Court Says DOT Illegally Withheld $74 Million In New York Highway Funds

A federal appeals court in New York ruled Friday that the U.S. Department of Transportation illegally withheld nearly $74 million in highway funds from New York after the state refused to cancel thousands of immigrants' commercial driver licenses.^[1]

In a unanimous decision, a three-judge panel of the 2nd U.S. Circuit Court of Appeals found that the Federal Motor Carrier Safety Administration, the DOT agency that oversees commercial trucking, could not penalize New York for failing to revoke about 33,000 licenses because the federal cancellation rules were not in effect when those licenses were issued.^[1]

The dispute grew out of Transportation Secretary Sean Duffy's post-2025 crackdown on what the administration called fraud and safety risks in the commercial driver licensing system, an effort that especially targeted licenses held by immigrants and non-U.S.-domiciled drivers.^[1] As part of that campaign, federal regulators pushed states to cancel licenses they deemed improperly issued and to remove drivers who failed new English-proficiency checks, ultimately taking about 26,000 drivers off the road for language-test failures and canceling roughly 30,000 commercial licenses nationwide as invalid.^[1]

New York resisted a federal demand to retroactively cancel tens of thousands of commercial licenses held by immigrants on the ground that, when the state issued those licenses, neither federal safety rules nor state law required the cancellations Washington later insisted upon.^[1] FMCSA responded by declaring New York out of compliance and triggering a penalty that froze nearly $74 million in federal highway money, prompting the state to sue and argue that the department was imposing rules after the fact.^[1]

The ruling lands in the middle of an already strained trucking labor market that leans heavily on foreign-born workers, who make up about 20% of U.S. truck drivers, and on non-domiciled commercial license holders, who account for about 5% of all CDLs, or around 200,000 drivers. The court's decision limits how far DOT can go in pressuring states to police immigrant drivers with retroactive penalties, even as Duffy's broader enforcement drive has already sidelined tens of thousands of drivers and sharpened political fights over how immigration, highway safety, and federal power intersect in the nation's freight industry.

1. PBS News