A federal appeals court in the United States has overturned the Trump administration's decision to withhold approximately $73.5 million in federal highway funding from New York over a dispute involving commercial driver's licences issued to non-domiciled individuals.
In a decision issued on November 13, 2026, the US Court of Appeals for the Second Circuit ruled that the Federal Motor Carrier Safety Administration (FMCSA) had acted contrary to law when it determined that New York failed to comply with federal commercial driver's licensing regulations.
Editorial Insight
Key Highlights
Important points readers should notice.
The Second US Circuit Court of Appeals issued its judgment on November 13, 2026.
The court overturned a federal highway funding penalty of $73,502,543 against New York.
The penalty represented four per cent of the state's federal-aid highway funding for fiscal year 2027.
The dispute involved commercial driver's licences issued to non-domiciled individuals.
The court's account of the FMCSA audit identified 101 non-compliant records among 200 records examined.
The earlier federal regulations did not explicitly establish the expiration-date matching requirement used to justify the penalty.
The funding penalty amounted to $73,502,543, representing four per cent of the state's federal-aid highway funding for the 2027 fiscal year.
The dispute centred on New York's issuance of non-domiciled commercial driver's licences to eligible individuals who were lawfully present in the United States. Under the regulations applicable during the relevant period, New York issued these licences with standard validity periods of five years after initial issuance and eight years after renewal.
Federal transportation authorities argued that the validity periods should not extend beyond the expiration dates of the documents establishing an applicant's lawful presence in the country.
Editorial Analysis
Why This Matters
The ruling is significant for the relationship between federal regulatory authorities and state governments in the United States. It reinforces the principle that federal agencies must act within established legal and regulatory frameworks when imposing financial penalties on states. For New York, the decision removes the specific $73.5 million funding penalty imposed through the challenged FMCSA determination. The case also highlights the importance of clearly defined commercial driver's licensing requirements, particularly where immigration documentation and transportation safety regulations intersect. The judgment does not prevent federal authorities from introducing or enforcing valid licensing standards through the appropriate legal procedures.
Following an audit of 200 non-domiciled commercial driver's licence records, the FMCSA identified 101 records in which licences remained valid beyond the expiration dates shown on the relevant lawful-presence documents, according to the court's account of the agency's findings.
The agency subsequently determined that New York was substantially non-compliant with federal licensing requirements and demanded corrective action, including the withdrawal of licences considered non-compliant.
New York challenged the determination, arguing that the federal regulations in force during the relevant period did not explicitly require states to match commercial driver's licence expiration dates with the expiration dates of immigration-related documents.
The Second Circuit agreed with New York. It found that the earlier regulatory framework did not contain the specific expiration-date matching requirement relied upon by the federal agency.
The court concluded that the FMCSA could not withhold federal funding on the basis of a regulatory obligation that had not been established under the rules applicable at the time.
It therefore granted New York's petition and set aside the agency's final determination.
The judgment also addressed the regulatory history surrounding the dispute. The court recognised that federal authorities could introduce new licensing requirements through the proper rulemaking process, but could not retrospectively penalise a state for failing to follow a requirement that did not previously exist.
Judge Schwartz separately concurred in the judgment while expressing disagreement with parts of the majority's additional reasoning.
The decision overturns the specific funding determination challenged by New York. It does not remove the federal government's authority to enforce valid commercial driver's licensing requirements.
