Transportation Department Funding Threat to New York Over Noncitizen Commercial Licenses

On December 12, 2025, the Transportation Department warned New York that the state could lose about $73 million in federal highway funds unless it stops issuing certain non-domiciled commercial driver’s licenses (CDLs) and reforms its process. Federal officials say an audit found New York routinely issued non-domiciled CDLs in ways that could leave the licenses valid well after a driver’s immigration or work authorization had expired. New York’s Department of Motor Vehicles (DMV) disputes that characterization and says the state is complying with the federal rules that govern commercial licensing.

The showdown matters beyond New York. It blends transportation safety oversight, federal grant leverage, and immigration politics, and it tests how far a federal agency can go when it believes a state licensing program is out of compliance with federal commercial driver standards. It also shows how quickly a technical dispute becomes high-stakes when the Transportation Department attaches a specific dollar figure and a short deadline.

Background on the Transportation Department’s funding threat

The Transportation Department’s warning is tied to an audit conducted by the Federal Motor Carrier Safety Administration (FMCSA), the federal agency that oversees commercial motor vehicle safety. In public statements and in reporting by Reuters and the Associated Press, federal officials said the FMCSA reviewed a sample of non-domiciled CDLs issued by New York and concluded that a significant share were improperly issued.

Transportation Secretary Sean Duffy described the central allegation as a mismatch between immigration documents and license duration. In his account, New York issued an eight-year CDL even when an applicant’s work authorization was valid for a far shorter period, such as 30 days, 60 days, or one year. The Transportation Department argues that federal CDL rules require the license term to align with lawful presence or work authorization when the documentation is temporary.

Federal officials also raised a broader documentation concern. In coverage of the dispute, federal officials said New York could not prove it had verified lawful status for a much larger pool of active non-domiciled CDLs. Reporting has cited roughly 32,000 active non-domiciled commercial licenses tied to New York, with federal officials asserting that the state could not demonstrate verification for that larger population to their satisfaction.

Based on those findings, the Transportation Department gave New York 30 days to come into compliance or face the potential withholding of approximately $73 million in federal highway funding. The ultimatum is framed as enforcement of existing federal commercial licensing standards linked to federal transportation programs, not as a new law passed by Congress.

What non-domiciled CDLs are and why they draw federal scrutiny

A non-domiciled CDL is not simply a special “immigrant license.” It is a recognized category within federal commercial driver licensing rules for drivers who are not domiciled in the issuing state. States administer CDLs, but they do so within a federal framework that sets baseline standards for eligibility, testing, and recordkeeping.

In practice, non-domiciled CDLs can be issued to some non-U.S. citizens who meet eligibility requirements, provide federally recognized documents, and pass the same commercial testing standards as other CDL holders. The dispute here is not over whether non-domiciled CDLs can exist. The dispute is over how long they remain valid and what documentation must be retained to prove eligibility and verification.

The Transportation Department’s argument is that when lawful presence or work authorization is temporary, a CDL should not automatically be issued with a long default term that outlasts that authorization. In the Transportation Department’s framing, a state license that remains valid after authorization expires undermines the purpose of eligibility verification in a safety-sensitive occupation, because the credential itself communicates ongoing eligibility to operate commercial vehicles.

New York’s position is that it already operates within federal requirements. The state’s response suggests that the fight is less about the concept of non-domiciled CDLs and more about how federal auditors interpreted records, how New York documented verification, and whether the federal review applied the rules correctly.

What the Transportation Department says it found in New York

Public reporting on the audit has centered on several specific claims.

Federal officials said the audit reviewed about 200 non-domiciled CDLs issued by New York and found that roughly 53% were improperly issued. The Transportation Department and FMCSA have described that proportion as evidence of systemic failures rather than isolated clerical errors.

Federal press materials also alleged that New York relied on expired lawful presence documents in multiple cases. If accurate, that would mean some applicants obtained commercial driving privileges based on documentation that federal auditors believed no longer established eligibility at the time the license was issued or renewed.

Separately, federal officials described what they say is a broader documentation and verification gap. Reporting has cited roughly 32,000 active non-domiciled commercial licenses associated with New York, and federal officials have said the state could not prove verification for that larger pool. The Transportation Department treated that claim as a major concern because it suggests the issue is not confined to a small sample but could implicate long-standing administrative practices.

New York disputes these conclusions, which is why the next phase will likely revolve around records and standards. In administrative compliance disputes, the key question is often whether the state can document compliance in a way that meets federal expectations, even if the state believes its process was compliant in practice.

New York’s response: compliance claimed and federal allegations rejected

New York’s DMV has publicly rejected the Transportation Department’s characterization. In an official statement, the DMV emphasized that CDLs are regulated by the federal government and said New York complies with federal CDL rules. The DMV also said that every CDL it issues is subject to verification of lawful status through federally issued documents reviewed in accordance with federal regulations.

The DMV statement also framed the dispute as political, accusing federal officials of making false claims and portraying the funding threat as political grandstanding rather than neutral safety enforcement. That language indicates New York is not merely seeking clarification. It is preparing to contest the federal narrative publicly and, if necessary, in court.

This sets up two parallel battles. One is factual and regulatory: what the audit reviewed, what records exist, and whether New York’s procedures satisfy federal requirements. The other is political: whether the Transportation Department’s enforcement campaign is being used to pressure Democratic-led states on an immigration-adjacent issue under the banner of road safety.

How federal funding leverage works in disputes like this

The Transportation Department’s threat relies on a long-standing federal tool: linking participation in federal programs to compliance with federal standards. Federal highway funding flows through statutory programs with safety and administrative conditions. When federal agencies determine a state is not meeting those conditions, they can require corrective action and, in some circumstances, move toward withholding or delaying particular funds, depending on what Congress authorized.

The hardest legal question is not whether conditions exist. It is whether the Transportation Department can withhold this specific money, under the specific statutes that govern it, for the specific CDL compliance issues alleged. Grant authority matters because agencies cannot invent remedies that Congress did not allow.

The 30-day deadline intensifies the pressure. It forces New York to choose a near-term path: adopt corrective measures, negotiate a compliance plan, or prepare to challenge the federal action. Even if funds are not withheld immediately, the threat itself can drive operational changes before any judge rules on the merits.

Legal implications: federalism, conditional spending, and agency authority

Legal disputes over conditional spending often turn on several principles. Courts generally permit Congress to attach conditions to federal funds, but they have also emphasized limits: conditions must be stated clearly, must relate to the purpose of the spending program, and cannot be so coercive that states have no real choice.

If New York chooses litigation, one argument would focus on statutory authority. The state could ask whether Congress clearly authorized the Transportation Department to withhold the threatened highway funds for the specific non-domiciled CDL issues cited. If the statutes are unclear, New York could argue the agency is exceeding its authority.

A second argument could focus on administrative process and evidence. If New York can show it verified lawful status consistent with federal rules and retained documentation appropriately, it could argue the audit’s conclusions are wrong, incomplete, or based on an unreasonable interpretation of the records.

A third argument could invoke coercion concerns. New York could claim that conditioning significant highway funds on licensing changes is excessive pressure that undermines state sovereignty. The federal government would respond that CDL compliance is directly related to transportation safety and the administration of interstate highways, making the linkage more defensible than in disputes where conditions are unrelated to the program’s purpose.

From the Transportation Department’s perspective, the counterargument is that this is a straightforward compliance issue involving longstanding federal CDL standards in a safety-critical domain. The agency can argue that states participating in the federal highway system must follow federal requirements designed to ensure commercial drivers are eligible and properly documented.

A broader enforcement campaign: other states and nationwide audits

The Transportation Department has presented the New York dispute as part of a national compliance effort. The Associated Press reported that federal investigators have identified similar issues in multiple states and described New York as the eighth state found to have improperly issued commercial driver’s licenses to immigrants in a way that could leave licenses valid long after legal authorization expires. States referenced in reporting include California, Pennsylvania, Minnesota, Texas, and South Dakota.

California has been a major earlier focus. Reuters reported that California faced the withholding of $160 million in funds and then revoked about 17,000 commercial licenses held by foreigners in response to federal pressure. AP later reported that California has revoked about 21,000 such licenses as the enforcement effort expanded. The difference likely reflects timing and what is included in the counts, but it shows the Transportation Department is willing to use audits and funding leverage to drive rapid changes in state systems even without new federal legislation.

Reuters also reported that DOT withheld $40.6 million from California over noncompliance with English proficiency rules. In addition, Reuters said the department removed thousands of driver training providers from its registry for failing to meet standards and was scrutinizing thousands more for potential noncompliance. Those details indicate the enforcement effort is not limited to one state or one category of alleged violations.

AP also emphasized a labor reality: immigrants make up a significant share of the U.S. trucking workforce, while non-domiciled CDLs represent a much smaller portion of all CDLs. That distinction matters because it separates a targeted compliance debate over a specific license category from sweeping claims about immigrants in trucking.

Political consequences: safety, immigration, and state sovereignty

For federal officials, the case is framed as safety enforcement. Federal officials have emphasized that commercial trucks are heavy vehicles and that licensing rules exist to protect the public. In that framing, issuing long-term CDLs based on temporary or expired documents is an eligibility and accountability failure that must be corrected.

For New York and immigrant advocacy groups, the concern is that DOT is using a safety narrative to advance an immigration-adjacent crackdown, especially against Democratic-led jurisdictions. Advocates have warned that sweeping audits and aggressive enforcement can increase fear and harassment, even for drivers who are lawfully present and properly credentialed.

The political stakes are magnified by the practical consequences of losing highway funds. Federal highway dollars support multi-year projects, maintenance programs, and safety improvements. Even the possibility of withholding can disrupt budgets and contracting decisions, which is why the Transportation Department’s threat functions as both a policy lever and a political weapon.

What happens next

Over the next month, the dispute will likely turn on documentation and corrective steps.

New York can attempt a corrective action plan, such as pausing certain non-domiciled CDL actions, auditing files, aligning license validity more explicitly with lawful presence documentation, and providing the Transportation Department with records intended to address or rebut the audit’s conclusions. This approach reduces immediate funding risk but may be criticized internally as compliance under pressure.

Alternatively, New York can choose a confrontational strategy: insist it is already compliant, refuse to make changes it views as unnecessary, and challenge any withholding decision in court. That route could become a high-profile test of federal authority to use funding threats to shape state licensing behavior, but it carries risk if funds are withheld while litigation proceeds.

The Transportation Department also faces choices. If it follows through with withholding, it risks a protracted court battle and political backlash. If it accepts a negotiated compliance plan, it can claim progress without exposing its authority to the same level of judicial scrutiny. Either way, the confrontation illustrates how quickly a licensing dispute becomes a federal funding fight when a Transportation Department audit is paired with a hard deadline.

Bottom Line

The Transportation Department’s ultimatum to New York over non-domiciled CDLs is both an administrative enforcement action and a political flashpoint. Federal officials say the state issued long-term commercial licenses based on temporary or expired documents and failed to retain proof of verification, and they have warned New York could lose about $73 million in highway funds if it does not comply within 30 days. New York’s DMV says it follows federal rules and verifies lawful status for every CDL it issues, setting up a clash that could end in negotiated reforms, a court fight, or a real funding cutoff.

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Transportation Department Funding Threat to New York Over Non-Domiciled CDLs