Which amount is compared to the alteration threshold on a mixed contract
Sent to ADOR Tax Policy on September 25, 2026. Answered September 30, 2026.
The question
The statute removes alteration status where the contract amount is more than 25% of the parcel's most recent full cash value. ADOR's Evaluating Mixed Construction Contracts worksheet and MRRA Contracting page test the alteration amount instead. On a contract that mixes alteration with maintenance, repair or replacement, the two figures differ, and the choice can decide whether the whole contract is MRRA or prime contracting.
What ADOR said
On a mixed contract, only the alteration portion is compared with the alteration threshold, not the total contract. The contract amount in A.R.S. 42-5075(S)(1)(a) applies to contracts that are purely alteration; for mixed contracts, ADOR's Evaluating Mixed Construction Contracts worksheet is the correct reading. In ADOR's example, a $150,000 contract with $100,000 of alteration does not convert to modification against a $125,000 threshold, 25 percent of the parcel's full cash value.
What changed. The glossary entries Contract amount, Alteration, Alteration threshold, and Full cash value; the Classifier's threshold computation.