Part I.

Adds new GS 163-278.18A, prohibiting the use of artificial intelligence (AI) in political advertisements by any candidate, candidate campaign committee, political party organization, political action committee, referendum committee, individual, or other sponsor. Defines AI as the capability of computer systems or algorithms to imitate intelligent human behavior, including generative AI. Defines political ad to include communications sent by mail, text, or  appearing on a website or social media platform. Makes violations a Class 1 misdemeanor with a fine to the State Board of Elections (SBE) based on the cost to produce and distribute the AI, along with the specified limits on donations or contributions (limited solely to PACs). Subjects persons that are not affiliated with a campaign but who create AI content of a candidate designed to confuse or interfere with a candidate's campaign to a fraud or election interference conviction. Exempts material that clearly states it is AI or parody law, so long as neither qualifies as any form of harassment, including sexual harassment. Applies to political ads using AI after the act becomes law.

Part II.

Authorizes local boards of education (new GS 115C-102.13), the schools for the deaf and blind (GS 115C-150.12C), charter schools (GS 115C-218.33), regional schools (GS 115C-238.66), and laboratory schools (GS 116-239.8) to adopt a policy on student use of AI tools (any algorithm, product, software, or system that uses AI to perform tasks), that can include provisions allowing schools to block access to AI tools on the specified student devices and internet connections, and to impose disciplinary action for policy violations. Requires any such policy to include exceptions for authorized educational purposes or if required by a student’s individualized education plan (IEP).

Requires, in GS 115C-81.46, the State Board of Education (Board) to include instruction on critical thinking and civics in the standard course of study for middle school students, including the five topics identified. Makes computer science mandatory at the middle school level, and requires that such courses provide instruction on the six enumerated topics, including proper uses of AI in academic and professional setting, identifying AI, and introduction to basic cybersecurity. Appropriates $500,000 from the General Fund to the Department of Public Instruction (DPI) for 2026-27 to implement the above provisions.

Applies beginning with the 2026-27 school year.

Requires the UNC Board of Governors, in GS 116-11, and the State Board of Community Colleges (SBCC), in GS 115D-10.85, to develop a policy requiring each UNC constituent institution/Community College to develop standards for the use of AI in the classroom, to include disciplinary action, as described, for student AI misuse and annual presentation of the policy to students each year.  Applies beginning with the 2026-27 academic year.

Part III.

Enacts GS Chapter 95A, the Fair AI Hiring Act. Contains four NCGA findings. Defines ten terms, including automated employment decision tool or AEDT (any computational process, or any technology that incorporates such a process, derived in whole or in material part from machine learning, statistical modeling, data analytics, or artificial intelligence, that issues a simplified output, including a score, classification, ranking, or recommendation, that is used to substantially assist or replace the exercise of discretionary judgment by an employer or employment agency in making a covered employment decision. A tool does not qualify as an AEDT solely because it translates or transcribes text, performs arithmetic computation on manually entered data without autonomous parameter adjustment, or conducts background checks governed exclusively by the federal Fair Credit Reporting Act.); and covered employment decision (a decision to hire an individual for, or to promote an employee to, a position within this State, including a remote position performed primarily by an individual who resides within this State),  

Prohibits use of AEDT in making a covered employment decision unless three condition are met: (1) the AEDT has been subject to a bias audit conducted by an independent auditor within the 12-month period immediately preceding each use of the AEDT; (2) a summary of those results is publicly accessible as required by new Chapter 95A, and (3) the required advance notice has been provided. Provides process for how bias audit should be conducted when an AEDT is going to be used for the first time. Clarifies that the absence of statistically significant adverse impact findings in a bias audit does not constitute a defense to a claim of employment discrimination under any other provision of State or federal law. Requires disclosure of the bias audit results and written notice to individuals when AEDT is used to make a covered employment decision.  Provides for enforcement by the Attorney General against private employers with civil fines ranging from $500 per day for an initial violation to $5,000 per day for each subsequent violations within a rolling three-year period, a private civil action against a private employer, investigation and adjudication of complaints against a public employer by the State Human Resources Commission (SHRC) with judicial review available to the employee after exhausting administrative remedies. After finding an employer has committed a violation, requires that the finding be sent to OSHR to initiate personnel disciplinary proceedings against the responsible employee. Sets out allowable sanctions. After SHRC finds that a public employer has violated the independent bias audit provisions and has failed to cure the violation within 30 days, requires certifying the finding and the agency's failure to cure to the OSBM, which must then withhold from the noncompliant agency's personnel services budget allotment an amount equal to two times the reasonable cost of a conforming independent bias audit for the AEDT at issue. The withheld amount is credited back to the agency's personnel services allotment in full upon OSHR's certification to OSBM that the agency has cured the violation; if it is not cured within 180 days of the withholding, the withheld amount is transferred to the General Fund as a nonrecurring credit. Limits a single withholding to $50,000 per violation. Requires OSBM to report each withholding action taken under this statute to the NCGA and Fiscal Research Division within 30 days of taking the action and requires including a summary of all withholding actions in its annual report.

Tasks SHRC, in conjunction with the Attorney General and the Department of Administration (DOA) the enumerated standards concerning employer use of AEDT. Requires prime contractors (any person that enters directly into a personal service contract exceeding $25,000 or more including all renewals and amendments, with a State agency) to comply with the audit, disclosure, and notice requirements of Chapter 95A with respect to any AEDT used to select contract employees under a covered contract. Specifies that such use constitutes a covered employment decision. Provides for contract terms in State contracts and a complaint process through SHRC.

Contains five exemptions to the Chapter, including tools used solely by employers with fewer than 15 employees and the judicial or legislative branches of government except that the Chief Justice of the Supreme Court and the Legislative Services Officer may establish substantially equivalent provisions and requirements concerning the deployment of AEDT. Clarifies that GS Chapter 95A does supplant any of the listed State or federal civil rights laws and other local ordinance, rule, or policy. Contains severability clause.

Effective July 1, 2026, appropriates from the General Fund to the SHRC $250,000, DOJ $250,000, and DOA $100,000, to be used for the purposes described.

Part IV.

Includes using AI (any machine-based system that, for a given set of objectives, generates predictions, recommendations, or decisions influencing outcomes without direct human control) as the primary method of processing an insurance claim as an unfair claims settlement practice under GS 58-63-15. Applies to policies issued or renewed on or after October 1, 2026.

Part V.

Enacts Article 64, concerning the use of AI to GS Chapter 7A, authorizing a trial court to dismiss a case without prejudice if a party to a case in a trial court uses any form of generative artificial intelligence (defined) in a court filing or appearance, regardless of whether a deepfake (defined) or hallucination (defined) is present. Provides for refiling or an appeal of the trial court’s dismissal. Allows for sanctions and dismissal with prejudice for use of AI in any refiling when the original case was dismissed due to misuse of AI as described above. Applies to court documents filed and proceedings initiated on or after July 1, 2026.

Part VI.

Appropriates $1 million from the General Fund to the Office of State Budget and Management for 2026-27 to be allocated for implementation of this act upon application made by the affected State agency, department, or institution. Specifies that the funds are not subject to reversion.