DBIO Recommended Practices - Appendix D
Legal IssuesEach Division Chair and Chair-Elect should be aware of these basic issues and restrictions. For additional information see the Tax and Legal Handbook.
The Special Libraries Association, Inc. is a not-for-profit corporation, incorporated pursuant to the Not-For-Profit Corporation Law of the State of New York. During its early years, SLA existed as an unincorporated Association. SLA was first incorporated in Rhode Island on April 13, 1928 and then reincorporated in New York on September 25, 1958.
The basic purposes of SLA as stated in its Certificate of Incorporation and Governing Document, are:
"l(a) To provide an Association of individuals and organizations having a professional, scientific, or technical interest in library and information science, especially as these are applied in the recording, retrieval and dissemination of knowledge and information in areas such as the physical, biological, technical and social sciences, and the humanities."
"l(b) To promote and improve the communication, dissemination and use of such information and knowledge for the benefit of libraries or other educational organizations. No part of the property, assets, profits or net income shall inure to the benefit of any director, officer, or member or be of benefit to any private shareholder or individual within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1954 as amended."
Members, Chapters and Divisions
Membership eligibility is governed by the membership provisions of Article II of the SLA Governing Document. Membership in the Association shall consist of: Full Members, Student Members, Retired Members, Organizational Members, Virtual Members, and Honorary Members. Eligibility for and privileges of each class shall be as stated herein.
Full Member status shall be granted to an applicant who has an interest in the objectives of the Association. A Member shall have the right to vote, to hold any Association or unit elective office or appointive position, and to affiliate with one Chapter and one Division without payment of additional fee, and to receive the official journal at no additional charge.
Student member status shall be granted to an applicant enrolled in a curriculum of library or information science at least part time (two or more courses). This category of membership shall be available to those joining the Association for the first time. This category of membership shall also be available to current members renewing their membership after enrolling in an appropriate academic program. Student membership may be maintained only while actively a student, but for no more than three years. Appropriate verification of student status is required. A Student Member shall have the right to vote, to hold any Association or unit elective or appointive position, to affiliate with one Chapter and one Division without payment of additional fee, and to receive the official journal at no additional charge.
Retired member status shall be granted, upon request, to a Member who has retired. In this connection, "retirement" shall be defined by the Board. A Retired Member shall have the right to vote, to hold any Association or unit elective office or appointive position, to affiliate with one Chapter and one Division without payment of additional fee, and to receive the official journal at no additional charge. A Member who has 45 years of uninterrupted Association membership shall be designated Forty-five Year Honoree status. Basic membership dues will be waived for members holding this distinction. Forty-five Year honorees have the same membership rights as other Retired Members.
Organizational member status shall be granted to a firm, organization, or individual desiring to support the objectives and programs of the Association. Organizational Members shall have the right to affiliate with one Chapter and one Division without payment of additional fee, and to receive the official journal at no additional charge. Other benefits of this membership category shall be determined by the Board.
An Honorary member shall be an individual elected to this honor by the Association members. Current members may not be considered for honorary membership. Nominations shall be presented in writing to the Board and may be proposed by one or more Association members. Upon endorsement by a two-thirds vote of the Board, the nomination shall be submitted by the Board to the members for election at an Annual Business Meeting. The total number of Honorary Members and the number who may be elected in any one year shall be determined by the Board. An Honorary Member shall have the right to affiliate with one Chapter and one Division, and to receive the official journal free.
A Virtual member shall be an individual who wishes access to publications but does not wish to affiliate with a Chapter or Division. This membership is limited to members outside the United States and Canada and to members in developing countries. A virtual member will have online access only to publications. A virtual member shall not have the right to vote, to hold any Association or unit elective office or appointive position, or to affiliate with a Chapter or Division. Association publications will be accessible to virtual members virtually
SLA Chapters and Divisions exist only as a part of the single corporate entity, Special Libraries Association, Inc. and are organized pursuant to Articles XII and IX of the Governing Document. There is no separate incorporation of SLA Chapters and Divisions and both are funded by allotments from the SLA annual dues. SLA, its members, Chapters and Divisions can be roughly analogized to a for-profit corporation, its shareholders and branch offices. Numerous not-for-profit corporations are organized in this way, including other major library Associations.
Association Meetings
SLA meetings, including Chapter, Division and Association meetings, may be attended by any interested party regardless of membership standing. This open attendance policy does not, however, require members to subsidize attendance by non-members. Chapters and Divisions may charge a reasonable registration fee to help defray the costs of the meeting. Non-members are permitted to attend Association meetings of SLA. The registration fee charged such nonmembers is higher than that charged members.
SLA's open attendance policy does not mean that non-members can participate in SLA in the same manner as members. Obvious examples include the fact that non-members may not vote and may not hold Association office.
The SLA Board of Directors and Chapter and Division Cabinets are not required to open their sessions to non-members although, in their discretion, they may do so.
All meetings, whether open to interested parties or restricted in attendance, should have a written agenda. Chapter and Division officers should ensure that summary minutes are prepared of all meetings and that such minutes are accurate.
Joint and Regional Meetings
Chapters often participate in joint or regional meetings. Regional, sectional and joint meetings require particular attention to organization and cooperation. The responsible person must be selected on the basis of experience and ability. Where program and arrangements require them, committees should be appointed as soon as possible. If an Association officer is to be invited, arrangements should be coordinated as early as possible. When other professional Associations are involved, it should be made clear that their members are welcome at any separate SLA program.
Initial planning of joint professional meetings normally is undertaken by the officials of the respective groups. Detailed programming is then worked out by specified representatives. Decisions, such as date, place, publicity, accommodations, registration, financing, etc., must be cleared through each group. Frequently, publication of papers is also considered with distribution and cost taken into account.
Any plan involving a unit of the Special Libraries Association must conform to the SLA practice on non-discrimination, which reads:
"It is the practice of Special Libraries Association that membership and participation in the Association and its units are not limited in any respect by race, creed, color, national origin, age, sex, or physical disability. In particular, all meetings are conducted so as to assure compliance with this practice. The Association participates in joint meetings only with other organizations having the same policy. The Association is an Equal Opportunity Employer." (Approved June 1975)
Tax Status - Federal
In 1972, the United States Internal Revenue Service ruled that SLA is an organization meeting the requirements of Section 501(c)(3) of the Internal Revenue Code.
As a Section 501(c)(3) organization, SLA must:
- Be organized exclusively for charitable, scientific or educational purposes.
- Be operated exclusively for those purposes.
- Have no part of the net earnings inure to the benefit of any private individual.
- Refrain from any substantial lobbying activities.
- Refrain from participating in political campaign activities.
Corporate gifts and life time gifts by individuals to a Section 501(c)(3) organization are, with certain limitations, deductible to the donor for purposes of the U.S. federal income tax. Testamentary bequests are, again with certain limitations, deductible for purposes of the U.S. federal estate tax. There are other advantages. A Section 501(c) (3) organization may qualify for privileged postal rates for mailings relating to the organization's own affairs. In some states, a Section 501(c)(3) organization is exempt from sales tax. As a general rule, the income of SLA which is related to its tax-exempt purposes is tax exempt. For example, members' dues, interest earned by bank accounts, and income resulting from the sale of SLA publications is tax exempt.
Income from a trade or business which is not substantially related to SLA's tax-exempt purposes is taxed. For example, income generated from the sale or rental of mailing lists (except for exchanging with or renting to another organization exempt under Sections 501(c)(3) or (c)(2)) and advertising income is taxed.
Although most of SLA's income is tax exempt, SLA normally does have unrelated income which is taxable. As a result, SLA annually files two returns with the Internal Revenue Service: Form 990 related to non-taxable income and Form 990T relating to taxable income.
To enable SLA to properly prepare these returns, each Chapter and Division must annually furnish certain information including all income generated during the year and expenses incurred in producing the income. New or major changes in programs and services provided by SLA must be reported in Form 990. Accordingly, any Chapter or Division which engages in a previously unreported activity must so inform the Director, Finance at the Association office.
SLA considers being recognized as a Section 501(c)(3) organization a valuable privilege. It is the policy of SLA to follow the provisions of the Internal Revenue Code and Regulations regarding the operation of a Section 501(c)(3) organization and not to engage in activities which might jeopardize that status. All questions regarding the Association's tax-exempt status should be referred to the executive director.
Tax Status - State and Provincial
Each of the fifty states and Canadian provinces has its own tax law and regulations and, accordingly, any question concerning state and provincial taxation must be addressed to the law of the state or province involved.
As a general rule, an organization which is exempt from U.S. federal income tax under Section 501(c)(3) is also exempt from state income taxes. In addition, in some states, local sales and use tax exemptions are available to Section 501(c) (3) organizations. Since SLA is not incorporated in Canada, it cannot apply for tax-exemption from Canadian provinces.
Because it is SLA, and not the individual Chapters and Divisions, which is responsible for compliance with state tax laws, responsibility for dealing with state tax authorities is that of the Director, Finance. Individual members or Chapter or Division officers are not allowed to deal with state tax authorities. Any question concerning state taxation of SLA units should be directed to the Director, Finance.
Over the years, the Director, Finance, working with legal counsel, has conducted extensive research and made numerous inquiries regarding the availability of sales and use tax exemptions for SLA units. As indicated above, the rules vary from state to state. Some states grant no exemption to any organization; some states grant exemptions only to particular types of charitable organizations such as religious organizations; and, in a few states, an exemption is available to an organization such as SLA. A consideration to be kept in mind is that the paper work costs associated with obtaining and maintaining a sales tax exemption may equal or exceed the limited savings which may be realized by a sales tax exemption. Again, if there is any question as to whether a sales tax exemption is available in a particular state, inquiries should be directed to the Director, Finance.
Political and Legislative Action
SLA, as a 501(c)(3) educational institution, is restricted in the amount of lobbying it can do. Although IRS rules in this area are not as restrictive as they have been in the past, they are always open to interpretation. It is therefore critical that all legislative endeavors be channeled centrally through the President or executive director, both of who, under SLA policy, are the only individuals who can officially speak on behalf of the Association. In essence, if the Board of Directors has not taken a position on a particular issue, it is imperative that either the president or executive director be consulted. However, if comments or statements are based on Board-approved issues, discuss them with the public policy staff for clarification. This also enables headquarters staff to be aware of Chapter/Division activities.
A Section 501(c)(3) organization may not participate directly or indirectly, in any campaign for any public office - federal, state or local. Thus, SLA may not endorse any candidate, make any contribution to a candidate or have its members work in any candidate's campaign. This requirement also prevents SLA from having a Political Action Committee (PAC).
A Section 501(c)(3) organization may, to a limited extent, attempt to influence legislation. The specific language of the statute is that "no substantial part of the activities" of the organization may consist of "carrying on propaganda, or otherwise attempting to influence legislation."
Examples of attempts to influence legislation include attempts to influence the general public to vote in a particular way, often called "grassroots" lobbying, and direct lobbying by communicating with a member or employee of a legislative body. Also included would be any effort by SLA to encourage its members to lobby.
The following would ordinarily not be considered activities endeavoring to influence legislation: making available the results of nonpartisan analysis or research; appearances before a legislative committee at the request of that committee; and communications between SLA and its members regarding legislation of interest to members as long as the communication does not encourage the members to endeavor to influence the same.
As is indicated above, a Section 501(c)(3) organization is not absolutely prohibited from endeavoring to influence legislation - the requirement is that such activities may not become a "substantial part" of the Association's activities. The U.S. Internal Revenue Code does not define what is meant by "substantial." The policy of SLA is that no more that 5% of its aggregate activities (not its income or expenditures) may be of such character.
Because SLA is so large and so geographically diverse, it is not feasible for each member, Chapter and Division to independently determine when efforts to influence legislation are to be undertaken. In January 1980, the Board of Directors approved a government relations practice statement and instructed the Executive Director to establish and conduct a government information program to carry out the statement.
Obviously, none of the foregoing affects the right of any member, acting as an individual and not as a member of SLA, to engage in whatever political or legislative activity he or she may consider appropriate.
Member Liability
One of the characteristics of a corporation is limited liability; that is, the members of the corporations are not personally liable for the debts, liabilities or obligations of the corporation. SLA is a corporation with its principal place of business in Virginia.Since it is incorporated in New York, it is covered by that state’s liability law.
New York Not-For-Profit Corporation Law Section 517(a) specifically states that "the members of a corporation shall not be personally liable for the debts, liabilities or obligations of the corporations."
As a general rule, directors and officers of SLA will incur no personal liability as a result of their carrying out their duties as long as they do so in good faith and with ordinary diligence, care and skill.
Section 717(a) of the New York Not-For-Profit Corporation law states, in part:
"(a) Directors and officers shall discharge the duties of their respective positions in good faith and with that degree of diligence, care and skill which ordinarily prudent men would exercise under similar circumstances in like positions."
Under certain circumstances, a director or officer can incur personal liability. For example, a director or officer can be personally liable for gross negligence or for defrauding the Association.
Under Section 719 of the New York Not-For-Profit Corporation Law, a director who votes for certain actions can be personally liable - for example, voting to distribute the Association's properties to members other than as permitted by law; and, voting to make a loan to a director or officer. The law permits an action to be brought against a director or officer to compel an accounting for the mismanagement, loss or waste of corporate assets.
Association Liability
SLA is legally responsible for its contracts and can sue or be sued in the same manner as any corporation, whether for-profit or not-for-profit.
A normal business contract made by the SLA President or Executive Director will be binding on SLA. Because SLA is a single corporate entity, obligations of the Chapters and Divisions are obligations of SLA. Accordingly, a normal business contract made by a Chapter or Division chairperson will also be binding on SLA and not just on the individual Chapter or Division.
Most contracts made by Chapter presidents and Division chairs involve routine matters such as meeting arrangements and the amounts involved are relatively small. There have been occasions in the past, however, when Chapters and Divisions, with more enthusiasm than prudence, have entered into contracts involving significant sums of money.
The "Extra-Association Relations Policy" which was adopted by the Board of Directors on June 9, 1973 addresses this problem. It states:
"An agreement, contract, or obligation entered into by an Association unit requires advance approval by the Association Board of Directors if liability exceeds the unit's available or budgeted funds."
In addition to the foregoing, it is the policy of the Association that all unit contracts in excess of $5,000, must be reviewed and signed by the executive director.
Any questions regarding contracts and their execution should be referred to the executive director. (See, also, Sections titled "Members, Chapters and Divisions" and "Contracts.")
SLA may be liable for the negligent or fraudulent acts of its authorized representatives. Therefore, officers, directors, committee chairpersons, and representatives must exercise "ordinary diligence and care" in performing their responsibilities.
In addition, SLA could be responsible for an obligation incurred by any member who had "apparent authority" to act for SLA even though such individual acted without authority and in violation of SLA's policies and Guidelines. In Hydro level Corp. v. American Society of Mechanical Engineers, 635 F. 2d 118 (2nd Cir. 1980), cert. den., 456 U.S. 989 (1981) the American Society of Mechanical Engineers was held liable for the act of two of its members. These members, while acting as volunteer ASME workers, defrauded a third party by deliberately misinterpreting the requirements of one of the ASME codes. The court found ASME liable for the acts of these members because the injured party had no reason to believe the volunteer members' code interpretation was not "regular" and because the volunteers appeared to be acting within the authority given to them by this Society.
Any Chapter Chair or Division chair who intends to give authority to a member to act for SLA, should keep the foregoing in mind.
Inspection of Records
New York State law requires SLA to keep correct and complete books and records of account and minutes of the proceedings of its members, Board and Executive Committee, and a list of member names, addresses, and their class or classes of membership.
Although the law permits SLA to impose restrictions on the availability of such information, it is SLA policy to make the same generally available to members. Thus, SLA publishes the names and addresses of all members in the membership directory. Meeting minutes of the Board of Directors, the Executive Committee, and the Annual Business Meeting are available for inspection by members with certain exceptions that are determined by the Board of Directors. An example is executive session minutes.
Antitrust Laws
In recent years, the U.S. antitrust laws have been the basis for actions against certain trade and professional Associations whose activities allegedly restrained competition. The decisions of the United States Supreme Court which struck down ethical codes of Bar Associations which prohibited advertising are well-known examples. The American Dental Association was subject to a similar suit by the Federal Trade Commission. The American Medical Association has been subjected to an investigation to determine whether it controls the supply of physicians in the United States through accreditation of medical schools and other practices.
The trade and professional Associations which have been subject to these actions are typically Associations of competitors. Because the members of SLA do not compete with each other, it is unlikely that SLA will be subject to an antitrust action such as is described above.
It is worth noting that SLA is essentially an open organization. That is, Association membership is open to any person "who has a serious interest in the objectives of the Association" and there are no restrictions on the general public attending SLA meetings. The antitrust actions described above have been based in part on the fact that the particular Association imposed restrictions on membership, and thereby restrained competition. Obviously, SLA is not subject to such an attack.
Notwithstanding the foregoing, it is conceivable that a particular Chapter or Division may engage in some activity which might be considered to be anticompetitive, thereby violating antitrust laws. Any member who believes that any such activity is taking place should contact the executive director. We must add that to the best of our knowledge, no governmental or private entity has ever claimed that SLA has to any extent violated the U.S. antitrust laws.
Bartering
For purposes of the U.S. Internal Revenue Code, a barter transaction is in substance the same as a sales transaction. For example, the exchange of a mailing list for advertising space is the essential equivalent of selling the mailing list for the value of the advertising space. The value of the advertising space is considered to be income to SLA. The comments made in the Tax Status section concerning SLA's tax liability for related business income and unrelated business income will equally apply to value received on bartering transaction. An example of barter which would generate related income would be an exchange of SLA publications for something of value. An example involving unrelated income would be the one just given, namely, the exchange of a mailing list for something of value, except when this exchange is with another organization exempt under Section 501(c)(3) or (c)(2). The sporadic and occasional bartering transaction of whatever character arguably does not constitute business income of any kind. In all events, every barter exchange transaction by any Chapter or Division should be reported, in writing, to the Director, Finance at the Association office.
Association Reserve Funds
Every Association needs the economic security of a reserve fund. Unforeseen demands or loss of income may necessitate the use of funds which are not currently available in the budget. The purpose of a reserve is financial stability - to support the Association through an emergency situation. Accordingly, the reserves maintained by SLA and by its Chapters and Divisions should not be used to finance day-to-day operations or activities. An ideal reserve fund would be equal to the regular budget for one year. On June 5-6, 1992 the Board of Directors approved a recommendation regarding Chapter and Division investment policy that permits funds to be deposited only in principal-protected and insured investment instruments (e.g. checking accounts, passbook savings accounts, CD's and T-bills) or in the Association Pooled Money Market Account.
Rev. May 2014