The rental car companies took Colorado to court over $3 a day, and they lost.

The 10th U.S. Circuit Court of Appeals ruled Monday that Colorado's congestion impact charge on rental cars is legal, turning down a challenge from the American Car Rental Association, the industry group representing Avis, Hertz, Enterprise, and others. The ruling upheld an earlier lower court decision and came down 2 to 1.

Colorado passed the fee in 2024. It applies to any rental of 30 days or less, covers car-sharing programs, and extends to larger vehicles like moving trucks. The money goes toward transit and rail investments meant to reduce traffic congestion. The fee also adjusts upward each year for inflation, so $3 today won't be $3 forever.

What the fight was actually about

The industry's legal argument wasn't simply "we don't want to pay." It was more technical than that. Federal laws passed since 1972 have progressively restricted what local governments can tax when it comes to businesses tied to commercial airports. A 2018 law tightened those restrictions further, saying local taxes on airport-adjacent businesses were only allowed if the money went directly to airport or aviation purposes.

Rental car counters sit inside airports. So the industry argued Colorado's fee violated that federal protection.

The court disagreed. The key distinction, in the majority's view, is who actually pays the charge. The fee falls on the person renting the car, not on the rental company itself. And those renters, the court reasoned, are the same people who benefit from better roads and transit funded by the fee. That framing kept the charge on the right side of federal law.

What this costs you

If you rent a car in Colorado for a week, you're already paying $21 in congestion fees on top of the base rate and whatever other taxes and surcharges pile onto a typical rental receipt. Over a two-week ski trip, that's $42. It's not a life-altering sum, but it's real money on top of what is already, for many travelers, one of the more frustrating line items on a travel budget.

And because the fee rises with inflation, future visitors will pay more than today's travelers do.

The more consequential point may be the precedent. Colorado is not the only government looking for ways to charge drivers for road congestion without calling it a tax. This ruling confirms that at least one structure, charging the renter rather than the company, can survive federal legal scrutiny. Other states watching this case now have a cleaner path to designing similar fees of their own.

The bigger pattern

The Colorado ruling lands in the same week as a broader national argument about who pays for congested roads and who gets to decide. In March, a federal judge in New York ruled that the U.S. Transportation Department had acted illegally when it tried to kill Manhattan's congestion pricing program, rejecting the Trump administration's attempt to shut it down. Two courts, two rulings, both pointing in the same direction: local and state governments have more room to charge drivers for road use than the federal government has recently tried to allow.

That matters because American cities are facing a version of the same math problem. Roads are expensive to maintain. Transit systems are expensive to build. Gas tax revenue, which was designed to fund both, has been eroding for years as cars get more efficient and electric vehicles pay nothing at the pump. Congestion fees, structured carefully, are increasingly how governments are trying to close that gap.

Whether renters or commuters or rideshare passengers end up bearing that cost, and how much, is the argument that's just getting started.