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 the promotion of commercial sex acts and trafficking in persons crimes, and to increase the criminal monetary penalty limitations for the underpayment or overpayment of tax due to fraud.

Summary: Human Trafficking Fraud Enforcement Act of 2010 - Authorizes appropriations in FY2011 to establish an office within the Internal Revenue Service (IRS) to investigate and prosecute violations of internal revenue laws by persons that appear to be engaged in sex trafficking of children, transportation and coercion of individuals and minors for the purpose of prostitution, racketeering, forced labor and trafficking in slavery, and importation of aliens for prostitution. Makes victims of sex trafficking eligible for whistleblower awards.

Amends the Internal Revenue Code to increase criminal penalties and fines for: (1) attempts to evade or defeat tax attributable to human trafficking and commercial sex acts; (2) willful failure to file returns for tax attributable to income derived from human trafficking and commercial sex acts; and (3) fraud and false statements with respect to tax attributable to human trafficking and commercial sex acts.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Human Trafficking Fraud Enforcement 
Act of 2010''.

SEC. 2. AUTHORIZATION OF APPROPRIATIONS FOR TAX LAW ENFORCEMENT 
              RELATING TO HUMAN TRAFFICKING AND PROMOTION OF COMMERCIAL 
              SEX ACTS.

    (a) Authorization of Appropriations.--
            (1) In general.--There is authorized to be appropriated 
        $4,000,000 for fiscal year 2011 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, section 1952, section 1589, 
        section 1590, or section 1351 of title 18, United States Code, 
        or section 1328 of title 8, United States Code, or the laws of 
        any State or territory that prohibit the promotion of 
        prostitution or of any commercial sex act (as such term is 
        defined in section 1591(e)(3) of title 18, United States Code).
            (2) Availability.--Any amounts appropriated pursuant to the 
        authority of paragraph (1) shall remain available for fiscal 
        year 2011.
    (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 2011 and 2012 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 
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 1589, section 1590, section 1591(a), section 2421, 
section 2422, subsection (a), (d), or (e) of section 2423, or section 
1952, or section 1351 of title 18, United States Code, or section 1328 
of title 8, United States Code, or the laws of any State or territory 
that prohibit the promotion of prostitution or of any commercial sex 
act (as such term is defined in section 1591(e)(3)) 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. 3. 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 of the 
        Internal Revenue Code of 1986 (relating to attempt to evade or 
        defeat tax) is amended--
                    (A) by striking ``Any person'' and inserting the 
                following:
    ``(a) In General.--Any person'', and
                    (B) by adding at the end the following new 
                subsection:
    ``(b) Attempt To Evade or Defeat Tax Attributable to Human 
Trafficking and Commercial Sex Acts.--
            ``(1) In general.--In the case of any attempt to evade or 
        defeat any tax attributable to income derived from an act 
        described in paragraph (2), subsection (a) shall be applied--
                    ``(A) by substituting `$500,000 ($1,000,000' for 
                `$100,000 ($500,000', and
                    ``(B) by substituting `10 years' for `5 years'.
            ``(2) Human trafficking and commercial sex acts.--For 
        purposes of paragraph (1), an act described in this paragraph 
        is any act which is a violation of section 1591(a), section 
        2421, section 2422, subsection (a), (d), or (e) of section 
        2423, section 1952, section 1589, section 1590, or section 1351 
        of title 18, United States Code, or section 1328 of title 8, 
        United States Code, or the laws of any State or territory that 
        prohibit the promotion of prostitution or of any commercial sex 
        act (as such term is defined in section 1591(e)(3) of title 18, 
        United States Code).''.
            (2) Willful failure to file return, supply information, or 
        pay tax.--Section 7203 of such Code (relating to willful 
        failure to file return, supply information, or pay tax) is 
        amended--
                    (A) 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'',
                    (B) in the third sentence, by striking ``section'' 
                and inserting ``subsection'', and
                    (C) by adding at the end the following new 
                subsection:
    ``(b) Failure To File With Respect to Tax Attributable to Human 
Trafficking and Commercial Sex Acts.--In the case of any failure with 
respect to any tax attributable to income derived from an act described 
in paragraph (2) of section 7201(b), the first sentence of subsection 
(a) shall be applied by substituting--
            ``(1) `felony' for `misdemeanor',
            ``(2) `$500,000 ($1,000,000' for `$50,000 ($100,000', and
            ``(3) `10 years' for `1 year'.''.
            (3) Fraud and false statements.--Section 7206 of such Code 
        (relating to fraud and false statements) is amended--
                    (A) by striking ``Any person'' and inserting the 
                following:
    ``(a) In General.--Any person'', and
                    (B) by adding at the end the following new 
                subsection:
    ``(b) Fraud and False Statements With Respect to Tax Attributable 
to Human Trafficking and Commercial Sex Acts.--In the case of any 
violation of subsection (a) relating to any tax attributable to income 
derived from an act described in paragraph (2) of section 7201(b), 
subsection (a) shall be applied--
            ``(1) by substituting `$500,000 ($1,000,000' for `$100,000 
        ($500,000', and
            ``(2) by substituting `5 years' for `3 years'.''.
            (4) Penalties may be applied in addition to other 
        penalties.--Section 7204 of such Code (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, 7201, and 
        7203''.
    (b) Increase in Monetary Limitation for Underpayment or Overpayment 
of Tax Due to Fraud.--Section 7206 of such Code (relating to fraud and 
false statements), as amended by subsection (a)(3), is amended by 
adding at the end the following new subsection:
    ``(c) 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.