Harvard Was First. Hollywood Could Be Next
Whether or not that was a mere trial balloon or a suggestion, the type of soft power at play is one of Hollywood's main assets. Look at Melania Trump's lucrative Amazon deal, for example, as one way that the giant companies that own studios can now wield influence and bend, if needed, for politically expedient purposes.
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So when Trump threatened Harvard University's tax-exempt status last week after the school rebuffed his administration's demands for a series of policy changes, it became apparent that that soft power could be leveraged as another weapon in his arsenal to get what he wants out of the entertainment and media industries.
Hollywood leans on a network of trade groups and associations representing various segments of the business. These include unions, guilds and professional organizations that advocate and promote the interests of its members. At the forefront: The Academy of Motion Picture and Arts and Sciences and the Recording Academy.
The organization behind the Oscars and the Academy Museum of Motion Pictures is tax-exempt as a 501(c)(6), which covers trade associations. It hasn't been immune to the ongoing period of contraction across Hollywood, laying off some of its workforce last year as part of a larger restructuring. And while it saw TV ratings for the Academy Awards broadcast surge to a post-pandemic high, the numbers suggest that revenue associated with the Oscars may be slowing, with real uncertainty about what the license fees will look like when it either negotiates a new broadcast deal with Disney or seeks to take the awards program elsewhere. Overall, revenue is down, exacerbated by the leveling off of the Academy Museum after a hot start.
The Academy losing its tax-exempt status will cost it tens of millions in the long run. If it was revoked last year, the group would've had to pay taxes on revenue ($15.3 million in 2024) and capital gains ($66.7 million in 2024).
Trump's clash with Harvard is the latest turn in his sweeping bid to purge 'woke' ideology across the government, private sector and academia. The entertainment industry has been targeted too, with companies across Hollywood rolling back diversity, equity and inclusion programs under the administration's position that they violate civil rights laws. Conservatives have taken issue with what they consider pandering to certain audiences by advancing certain narratives that exclude straight white men and suppress their viewpoints.
Members of the Academy have been critical of that line of criticism. In 2017, Warren Beatty nodded to it in his presentation of the best picture nominees, observing that those films, of which Barry Jenkins' Moonlight emerged as the winner, 'show us the increasing diversity in our community, and our respect for diversity and freedom all over the world.'
If Trump does flout federal laws barring him from directing the Internal Revenue Service to conduct tax investigations targeted at specific groups, it could embolden his circle to do the same with trade groups and nonprofits in the entertainment sector.
'They would love to make an example out of Hollywood,' says Edward McCaffery, professor of tax policy at USC Gould School of Law. 'If you give Trump and his acolytes a tool, they're going to use it.'
Unlike charities, the film and recording academies are allowed to engage in politics as a 501(c)(6), but it can't be the bulk of their work. Under the tax code that governs exemptions, political activity is defined exclusively as supporting and opposing candidates for public office. Legal experts observe that it'd be a losing proposition for the government to argue the trade groups, which don't make endorsements, aren't mostly focused on their objectives of advancing the appreciation of movies and music.
'I don't hear them going around saying that this candidate is better than another. That's all that counts,' says Rose Chan Loui, who specializes in teaching about nonprofits at UCLA School of Law. 'I don't see that leading to the revocation of their tax-exempt status.'
Possible violations of civil rights law will be the wild card. In 1970, the IRS implemented a policy of barring tax-exempt status for private schools engaged in racial discrimination. And the Supreme Court years later upheld the agency's decision to strip Bob Jones' University's status because tax-exempt institutions 'must serve a public purpose and not be contrary to established public policy.'
This administration has suggested that DEI programs illegally discriminate against straight white men. That could form the basis of stripping the film and recording academies of their tax-exempt statuses. Unlike entertainment giants who've complied with the government's position on the issue by rolling back diversity policies, they appear to have mostly maintained initiatives and goals that fall under that umbrella.
One example: The film academy maintains standards requiring nominated movies to meet specific levels of diversity, explicitly mentioning certain racial and ethnic groups.
The Recording Academy also remains committed to advancing DEI initiatives. Last year, it launched the Dream (Diversity Reimagined by Engaging All Music Makers) Network, which spotlights the work of creators from groups such as the Black Music Collective, Indigenous Peoples Network and Academy Proud, among others.
'There's a body of law that says a tax-exempt organization cannot be violating public policy,' Chan Loui says. 'But a lot of practitioners would say that this administration's interpretation doesn't make it a policy.'
The courts will decide, though the answer isn't as clear-cut as it appears. Diversity programs that require companies to hire applicants from certain racial or ethnic groups have been legally tenuous for years, but especially since the Supreme Court struck down affirmative action in a 2023 ruling that implicated race-conscious DEI initiatives in the private sector. There's a reason why several of these policies no longer explicitly mention race, often using read-between-the-lines placeholders like 'underrepresented,' 'underserved' or 'unique perspectives.'
Another possible target: nonprofits, specifically those that promote causes Trump has been hostile against, like immigration and the environment.
'There is a legitimate concern,' says Social Impact Fund executive director Craig Cichy, who previously was a program officer for philanthropic services at the Entertainment Industry Foundation, Hollywood's original major fiscal sponsor that was founded in 1942. 'When elected officials appear to target nonprofits based on the causes they support — whether in areas like immigration, climate or equity — it can affect both organizations and the willingness of donors and institutional funders to support those efforts.'
For Trump, winning these potential cases is almost beside the point. His playbook involves drowning rivals in legal fees. And if it's a battle of deeper pockets, he stands to win. Trump has extracted nearly $1 billion in pro bono legal services from elite law firms — including Willkie Farr & Gallagher; Paul, Weiss, Rifkind, Wharton & Garrison; and Skadden, Arps, Slate, Meagher & Flom.
This administration already has news organization, universities and private companies yielding to its demands. It's easy to see why. Prosecutors will go after entertainment giants — many of which have publications under their corporate umbrellas — for adversarial coverage, and regulators will be hesitant to greenlight the sink-or-swim mergers they're chasing. There will be fewer law firms willing to defend them. Amid this landscape, it's becoming tougher to envision any opposition from gaining meaningful traction.
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