It should have at least been nominated for the Best Non-Fiction documentary. Oh wait...
The way I understand the process, first the Oscars determine eligibility, then a nominating committee will choose who is to be nominated or put on the ballot, then there is a vote for the award.
Deeming the movie 2016 to be “ineligible” means it is not eligible for consideration to be nominated.
This is as low as you can go.
Not winning is one thing, not getting nominated is another, but being deemed “ineligible” to even be considered for nomination is really bad.