10th Circuit Upholds Colorado Congestion Impact Fee on Rental Cars

• The 10th Circuit Court of Appeals upheld Colorado's congestion impact fee on rental cars.
• The tax is levied against consumers rather than businesses, with liability falling squarely on consumers.
• Companies operating in Colorado must continue to collect and remit the fee.
• The ruling confirms that federal law does not preempt the enforcement of the congestion impact fee.

We conclude that the phrase 'fee payers' in subsection (7.6)(a)(I) refers to the persons who rent vehicles, and not car rental businesses.

A recent ruling by the 10th Circuit Court of Appeals has upheld Colorado's congestion impact fee on rental cars, a $3-per-day tax levied against consumers rather than businesses. This decision confirms that companies operating in Colorado must continue to collect and remit the fee, with liability falling squarely on consumers. The American Car Rental Association had argued that the tax was preempted by federal law, specifically the 1973 Anti-Head Tax Act, which prohibits taxes on airport businesses. However, the court's majority opinion found that the tax is 'generally imposed on sales or services' because it applies to all rental companies, not just those at airports.

The 1973 Anti-Head Tax Act prohibits taxes levied specifically against businesses in commercial airports. However, the court's ruling suggests that this law does not apply to Colorado's congestion impact fee because it is imposed on consumers rather than businesses. The statute requires the Colorado High Performance Transportation Enterprise to impose a tax 'that is reasonably calculated to generate only the amount of revenue needed to pay the overall costs of providing services to fee payers.' While the term 'fee payer' is not defined, the funded services include projects to reduce traffic congestion and provide diverse transportation options. The court concluded that these services reflect lawmakers' intent to benefit drivers of all vehicles, not just rental vehicles.

This ruling has significant implications for companies operating in Colorado, as they must continue to collect and remit the congestion impact fee. The liability for this fee falls squarely on consumers, rather than businesses. This decision may also have broader implications for the regulation of transportation-related taxes and fees in other states. As the court noted, the services funded by the congestion impact fee are intended to benefit drivers of all vehicles, not just rental vehicles.

Lawyers and compliance officers should note that the ruling confirms that Colorado's $3-per-day 'congestion impact fee' on rental cars is enforceable, with liability falling on consumers rather than businesses. This may have implications for companies operating in Colorado to ensure they are properly collecting and remitting the fee.

Source: Original reporting via Colorado News