Glossary · Thresholds & Valuation
Alteration threshold
In short
The line above which alteration work becomes Modification. A percentage of the parcel's full cash value on residential property, a flat figure on everything else.
In full
Alteration is the only one of the four MRRA activities with a ceiling. Above it the work is Modification and prime contracting tax applies to the contract; below it the work is MRRA and tax applies to the materials.
On residential property the threshold is 25% of the parcel's most recent full cash value. On all other existing property it is a flat $750,000.
The statute removes alteration status only where the amount is more than the threshold, so a contract at exactly the threshold keeps it. ADOR's written response of August 13, 2026 states the same boundary from the other direction — the value of the alteration contract should be 25% or less of the parcel's full cash value.
The denominator is full cash value. The statute names it and never mentions limited property value; ADOR Tax Policy confirmed in writing that limited property value is not the measure. Full cash value is the county assessor's figure and is public record.
The residential test uses two lookups rather than one: the most recent full cash value as of the date of any bid for the work, and as of the date of the contract, whichever value is higher.
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 threshold is not settled once. Scope-related change orders are added into the contract amount, so it is retested as they arrive. And a project that exceeds it at completion may still qualify as an alteration under the 25% cushion.
A.R.S. § 42-5075(S)(1)(a), (S)(1)(b), (S)(1)(d), (S)(1)(e); ADOR Tax Policy information letter, 2026-08-13; ADOR Evaluating Mixed Construction Contracts worksheet, steps 3a and 3b; ADOR MRRA Contracting page; ADOR Tax Policy information letter, 2026-09-30