Federal appeals court upholds Colorado’s $3 daily rental car fee aimed at easing traffic congestion
By David Shepardson
WASHINGTON, July 27 (Reuters) – A divided federal appeals court on Monday upheld Colorado’s $3-per-day congestion impact fee on rental cars, delivering a win for state officials who argue the charge helps fund transit projects and reduce traffic.
The 10th U.S. Circuit Court of Appeals, in a 2-1 ruling, rejected a lawsuit brought by the American Car Rental Association, which represents Avis, Hertz, Enterprise and other rental car companies. The group had argued the fee violates federal laws that restrict local taxes on airport-related businesses.
Colorado enacted the fee in 2024 on rentals of 30 days or less, with the stated goal of offsetting the wear-and-tear rental vehicles cause on public roads. Revenue from the charge is dedicated to investments in transit and rail services, which state officials say will help ease congestion on highways and in urban areas. The fee is adjusted each year to account for inflation and applies to car-sharing programs as well as larger vehicles such as moving trucks.
The ruling follows a growing trend of states and cities adopting congestion pricing mechanisms to manage traffic and fund infrastructure. In March, a federal judge in New York ruled that the U.S. Transportation Department had acted illegally in trying to force an end to Manhattan’s congestion pricing program, dealing a blow to former President Donald Trump’s efforts to eliminate that charge.
The appeals court found that the Colorado fee is lawful because it is levied on the people who rent vehicles — not on the rental businesses themselves. The court also noted that travelers who pay the fee stand to benefit from the surface transportation projects it funds. “The fee is a permissible charge on users of the roads, not a tax on airport rental operations,” the majority wrote.
The American Car Rental Association did not immediately respond to a request for comment on Monday. The group has not indicated whether it will appeal further.
Industry analysts say the decision could encourage other states to consider similar fees. Colorado’s approach is distinct from traditional vehicle registration taxes in that it targets short-term rentals, which often involve out-of-state visitors who use roads but may not contribute to state fuel or registration taxes.
(Reporting by David Shepardson; Editing by Bill Berkrot)