Tennessee passed companion legislation covering licensed mental health professionals the same week. The trajectory is clear.

AI disclosure in engagement letters is going to be legally required across most states within 18 to 24 months. The only question is whether your firm is ahead of that curve or scrambling to update signed agreements after a statute takes effect.

This is your window to get ahead of it.

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Why "Inform in Writing" Changes Your Engagement Letter

Before AI, engagement letters were mostly about scope, fees, and liability. Your client signed and you both moved on. The letter lived in a filing cabinet unless something went wrong.

The "inform in writing" clause in NH SB 640 adds a new category: AI use as a documented element of service delivery. Not just what you're doing for the client, but how you're doing it. Specifically: whether AI is involved.

That's a structural change. It means the engagement letter is no longer just a scope document — it's also a technology disclosure document. And once that's true, it needs to be kept current.

Here's what that means in practice:

• If AI is involved in your service delivery and your current engagement letter says nothing about it, you're undisclosed today (even if not yet required to disclose)
• If NH SB 640 passes and becomes law — or if your state passes companion legislation — the absence of disclosure becomes a violation
• If something goes wrong and a client later claims they didn't know AI was involved in their matter, your engagement letter is the first document both sides will look at

The cost of adding disclosure language now: one revision to your engagement letter template. The cost of not adding it: either compliance scramble when a law passes, or exposure when something goes sideways.

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What the Disclosure Needs to Cover

Think of engagement letter AI disclosure in three layers.

Layer 1: Disclosure that AI is used

The baseline. Clients need to know that AI tools may be part of how your firm delivers services. This doesn't mean listing every tool. It means acknowledging AI as a category of technology in your workflow.

Layer 2: Professional oversight statement

The critical modifier that separates legitimate professional use from automation without accountability. Every AI output your firm produces is reviewed, verified, and validated by a licensed professional before it's delivered. This is what justifies continued professional liability coverage and what distinguishes your firm from a chatbot.

Layer 3: Data handling commitment

What happens to client data when it enters an AI tool. This matters more to most clients than the disclosure itself. They want to know their financial statements, case files, and business strategy aren't being used to train AI models or shared beyond the engagement.

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Sample Engagement Letter Language

The following language is a starting point. Have your firm's attorney review and adapt it to your jurisdiction and context before using it in signed agreements.

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AI Tools and Technology — Suggested Engagement Letter Clause

Use of Technology in Service Delivery

[Firm Name] uses technology tools, including artificial intelligence (AI) tools, in delivering professional services. These tools may assist in research, document preparation, data analysis, drafting, and other service delivery functions.

All work product delivered to you has been reviewed, validated, and approved by a licensed professional at [Firm Name] before delivery. We do not deliver AI-generated content without professional review and accountability.

Client Data and Confidentiality

Client information shared with [Firm Name] is handled in accordance with our confidentiality obligations. When AI tools are used in your engagement, we use only tools that maintain appropriate data processing protections and do not use client-identifiable information to train AI models. Client data is not uploaded to public AI services.

If you have questions about the specific tools used in your engagement or wish to discuss how AI is used in your matter, please contact [Name/Role].

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This is minimum viable disclosure. It accomplishes three things: it puts the client on notice that AI is used, it makes the professional oversight commitment explicit, and it addresses the data concern without requiring you to name specific tools.

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What NOT to Include

A few things that seem reasonable but create problems:

Don't name specific tools in the letter. "We use OpenAI's ChatGPT and Microsoft Copilot" sounds transparent, but it creates a promise you may not be able to keep. If you switch tools, upgrade to a different version, or a tool changes its data handling policy, your engagement letter is now inaccurate. Reference a separate technology policy document instead, which you can update without re-executing signed agreements.

Don't create an opt-out you can't honor. "You may opt out of AI use in your matter" sounds client-friendly until a client says yes and then you need to track it across every workflow. If you want to offer an opt-out, think through the operational reality first.

Don't promise "no AI" unless you mean it. If the opt-out is available but your team uses AI for internal research, spell out the line clearly: AI in client-deliverable work, AI in internal research, or all AI. Vague promises create liability when claims arise.

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The Regulatory Calendar

NH SB 640 is in the House as of April 2026. If it passes and Governor Sununu signs it, New Hampshire licensed professionals will need written AI disclosure in client agreements.

Tennessee's companion legislation passed in March 2026 covering licensed mental health professionals specifically.

Oregon SB 1546 (chatbot AI, awaiting Governor Kotek's signature as of April 2026) applies to consumer-facing AI chat tools and creates a private right of action for violations — different scope than SB 640, but reinforcing the same direction.

The pattern is bipartisan. The Oregon House vote was 52-0. The Tennessee bills passed with broad support. State legislatures are moving toward AI transparency requirements for licensed professionals, and they're moving faster than most firm owners expect.

The conservative planning assumption: AI disclosure in engagement letters will be legally required in multiple states by 2027-2028. If you serve clients in multiple states, adding disclosure language now keeps you compliant across the board as requirements roll in — rather than state-by-state updates to your engagement letter template.

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The Practical Action This Week

Pull out your current engagement letter template. Read it. Ask: if a client asked you right now whether their matter involved AI, and they then read your engagement letter — would they find any answer there?

If the answer is no, that's the gap to close.

Update the template with a clause covering the three layers above. Review it with your attorney. Send it to your clients as part of your next engagement or at the next renewal.

You don't need to do this because it's legally required today. You need to do it because it will be required, it's easy to do now, and it demonstrates the kind of professional transparency that the best professional services firms are building as a standard — not a compliance checkbox.

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The Crossing Co covers AI strategy for professional services firm owners — accounting, law, consulting, staffing, and marketing agencies. Subscribe to The Crossing Report for weekly intelligence on what's changing and what to do about it.