The Denver-based federal appeals court concluded on Monday that a 2024 “congestion impact fee” that lawmakers imposed on short-term vehicle rentals did not conflict with a federal prohibition on certain airport-related charges.

Beginning in the 1970s, Congress began limiting the types of taxes or fees that state or local governments could impose at airports. Originally, Congress prohibited taxes on individual passengers and commerce, then it expanded the prohibition to taxes “exclusively” on airport businesses.

Finally, in 2018, Congress forbade states and localities from unreasonably burdening or discriminating against interstate commerce by imposing charges upon airport businesses that are “not generally imposed” on other activities. There was an exception for revenues that would be “wholly utilized for airport or aeronautical purposes.”

The question for the U.S. Court of Appeals for the 10th Circuit was whether a daily charge on car rentals, which disproportionately occur at airports, ran afoul of the 2018 prohibition. By 2-1, a three-judge panel determined it did not.

Colorado’s legislation refers to “fee payers,” wrote Judge Scott M. Matheson Jr. in the July 27 opinion. While lawmakers did not define that term, the majority believed the fee payers were the people renting cars, not the airport businesses.

The federal law “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,” wrote Matheson for himself and Judge Joel M. Carson III.

Judge Allison H. Eid dissented, believing Congress’ prohibition applied to the congestion impact fee.

“By focusing on the phrase ‘fee payers,'” she wrote, “the majority overlooks the broader statutory framework supporting the Congestion Impact Fee — a scheme that operates upon airport businesses, not on their customers. Most importantly, car rental companies have no obligation under Colorado law to pass the Congestion Impact Fee on to their customers.”

Senate Bill 184 directed the state to impose a congestion impact fee on short-term vehicle rentals, capped at $3 per day, that is “reasonably calculated to generate only the amount of revenue needed to pay the overall costs of providing the services to fee payers.” The bill specified that financial investments in rail and transit would decrease the congestion that rental drivers encounter.

The American Car Rental Association challenged the fee, arguing federal law preempted the charge as designed. It sought to declare the fee invalid, but only for vehicle rentals occurring at airports.

In May 2025, U.S. District Court Chief Judge Daniel D. Domenico sided with the state. He acknowledged that rental car drivers account for a small portion of miles traveled, and the fee would disproportionately affect rentals at airports. But he concluded that the plaintiffs should not be able to create an exclusive carve-out from the fee for airport rentals.

“If Colorado were to pass a new fee on sales of plastic water bottles, for example, (as it has done with plastic grocery bags, much to my chagrin) Plaintiff’s statutory construction would require that this fee not apply to any plastic water bottles sold at airport locations,” he wrote. “This would result in a strange state of affairs where consumers of certain goods would have an affirmative financial incentive to purchase them at airports. Far from simply preventing discrimination towards interstate commerce, this would result in discrimination in favor of airport businesses, at the expense of commercial activity happening in the rest of the state.”

On appeal, shortly before oral arguments, the 10th Circuit panel asked the parties to respond to a different question: Did Colorado impose the congestion impact fee on car rental businesses? Or car rental customers?

“Although rental businesses may pass the Fee on to their customers, the business remains liable for the Fee regardless of whether it passes it on and regardless of whether the customer pays it,” wrote attorneys for the car rental association. “Consequently, the Fee is ‘levied’ or ‘collected’ on rental businesses located at the airport.”

“It is levied on and collected from consumers,” countered the Colorado Attorney General’s Office. Companies “are simply middlemen that forward the Fee collected from their customers.”

The panel’s majority agreed with the state.

“Those persons, not car rental businesses, will benefit from the ‘services’ provided by the ‘surface transportation infrastructure projects’ funded by the Fee,” wrote Matheson.

Eid, in dissent, argued that lawmakers imposed the fee “directly and exclusively upon car rental companies.” She would have concluded the fee was not “generally imposed” as required under federal law and, therefore, it was invalid.

The case is American Car Rental Association v. Humphreys et al.