The Republican-controlled Senate repealed the law in a 31-1 vote, and the GOP-run House later sent the measure to Gov. Bill Haslam on an 85-0 vote. The General Assembly then adjourned its three-day special session and left the Capitol.
Haslam had called lawmakers into special session to fix the law and avoid the loss of federal funding. On Wednesday, he thanked General Assembly members for repealing it.
"I am grateful to the General Assembly for quickly convening and passing legislation that clarifies our drunk-driving law to remove any question of compliance with federal requirements," Haslam said.
Tennessee's law, passed in April, sought to crack down on 18-, 19- and 20-year-old motorists who drive under the influence.
But the National Highway Traffic Safety Administration said Tennessee's new law put the state out of compliance with federal "zero tolerance" requirements. And that threatened to cost the state about 8 percent, or $60 million, of its federal highway funding.
Under federal rules, the maximum allowable blood-alcohol content for drivers under age 21 is 0.02 percent. The Tennessee law raised that limit to 0.08 percent for 18- to 20-year-olds. But it added tougher penalties for those violators, subjecting them to the same 48-hour jail sentences as those 21 and over.
The 0.02 standard remained in place for drivers under age 17. The legal drinking age is 21.
Haslam tried to argue with U.S. Transportation Secretary Anthony Foxx and other federal officials that the state's combined DUI laws still effectively created a "zero tolerance" policy. But the feds wouldn't budge.
When legislation to handle the state's costs for the three-day special session's expenses — estimated at about $100,000 — came up for a vote Wednesday, Senate Speaker Pro Tempore Bo Watson, R-Hixson, said state lawmakers should instead stick the federal government with the tab.
That prompted yet more discussion as Republicans railed about the federal government, federal spending and federal interference in state affairs.
Republican lawmakers noted Tennesseans send more to the federal government in gas tax money than the state gets back. The state should just keep the money itself, Sen. Frank Niceley, R-Strawberry Plains, suggested.
Senate Democratic Caucus Chairman Jeff Yarbro of Nashville, however, pointed out while Tennessee is indeed a donor state in terms of sending more fuel tax money to Uncle Sam than it gets back in federal highway spending, Tennesseans and their state government generally get a pretty smooth ride from the federal government in any number of other areas.
Federal dollars amount to as much as 40 percent of the state's total budget, Yarbro noted.
In the House debate, Rep. David Alexander, R-Winchester, charged that "our own federal government is blackmailing us" on the DUI law.
But Minority Leader Craig Fitzhugh, D-Ripley, said Tennessee lawmakers and officials simply goofed and should have caught the problem they were creating.
"You can talk about blackmail, but we just messed up," Fitzhugh said. "That's it."
Meanwhile, hours after the special session on DUI ended, the House Ethics Committee dismissed three complaints against Speaker Beth Harwell over her actions related to the investigation and expulsion of disgraced former Rep. Jeremy Durham, R-Franklin.
On Tuesday, the House voted 70-2 to oust Durham, who had allegedly sexually harassed a number of Capitol Hill female workers, interns and lobbyists, according to an investigation by the state attorney general.
Rep. Rick Womick, R-Murfreesboro, had filed five ethics complaints against Harwell. He dropped two. Among his charges was that Harwell violated the Tennessee Constitution when she exiled Durham from the Legislative Plaza complex to a nearby state office building.
The 10-member Ethics Committee, whose members include Reps. Mike Carter, R-Ooltewah, and Patsy Hazlewood, R-Signal Mountain, dismissed Womick's three other complaints as being without merit.
Contact staff writer Andy Sher at email@example.com or 615-255-0550. Follow on Twitter @AndySher1.