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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).



West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
References in periodicals archive ?
You can just see their attitude of taking advantage of the loopholes. You'll know how they will react when they are in office," Caritos explained.
Trump's recent tax legislation did not include language to statutorily end the loophole because, as his economic adviser Gary Cohn (https://www.nytimes.com/2017/12/22/business/trump-carried-interest-lobbyists.html) asserted , "The reality of this town is that constituency [Wall Street] has a very large presence in the House and the Senate, and they have really strong relationships on both sides of the aisle." But experts have long contended that Trump could simply revise the rule that creates the loophole - a move he has refused to take.
The Carried Interest Fairness Act, which would end the tax loophole, "has received broad bipartisan support from government officials, economists, investors and hedge fund managers," the two lawmakers said.
The big loophole in gun laws is the "Gun Free Zone" loophole.
Chris Turner, D-Grand Prairie, won passage of a bill that will close a loophole that allowed longtime elected officials to double-dip their salary and pension.
The council said Mrs Roberts was paid an extra PS833.46 but warned the "loophole" was to be closed by a change in the law.
Mr Loophole said Fergie had no choice because he had a stomach bug and was rushing to get to the toilet at United's training ground.
Unions have warned the move would make it easier for workers to be sacked and could be used as a tax loophole by companies.
CALL centre operators were yesterday accused of exploiting a legal loophole to avoid paying fair wages.
AN MP claimed a government decision to close a VAT loophole should mean ministers can act on other taxation problems.
Summary: A lawyer known as Mr Loophole for helping celebrities evade driving bans has refused to help his own daughter fight a speeding ticket.