A federal appeals court on Friday set aside the decision that withheld $73.5 million in highway funding from New York over the expiration dates on some commercial driver’s licenses. The ruling removes the federal agency determination behind the penalty, which represented 4% of New York’s federal highway and transportation funding for fiscal 2027.
The U.S. Court of Appeals for the Second Circuit said the rules in force during the period under review didn’t require New York to make certain commercial licenses expire on the same date as the documents drivers used to show lawful presence in the United States. The court granted New York’s petition and set aside the Federal Motor Carrier Safety Administration’s final determination.
What triggered the funding penalty
The case concerns non-domiciled commercial driver’s licenses. These are the credentials at issue for drivers who aren’t domiciled in the United States. The dispute centered on how long the license could remain valid under the applicable rules. The opinion says New York typically issued these licenses for five years and renewed them for eight. It records about 32,600 non-domiciled license and learner’s permit holders in July 2025, roughly 7% of the state’s active commercial licenses and permits.
The Transportation Department’s April 16 announcement said 53% of the license records sampled failed its audit. The department said the state had issued licenses that remained valid beyond the expiration date on the drivers’ supporting immigration documents. New York challenged the penalty, saying the federal agency had changed its interpretation and that drivers had been legally present when licensed.
The judges focused on the wording of the regulations that applied at the time. The agency acknowledged that those rules didn’t expressly say that the expiration dates had to match. The court found that the regulations’ structure and history supported New York’s reading.
What the decision covers
The court reviewed a specific compliance determination and funding penalty. It did not set a date for federal officials to disburse the money or decide who can qualify for a license under later federal rules. Drivers seeking to renew a license still need to check the rules in effect now.
New York’s attorney general said the federal highway funds support road maintenance, safety improvements and infrastructure upgrades. In April, the state also said the department had threatened to withhold about $147 million annually in future years. Friday’s ruling sets aside the agency’s April determination, the action at the center of this case.
