Glossary · Activities & Property
Alteration
In short
A physical change to existing property that is none of the other three MRRA activities. The only one of the four with a threshold above which the work becomes Modification.
In full
A physical change to a building that already exists — adding or expanding square footage, for example.
The statute defines alteration broadly, as an activity or action that causes a direct physical change to existing property, and then excludes maintenance, repair and replacement from it in a separate subdivision. Alteration is therefore a residual: work is tested against the other three first, and only what none of them covers can be alteration. Because those three carry no threshold at any contract size, identifying work correctly as one of them removes the threshold question entirely.
Alteration status is lost, and the work becomes Modification taxable under prime contracting, where the amount is more than 25% of the parcel's most recent full cash value on residential property, or more than $750,000 on all other existing property. Full cash value is measured as of the bid date or the contract date, whichever value is higher.
Two things about that boundary. The statute removes alteration status only where the amount is *more than* the threshold, so a contract at exactly 25% keeps it; ADOR's written response of 2026-08-13 states the same test inclusively, while the MRRA Contracting page describes alteration as work "below" the threshold, which would exclude a contract at exactly 25%. And the residential measure is full cash value, not the property's tax value as that page and the Contracting FAQ describe it. The statute and the written response govern on both points.
On a contract that mixes alteration with maintenance, repair or replacement, only the alteration charges are compared with the threshold. The statute tests "the contract amount"; ADOR Tax Policy stated in writing on September 30, 2026 that the phrase refers to contracts that are purely alteration, and that a mixed contract is tested on its itemized alteration charges, as ADOR's Evaluating Mixed Construction Contracts worksheet does at steps 3a and 3b. Maintenance, repair and replacement carry no threshold, so their charges never count toward it. The answer covers the commercial $750,000 threshold as well as the residential one.
A.R.S. § 42-5075(S)(1), (S)(1)(a), (S)(1)(b), (S)(1)(f); ADOR MRRA Contracting page; ADOR Evaluating Mixed Construction Contracts worksheet; ADOR Tax Policy information letter, 2026-09-30