Year Ahead Will Test DOT Power to Withhold State Funds
FMCSA Now Targeting 8 States to Make Changes or Forfeit Millions in Grants
Key Takeaways:
- DOT and FMCSA launched audits and tightened rules in 2025, prompting states to pause non-domiciled CDL and permit issuance amid safety concerns.
- Audits found widespread noncompliance, including a 99.5% failure rate in Nevada and rates up to 53% elsewhere, risking tens of millions in federal funds.
- States face corrective deadlines and possible grant losses as lawsuits proceed, while a court pause leaves the interim rule unenforceable pending a permanent decision.
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The coming year will likely test whether the Federal Motor Carrier Safety Administration and the U.S. Department of Transportation can successfully withhold grants and impose other punitive measures on states for noncompliance with non-domiciled truck driver licensing regulations.
Transportation Secretary Sean Duffy and FMCSA Administrator Derek Barrs have both repeatedly stressed that the effort — launched by Duffy in mid-2025 — is focused on highway safety and ensuring that states take corrective actions to address deficiencies in their licensing processes and remove unsafe drivers from the road.
“Compliance and safety is our goal. We want strong, reliable state partners who share a commitment with us in saving lives because one loss is way too many,” Barrs said recently.
An audit of states’ processes and procedures for granting non-domiciled commercial driver licenses and commercial learner’s permits was launched by Duffy in June. In September, based on preliminary findings of those audits, Duffy declared a national emergency over some states’ handling of CDLs and imposed an interim rule that severely tightened restrictions on issuance of licenses and permits.
“All states must immediately pause the issuance of non-domiciled CDLs until they can comply with our new rules,” Duffy said at the time. “It’s very simple. Get into compliance now or we’ll pull funding and we’ll force you into compliance.”
In the ensuing months, states paused issuance of non-domiciled CDLs and CLPs and worked with FMCSA auditors to detail their issuance and testing procedures. Along the way, auditors realized that many states set default time periods for validity of permits and licenses. In some cases, these time spans stretch beyond a driver’s legal U.S. residency status — a violation of FMCSA policy.
Non-Compliance Issues
The FMCSA audits — many of which were conducted as part of annual reviews — also examined random batches of drivers holding commercial driving credentials. Among states that have drawn potential DOT action, random samplings of driver records for valid non-domiciled CDLs and CLPs revealed, in some cases, high failure rates for compliance issues.
In Nevada, officials permanently stopped issuing non-domiciled CDLs and CLPs based on a 99.5% failure rate across records sampled. This move was viewed as preemptive to avoid federal consequences.
“Nevada is taking a proactive, responsible approach to comply with the new federal requirements,” Tonya Laney, director of the state’s Department of Motor Vehicles, said in a Nov. 4 release. “By phasing out the Limited-Term CDL Program, we are protecting federal highway funding, maintaining program integrity and ensuring that Nevada’s licensing system remains fully compliant with national standards.”
“The phaseout is permanent,” Nevada DMV spokesperson Hailey Foster told Transport Topics.
(Graphic by Transport Topics)
Failure rates across states included:
- New York: 53%
- Texas: 49%
- Minnesota: 33%
- California: 26%
- Colorado: 22%
- South Dakota: 12%
- Washington: 10%
- Pennsylvania: 5.3%
Duffy on Dec. 12 threatened New York with the loss of “tens of millions of dollars” in federal transportation funds if it fails to address issues identified by auditors.
California is currently suing DOT over the withholding of $33 million in federal funds related to the state’s enforcement of English-language proficiency rules.
Other states listed have also received notices of noncompliance and face threats of losing federal transportation funds in the year ahead.
“We don’t want to have conflict with New York or California or Minnesota,” Duffy said recently. “That’s not the mission here. The mission is to get compliance to make sure we have safe commercial drivers on American roadways and Americans are safe. If we have state governors who are unwilling to cooperate and collaborate and make sure that Americans are safe, we will use every single tool at our disposal to make sure they do come in compliance. If they don’t, the federal taxpayer, the American taxpayer, should not be funding these states.”
States must review driver records, identify problematic ones and complete a series of corrective actions that must be approved by FMCSA.
Interim Rule on Hold
The interim federal rule has been challenged in court, but a judge has halted further action on that challenge to give DOT time to consider public input on a potential permanent rule change. While FMCSA has continued to sanction states and issue preliminary determinations of noncompliance, the agency cannot mandate tougher measures pending final court action.
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