Harvard Was First. Hollywood Could Be Next

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Recently, there have been whispers about individuals connected to President Donald Trump proposing the idea to Warner Bros. Discovery of offering a hunting or fishing program to Donald Trump Jr., potentially as a means of gaining favor with the administration.

It’s unclear whether that was a preliminary test or a genuine proposal, but in any case, the kind of persuasive power being used is one of Hollywood‘s primary strengths. For instance, consider Melania Trump’s profitable Amazon deal as an example of how big corporations, such as those owning studios, can now exert influence and make adjustments, if necessary, for politically convenient reasons.

Last week, when Trump hinted at revoking Harvard University’s tax-exempt status following their refusal to comply with his administration’s policy changes requests, it became clear that soft power could be employed as another tool in his strategy to extract concessions from the entertainment and media sectors.

In Hollywood, numerous professional bodies like unions, guilds, and specialized organizations are heavily relied upon to represent different sectors of the industry. These entities champion and boost the concerns of their individual members. Notably prominent among them: The Academy of Motion Picture Arts and Sciences (AMPAS) and the Recording Academy.

The organization responsible for hosting the Oscars and operating the Academy Museum of Motion Pictures operates tax-free as a 501(c)(6) entity, categorized under trade associations. Despite this, it’s not been shielded from Hollywood’s ongoing contraction, resulting in workforce reductions last year during a larger restructuring process. Although television viewership for the Oscars broadcast reached a post-pandemic peak, financial returns linked to the Oscars seem to be decelerating, with doubts about what future license fees will look like when either negotiating a new deal with Disney or exploring alternative broadcast options. In summary, income has declined, worsened by the Academy Museum’s leveling off after an initial surge in popularity.

If the Academy loses its tax-exempt status in the future, it could end up paying tens of millions over time. Had this happened last year, the organization would have had to pay taxes on its 2024 revenue (approx. $15.3 million) and capital gains ($66.7 million), which could be significant. Furthermore, losing the tax-exempt status might cause a dramatic decrease in donations because those contributions would no longer be tax-deductible.

Trump’s confrontation with Harvard represents a new phase in his campaign to eliminate “woke” ideologies from various sectors, including the government, private businesses, and academia. The entertainment industry has also been drawn into this battle, as companies within Hollywood are scaling back diversity, equity, and inclusion initiatives due to the administration’s assertion that these programs violate civil rights laws. This issue has become a contentious topic among conservatives who believe that such efforts cater to certain groups at the expense of straight white men and their perspectives.

Members of the Academy have faced criticism regarding this particular aspect. In 2017, Warren Beatty acknowledged this during his presentation of the best picture nominees, pointing out that these films, including Barry Jenkins’ Moonlight, which ultimately won, “reflect the growing inclusivity within our society and our appreciation for diversity and freedom worldwide.

If Donald Trump disregards the federal regulations preventing him from instructing the Internal Revenue Service to perform targeted tax investigations on certain groups, it might encourage those in his circle to follow suit when dealing with trade associations and non-profit organizations within the entertainment industry.

Edward McCaffery, a professor specializing in tax policy at the USC Gould School of Law, states that Trump and his followers might take advantage of any given opportunity. According to him, their intention is to set an example within Hollywood.

Unlike charities, organizations like film and recording academies are permitted to involve themselves in political matters under the 501(c)(6) status, but politics can’t be their primary focus. According to tax laws governing exemptions, political activity is strictly defined as advocating for or against specific candidates running for public office. Legal experts argue that it would be challenging for authorities to claim these non-endorsement groups primarily engage in activities other than promoting the appreciation of films and music.

According to Rose Chan Loui, an expert on nonprofits at UCLA School of Law, there’s no widespread claim that one candidate is superior to another. She doesn’t believe such a statement would result in the removal of their tax-exempt status.

The potential infringements of civil rights legislation could act as an unpredictable factor. In 1970, the Internal Revenue Service enforced a rule that revoked tax-exempt status for schools involved in racial discrimination. Later on, the Supreme Court validated this decision to withdraw the tax-exempt status from Bob Jones University, stating that such institutions ought to serve a public purpose and not contradict established public policy.

The current administration asserts that DEI (Diversity, Equity, and Inclusion) programs unfairly target straight white men, which could lead to revoking the tax-exempt statuses of film and music academies. Contrary to large entertainment companies who’ve adjusted their diversity policies in line with government demands, these academies seem to have continued their efforts towards diversity initiatives and objectives.

The movie awards organization sets rules that demand diverse films, specifically highlighting particular racial and ethnic backgrounds in the nominations.

As a gamer, I’m all about inclusivity and diversity in gaming, just like The Recording Academy is for music. Last year, they kicked off the Dream (Diversity Reimagined by Engaging All Game Creators) Network, highlighting the awesome work of game developers from various backgrounds such as the Black Gaming Collective, Indigenous Gamers Network, and Queer Gamers Alliance, to name a few.

Chan Loui points out that tax-free organizations must adhere to the principle of not going against public policy. However, many professionals argue that the current administration’s interpretation of this rule does not equate to an established policy.

The courts are set to rule on this matter, but it’s not as straightforward as it seems. For a long time, diversity programs that mandate companies to hire candidates from specific racial or ethnic groups have been questionable legally. However, since the Supreme Court abolished affirmative action in a 2023 decision that affected race-based DEI initiatives in private businesses, this has become even more uncertain. Consequently, many of these policies no longer explicitly refer to race, instead opting for indirect references such as “diversity,” “underrepresented groups,” or “varied viewpoints.

Another potential focus area could be non-governmental organizations, particularly those advocating for causes that President Trump has shown opposition towards, such as immigration reform and environmental conservation.

Craig Cichy, executive director of Social Impact Fund, expresses a valid worry. Being a former program officer for philanthropic services at the Entertainment Industry Foundation – Hollywood’s initial significant financial supporter established in 1942 – he notes that when political leaders seem to single out nonprofits based on the causes they advocate for, such as immigration, climate change, or equality, it may impact both these organizations and the readiness of donors and institutional funders to back those initiatives.

Trump finds it almost immaterial to win these pending cases. Instead, his strategy is to bury opponents under mounting legal expenses. If it’s a question of financial resources, he has the upper hand. Trump has managed to secure over $1 billion in free legal services from top-tier law firms such as Willkie Farr & Gallagher, Paul, Weiss, Rifkind, Wharton & Garrison, and Skadden, Arps, Slate, Meagher & Flom.

This administration has already managed to get news organizations, universities, and private companies to comply with its requests. It’s not hard to understand why. Prosecutors could target entertainment giants – many of which own media outlets – for negative coverage, while regulators might be reluctant to approve the risky mergers these entities are pursuing. Fewer law firms may be willing to represent them in court. In this situation, it’s increasingly challenging to imagine significant opposition making a substantial impact.

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2025-04-25 16:55