MEMORANDUM OF DECISION
This is an appeal and cross-appeal, pursuant to Bankruptcy Rule 8001 and 28 U.S.C. § 1334, from a ruling of the United States Bankruptcy Court (Krechevsky, J.) denying defendant's motion to dismiss plaintiffs complaint for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted, Rule 12(b)(1), (6), Fed.R.Civ.P. Hoffman v. State of Connecticut (In re Zera), Bank. No. 2-83-00754 (Bankr.D.Conn. June 8, 1984). The facts summarized by the bankruptcy court and recited in the briefs are not in dispute. Background
Edward Zera did business as Alyear Maintenance Service. Alyear owed the State of Connecticut Department of Revenue (“Revenue”) sales and use taxes for the quarters of June 30, 1981, through December 31, 1982; a renewal fee due in July 1983; and penalties and interest. Accordingly, on September 22, 1983, Revenue issued a tax warrant, as authorized by Conn.Gen.Stat. § 12-35 for $1,977, the total of the taxes, fees, penalties and interest owed. An independently employed officer served the warrant upon Pioneer Systems as garnishee. On or about October 6,1983, Pioneer paid the $1,977, in addition to a $123.62 service fee due the officer — a total of $2,100.62.
Zera also owed the State of Connecticut Department of Labor (“Labor”) unemployment compensation taxes in the amount of $1,139.69 (later amended to $1,002.91).
On October 7, 1983, Zera filed a Chapter 7 liquidation petition and a trustee was appointed. On October 28, Labor filed a proof of claim for the unemployment compensation taxes.
On January 5, 1984, the trustee filed a complaint against Revenue seeking the return as a preferential transfer1 of the $2,100.62 received from Zera’s garnishee back in October 1983. Revenue then *999moved to dismiss, arguing that the eleventh amendment2 and the doctrine of sovereign immunity barred the trustee’s suit as one for retroactive payment of funds from the state treasury. The trustee opposed the motion, claiming that 11 U.S.C. § 106(c)3 is a constitutional waiver by Congress of a state’s eleventh amendment and sovereign immunity and that, in any event, by filing a proof of claim against the estate Labor had waived (as provided in 11 U.S.C. § 106(a)) whatever immunity defenses Revenue might have otherwise asserted.
The bankruptcy court held: (1) with respect to 11 U.S.C. § 106(a), that there had been no waiver of sovereign immunity because the trustee’s action against Revenue was not a compulsory counterclaim to Labor’s claim against the estate; and (2) with respect to 11 U.S.C. § 106(c), that Congress has the power acting under the Bankruptcy Clause4 to abrogate the states’ eleventh amendment and sovereign immunities, and that by enacting 11 U.S.C. § 106(c) it clearly and unequivocally had done so.
Revenue, though content with the bankruptcy court’s analysis of the § 106(a) issues, appeals the court’s conclusions with respect to § 106(c). The trustee, though in agreement with the bankruptcy court’s views on § 106(c), cross-appeals its treatment of § 106(a).
Inasmuch as part of Revenue’s objections to the bankruptcy court’s ruling raised a challenge to the constitutionality of § 106(c), this appeal was deferred until the Attorney General of the United States was apprised of the challenge and permitted to argue the constitutional question. See 28 U.S.C. § 2403(b). The United States’ motion to intervene has been granted and it has filed a brief.
Discussion
Section 106(a)
The State of Connecticut argues that the Departments of Revenue and Labor are two separate “governmental units” within the meaning of 11 U.S.C. § 101(21),5 so that the filing of Labor’s proof of claim waived only that agency’s sovereign immunity.6 The trustee contends that because Labor and Revenue are agencies of the same “governmental unit” — the State of Connecticut — the filing of the proof of claim by Labor effected a waiver of the sovereign immunity which Revenue seeks to assert.7
*1000The bankruptcy court did not deem it necessary to resolve the nice question posed above, because it found from its reading of the legislative history of § 106(a) that it was intended to apply only with respect to compulsory counterclaims as that term is defined in the Féderal Rules of Civil Procedure.8 The court concluded that the estate’s preference claim against Revenue for the sales and use taxes that had been collected could not be viewed as a compulsory counterclaim to Labor’s attempt to recover the unemployment compensation taxes.9 Thus, “even accepting, arguendo, the trustee’s contention that there is but one governmental unit, Connecticut,” Zera, slip op. at 9, the filing of Labor’s proof of claim was held not to authorize the estate to go after the funds which had been paid to Revenue.
The findings and conclusions of the bankruptcy court with respect to § 106(a) are found to be correct and in accordance with the language and legislative history of subsection (a). See Hoffman v. State of Connecticut (In re Willington Convalescent Home, Inc.), 72 B.R. 1002, 1008-1010 (D.Conn.1987). Although the trustee contends in this appeal that the debtor’s filing of a petition in bankruptcy is the “transaction or occurrence” — within the meaning of § 106(a) — out of which arose both Labor’s filing of its proof of claim and the trustee’s action to set aside Revenue’s preferential transfer, that argument must be rejected as more clever than sound. If the bringing of the bankruptcy proceeding itself were the “transaction or occurrence” linking the two different rights asserted here, then that would mean that any claim by the estate could be brought without limit against a governmental unit, provided only that the governmental unit had filed proof of any claim against the estate. That construction is untenable because it would obliterate the distinction between subsection (a) and subsection (b), that distinction being that only compulsory counterclaims may be prosecuted without limit against a governmental unit filing a proof of claim (subsection (a)) whereas permis *1001 sive counterclaims (i.e., those not arising “out of the same transaction or occurrence” out of which the governmental unit’s claim arose) may be prosecuted only to the extent that they offset the claims brought by the governmental unit (subsection (b)).
The trustee concedes:
Judge Krechevsky is correct to state, in regard to the Trustee’s and the state’s claim, that “the transactions which give rise to each type of tax liability are different.” [Zera, slip op. at 9.] The tax warrant that is the subject of the Trustee’s claim arose from a different source than the proof of claim.
Brief of the Cross-Appellant at 6. To concede that, however, is to concede the ultimate issue, because, if the trustee’s claim against Revenue is not a compulsory counterclaim to Labor’s claim against the estate, then it is not within the purview of subsection (a). Thus, the bankruptcy court validly determined that Connecticut had not waived its immunity with respect to the preferential transfer transaction merely because one of its agencies had filed a proof of claim for payment of other kinds of taxes allegedly owed by the debtor.
Subsection (c)
The bankruptcy court, in construing § 106(c), relied heavily on its ruling in In re Willington, 39 B.R. 781, 785 (Bankr.D. Conn.1984). The bankruptcy court there held that: (1) § 106(c) clearly and unambiguously expressed Congress’ intention to waive the common-law sovereign immunity of states by making them subject to bankruptcy court orders issued pursuant to any provision of the bankruptcy laws containing a reference to “creditor,” “entity,” or “governmental unit”; (2) 28 U.S.C. § 1471(b)10 provided the jurisdictional vehicle by which the liability created by § 106(c) could be enforced in federal court, thereby abrogating the eleventh amendment immunity of states; and (3) Congress’ authority pursuant to the Bankruptcy Clause of the Constitution was sufficient to empower Congress to do what it had accomplished in § 106(c) and § 1471(b). Accord McVey Trucking, Inc. v. Secretary of State of Illinois (In re McVey Trucking, Inc.), 812 F.2d 311 (7th Cir.1987).)
In the case at bar, the bankruptcy court found that, because the provision governing the avoidance of preferential transfers (11 U.S.C. § 547) contained the word “creditor,” it was, by virtue of § 106(c), applicable to any governmental unit, including Revenue. Thus, § 547(b), when read in conjunction with § 550(a)11 (which also contains one of the § 106(c) trigger words, to wit, “entity”), authorized the trustee to recover from the State treasury the money Zera’s debtor paid in satisfaction of Zera’s sales and use tax obligations.
With all due respect to the bankruptcy court and the Seventh Circuit, this court has a different view of § 106(c), one not requiring a pronouncement on the momentous constitutional issues reached in Will-ington and McVey. As explained in this court’s ruling on the Willington appeal, the critical words of subsection (c) are contained in its opening subordinate clause: “Except as provided in subsections (a) and (b) of this section,_” Those words indicate that the waiver of sovereign immunity effected by subsection (c) is limited by the exceptions provided in subsection (a) and (b) so that the only situation in which state funds can actually be ordered by the bankruptcy court to be paid to the estate is pursuant to subsection (a) under circumstances where the state files a proof of claim and the estate can assert a compulsory counterclaim which exceeds the amount of the state’s claim.
*1002It is conceded that § 106(c) was specifically designed to abrogate sovereign immunity in preference actions, even when the governmental unit files no proof of claim.12 However, “properly construed,” as the United States argues in its intervening brief,
§ 106(c) permits the trustee to bring preference actions against a sovereign in a bankruptcy court [only] where that court has jurisdiction to enforce its order. Thus, with regard to actions in rem, where the trustee seeks to set aside a preferential lien of a sovereign on property within the estate, the sovereign would be bound by the bankruptcy court’s determination notwithstanding its failure to file a proof of claim_ However, the legislative history does not reveal that sovereign units would be liable even for 'preference actions which would expend themselves on the sovereign’s treasury in the form of retroactive monetary damages.
Intervening Brief of the United States at 8 (emphasis added).13
Where the eleventh amendment immunity of a state is in the balance, the Supreme Court requires “an unequivocal expression of congressional intent” that the states’ immunity was meant to be compromised. Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 99, 104 S.Ct. 900, 907, 79 L.Ed.2d 67 (1984). Neither 11 U.S.C. 106(c) nor 28 U.S.C. § 1471 or 11 U.S.C. § 547(b) are unequivocal expressions of congressional intent to abrogate the states’ immunity to suit in bankruptcy court for recovery of funds from the state treasury.
Accordingly, the order of the bankruptcy court dismissing Revenue’s motion to dismiss is reversed and the cause is remanded to that court for the purpose of dismissing the action against Revenue.
SO ORDERED.