loophole

1. A way of escaping a difficulty, especially an omission or ambiguity in the wording of a contract or law that provides a means of evading compliance.
2. A small hole or slit in a wall, especially one through which small arms may be fired.

[LOOP² + HOLE.]

A technicality that allows a person or business to avoid the scope of a law without directly violating the law.

Investopedia Says:
Someone who wants to evade certain taxes might find a loophole that allows them to avoid penalties legally.

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To bamboozle someone out of their money is an age-old ruse. Learn about some of the gimmicks modern-day swindlers use and avoid becoming a statistic. Online Investment Scams Tutorial
Tax loopholes are shrinking, but there are still plenty of viable prospects. Get the big picture. Pros And Cons Of Offshore Investing

Technicality making it possible to circumvent a law's intent without violating its letter. For instance, a Tax Shelter may exploit a loophole in the tax law, or a bank may take advantage of a loophole in the Glass-Steagall Act to acquire a Discount Broker.

1. See arrow loop.
2. In a fortification, one of a number of long, narrow slits in the walls, usually widening inward to permit small arms to be fired over a wide angle at an enemy.
3. Same as slit ventilator.

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 so-called 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.

See: lobbying.

For other uses, see Loophole (disambiguation).

U.S. bound Ford Transit Connect: pieces of its interior are shredded — immediately upon importation — to circumvent the 1963 Chicken Tax — which imposes a 25% tariff on imported light trucks.

Ford imports all Transit Connects as passenger vehicles with rear windows, rear seats and rear seatbelts.^[1] The vehicles are exported from Turkey, arrive in Baltimore, and are converted into light trucks: rear windows are replaced with metal panels and rear seats removed.^[1]

The process exploits a loophole in the customs definition of a commercial vehicle. As cargo doesn't need seats with seat belts or rear windows, mere presence of those items exempts the vehicle from light truck status. The conversion process costs Ford only hundreds of dollars per van, but saves thousands in taxes.^[1]

A loophole is a weakness or exception that allows a system, such as a law or security, to be circumvented or otherwise avoided. Loopholes are searched for and used strategically in a variety of circumstances, including taxes, elections, politics, the criminal justice system, or in breaches of security.

A loophole in a law often contravenes the intent of the law without technically breaking it. For example, in some places, one may avoid paying taxes to the jurisdiction by forming a second residence in another location, or a commercial property can be built in a residential zone if it is made also for residential use.

In a security system, the one who breaches the system (such as an inmate escaping from prison or a terrorist) exploits the loophole during breach. Such weaknesses are often studied in advance by the violator, who spends time observing and learning the routine of the system and sometimes conducts surreptitious tests until such a loophole can be found.

An example of a legal loophole:

• In 2005, Wal-Mart planned a store in Calvert County, Maryland. While a law in the county restricted the size of a retail store to 75,000 square feet, Wal-Mart considered a plan that would dodge this restriction by building two separate smaller stores. Though Wal-Mart later withdrew this controversial plan^[2], the plan highlighted a legal loophole.

See also

• Legal technicality
• Piggybacking
• Quibble (plot device)
• Gerrymandering
• Gray area

References

1. ^ ^{a b c} "To Outfox the Chicken Tax, Ford Strips Its Own Vans". The Wall Street Journal, Matthew Dolan, September 22, 2009. http://online.wsj.com/article/SB125357990638429655.html. 
2. ^ Wal-Mart Drops Plan for Side-by-Side Calvert Stores

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Dansk (Danish)
n. - skydeåbning, skydeskår, kighul, lufthul, smuthul, smutvej
v. tr. - lave smuthuller/kighuller i

Nederlands (Dutch)
uitvlucht, maas (in wet), kijkgat, schietgat, sluipgat, kijk-/schietgat maken, opening zoeken/ vinden

Français (French)
n. - lacune, (Archit) meurtrière
v. tr. - exploiter une lacune

Deutsch (German)
n. - Schießscharte, Lücke
v. - Öffnungen machen

Ελληνική (Greek)
n. - πολεμίστρα, υπεκφυγή, διέξοδος, "παράθυρο", (καθομ.) "παραθυράκι" νόμου κ.λπ.
v. - ανοίγω πολεμίστρα

Italiano (Italian)
scappatoia, feritoia, asola, fare asole, aprire feritoie

Português (Portuguese)
n. - seteira (f), fenda (f), saída (f), escapatória (f)
v. - fazer um buraco

Русский (Russian)
амбразура, лазейка

Español (Spanish)
n. - aspillera, tronera, escapatoria, evasiva, pretexto
v. tr. - hacer aspilleras o troneras

Svenska (Swedish)
n. - skottglugg, titthål, ljusspringa, kryphål, smyghål
v. - förse med skottgluggar etc.

中文（简体）(Chinese (Simplified))
枪眼, 射弹孔, 望孔, 在...上开枪眼

中文（繁體）(Chinese (Traditional))
n. - 槍眼, 射彈孔, 望孔
v. tr. - 在...上開槍眼

한국어 (Korean)
n. - 작은 창문 , 요새 등의 총안 , 구멍
v. tr. - 총안을 내다

日本語 (Japanese)
n. - 銃眼, 逃げ道
v. - 狭間をつくる

العربيه (Arabic)
‏(الاسم) فتحه الرمى, كوة, فجوة, منفذ, مهرب (فعل) يزود بفتحات للرمى‏

עברית (Hebrew)
n. - ‮פירצה (בחוק), חרך-ירי, סדק בקיר‬
v. tr. - ‮פירצה (בחוק), חרך-ירי, סדק בקיר‬

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