loophole


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Loophole

An omission or Ambiguity in a legal document that allows the intent of the document to be evaded.

Loopholes come into being through the passage of statutes, the enactment of regulations, the drafting of contracts or the decisions of courts. A loophole allows an individual or group to use some gap in the restrictions or requirements of the law or contract for personal advantage without technically breaking the law or contract. In response, lawmakers and regulators work to pass reforms that will close the loophole. For example, in the federal tax code, a long-standing loophole was the socalled tax shelter, which allowed taxpayers to reduce their tax debt by making investments. Although not closed entirely, this loophole was substantially reduced by the tax reform act of 1986 (Pub. L. No. 99-514, 100 Stat. 2085 [codified as amended in numerous sections of 26 U.S.C.A.]).

Loopholes exist because it is impossible to foresee every circumstance or course of conduct that will arise under, or in response to, the law. Loopholes often endure for a time because they can be difficult to close. Those who benefit from a loophole will lobby legislators or regulators to leave the loophole open. In the case of Election Campaign Financing, it is the legislators themselves who benefit. The Federal Election Campaign Act Amendments of 1974 (Pub. L. No. 93-443, 88 Stat. 1263 [1974] [codified as amended in scattered sections of 2 U.S.C.A. §§ 431–455 (1988)]) were passed to limit private financing of federal election campaigns. But loopholes in the law allow these limits to be circumvented. Through one loophole, intermediaries can pool or "bundle" contributions so that the limit is not legally exceeded. Through another, money raised specifically for building political parties (soft money) is funneled into campaigns.

Further readings

Burke, Debra. 1995. "Twenty Years After the Federal Election Campaign Act Amendments of 1974: Look Who's Running Now." Dickinson Law Review 99 (winter).

Wardle, Geoffrey M. 1996. "Political Contributions and Conduits after Charles Keating and Emily's List: An Incremental Approach to Reforming Federal Campaign Finance." Case Western Reserve Law Review 46 (winter).

Cross-references

Lobbying.

loophole

noun alternative, aperture, contrivance, device, escape clause, escape hatch, escape valve, exception, excuse, expedient, foramen, means of essape, mechanism for evasion, opening, outlet, saving clause, uncommunicativeness, vehicle for escape, way of escape, way out
References in periodicals archive ?
Trump's recent tax legislation did not include language to statutorily end the loophole because, as his economic adviser Gary Cohn (https://www.
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Whenever a gun control law fails--as they all inevitably do--the prohibitionists blame a loophole and are always ready with a more restrictive proposal.
But Carr was not using the phone as a phone, Mr Loophole told a court.
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Unfortunately, the fuss is mostly political, but let's look at some of the facts and background around the dosing of the LLC loophole
The Senate closed a third loophole by requiring online hotel booking companies to pay the full sales tax on the rates they charge consumers rather than the lower rate hotels bill the companies.
8) The court affirmed the district court's denial of the defendant's motion to dismiss for failure to state a claim and remanded the SEC's [section] 10(b) claim, explaining that a pre-tip disclosure does not always render the acquisition of information non-deceptive and eliminate liability, thus limiting the scope of the "safe harbor" loophole for misappropriation-based insider trading.
Mr Freeman said: "The media coined the term for me and while some might not know the name Nick Freeman, they usually have heard the name Mr Loophole.
A loophole is when some poor old dear gets an extra tenner in her pension.
A recent report showing nearly two million students' test scores--including many minority students' scores--are not being counted in NCLB provisions has some education advocates saying schools are exploiting a loophole to escape penalties.