NC S735

Establishes the North Carolina Artificial Intelligence Innovation Trust Fund as a nonreverting fund under the Secretary of Commerce to provide grants to companies developing AI models and support AI entrepreneurship programs, with $750,000 appropriated for FY 2025-2026

Prohibits fund recipients from developing AI for mass surveillance, unlawful social scoring, discriminatory profiling, or generating deceptive content for fraud or electoral interference

Imposes extensive requirements on developers of "covered models" (high-risk AI systems identified by the Secretary), including mandatory safety and security protocols, cybersecurity protections, full shutdown capabilities, annual third-party compliance audits, and 72-hour incident reporting to the Attorney General

Authorizes civil penalties of 5% of training compute costs for first violations causing harm (15% for subsequent violations), with enforcement effective January 1, 2026, and grants the Attorney General authority to seek injunctive relief and damages

Requires computing cluster operators to collect customer identifying information and assess whether customers intend to train covered models, with records retained for seven years