Rental car group asks 10th Circuit to greenlight challenge to Colorado congestion fee

DENVER (CN) — The American Car Rental Association on Wednesday asked the 10th Circuit to greenlight its challenge to Colorado’s $3-per-day “congestion fee” on car rentals arguing the tax illegally targets airport customers.

“The problem that Congress was concerned with was airports being used as a piggy bank to fund state projects,” argued Daniel Schlueter, who represented the trade group.

Fearing states were hiking up airport taxes to make visitors foot the bill for local projects, Congress passed the 1973 Airport Development Acceleration Act banning states from taxing airport transportation outright. In 1994, federal lawmakers expanded the law to require taxes generated from business at the airport to be spent on the airport.

According to the association, 43 states put 115 new taxes on rental cars between 1990 and 2010 to fund a variety of projects including stadiums and convention centers.

In May 2024, Colorado levied a $3 per day “congestion fee” on car rentals. While car rentals make up about 3% of Colorado traffic, half of them are rented from airports, according to the association.

Believing the Centennial State was unfairly targeting airport customers, the American Car Rental Association sued the Colorado Departments of Revenue and Transportation in September 2024. Finding the fee generally imposed — and not targeted at tourists — Donald Trump-appointed U.S. District Judge Daniel Domenico dismissed the complaint in September 2025. The association appealed.

U.S. Circuit Judge Allison Eid pressed Schlueter on his assertion that the fee targeted airport customers.

“How do I see that this is not a general tax?” the Trump appointee asked.

Schlueter, who practices with Eversheds Sutherland in D.C., pointed to the fact that half of the state’s rental cars are rented from airports.

“This is the very opposite of a sales tax that is generally imposed on sales and services,” Schlueter said. The tax would be fine, Schlueter added, as long as the revenue stayed at the airport, rather than being spent on general road projects.

On behalf of the state, Assistant Attorney General Pawan Nelson argued the congestion impact fee applies to everyone who rents a car, regardless of whether they entered the state through the airport.

“It applies to me, thee, the guy behind the tree, tourists coming to the state, residents whose car is in the shop,” Nelson said. “It applies to anyone who rents a U-Haul to move from Denver to Grand Junction.”

Barack Obama-appointed U.S. Circuit Judge Scott Matheson and Trump-appointed U.S. Circuit Judge Joel Carson rounded out the panel. The court did not indicate when or how it would decide the case — or whether any of the judges rented a car from Denver International Airport to attend court this term. While Eid was a formal solicitor general for Colorado, Carson hails from Artesia, New Mexico, and Matheson from Salt Lake City, Utah.

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