The United States Court of Appeals for the Second Circuit ruled on November 13, 2026, that New York's issuance of commercial driver's licenses (CDLs) to non-domiciled individuals complies with federal regulations. This decision affects the state's transportation funding and clarifies the requirements for issuing licenses to noncitizens.

The case, State of New York v. U.S. Department of Transportation (Docket No. 26-1097), arose after the Federal Motor Carrier Safety Administration (FMCSA) determined that New York was not in substantial compliance with federal regulations governing CDLs. The FMCSA had withheld four percent of New York's federal-aid highway funding for the 2027 fiscal year, asserting that the state failed to match the validity periods of non-domiciled licenses with the expiration dates of the drivers’ lawful presence documents.

New York challenged this determination, arguing that the FMCSA's requirements were arbitrary and not supported by the text of the regulations. The court's ruling is significant as it underscores the importance of clear regulatory language and the need for federal agencies to provide fair notice of compliance requirements.

Background

The parties involved in this case are the State of New York and the U.S. Department of Transportation, specifically the FMCSA. The dispute centers around the issuance of non-domiciled CDLs to individuals who are not U.S. citizens but are legally present in the country. New York has issued these licenses to individuals such as DACA recipients, asylees, and refugees.

In 2025, the FMCSA began reviewing New York's licensing program and found that the state was not compliant with federal regulations. The agency claimed that New York had issued non-domiciled licenses that extended beyond the expiration of the drivers’ lawful presence documents. As a result, the FMCSA threatened to withhold federal funding unless New York took corrective actions.

New York argued that the FMCSA's interpretation of the regulations was incorrect and that there was no explicit requirement to match the expiration dates. After a series of communications and a preliminary determination by the FMCSA, New York filed a petition for review in the Second Circuit.

The Ruling

The Second Circuit ruled in favor of New York, stating that the FMCSA's final determination was arbitrary and capricious. The court found that the federal regulations did not include a requirement for states to match the validity periods of non-domiciled licenses with the expiration dates of lawful presence documents. The opinion stated, "FMCSA concedes that the plain text of the regulations does not contain an expiration-matching requirement, and regulatory structure and history reinforces that conclusion."

The ruling emphasized that the FMCSA's actions were not supported by the regulatory text, and the agency could not withhold funding based on a non-existent requirement. The court granted New York's petition and set aside the FMCSA's final determination, effectively reinstating the state's licensing practices.

Impact

This ruling has significant implications for New York and potentially for other states with similar licensing practices. By affirming that the FMCSA cannot impose additional requirements not clearly stated in the regulations, the court has reinforced the need for federal agencies to adhere to established regulatory frameworks. This decision may also influence how federal funding is allocated to states based on compliance with regulations.

Furthermore, the ruling may set a precedent for future cases involving regulatory interpretations by federal agencies. It highlights the importance of clear communication and the need for agencies to provide explicit guidelines for compliance.

What's Next

As of now, there is no indication that the ruling will be appealed. However, the FMCSA may consider revising its regulations to clarify the requirements for issuing non-domiciled CDLs. Additionally, related cases could arise if other states face similar compliance challenges with federal regulations.