To authorize appropriations for the purpose of establishing an office within the Internal Revenue Service to focus on violations of the internal revenue laws by persons who are under investigation for conduct relating to commercial sex acts, and to increase the criminal monetary penalty limitations for the underpayment or overpayment of tax due to fraud.

Summary: Authorizes appropriations to establish an office in the Internal Revenue Service (IRS) to investigate and prosecute violations of tax laws by individuals under investigation for criminal commercial sex activity.

Amends the Internal Revenue Code to increase criminal monetary and other penalties for attempts to evade or defeat tax, willful failure to file a tax return, supply information, or pay tax, aggravated failure to file tax returns, fraud and false statements, and underpayment or overpayment of tax due to fraud.

SECTION 1. AUTHORIZATION OF APPROPRIATIONS FOR TAX LAW ENFORCEMENT 
              RELATING TO HUMAN SEX TRAFFICKING.

    (a) Authorization of Appropriations.--
            (1) In general.--There is authorized to be appropriated 
        $4,000,000 for fiscal year 2008 for the purpose of establishing 
        an office within the Internal Revenue Service to investigate 
        and prosecute violations of the internal revenue laws by 
        persons that appear to be engaged in conduct in violation of 
        section 1591(a), section 2421, section 2422, subsection (a), 
        (d), or (e) of section 2423, or section 1952 of title 18, 
        United States Code, or the laws of any State or territory that 
        prohibit the promotion of prostitution or any commercial sex 
        act (as such term is defined in section 1591(c)(1) of title 18, 
        United States Code).
            (2) Availability.--Any amounts appropriated pursuant to the 
        authority of paragraph (1) shall remain available for fiscal 
        year 2009.
    (b) Additional Funding for Operations of Office.--Unless 
specifically appropriated otherwise, there is authorized to be 
appropriated and is appropriated to the office established under 
subsection (a)(1) for fiscal years 2008 and 2009 for the administration 
of such office an amount equal to the amount of any tax under chapter 1 
of the Internal Revenue Code of 1986 (including any interest) collected 
during such fiscal years as the result of the actions of such office, 
plus any civil or criminal monetary penalties imposed under such Code 
relating to such tax and so collected.
    (c) Report.--Not later than 1 year after the date of the enactment 
of this Act, the Secretary of the Treasury shall report to the 
Committee of Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate on the enforcement activities of the 
office established under subsection (a)(1) and shall include any 
recommendations for statutory changes to assist in future prosecutions 
under this section.
    (d) Applicability of Whistleblower Awards to Victims of Human Sex 
Trafficking.--For purposes of making an award under paragraph (1) or 
(2) of section 7623(b) of the Internal Revenue Code of 1986 with 
respect to information provided by victims of any person convicted of 
violating section 1591(a), section 2421, section 2422, subsection (a), 
(d), or (e) of section 2423, or section 1952 of title 18, United States 
Code, or the laws of any State or territory that prohibit the promotion 
of prostitution or any commercial sex act (as such term is defined in 
section 1591(c)(1) of title 18, United States Code), the determination 
of whether such person is described in such paragraph shall be made 
without regard to paragraph (3) of section 7623(b) of such Code.

SEC. 2. INCREASE IN CRIMINAL MONETARY PENALTY LIMITATION FOR THE 
              UNDERPAYMENT OR OVERPAYMENT OF TAX DUE TO FRAUD.

    (a) In General.--
            (1) Attempt to evade or defeat tax.--Section 7201 (relating 
        to attempt to evade or defeat tax) is amended--
                    (A) by striking ``$100,000 ($500,000'' and 
                inserting ``$500,000 ($1,000,000'', and
                    (B) by striking ``5 years'' and inserting ``10 
                years''.
            (2) Willful failure to file return, supply information, or 
        pay tax.--
                    (A) In general.--Section 7203 (relating to willful 
                failure to file return, supply information, or pay tax) 
                is amended--
                            (i) in the first sentence--
                                    (I) by striking ``Any person'' and 
                                inserting the following:
    ``(a) In General.--Any person'', and
                                    (II) by striking ``$25,000'' and 
                                inserting ``$50,000'',
                            (ii) in the third sentence, by striking 
                        ``section'' and inserting ``subsection'', and
                            (iii) by adding at the end the following 
                        new subsection:
    ``(b) Aggravated Failure to File.--
            ``(1) In general.--In the case of any failure described in 
        paragraph (2), the first sentence of subsection (a) shall be 
        applied by substituting--
                    ``(A) `felony' for `misdemeanor',
                    ``(B) `$500,000 ($1,000,000' for `$50,000 
                ($100,000', and
                    ``(C) `10 years' for `1 year'.
            ``(2) Failure described.--A failure described in this 
        paragraph is--
                    ``(A) a failure to make a return described in 
                subsection (a) for a period of 3 or more consecutive 
                taxable years if the aggregate tax liability for such 
                period is not less than $100,000, or
                    ``(B) a failure to make a return if the tax 
                liability giving rise to the requirement to make such 
                return is attributable to an activity which is a felony 
                under any State or Federal law.''.
                    (B) Penalty may be applied in addition to other 
                penalties.--Section 7204 (relating to fraudulent 
                statement or failure to make statement to employees) is 
                amended by striking ``the penalty provided in section 
                6674'' and inserting ``the penalties provided in 
                sections 6674 and 7203''.
            (3) Fraud and false statements.--Section 7206 (relating to 
        fraud and false statements) is amended--
                    (A) by striking ``$100,000 ($500,000'' and 
                inserting ``$500,000 ($1,000,000'', and
                    (B) by striking ``3 years'' and inserting ``5 
                years''.
    (b) Increase in Monetary Limitation for Underpayment or Overpayment 
of Tax Due to Fraud.--Section 7206 (relating to fraud and false 
statements), as amended by subsection (a)(3), is amended--
            (1) by striking ``Any person who--'' and inserting ``(a) In 
        General.--Any person who--'', and
            (2) by adding at the end the following new subsection:
    ``(b) Increase in Monetary Limitation for Underpayment or 
Overpayment of Tax Due to Fraud.--If any portion of any underpayment 
(as defined in section 6664(a)) or overpayment (as defined in section 
6401(a)) of tax required to be shown on a return is attributable to 
fraudulent action described in subsection (a), the applicable dollar 
amount under subsection (a) shall in no event be less than an amount 
equal to such portion. A rule similar to the rule under section 6663(b) 
shall apply for purposes of determining the portion so attributable.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to actions, and failures to act, occurring after the date of the 
enactment of this Act.