New York State and the Federal Motor Carrier Safety Administration are headed toward oral arguments at the end of next month in their legal battle over the federal cutoff of funds to the Empire State, a conflict rooted in the state's issuance of non-domiciled CDLs and Commercial Learning Permits (CLPs).

Non-domiciled CDLs are commercial licenses issued to drivers who live outside the state issuing the credential—most often foreign nationals. Under federal rules, states may issue them only to applicants who present proof of lawful presence in the United States, which is what makes the duration of that lawful presence the crux of the dispute.

With FMCSA having filed its brief to the Second Circuit U.S. Court of Appeals last week, both sides have now spelled out their cases ahead of oral arguments scheduled for September 28 in lower Manhattan.

According to the state's brief, the central question is how long a non-domiciled CDL issued by New York—or, by extension, by any state—can remain in effect if its duration does not align with how long the license holder is legally permitted to be in the U.S. The vast majority of non-domiciled CDL holders are foreign nationals who are in the country, legally or not. While New York's brief makes this the key issue, FMCSA's filing gives it somewhat less emphasis.

After the Department of Transportation (DOT) decided in April to withhold approximately $73 million in federal funds as a result of the dispute, New York quickly filed suit in the Second Circuit challenging the action. The state characterized the move as "political payback." The withheld money flows through federal highway and safety programs, and the case could shape how far Washington can go in pressuring states over licensing practices—a dynamic relevant to other states that issue non-domiciled CDLs as well.

What does the rule say?

New York's brief lays out the substance of its objections. Its key argument is that the DOT is enforcing a rule that does not exist.

In a December 2025 "preliminary determination of substantial noncompliance," FMCSA asserted, according to the state's brief, that a review of New York's practices had "uncovered evidence of systemic policy, procedural and programming errors" in a sampling of New York licenses.

"In particular, FMCSA observed that 101 of those licenses included expiration dates that exceeded the period of validity shown on the drivers' lawful presence documents presented at the time of license issuance," New York said in its brief. "Citing no authority, FMCSA asserted that (New York's Department of Motor Vehicles) was required to 'make the period of validity of the non-domiciled commercial learning permits or CDL less than or equal to the period of validity of the driver's lawful presence document(s).'"

But according to the state, nothing in the law requires that.

"FMCSA points to no regulatory text that affirmatively required the State to match license expiration dates with the lawful-presence documentation provided with drivers' CDL applications," New York says in its brief. "The principal provision that FMCSA relies upon (which it says can be found in 49 C.F.R. § 384.212) does not address expiration dates. Nor does any other regulatory provision incorporated therein."

Implicit or explicit

New York sums up FMCSA's argument in its brief: "FMCSA nevertheless claims that this supposed expiration-matching rule was implicit in its prior regulations because a contrary interpretation would render 'meaningless' and 'inconsequential' the regulatory provisions that require CDL and CLP applicants to verify their lawful presence at the time of license issuance." But prior Supreme Court precedents hold that funding requirements must be made "clearly"—a word New York put in italics. That line of argument invokes the Court's spending-clause doctrine, under which conditions attached to federal funds must be stated unambiguously so states can knowingly accept them.

Citing another part of federal law, § 383.73(f)(2), New York argues that "state procedures" for issuing CDLs to domiciled and non-domiciled persons—and, by extension, their expiration dates—cannot differ.

"Notably, the requirement that a CDL issued by a state be valid for no more than eight years… presumptively applies to both nondomiciled and domiciled licenses alike," the state says.

Notably, the state does not argue anywhere that the CDLs in question did not exceed the length of a recipient's legal window for staying in the U.S. Its argument is that no such requirement is part of the law.

The DOT's brief, however, goes directly to that issue. When the agency audited New York's program, it found, according to its brief filed last week, that "more than half turned out to have been issued with expiration dates well past the period for which the license-holders could demonstrate, at the point they applied for the CDLs, that they were lawfully present in the United States. In several cases, CDLs were issued for seven or eight years longer than the applicants' demonstrated periods of lawful presence."

According to DOT's brief, New York told the agency that the CDLs had "overlong expiration dates" because its system does not check how long a license holder is allowed to stay in the U.S.

No cooperation

Another charge in the DOT brief is that New York refused to work with FMCSA to reach a point where the federal agency would withdraw its determination that the state was out of compliance with federal law.

FMCSA's legal argument appears in its summary of an "informal conference" between the agency and New York. At that February meeting, according to the brief, "FMCSA underscored that because States could only issue non-domiciled CDLs to applicants who presented unexpired proof of lawful presence, the credentials the DMV had issued with expiration dates exceeding the validity of the documentation presented were improperly issued." FMCSA says it laid out a series of steps New York needed to take to come into compliance, which the state refused to adopt.

The Final Determination of Substantial Noncompliance followed in April, leading to the withdrawal of federal funds and New York's decision to fight the action in federal court.

The FMCSA brief is far less specific about what the law says regarding an alignment between a CDL's expiration and how many months or years a CDL or CLP holder is allowed to remain in the U.S. In its summary of its argument, the agency appears to suggest that the state's non-cooperation was the greater issue.

"The DMV based its refusal on its disagreement with FMCSA's interpretation of the provision limiting the maximum duration of non-domiciled CDLs," the state writes. "That disagreement is largely beside the point, because the DMV was obligated to work with FMCSA toward resolution of the issues identified." The brief immediately adds that "the DMV misreads the governing federal regulations, which link issuance of a CDL to lawful presence."

Hageman bill on the issue

Although one part of the battle between New York and FMCSA is not in dispute—that the agency audited the Empire State's records—Wyoming Congresswoman Harriet Hageman last week introduced a bill mandating such inspections. She dubbed the legislation the Strengthening Transportation Oversight and Preventing (STOP) Improper Licensing Act.

"This bill requires federal safety regulators to audit states issuing non-domiciled commercial driver's licenses to illegal aliens and unqualified drivers," a prepared statement released by Hageman's office said.

Hageman's release included testimonials on the legislation from a series of key Washington trucking associations: the American Trucking Associations, the Truckload Carriers Association, and the Owner Operator Independent Drivers Association.

The general consensus in Washington is that with the midterm elections close enough that their November 4 date is now discussed in terms of days or weeks away rather than months, no significant legislation is likely to pass in this Congress. Even so, the bill signals continuing congressional interest in non-domiciled licensing oversight, an issue likely to persist regardless of how the Second Circuit rules.

Hageman is the Republican nominee for U.S. Senator from Wyoming, seeking to fill the seat of retiring Sen. Cynthia Lummis, and she is expected to coast to victory.

Source: FreightWaves