and

(3) providing necessary information to enable the

controller to conduct and document data protection assessments

under Section 541.105.

SECTION 5. Subtitle E, Title 4, Labor Code, is amended by

adding Chapter 319 to read as follows:

CHAPTER 319. TEXAS ARTIFICIAL INTELLIGENCE WORKFORCE DEVELOPMENT

GRANT PROGRAM

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 319.001. DEFINITIONS. In this chapter:

(1) "Artificial intelligence industry" means

businesses, research organizations, governmental entities, and

educational institutions engaged in the development, deployment,

or use of artificial intelligence technologies in Texas.

(2) "Commission" means the Texas Workforce

Commission.

(3) "Eligible entity" means Texas-based businesses in

the artificial intelligence industry, public school districts,

community colleges, public technical institutes, and workforce

development organizations.

(4) "Program" means the Texas Artificial Intelligence

Workforce Development Grant Program established under this

chapter.

SUBCHAPTER B. ARTIFICIAL INTELLIGENCE WORKFORCE DEVELOPMENT GRANT

PROGRAM

Sec. 319.051. ESTABLISHMENT OF GRANT PROGRAM. (a) The

commission shall establish the Texas Artificial Intelligence

Workforce Development Grant Program to:

(1) support and assist Texas-based artificial

intelligence companies in developing a skilled workforce;

(2) provide grants to local community colleges and

public high schools to implement or expand career and technical

education programs focused on artificial intelligence readiness

and skill development; and

(3) offer opportunities to retrain and reskill workers

through partnerships with the artificial intelligence industry and

workforce development programs.

(b) The program is intended to:

(1) prepare Texas workers and students for employment

in the rapidly growing artificial intelligence industry;

(2) support the creation of postsecondary programs and

certifications relevant to current artificial intelligence

opportunities;

(3) ensure that Texas maintains a competitive edge in

artificial intelligence innovation and workforce development; and

(4) address workforce gaps in artificial

intelligence-related fields, including data science,

cybersecurity, machine learning, robotics, and automation.

(c) The commission shall adopt rules necessary to implement

this subchapter.

Sec. 319.052. FEDERAL FUNDS AND GIFTS, GRANTS, AND

DONATIONS.

In addition to other money appropriated by the legislature,

for the purpose of providing artificial intelligence workforce

opportunities under the program established under this subchapter

the commission may:

(1) seek and apply for any available federal funds;

and

(2) solicit and accept gifts, grants, and donations

from any other source, public or private, as necessary to ensure

effective implementation of the program.

Sec. 319.053. ELIGIBILITY FOR GRANTS. (a) The following

entities are eligible to apply for grants under this program:

(1) Texas-based businesses engaged in the development

or deployment of artificial intelligence technologies;

(2) public school districts and charter schools

offering or seeking to offer career and technical education

programs in artificial intelligence-related fields or to update

existing curricula to address these fields;

(3) public community colleges and technical

institutes that develop artificial intelligence-related curricula

or training programs or update existing curricula or training

programs to incorporate artificial intelligence training; and

(4) workforce development organizations in

partnership with artificial intelligence companies to reskill and

retrain workers in artificial intelligence competencies.

(b) To be eligible, the entity must:

(1) submit an application to the commission in the

form and manner prescribed by the commission; and

(2) demonstrate the capacity to develop and implement

training, educational, or workforce development programs that

align with the needs of the artificial intelligence industry in

Texas and lead to knowledge, skills, and work-based experiences

that are transferable to similar employment opportunities in the

artificial intelligence industry.

Sec. 319.054. USE OF GRANTS. (a) Grants awarded under the

program may be used for:

(1) developing or expanding workforce training

programs for artificial intelligence-related skills, including but

not limited to machine learning, data analysis, software

development, and robotics;

(2) creating or enhancing career and technical

education programs in artificial intelligence for high school

students, with a focus on preparing them for careers in artificial

intelligence or related fields;

(3) providing financial support for instructors,

equipment, and technology necessary for artificial

intelligence-related workforce training;

(4) partnering with local businesses to develop

internship programs, on-the-job training opportunities, instructor

externships, and apprenticeships in the artificial intelligence

industry;

(5) funding scholarships or stipends for students,

instructors, and workers participating in artificial intelligence

training programs, particularly for individuals from underserved

or underrepresented communities; or

(6) reskilling and retraining workers displaced by

technological changes or job automation, with an emphasis on

artificial intelligence-related job roles.

(b) The commission shall prioritize funding for:

(1) initiatives that partner with rural and

underserved communities to promote artificial intelligence

education and career pathways;

(2) programs that lead to credentials of value in

artificial intelligence or related fields; and

(3) proposals that include partnerships between the

artificial intelligence industry, a public or private institution

of higher education in this state, and workforce development

organizations.

SECTION 6. Section 325.011, Government Code, is amended to

read as follows:

Sec. 325.011. CRITERIA FOR REVIEW. The commission and its

staff shall consider the following criteria in determining whether

a public need exists for the continuation of a state agency or its

advisory committees or for the performance of the functions of the

agency or its advisory committees:

(1) the efficiency and effectiveness with which the

agency or the advisory committee operates;

(2)(A) an identification of the mission, goals, and

objectives intended for the agency or advisory committee and of the

problem or need that the agency or advisory committee was intended

to address; and

(B) the extent to which the mission, goals, and

objectives have been achieved and the problem or need has been

addressed;

(3)(A) an identification of any activities of the

agency in addition to those granted by statute and of the authority

for those activities; and

(B) the extent to which those activities are

needed;

(4) an assessment of authority of the agency relating

to fees, inspections, enforcement, and penalties;

(5) whether less restrictive or alternative methods of

performing any function that the agency performs could adequately

protect or provide service to the public;

(6) the extent to which the jurisdiction of the agency

and the programs administered by the agency overlap or duplicate

those of other agencies, the extent to which the agency coordinates

with those agencies, and the extent to which the programs

administered by the agency can be consolidated with the programs of

other state agencies;

(7) the promptness and effectiveness with which the

agency addresses complaints concerning entities or other persons

affected by the agency, including an assessment of the agency's

administrative hearings process;

(8) an assessment of the agency's rulemaking process

and the extent to which the agency has encouraged participation by

the public in making its rules and decisions and the extent to which

the public participation has resulted in rules that benefit the

public;

(9) the extent to which the agency has complied with:

(A) federal and state laws and applicable rules

regarding equality of employment opportunity and the rights and

privacy of individuals; and

(B) state law and applicable rules of any state

agency regarding purchasing guidelines and programs for

historically underutilized businesses;

(10) the extent to which the agency issues and

enforces rules relating to potential conflicts of interest of its

employees;

(11) the extent to which the agency complies with

Chapters 551 and 552 and follows records management practices that

enable the agency to respond efficiently to requests for public

information;

(12) the effect of federal intervention or loss of

federal funds if the agency is abolished;

(13) the extent to which the purpose and effectiveness

of reporting requirements imposed on the agency justifies the

continuation of the requirement; [ and ]

(14) an assessment of the agency's cybersecurity

practices using confidential information available from the

Department of Information Resources or any other appropriate state

agency ; and

(15) an assessment, using information available from

the Department of Information Resources, the Attorney General, or

any other appropriate state agency, of the agency's use of

artificial intelligence systems, high-risk artificial intelligence

systems, in its operations and its oversight of the use of

artificial intelligence systems by entities or persons under the

agency's jurisdiction, and any related impact on the agency's

ability to achieve its mission, goals, and objectives .

SECTION 7. Section 2054.068(b), Government Code, is amended

to read as follows:

(b) The department shall collect from each state agency

information on the status and condition of the agency's information

technology infrastructure, including information regarding:

(1) the agency's information security program;

(2) an inventory of the agency's servers, mainframes,

cloud services, and other information technology equipment;

(3) identification of vendors that operate and manage

the agency's information technology infrastructure; [ and ]

(4) any additional related information requested by

the department ; and

(5) an evaluation of the use, or considered use, of

artificial intelligence systems and high-risk artificial

intelligence systems by each state agency.

SECTION 8. Section 2054.0965(b), Government Code, is

amended to read as follows:

Sec. 2054.0965. INFORMATION RESOURCES DEPLOYMENT REVIEW.

(b) Except as otherwise modified by rules adopted by the

department, the review must include:

(1) an inventory of the agency's major information

systems, as defined by Section 2054.008, and other operational or

logistical components related to deployment of information

resources as prescribed by the department;

(2) an inventory of the agency's major databases ,

artificial intelligence systems, and applications;

(3) a description of the agency's existing and planned

telecommunications network configuration;

(4) an analysis of how information systems,

components, databases, applications, and other information

resources have been deployed by the agency in support of:

(A) applicable achievement goals established

under Section 2056.006 and the state strategic plan adopted under

Section 2056.009;

(B) the state strategic plan for information

resources; and

(C) the agency's business objectives, mission,

and goals;

(5) agency information necessary to support the state

goals for interoperability and reuse; and

(6) confirmation by the agency of compliance with

state statutes, rules, and standards relating to information

resources.

SECTION 9. Not later than September 1, 2025, the attorney

general shall post on the attorney general's Internet website the

information and online mechanism required by Section 551.041,

Business & Commerce Code, as added by this Act.

SECTION 10. This Act takes effect September 1, 2025.