[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6107 Introduced in House (IH)]








109th CONGRESS
  2d Session
                                H. R. 6107

 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, to establish a Whistleblower 
    Office within the Internal Revenue Service, and to increase the 
     criminal monetary penalty limitations for the underpayment or 
                    overpayment of tax due to fraud.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 19, 2006

Mrs. Maloney (for herself, Ms. Woolsey, and Mr. Nadler) introduced the 
 following bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 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, to establish a Whistleblower 
    Office within the Internal Revenue Service, and to increase the 
     criminal monetary penalty limitations for the underpayment or 
                    overpayment of tax due to fraud.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

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 
        $2,000,000 for fiscal year 2007 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 by any office of Federal, State, or local 
        law enforcement for knowingly recruiting, enticing, harboring, 
        transporting, or providing by any means a person, knowing 
        that--
                    (A) force, fraud, or coercion will be used to cause 
                the person to engage in a commercial sex act, or
                    (B) the person has not attained the age of 18 years 
                and will be caused to engage in a commercial sex act.
            (2) Definitions.--For purposes of paragraph (1), the terms 
        ``commercial sex act'' and ``coercion'' shall have the meaning 
        given such terms by section 1591(c) of title 18, United States 
        Code.
            (3) Availability.--Any amounts appropriated pursuant to the 
        authority of paragraph (1) shall remain available for fiscal 
        year 2008.
    (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 2007 and 2008 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 any person caused to engage in a 
commercial sex act (within the meaning of section 1591(c)(1) of title 
18, United States Code), the determination whether such person is 
described in such paragraph shall be made without regard to paragraph 
(3) of such section 7623(b).

SEC. 2. WHISTLEBLOWER REFORMS.

    (a) In General.--Section 7623 (relating to expenses of detection of 
underpayments and fraud, etc.) is amended--
            (1) by striking ``The Secretary'' and inserting ``(a) In 
        General.--The Secretary'',
            (2) by striking ``and'' at the end of paragraph (1) and 
        inserting ``or'',
            (3) by striking ``(other than interest)'', and
            (4) by adding at the end the following new subsections:
    ``(b) Awards to Whistleblowers.--
            ``(1) In general.--If the Secretary proceeds with any 
        administrative or judicial action described in paragraph (5) 
        based on information brought to the Secretary's attention by an 
        individual, the Secretary shall, as determined by the 
        Whistleblower Office and subject to paragraph (2), pay such 
        individual as an award at least 15 percent but not more than 30 
        percent of the collected proceeds (including penalties, 
        interest, additions to tax, and additional amounts) resulting 
        from the action (including any related actions) or from any 
        settlement in response to such action. The Whistleblower Office 
        shall determine the amount of such award on the basis of the 
        extent to which the individual substantially contributed to 
        such action.
            ``(2) Award in case of less substantial contribution.--
                    ``(A) In general.--If the Whistleblower Office 
                determines that the action described in paragraph (1) 
                is based principally on disclosures of specific 
                allegations (other than information provided by the 
                individual described in paragraph (1)) resulting from a 
                judicial or administrative hearing, from a governmental 
                report, hearing, audit, or investigation, or from the 
                news media, the Whistleblower Office may award such 
                sums as it considers appropriate, but in no case more 
                than 10 percent of the collected proceeds (including 
                penalties, interest, additions to tax, and additional 
                amounts) resulting from the action (including any 
                related actions) or from any settlement in response to 
                such action, taking into account the significance of 
                the individual's information and the role of such 
                individual and any legal representative of such 
                individual in contributing to such action.
                    ``(B) Nonapplication of paragraph where individual 
                is original source of information.--Subparagraph (A) 
                shall not apply if the information resulting in the 
                initiation of the action described in paragraph (1) was 
                originally provided by the individual described in 
                paragraph (1).
            ``(3) Reduction in or denial of award.--If the 
        Whistleblower Office determines that the claim for an award 
        under paragraph (1) or (2) is brought by an individual who 
        planned and initiated the actions that led to the underpayment 
        of tax or actions described in subsection (a)(2), then the 
        Whistleblower Office may appropriately reduce such award. If 
        such individual is convicted of criminal conduct arising from 
        the role described in the preceding sentence, the Whistleblower 
        Office shall deny any award.
            ``(4) Appeal of award determination.--Any determination 
        regarding an award under paragraph (1), (2), or (3) may, within 
        30 days of such determination, be appealed to the Tax Court 
        (and the Tax Court shall have jurisdiction with respect to such 
        matter).
            ``(5) Application of this subsection.--This subsection 
        shall apply with respect to any action--
                    ``(A) against any taxpayer, but in the case of any 
                individual, only if such individual's gross income 
                exceeds $200,000 for any taxable year subject to such 
                action, and
                    ``(B) if the tax, penalties, interest, additions to 
                tax, and additional amounts in dispute exceed $20,000.
            ``(6) Additional rules.--
                    ``(A) No contract necessary.--No contract with the 
                Internal Revenue Service is necessary for any 
                individual to receive an award under this subsection.
                    ``(B) Representation.--Any individual described in 
                paragraph (1) or (2) may be represented by counsel.
                    ``(C) Submission of information.--No award may be 
                made under this subsection based on information 
                submitted to the Secretary unless such information is 
                submitted under penalty of perjury.
    ``(c) Whistleblower Office.--
            ``(1) In general.--There is established in the Internal 
        Revenue Service an office to be known as the `Whistleblower 
        Office' which--
                    ``(A) shall at all times operate at the direction 
                of the Commissioner and coordinate and consult with 
                other divisions in the Internal Revenue Service as 
                directed by the Commissioner,
                    ``(B) shall analyze information received from any 
                individual described in subsection (b) and either 
                investigate the matter itself or assign it to the 
                appropriate Internal Revenue Service office,
                    ``(C) shall monitor any action taken with respect 
                to such matter,
                    ``(D) shall inform such individual that it has 
                accepted the individual's information for further 
                review,
                    ``(E) may require such individual and any legal 
                representative of such individual to not disclose any 
                information so provided,
                    ``(F) in its sole discretion may ask for additional 
                assistance from such individual or any legal 
                representative of such individual, and
                    ``(G) shall determine the amount to be awarded to 
                such individual under subsection (b).
            ``(2) Request for assistance.--
                    ``(A) In general.--Any assistance requested under 
                paragraph (1)(F) shall be under the direction and 
                control of the Whistleblower Office or the office 
                assigned to investigate the matter under paragraph 
                (1)(A). No individual or legal representative whose 
                assistance is so requested may by reason of such 
                request represent himself or herself as an employee of 
                the Federal Government.
                    ``(B) Funding of assistance.--From the amounts 
                available for expenditure under subsection (b), the 
                Whistleblower Office may, with the agreement of the 
                individual described in subsection (b), reimburse the 
                costs incurred by any legal representative of such 
                individual in providing assistance described in 
                subparagraph (A).
    ``(d) Report by Secretary.--The Secretary shall each year conduct a 
study and report to Congress on the use of this section, including--
            ``(1) an analysis of the use of this section during the 
        preceding year and the results of such use, and
            ``(2) any legislative or administrative recommendations 
        regarding the provisions of this section and its 
        application.''.
    (b) Assignment to Special Trial Judges.--
            (1) In general.--Section 7443A(b) (relating to proceedings 
        which may be assigned to special trial judges) is amended by 
        striking ``and'' at the end of paragraph (4), by redesignating 
        paragraph (5) as paragraph (6), and by inserting after 
        paragraph (4) the following new paragraph:
            ``(5) any proceeding under section 7623(b)(4), and''.
            (2) Conforming amendment.--Section 7443A(c) is amended by 
        striking ``or (4)'' and inserting ``(4), or (5)''.
    (c) Deduction Allowed Whether or Not Taxpayer Itemizes.--Subsection 
(a) of section 62 (relating to general rule defining adjusted gross 
income) is amended by inserting after paragraph (20) the following new 
paragraph:
            ``(21) Attorneys fees relating to awards to 
        whistleblowers.--Any deduction allowable under this chapter for 
        attorney fees and court costs paid by, or on behalf of, the 
        taxpayer in connection with any award under section 7623(b) 
        (relating to awards to whistleblowers). The preceding sentence 
        shall not apply to any deduction in excess of the amount 
        includible in the taxpayer's gross income for the taxable year 
        on account of such award.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to information provided on or after the date of the enactment of 
this Act.

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 (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(b)''.
            (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.
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