The Tenth Circuit Court of Appeals has upheld Colorado's congestion impact fee on short-term vehicle rentals, ruling that the fee does not violate federal law. This decision affects car rental companies operating in Colorado, as it allows the state to impose a fee of up to $3 per day on all short-term vehicle rentals. The ruling is significant as it clarifies the legal boundaries of state taxation on rental car businesses.
The case, American Car Rental Association v. Humphreys (Docket No. 25-1246), arose after the Colorado General Assembly enacted the congestion impact fee in 2024. The fee is aimed at addressing traffic congestion and environmental concerns associated with increased vehicle rentals. The American Car Rental Association (ACRA), representing rental car businesses, challenged the fee, arguing it was preempted by the federal Anti-Head Tax Act (AHTA).
ACRA contended that the AHTA prohibits states from imposing fees that are not generally applied to all sales and services. The organization argued that the congestion impact fee specifically targets car rentals and therefore violates the AHTA. However, the state defended the fee, asserting that it applies to all short-term vehicle rentals, regardless of the rental location, including both airport and non-airport rentals.
The court's ruling confirmed that the fee is imposed on consumers renting vehicles, not directly on rental businesses. The judges noted that the AHTA's prohibition only applies to fees levied on businesses located at commercial service airports. Since the fee is ultimately charged to consumers, the court found that it does not fall under the AHTA's restrictions.
In its opinion, the court stated, "Colorado imposes the Fee on consumers. The AHTA prohibits a fee 'upon any business located at a commercial service airport.' It therefore does not apply to the Fee and does not preempt the Colorado law." The ruling was issued by a panel of judges, including Circuit Judges Matheson, Eid, and Carson.
This ruling has important implications for the future of state taxation and fees on rental car businesses. It sets a precedent that allows states to impose similar fees aimed at addressing public infrastructure and environmental concerns without conflicting with federal law. The decision may encourage other states to consider similar measures to manage traffic congestion and fund transportation projects.
Going forward, the ruling means that rental car companies in Colorado must comply with the congestion impact fee, which will be collected from consumers and remitted to the state. The case may not be the end of the legal battle, as ACRA could still consider appealing the decision or pursuing related cases in the future.
Details were not available in the court filing regarding the potential for an appeal or any related cases currently pending.