NEW YORK (AP) — The U.S. Transportation Department wrongly decided to withhold nearly $74 million in highway money from New York state after it refused to revoke nearly 33,000 questionable commercial driver’s licenses for immigrants when an audit revealed problems last year, a federal appeals court said Friday.
A three-judge panel of the 2nd U.S. Circuit Court of Appeals in Manhattan concluded in a written decision that the Federal Motor Carrier Safety Administration, an arm of the Transportation Department, acted in a manner that was “arbitrary, capricious, or contrary to law” when it penalized New York.
The appeals court said the state can’t be faulted for failing to cancel licenses when a commercial driver lost legal status to stay in the United States because rules that would require a cancellation were not in place at the time.
The driver’s licenses pertain to commercial vehicles such as trucks, trailers, limousines and buses.
New York Attorney General Letitia James complained when the lawsuit was filed in April that the federal government was unfairly holding back money the state needs to repair roads and bridges. New York Gov. Kathy Hochul in the spring called the federal cuts “devastating” and characterized them as “political payback.”
The Transportation Department said in a statement Friday that it makes no sense for states to let trucking licenses for foreign drivers stretch years beyond when they are legally in the U.S.
“We’ve put a stop to the madness to keep the driving public safe,” the statement said.
The Transportation Department began enforcing existing English language requirements for truckers in the summer of 2025. Concerns about truck driver qualifications took on more urgency after an August 2025 crash in Florida, when a truck driver was accused of performing an illegal U-turn that killed three people. Transportation Secretary Sean Duffy said that driver, who is from India, should never have been licensed in the first place.
Audits conducted in every state uncovered numerous non-domiciled commercial driver’s licenses that remained valid long after an immigrant’s work permits had expired or were issued without properly verifying citizenship status.
Since then, about 26,000 drivers have been pulled off the road for failing to demonstrate English proficiency, and the Transportation Department said 30,000 commercial licenses were canceled because they were issued illegally.
Immigrants account for about 20% of all truck drivers while the non-domiciled licenses immigrants can receive represent about 5% of all commercial driver’s licenses or about 200,000 drivers.
Immigrant groups have said they believe that many drivers are being unfairly targeted.
The dispute came after Transportation Secretary Sean Duffy tightened rules governing when immigrants can obtain a commercial driver’s license.
Officials said they took actions against states like New York after learning that some licenses remained valid long after an immigrant was no longer authorized to be in the country. New York issued licenses valid for eight years regardless of how long a driver’s visa remained valid, authorities said.
A message seeking comment from the New York attorney general’s office was not immediately returned.
AP Transportation Writer Josh Funk reported from Omaha, Nebraska.
