Association Law and the ALA Legal Framework
ALA is a non-profit association, incorporated under the laws of the State of Massachusetts. ALA is tax-exempt under section 501(c)(3 ) of the U.S. Internal Revenue Code. A broad range of federal, state and local laws affect ALA - as a non-profit corporation, as a tax-exempt organization, as an association, as an employer, as a publisher, and conference sponsor.
It does not mean that ALA is prohibited from having revenues greater than its expenses. There are many specific differences in law and regulation between non-profit and for-profit entities. The overriding difference is that while a for-profit corporation has equity shareholders - the legal "owners" of the corporation, a non-profit corporation does not have shareholders. Its profits are not distributed to owners, but remain in the corporation to be used to further its mission.
The determination that an organization may be "tax-exempt" primarily relates to the purpose for which it is organized and operated. A determination by the U.S. Internal Revenue Service that an association is tax-exempt generally permits that association to earn specific types of income without paying federal income tax. Most importantly for ALA, this means that ALA does not pay federal income tax on dues received from its members, on subscriptions to its journals, on registration for its conferences and institutes, and on other mission-related income.
No. First, ALA does pay some federal income tax. The Internal Revenue Code states that income which is not directly related to an association's tax-exempt purpose is subject to tax - called Unrelated Business Income Tax. For instance, ALA pays federal income tax on revenue derived from advertising in its journals. The distinction between taxable and non-taxable revenue is the subject of voluminous IRS rulings and court decisions.
The U.S. Internal Revenue Code grants tax-exempt status to non-profit organizations in more than 20 categories under Section 501(c). Depending on its category of tax-exemption, a non-profit organization may be permitted to, or prohibited from, engaging in various activities.
Section 501(c)(3) is reserved for organizations organized for public benefit. Permitted tax-exempt purposes include charitable, educational and literary. As a 501(c)(3) organization, ALA may use its funds for charity, education, the promotion of literature, and related administrative costs. Charitable activities include promoting literacy, giving scholarships, and improving libraries. Educational activities include publications, seminars, institutes and conferences. Literacy activities include promoting books and authors, and providing forums for discussion of literary topics.
There are limitations on 501(c)(3) organizations. Any activities which are not charitable, educational or literary must be "insubstantial" - i.e. short-term, limited in nature. There are limitations on the amount of lobbying done by 501(c)(3) organization. All political activity is prohibited. Transfer of funds to organizations in different tax-exemption categories is prohibited, unless the transfer furthers a charitable, educational, or literary purpose - or unless it is a loan at market rates of interest, as is the ALA loan of funds of ALA-APA.
Other 501(c)(3) organizations include the American College of Surgeons, American Psychological Association, the National PTA, the United Way, and the Arthritis Foundation. Many association which might appear to be "like ALA," are, in fact, exempt under section 501(c)(6), the section which deals with business leagues, chambers of commerce, real estate boards, and boards of trade. The IRS defines a "business league" as an association of persons having some common business interest, the purpose of which is to promote such common interests. ALA-APA is, therefore, seeking tax-exemption under section 501(c)(6). Associations in this category include the American Bar Association, American Medical Association, Independent Insurance Agents of America, Spring Manufacturers Association, Northwest Association of Realtors. State library associations - ALA chapters - include both 501(c)(3) and 501(c)(6) organizations.
501(c)(3) organizations are completely prohibited from engaging, directly or indirectly, in any political campaign for or against a candidate for local, state or federal office. The penalty for violation of these prohibitions is revocation of tax-exempt status.
For additional information, see http://www.ala.org Governance -Election Year Rules]
Do member (volunteer) leaders have any potential liability resulting from their service to the Association?
Associations take several steps to protect their boards of directors and other volunteer leaders.
Some of the most damaging claims brought against associations have related to antitrust laws. Are antitrust laws relevant to ALA?
Yes. While ALA may be different from a trade association in the extent of its exposure, antitrust laws are relevant. This is a broad and complex area of the law and there are numerous ways in which associations are impacted.
No. The 1982 case American Society of Mechanical Engineers, Inc. v Hydrolevel Corporation determined that the association's volunteers and lower-level staff members caused competitive injury, although the association's leadership was not aware of the activities and had not approved them. The Court ruled that the association was liable because it failed to prevent antitrust violations by its volunteers and staff, who had acted within their "apparent authority" in speaking for the Association. Treble damages were assessed the association under provisions of the Sherman Act.
Yes. Laws relating to defamation affect associations. Defamation encompasses both libel (generally written) and slander (generally oral). A defamatory communication is one which harms the reputation of someone through libel or slander. This is a complicated area of the law. Public figures are subject to a somewhat different set of standards from other individuals or corporations. Defamation laws are relevant to associations because (a) officers, directors and other members of an association may be personally liable for certain kinds of actions - including defamation, (b) publishers - including associations - are liable for defamatory statements in publications, including publications on the website. Truth is a defense to a defamation claim. Opinion is protected - thus book reviews, for instance, do not represent significant legal exposure. Again, this does not mean that programs or articles by members should not address specific products or services. Attention to the accuracy of facts is important. Any claim related to "incorrect" facts must be promptly addressed to help lessen the damages.
ALA, like other associations, gathers and makes available statistical data. Are there laws that affect that service?
Yes, especially statistics relating to salaries or the price of products or services or components of price (such as cost information). Participation in any program to gather statistics must be voluntary. The confidentiality of information supplied by each participant must be maintained; only composite or average figures should be used in statistical reports. Nonmembers must have access to the results of association statistical programs, assuming a legitimate need to receive the results; again, a higher fee may be charged to nonmembers. Many other rules apply, depending on the type of statistics being compiled.
Yes. As is the case with any activity that has the potential to adversely affect another party, due process is a fundamental consideration. The avoidance of antitrust problems is also an issue.
Yes. There are some key questions to ask during the establishment of such a program: (1) Are the criteria for certification carefully matched to legitimate professional goals? (2) Are the criteria for certification pro-competitive (vs. anti-competitive)? (3) Is the analysis thorough and objective? Further, as is true for accreditation, due process is a fundamental consideration in developing and administering certification procedures.