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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).




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 ?
Baldwins amendments include closing the carried interest tax loophole by ensuring that income earned by managing other people's money is taxed at the same ordinary income tax rates as the vast majority of working Americans.
Trump's one-page tax reform outline was "full" of tax breaks for the wealthiest Americans but it did not include any reference to closing the carried interest loophole, they said.
Either we close the loophole more and more, and we're more confident in quantum theory, or we see something that could point toward new physics.
As the plan worked its way through Congress, both Democrats and Republicans changed it to preserve some loopholes.
The first "new" loopholes I've dubbed the Wal-Mart/McDonald's Loophole.
And it's not like the loophole has just been identified.
All of which raises an obvious question: Who are these loopholes for?
Helped along by an ineffectual FEC, the political parties created a loophole that allowed vast amounts of corporate and union money into federal elections.
The revised code effectively closes the loopholes in rules established in 2001 that prevented the NHS from recruiting staff from Third World countries unless there was an agreement between them.
Whereas other widespread versions of the Netsky worm have infected users by tempting them to double click on an email attachment, W32/Netsky-V exploits security loopholes in Microsoft's software that mean users can be hit just by reading an email.
And if politicians are good at anything, they are good at closing loopholes that may threaten their own reelection.
Later sections describe how the loopholes are defended exactly as that by those who wish to interpret them as not deceptive.