                        T.C. Memo. 1999-344



                      UNITED STATES TAX COURT



 ESTATE OF EDWARD J. KUNZE, DECEASED, CAROL ANN HAUSE, EXECUTOR,
                           Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16583-98.              Filed October 18, 1999.



     Robert J. Tootelian, Jr., for petitioner.

     John Q. Walsh, for respondent.



                        MEMORANDUM OPINION

     GALE, Judge:   This matter is before the Court on

respondent’s motion to dismiss for lack of jurisdiction, on the

ground that the petition was not filed by a taxpayer meeting the
                                - 2 -

requirements of section 7430(c)(4)(A)(ii).1     The issue for

decision is whether section 7430(c)(4)(D) applies in determining

the net worth requirements for an estate seeking review under

section 6404(i) of a failure to abate interest.

     After respondent issued a final determination denying

petitioner’s request to abate interest, a timely petition for

review under section 6404 was filed with this Court.     Respondent

thereafter filed a motion to dismiss for lack of jurisdiction,

with exhibits, to which petitioner filed an objection, with

exhibits.   The Court held a hearing on the motion, received an

additional exhibit, and granted leave for the parties to file

briefs supporting their positions.      We decide the motion based on

the hearing record, respondent’s motion, petitioner’s objection,

the exhibits, and the briefs.

                            Background

     Edward J. Kunze (decedent) died on December 18, 1992.      Carol

Ann Hause is the independent executor for the estate of decedent

(estate).   The executor resided in East Lansing, Michigan, at the

time the petition was filed.    Decedent was domiciled in Cook

County, Illinois, on the date of death, and his estate was

probated in Cook County, Illinois.      The value of the gross estate

as of December 18, 1992 (decedent’s date of death), as agreed to


     1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code.
                               - 3 -

by the parties, was $4,722,350.67; the taxable estate equaled

$4,284,417.36; the allowable credit for State death taxes was

$311,454.74; and the net estate tax payable was $1,492,974.81.

By subtracting the credit for State death taxes and the net

estate tax payable from the taxable estate, respondent estimated

a net worth for the estate as of decedent’s date of death of at

least $2,479,987.81.2

                            Discussion

     This Court is a court of limited jurisdiction and may

exercise jurisdiction only to the extent expressly provided by

statute.   See Breman v. Commissioner, 66 T.C. 61, 66 (1976); see

also sec. 7442.   Section 6404(i) grants the Tax Court

jurisdiction to review the Treasury Secretary’s failure to abate

interest in any timely action “brought by a taxpayer who meets

the requirements referred to in section 7430(c)(4)(A)(ii)”.   In

his motion to dismiss for lack of jurisdiction, respondent argues

that petitioner has not shown that it meets the net worth

requirements referred to in section 7430(c)(4)(A)(ii).   We agree.

     The requirements referred to in section 7430(c)(4)(A)(ii)

include “the requirements of section 2412(d)(2)(B) of * * * title

28 [as in effect on October 22, 1986]”.   Section 2412(d)(2)(B) of


     2
       Respondent notes in connection with this estimate that
certain items deductible in computing the taxable estate would
not be equivalent to liabilities for purposes of calculating net
worth, with the result that actual net worth would be higher than
the figure estimated using the taxable estate.
                               - 4 -

title 28 of the United States Code provides that a “party” for

purposes of the award of fees and other expenses means:

     (i) an individual whose net worth did not exceed $2,000,000
     at the time the civil action was filed, or (ii) any owner of
     an unincorporated business, or any partnership, corporation,
     association, unit of local government, or organization, the
     net worth of which did not exceed $7,000,000 at the time the
     civil action was filed, and which had not more than 500
     employees at the time the civil action was filed * * *

The foregoing section does not refer to an estate.   However,

section 7430(c)(4)(D) states as follows:

          (D) Special rules for applying net worth requirement.--
     In applying the requirements of section 2412(d)(2)(B) of
     title 28, United States Code, for purposes of subparagraph
     (A)(ii) of this paragraph--

                (i) the net worth limitation in clause (i) of such
           section shall apply to—-

                          (I) an estate but shall be determined as
                     of the date of the decedent’s death * * *

Thus, in the case of an estate, the applicable net worth

requirement referred to in section 7430(c)(4)(A)(ii) is a

limitation of $2,000,000, determined as of the decedent’s date of

death.

     Petitioner has not alleged, or otherwise sought to prove,

that its net worth as of the decedent’s date of death did not

exceed $2,000,000.   Instead, as discussed more fully below,

petitioner contends that its net worth should be measured as of

some other date, apparently either the date of filing of the

petition or the date on which its right to seek review “began to

accrue”.   In line with this reasoning, petitioner merely alleges
                               - 5 -

in the petition that “The only asset of the Estate of Edward J.

Kunze is the cause of action in this case; therefore, the estate

has net worth that does not exceed two million dollars.”

Notwithstanding respondent’s contention that petitioner has a net

worth of at least $2,479,987.81 on the decedent’s date of death,

and the fact that the parties entered an agreement specifying

that the decedent’s gross and taxable estate exceeded $4,000,000,

petitioner has offered no proof of its net worth as of the

decedent’s date of death.   Accordingly, we conclude that

petitioner did not meet the requirements referred to in section

7430(c)(4)(A)(ii), and we do not have jurisdiction.

     Petitioner’s arguments to the contrary are unavailing.

Petitioner first argues that section 7430(c)(4)(D) does not apply

in the case of actions for review of denials of requests for

abatement of interest.   According to petitioner, the “statutory

scheme for abatement does not incorporate IRC section

7430(c)(4)(D)” and cannot be “logically [connected]” to it.

Petitioner’s position appears to be that since section

7430(c)(4)(D) appears in a section entitled “Awarding of costs

and certain fees” which itself incorporates provisions of another

section, 28 U.S.C. sec. 2412 (1994) (as in effect on Oct. 22,

1986), entitled “Costs and fees”, section 7430(c)(4)(D) has no

connection with, and is not incorporated by, the provisions

governing our review of abatements.
                               - 6 -

     The statute clearly provides otherwise.   Section 6404(i)

grants Tax Court jurisdiction over abatement review actions

brought by taxpayers meeting “the requirements referred to in

section 7430(c)(4)(A)(ii)”.   One such requirement referred to in

section 7430(c)(4)(A)(ii) is section 2412(d)(2)(B) of title 28 of

the United States Code.   Section 7430(c)(4)(D) provides “special

rules” for applying the requirements of section 2412(d)(2)(B) of

title 28 “for purposes of” section 7430(c)(4)(A)(ii).   (Emphasis

added.)   Nothing in the language of section 7430(c)(4)(D) limits

its application to awards of costs and fees.   Indeed, without

incorporation of section 7430(c)(4)(D) by section 6404(i), there

would be no express statutory basis for Tax Court jurisdiction

over an action for review of abatement brought by an estate.2a


     2a
       Since 28 U.S.C. sec. 2412(d)(2)(B) (1994) (as in effect
on Oct. 22, 1986) by its terms applies only to “an individual * *
* or * * * any owner of an unincorporated business, or any
partnership, corporation, association, unit of local government,
or organization, * * * or a cooperative association”, that
section standing alone does not provide a clear basis to discern
whether or how an estate might meet its requirements. Cf. Estate
of Hubberd v. Commissioner, 99 T.C. 335 (1992). However, prior
to enactment of sec. 7430(c)(4)(D), this Court and others held
that 28 U.S.C. sec. 2412(d)(2)(B) as used in sec.
7430(c)(4)(A)(ii) should be construed to entitle estates to seek
an award of litigation costs. See, e.g., Estate of Woll v.
United States, 44 F.3d 464, 467-468 (7th Cir. 1994); Estate of
Hubberd v. Commissioner, supra. Recognizing the statutory
ambiguities addressed in those and similar cases, Congress added
sec. 7430(c)(4)(D) with the specific intent of clarifying the net
worth limitations applicable to estates, trusts, and individuals
filing jointly, thereby rendering those cases moot. See H. Rept.
105-148 at 638-639 (1997) (“Although the net worth requirements
are explicit for individuals, corporations, and partnerships, it
                                - 7 -

     Petitioner also argues that its interpretation of the

statute is consistent with an interpretation expressed by

respondent in a final determination letter sent to petitioner in

which its claim for abatement of interest was disallowed.    The

letter states:

     The eligibility requirements [for Tax Court review] are:

          For individual and estate taxpayers - your net worth
     must not exceed $2 million as of the filing date of your
     petition for review. * * *

While respondent’s letter is in error regarding the

jurisdictional requirements for an estate, any such error does

not operate to confer jurisdiction on this Court.   See Yuen v.

Commissioner, 112 T.C. 123, 130 (1999); Romann v. Commissioner,

111 T.C. 273, 280-281 (1998).   The subject matter jurisdiction of

this Court is prescribed by statute and cannot be enlarged by the

actions of the parties.   See Freedman v. Commissioner, 71 T.C.



is not clear which net worth requirement is to apply to other
potential litigants. * * * Clarifying these rules will provide
certainty for potential claimants and will decrease needless
litigation over procedural issues.”).

     Moreover, if petitioner were correct that there is no
logical connection between the 28 U.S.C. sec. 2412(d)(2)(B) net
worth requirements as used in connection with the award of costs
and fees and as used with respect to review of interest
abatements, then it would follow that Estate of Hubberd v.
Commissioner, supra, which construed the net worth requirements
applicable to estates in cases involving awards of litigation
costs, could have no application in the interest abatement area.
Nevertheless, petitioner cites Estate of Hubberd in support of
its position herein.
                                - 8 -

564, 568 (1979).

     Petitioner next argues that at the time its cause of action

for review of respondent’s denial of interest abatement “began to

accrue”, which in petitioner’s view was April 27, 1998, the date

of the final determination letter, section 7430(c)(4)(D)

contained an erroneous cross-reference to a nonexistent

subparagraph of subsection 7430(c)(4)(A).    Because of this

erroneous cross-reference, petitioner contends, section

7430(c)(4)(D) did not apply to section 6404(g) (the predecessor

of section 6404(i)), or could not have been read by a taxpayer to

apply, on the date petitioner’s cause of action began to accrue.

     Petitioner is correct that section 7430(c)(4) as originally

enacted contained an erroneous cross-reference.    As originally

enacted on August 5, 1997, section 7430(c)(4)(D) read as follows:

     (D) Special rules for applying net worth requirement. In
     applying the requirements of section 2412(d)(2)(B) of title
     28, United States Code, for purposes of subparagraph
     (A)(iii) of this paragraph * * * [Taxpayer Relief Act of
     1997, Pub. L. 105-34, sec. 1453, 111 Stat. 788, 1055;
     emphasis added.]

On August 5, 1997, paragraph (c)(4) of section 7430 contained no

such “subparagraph (A)(iii)”.   An earlier version of paragraph

(c)(4) of section 7430, prior to its amendment on July 30, 1996,

did contain such a reference, reading as follows:

     (c) Definitions.
        For purposes of this section--

        *       *       *        *       *        *       *
                               - 9 -

         (4) Prevailing party.
           (A) In general. The term “prevailing party” means any
           party in any proceeding to which subsection (a) applies
           (other than the United States or any creditor of the
           taxpayer involved)--
                (i) which establishes that the position of the
                United States in the proceeding was not
                substantially justified,
                (ii) which--
                     (I) has substantially prevailed with respect
                     to the amount in controversy, or
                     (II) has substantially prevailed with respect
                     to the most significant issue or set of
                     issues presented, and
                (iii) which meets the requirements of the 1st
                sentence of section 2412(d)(1)(B) of title 28,
                United States Code (as in effect on October 22,
                1986) except to the extent differing procedures
                are established by rule of court and meets the
                requirements of section 2412(d)(2)(B) of such
                title 28 (as so in effect).

On July 30, 1996, the version of paragraph (c)(4) of section 7430

quoted above was amended by striking subparagraph (A)(i) and

renumbering subparagraphs (A)(ii) and (iii) as (A)(i) and (ii),

respectively.3   See Taxpayer Bill of Rights 2, Pub. L. 104-168,

sec. 701(a), 110 Stat. 1452, 1463 (1996).   Notwithstanding the

1996 elimination of subparagraph (A)(iii) and renumbering of its

contents as subparagraph (A)(ii), when section 7430(c)(4)(D) was

enacted on August 5, 1997, it erroneously referred to

subparagraph (A)(iii).   See Taxpayer Relief Act of 1997, Pub. L.


     3
        The same legislation enacted sec. 6404(g)(now sec.
6404(i)) and that section correctly cross-referenced subparagraph
(A)(ii) of paragraph (c)(4) of sec. 7430 when referring to the
eligibility requirements for a taxpayer seeking Tax Court review
of a failure to abate interest. See Taxpayer Bill of Rights 2,
Pub. L. 104-168, secs. 302(a), 701(c)(3), 110 Stat. 1452, 1457,
1464 (1996).
                               - 10 -

105-34, sec. 1453, 111 Stat. 788, 1055.     The erroneous reference

was corrected by Congress in the IRS Restructuring and Reform Act

of 1998, Pub. L. 105-206, sec. 6014(e), 112 Stat. 685, 820,

enacted on July 22, 1998, which amended the reference to

“subparagraph (A)(iii)” to read   “subparagraph (A)(ii)” in

section 7430(c)(4)(D).

     With respect to the consequences that petitioner would

ascribe to this drafting error, the short answer is that Congress

made the corrective amendment retroactive, i.e., effective for

proceedings commenced after August 5, 1997, the date of original

enactment of section 7430(c)(4)(D).     See IRS Restructuring and

Reform Act of 1998, Pub. L. 105-206, secs. 6014, 6024, 112 Stat.

685, 826.   The corrected version “[takes] effect as if included

in the [provision] of the Taxpayer Relief Act of 1997 to which

[it] relate[s].”   Id.   Thus, the corrected version of section

7430(c)(4)(D) applies to this proceeding.

     Moreover, the corrective amendment was enacted on July 22,

1998, well before petitioner commenced this proceeding on October

13, 1998.   In addition, we think the nature of the error, and the

actual intent of the uncorrected version of section

7430(c)(4)(D), were at all times reasonably clear.     The

legislative history reveals that section 7430(c)(4)(D) was always
                              - 11 -

intended to modify section 7430(c)(4)(A)(ii).4   Also, the

incorporation of the latter provision by section 6404(g) (and its

successor, section 6404(i)) has always been explicit.   A careful

examination of the statute would have alerted petitioner to the

foregoing, in our view.

     Petitioner further argues that the amendment to section

7430(c)(4)(D) correcting the erroneous reference to subparagraph

“(A)(iii)” gave insufficient notice that section 6404 was being

changed, thereby denying petitioner due process.   Petitioner

first asserts that the retroactive application of the corrective

amendment would deny petitioner’s due process rights.   Because

retroactive tax statutes have long been upheld, this argument

lacks merit.   See United States v. Carlton, 512 U.S. 26, 30-31

(1994); Cohan v. Commissioner, 39 F.2d 540, 545 (2d Cir. 1930).

The retroactive application of a statute does not deny due

process so long as it is “supported by a legitimate legislative

purpose furthered by rational means”.   United States v. Carlton,

supra at 30-31.   Clearly, the retroactive correction of section

7430(c)(4)(D) is justified by a rational legislative purpose in

that Congress merely acted to correct the obviously mistaken

reference to “subparagraph (A)(iii)” in the original version of


     4
       See H. Rept. 105-148 at 639 (1997). In its explanation of
sec. 7430(c)(4)(D), the House Committee on the Budget report
states that the “bill provides that the net worth limitations
currently applicable to individuals also apply to estates and
trusts.” Id.
                                - 12 -

section 7430(c)(4)(D).    Moreover, the retroactive application of

a tax statute is not suspect “where it involves a mere change in

rate or a technical amendment.”     Howell v. Commissioner, 77 T.C.

916, 921 (1981).   Finally, the fact that Congress acted promptly

to correct the error and established only a modest period of

retroactivity supports the conclusion that petitioner’s due

process rights have not been violated.    See United States v.

Carlton, supra at 34.     For these reasons, the retroactive

application of the technical correction to section 7430(c)(4)(D)

does not violate due process.

     Petitioner appears to fashion a second due process claim

based on the contention that the statutory scheme for

jurisdiction in interest abatement cases, involving “three

statutes contained in two different titles of the U.S. Code”,

provides inadequate notice of the requirements for Tax Court

review and thereby offends due process.    More specifically,

petitioner contends that, given their subject matter differences,

an amendment to section 7430(c)(4)(D) gives no indication of a

change in section 6404.    In support of this argument, petitioner

cites Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306

(1950), and quotes from Walthall v. United States, 131 F.3d 1289,

1294 (9th Cir. 1997).5     However, both of these cases address the


     5
       Although petitioner attributes the quotation to United
States v. Jose, 131 F.3d 1325 (9th Cir. 1997), its source is
Walthall v. United States, 131 F.3d 1289, 1294 (9th Cir. 1997).
                                - 13 -

sufficiency of statutorily prescribed notice provided in

connection with pending judicial proceedings, and not

constructive notice of new legislation, where due process

considerations are different.    Cf. Chamberlin v. United States,

664 F. Supp. 663, 664 (N.D.N.Y. 1987); Texaco, Inc. v. Short, 454

U.S. 516, 537-536 n.33 (1982).    They accordingly have no

relevance here.    In any event, the central premise of

petitioner’s argument--that the numerous cross-references

delineating the statutory basis for Tax Court jurisdiction in

interest abatement cases are unduly opaque--is not well founded.

Section 6404(i) expressly incorporates section 7430(c)(4)(A)(ii),

which in turn is specifically referenced in (current) section

7430(c)(4)(D).    Such cross-referencing and incorporation are not

unusual in the Internal Revenue Code and hardly raise due process

notice concerns.    For the foregoing reasons, we find that the

jurisdictional requirements for abatement of interest cases do

not offend due process.

     Finally, petitioner argues that imposing a net worth

limitation on a party’s right to Tax Court review of denials of

interest abatement is a violation of the Equal Protection Clause

of the U.S. Constitution because there is no rational basis for

establishing a net worth threshold in a suit challenging the

respondent’s failure to abate interest.

     However, “In areas of social and economic policy, a
                               - 14 -

statutory classification that neither proceeds along suspect

lines nor infringes fundamental constitutional rights must be

upheld against equal protection challenge if there is any

reasonably conceivable state of facts that could provide a

rational basis for the classification.”    FCC v. Beach

Communications, Inc., 508 U.S. 307, 313 (1993).    One reasonably

conceivable explanation for the classification embodied in the

net worth limitation is that Congress believed taxpayers with net

worths exceeding the limitation were less vulnerable to

unjustified interest charges because such taxpayers were better

able to make an advance payment of tax or to post a cash bond,

thereby limiting the accrual of interest during a dispute with

the Commissioner.    Cf. Rev. Proc. 84-58, 1984-2 C.B. 501

(establishing procedures for making an advance payment or posting

a cash bond).    We believe a rational basis exists for the net

worth limitations of section 6404(i); consequently, the provision

does not violate the Equal Protection Clause.

     Because petitioner’s net worth, determined as required by

section 7430(c)(4)(D)(i)(I), does not meet the requirements of

section 7430(c)(4)(A)(ii), this Court does not have

jurisdiction.6


     6
       In light of this conclusion, we find it unnecessary to
address respondent’s alternative argument that, even if
petitioner’s net worth is to be determined as of the date of
filing the petition, such net worth must include all assets in
the estate, including assets already distributed. See Estate of
                             - 15 -

     For the foregoing reasons,

                                   An order granting respondent’s

                              motion to dismiss for lack of

                              jurisdiction will be entered.




Woll v. United States, 44 F.3d 464, 471 (7th Cir. 1994).
