loophole

(lūp'hōl')
n.

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.]

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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.

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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.

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This entry contains information applicable to United States law only.

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.

A technicality that allows a person or business to avoid the scope of a law or restriction without directly violating the law. Used often in discussions of taxes and their avoidance, loopholes provide ways for individuals and companies to remove income or assets from taxable situations into ones with lower taxes or none at all.

Loopholes are most prevalent in complex business deals involving tax issues, political issues and legal statutes. They can be found within contract details, building codes, tax codes, among others.

Investopedia Says:
A person or company utilizing a loophole isn't considered to be breaking the law, but circumventing it in a way that was not intended by the regulators or legislators that put the law or restriction into place. Most loopholes will close in time, as those who have the power to do so rewrite the rules to cut off the opportunity for loophole advantage. Some tax loopholes exist perennially, especially in nations like the United States where the intricate tax code amounts to tens of thousands of pages - which can lead to many opportunitoes for those seeking to exploit it.

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Follow these simple steps to get you ready for April 15. 10 Steps To Tax Preparation

For a list of words related to loophole, see:

• Income Tax - loophole: means of reducing taxes by careful use of laws; law written to benefit one class or group of taxpayers
• Strategy and Tactics - loophole: means of escape, esp. through an ambiguity or omission in a document permitting an evasion or misconstruction of its intent

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See words rhyming with "loophole."

This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)

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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