Trump Administration Loses New York Driver’s License Funding Case, What the $73.5M Ruling Means

A federal appeals court ruled on November 13, 2026, that the Trump administration could not withhold $73.5 million in highway funding from New York over commercial driver’s licenses issued to certain noncitizen drivers. The Second Circuit set aside the Federal Motor Carrier Safety Administration’s (FMCSA) April 16 finding that New York was substantially noncompliant with federal licensing rules.

The ruling is a major win for New York, but it has limits. It did not automatically reinstate revoked commercial driver’s licenses (CDLs), open the door to new applications, or invalidate the separate 2026 federal rule that now restricts who can get a non-domiciled CDL. It decides one question: whether FMCSA could penalize New York using the older regulations that applied to its past licensing transactions.

For truck drivers, school bus operators, employers and New York residents, the practical question is what changes now and which restrictions remain in force.

New York $73.5 Million CDL Ruling: Key Facts

Question	Answer
Court	U.S. Court of Appeals for the Second Circuit
Case	State of New York v. U.S. Department of Transportation
Docket number	26-1097
Decision date	November 13, 2026
Funding at issue	$73,502,543
Additional threatened cut	About $147 million per year
Agency	Federal Motor Carrier Safety Administration (FMCSA)
Credentials at issue	Non-domiciled CDLs and commercial learner’s permits
Outcome	New York’s petition granted; FMCSA’s April 16 determination set aside
Are canceled CDLs automatically reinstated?	No
Is the 2026 federal CDL rule overturned?	No, the court did not decide that question
Can the government seek further review?	Yes, through rehearing or a Supreme Court petition

Primary source: Second Circuit opinion, November 13, 2026

What Did the Second Circuit Rule on November 13?

A three-judge panel held that FMCSA could not penalize New York for violating an expiration-date requirement that did not appear in the regulations governing the licensing transactions under review.

Circuit Judge Alison J. Nathan wrote the majority opinion, joined by Judge Sarah A. L. Merriam. Judge Maria A. Schwartz agreed with the result but wrote separately.

The court explained that the older regulations required non-domiciled CDL applicants to present specified, unexpired immigration or work authorization documents when they applied. They did not expressly require the resulting license to expire on the same date as those documents. The judges concluded FMCSA had treated its own reading of the rules as a legal obligation that the text did not impose.

The court granted New York’s petition and set aside FMCSA’s April 16, 2026 final determination of substantial noncompliance.

The ruling invalidates the specific federal determination behind the $73.5 million penalty. It does not strip FMCSA of its power to enforce valid licensing and safety requirements.

Why Did the Trump Administration Withhold $73.5 Million From New York?

The dispute began with a federal review of New York’s commercial licensing system in July 2025. FMCSA examined 200 records involving non-domiciled CDLs and learner’s permits and reported that:

• 101 records showed licenses or permits with expiration dates that ran past the expiration of the supporting lawful-presence documents.
• Six more records initially raised questions about whether immigration documents had been properly verified.
• New York generally issued non-domiciled CDLs for five years at initial issuance and eight years at renewal.

New York disputed the agency’s reading of the rules. After reviewing more records, FMCSA acknowledged that documents supported lawful-presence verification in five of the six additional cases, but it continued to object to the state’s licensing practices.

On April 16, 2026, FMCSA issued a final determination finding New York substantially noncompliant. The agency said it would withhold four percent of the state’s funding under two federal highway programs starting in fiscal year 2027, which came to exactly $73,502,543. It also warned that continued noncompliance could trigger an eight percent cut in later years, estimated at $147,005,086 per year.

New York Attorney General Letitia James and Governor Kathy Hochul challenged the decision, arguing the federal government was applying a new interpretation to licensing transactions that were governed by older regulations. The case went straight to the Second Circuit, which is the required path for challenges to this type of federal agency action under the Hobbs Act (28 U.S.C. §§ 2341-2351). Oral argument took place on September 28.

Source: FMCSA’s April 16, 2026 final determination

What Law Lets the Federal Government Withhold Highway Funds Over CDL Violations?

Federal law, 49 U.S.C. § 31314, directs the Secretary of Transportation to withhold a percentage of a state’s federal-aid highway funds if the state is not substantially complying with the commercial driver’s license requirements. The statute sets the withholding at four percent for the first fiscal year of noncompliance and eight percent for each later year. Those percentages match the amounts in this case. The money comes from the National Highway Performance Program and the Surface Transportation Block Grant Program.

The CDL standards themselves are in 49 C.F.R. Part 383. That part sets the rules for issuing CDLs, including the provisions on non-domiciled applicants and on states’ procedures for issuing them.

What Legal Standards Apply When a Court Reviews an Agency Decision?

A court reviewing a final agency action generally asks whether it was arbitrary, capricious, an abuse of discretion or not in accordance with law (the Administrative Procedure Act standard, 5 U.S.C. § 706(2)). Courts also decide for themselves what a statute means and do not defer to an agency’s reading under Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), while agency readings of their own ambiguous regulations get limited deference under Kisor v. Wilkie, 588 U.S. 558 (2019).

Another principle matters here. An agency generally cannot punish a regulated party for violating a requirement the regulation did not give fair notice of. The Supreme Court discussed fair notice in Christopher v. SmithKline Beecham Corp., 567 U.S. 142 (2012), and FCC v. Fox Television Stations, Inc., 567 U.S. 239 (2012). The Second Circuit’s reasoning, which rests on the text and history of the older rules, fits within that body of law, though readers should consult the opinion for the exact standards the court applied.

What Is a Non-Domiciled Commercial Driver’s License?

A non-domiciled CDL is a commercial driving credential issued under federal rules to certain applicants who are not domiciled in the issuing state. It allows qualifying commercial driving, such as operating trucks and buses, and is different from an ordinary passenger license. Historically, eligible foreign-domiciled applicants could show lawful presence using certain immigration documents, including Employment Authorization Documents (EADs).

According to the Second Circuit’s opinion, New York had about 32,600 non-domiciled CDL and commercial learner’s permit holders in July 2025, about seven percent of its active commercial credentials. The court did not individually review or approve each of those credentials. The number simply shows how many drivers the challenged federal position touched.

Does the Ruling Make Immigrant Commercial Driver’s Licenses Valid Again?

Not automatically. This is the most important point for individual drivers.

The November 13 ruling addresses whether FMCSA lawfully penalized New York under the regulations that applied to the earlier licensing transactions. It does not order the DMV to reinstate every suspended, downgraded or canceled license. It also does not stop authorities from enforcing separate requirements on immigration eligibility, medical certification, driver qualifications or safety violations.

Your situation	What it means
Your New York CDL is still valid	The ruling does not require you to take action, but you must keep meeting licensing and work-authorization requirements
Your CDL was canceled or downgraded	The ruling does not automatically reactivate it; confirm your actual status with the DMV
You are applying for a new CDL	The March 2026 federal eligibility rules remain relevant
Your immigration work authorization has expired	Having a CDL does not prove lawful status or permission to work

A commercial driver’s license and federal employment authorization are separate legal matters. Employers also have their own obligations to verify employment eligibility (8 U.S.C. § 1324a).

Did the Court Overturn Trump’s March 2026 CDL Restrictions?

No. FMCSA issued a final rule in February 2026, effective March 16, 2026, that sharply restricted non-domiciled CDL eligibility. Under that rule, the principal eligible foreign-domiciled nonimmigrant categories are:

Classification	General description
H-2A	Temporary agricultural workers
H-2B	Temporary non-agricultural workers
E-2	Treaty investors

For foreign-domiciled applicants, holding an EAD is no longer enough under the new rule. Many asylum applicants, refugees and Deferred Action for Childhood Arrivals (DACA) recipients may be ineligible for a new non-domiciled CDL under the current framework even if they have permission to work. The rule also sets shorter validity periods, including a one-year maximum for certain qualifying credentials.

The Second Circuit did not decide whether the newer regulations are lawful. The 2026 final rule is being challenged in separate litigation. An earlier 2025 interim rule was stayed, but the D.C. Circuit declined to stay the newer final rule in May 2026.

For the broader challenge, see FMCSA’s Non-Domiciled CDL Crackdown Is Facing Multiple Lawsuits Here Is What Affected Drivers Need to Know.

Official guidance: FMCSA’s 2026 non-domiciled CDL rule FAQs

Why Did the Court Reject FMCSA’s Interpretation?

The judges found a gap in the text of the original regulations. Under the older rules, non-domiciled applicants generally had to present appropriate, unexpired documentation when applying or renewing. But the rules did not clearly require states to match the credential’s expiration to the expiration of that documentation. The government argued such a requirement followed logically from the duty to confirm lawful presence, and the court rejected that reasoning.

An EAD Is Not the Same as Immigration Status

The opinion draws a distinction that many reports miss. An EAD shows permission to work under immigration rules, and its expiration date does not necessarily mark the date lawful presence ends. Employment authorization and immigration status can follow different rules, extension periods and termination events. The court also explained that a foreign passport’s expiration date does not necessarily set how long the holder may lawfully remain in the United States. That weakened the administration’s claim that matching a CDL to those dates was an obvious requirement of the old rules.

FMCSA Had Previously Declined to Adopt a Similar Rule

The majority also reviewed the regulatory history. During earlier rulemaking, states had suggested incorporating REAL ID requirements that would tie license validity to immigration authorization, and FMCSA did not adopt that approach for the older CDL regulations. The court treated that history as relevant because the agency later tried to enforce an expiration-matching requirement it had not clearly written into the rule. The court recognized that FMCSA can adopt new requirements through proper rulemaking, which it later did, but it could not punish past conduct using a requirement that did not yet exist.

What Did Judge Schwartz Say in Her Separate Opinion?

All three judges agreed the FMCSA determination should be set aside. Judge Schwartz concurred only in the judgment. She agreed the older regulations lacked an expiration-matching requirement, but she disagreed with the majority’s added discussion of regulatory history and structure. In her view the plain text already resolved the case, and she expressed concern that the broader discussion could complicate other pending litigation.

This does not change New York’s win. It does matter for how much of the court’s reasoning could influence future challenges to commercial licensing rules.

Will New York Get Its $73.5 Million Back Immediately?

The ruling removes the final noncompliance determination behind the $73.5 million penalty, but the opinion does not set a date for the federal government to release the money. The withholding involved federal highway funds for fiscal year 2027, which began October 1, 2026, under two programs:

• National Highway Performance Program: support for eligible highway-system improvements and related infrastructure.
• Surface Transportation Block Grant Program: assistance for eligible road, bridge and other transportation projects.

These are public transportation funds, not payments owed to individual drivers. The ruling gives New York a strong legal basis to have the restriction lifted, but the steps to carry it out may need to happen separately. In federal appeals, the court’s mandate generally issues seven days after the time to petition for rehearing expires (Federal Rule of Appellate Procedure 41(b)), so the timing of any formal implementation depends on what the government does next.

The ruling also undercuts the threatened future cuts that flowed from the invalidated determination. It does not bar every possible future enforcement action based on different or later valid requirements.

What Happens Next in the New York Highway Funding Case?

The November 13 decision resolves New York’s challenge to the April 16 determination at the panel level. The federal government has several options:

• Petition for rehearing or rehearing en banc. Under Federal Rule of Appellate Procedure 40, the deadline is generally 45 days after judgment when the United States is a party.
• Petition for certiorari. A petition to the U.S. Supreme Court is generally due within 90 days after judgment or denial of rehearing (Supreme Court Rule 13).
• New rulemaking or new enforcement. FMCSA can pursue compliance through valid regulations, including the 2026 final rule.

As of November 14, 2026, no later ruling reversing the decision has been identified. The separate challenges to the 2026 non-domiciled CDL rule could ultimately decide eligibility for a much broader group of commercial drivers nationwide, and this ruling does not decide them.

How Could the Decision Affect Trucking Companies and School Bus Drivers?

New York officials argued that forcing the state to cancel thousands of commercial credentials could disrupt transportation services. Trucking companies, school transportation operators and businesses that rely on commercial drivers could be affected, and school bus staffing drew particular attention because large-scale cancellations could leave districts short of drivers.

The ruling reduces the legal force of the federal determination used to demand those cancellations. It does not guarantee that every affected worker will stay licensed or employed. Employers must still confirm that drivers hold valid commercial driving privileges, meet safety standards under the Federal Motor Carrier Safety Regulations and have any required employment authorization.

Could Similar CDL Cases in California or Other States Benefit?

Possibly, but not automatically. Other states have faced federal scrutiny over their non-domiciled CDL programs, and some have changed their own laws. The Second Circuit’s reasoning could be relevant where a dispute involves the same older regulations and the same expiration-date issue. A Second Circuit decision, however, does not automatically undo another state’s penalty or resolve proceedings in other circuits. California, for example, has pursued its own case in the D.C. Circuit.

For earlier coverage, see California DMV CDL Cancellation Lawsuit, 20,000 Truck Drivers Face Job Loss Over DMV’s Own Errors—What You Need to Know Before January 5. States can also set their own limits within federal rules, as in Idaho Ends Its Non-Domiciled CDL Program, What Every Truck Driver Needs to Know Before July 1, 2026. Neither state’s licensing status changes because New York won.

What Should New York CDL Holders Do After the November 13 Ruling?

1. Verify your license status. Use the New York DMV’s official services instead of assuming a court win made your credential active.
2. Review any DMV notice. Check whether your license has been suspended, downgraded, canceled or restricted, and note the stated reason.
3. Keep your documents. Save your CDL, immigration and work authorization documents, DMV letters and earlier application records.
4. Check the rules for your transaction. A newly issued, renewed, transferred or upgraded license may be covered by different requirements than an older credential.
5. Get advice if your status is unclear. A licensing attorney or immigration attorney can look at your specific situation.

The New York DMV offers an official driving record service that shows commercial license status, restrictions and suspensions.

Do not drive a commercial vehicle if your CDL privileges are suspended, canceled or otherwise invalid because you heard New York won this case.

Frequently Asked Questions About the New York CDL Funding Ruling

Did New York win its lawsuit against the U.S. Department of Transportation?

Yes. On November 13, 2026, the Second Circuit granted New York’s petition and set aside FMCSA’s April 16 determination behind the $73.5 million penalty.

Why did the court rule against FMCSA?

The court held that the older federal regulations did not contain the expiration-date matching requirement FMCSA used to penalize New York.

Are all of New York’s roughly 32,600 non-domiciled CDL holders safe from cancellation?

No. The court did not review each license or bar all future cancellations. Individual status still depends on the rules that apply to each credential.

Can DACA recipients get a New York non-domiciled CDL after this ruling?

The decision does not restore eligibility under the March 2026 federal rule. Eligibility depends on the current regulations and your circumstances.

Does the ruling allow asylum applicants to apply for commercial licenses again?

Not automatically. The newer federal rule has separate immigration classification requirements, and the Second Circuit did not overturn it.

Did the court say immigration documents never have to match CDL expiration dates?

No. It held that the older regulations lacked that requirement. Newer regulations impose different expiration rules.

Does a valid CDL prove someone can legally work in the United States?

No. Commercial driving privileges and federal work authorization are separate legal requirements.

Is New York receiving $73.5 million in refunds for drivers?

No. The money is public highway and transportation funding. There is no individual settlement fund or claim form for drivers.

Can the Trump administration appeal the November 13 decision?

Yes. It can seek rehearing or file a petition for certiorari with the Supreme Court. Whether it will has not been reported.

Does the ruling apply to California, Texas and Florida?

Not automatically. It may offer useful reasoning in disputes over the same older regulations, but each state’s practices and court proceedings stand on their own.

Which law allows the government to withhold highway funds over CDL problems?

49 U.S.C. § 31314, which provides for a four percent withholding in the first year of noncompliance and eight percent after that.

Official Sources and Court Records

1. Second Circuit, State of New York v. U.S. Department of Transportation, No. 26-1097 (Nov. 13, 2026)
2. FMCSA, April 16, 2026 Final Determination of Substantial Noncompliance
3. New York Attorney General, April 24, 2026 Lawsuit Announcement
4. FMCSA, 2026 Non-Domiciled CDL Final Rule
5. FMCSA, Non-Domiciled CDL Final Rule FAQs
6. New York DMV, Obtain Your Driving Record
7. 49 U.S.C. § 31314, Withholding Amounts for State Noncompliance

Bottom Line

The Second Circuit’s November 13 ruling stops the Trump administration from relying on its April 16 determination to withhold $73.5 million in highway funding from New York. The court concluded that FMCSA tried to enforce an expiration-date requirement that was missing from the older federal licensing regulations. But the decision does not restore canceled commercial licenses and does not overturn the stricter 2026 federal CDL rule. New York drivers should check the real status of their credentials and the rules for any new application or renewal. The government can still seek rehearing or Supreme Court review.

This article provides general legal information, not legal advice. Commercial licensing rules, immigration classifications and court proceedings can change. Drivers facing a license suspension, cancellation or immigration issue should seek qualified legal advice. Last fact-checked: November 14, 2026. Written by Israr Ahmad, a legal content researcher, not an attorney.

By Israr Ahmad, Legal Content Researcher | Updated: November 14, 2026 | Immigration Law and Transportation Regulation | Legal News