Cities and municipalities across the country have adopted laws similar to the City of Hazleton's 2006 ordinance. However, a federal judge later called the Hazleton law unconstitutional, and its provisions are not being enforced.

On Thursday, a lawyer for the former coal town argued that the ordinance would not conflict with federal immigration policy set by Congress. But an American Civil Liberties Union lawyer argued that municipalities should not be allowed to set varying standards and restrictions for illegal immigrants.

Congress, in crafting U.S. immigration law, aims to strike a balance between the rights of immigrants, foreign policy concerns, national security and other competing interests, ACLU lawyer Omar C. Jadwat told the three-judge panel.

"That's going to be impossible if Hazleton and other cities strike their own balance," Jadwat said.

The city's Illegal Immigration Relief Act would impose fines on landlords who rent to illegal immigrants and deny business permits to companies that give them jobs. It would also require tenants to register with City Hall and pay for a rental permit.