Bren Abandons Tax-Penalty Fight : Settlement: The Irvine Co. chairman pays $120,830 on art that he purchased out of state.

SACRAMENTO —  Orange County billionaire Donald L. Bren, who stands at No. 57 on Forbes magazine’s listing of the 400 richest Americans, has decided to stop fighting a $120,830 penalty for failing to pay taxes on out-of-state art purchases.

Bren, the publicity-shy Irvine Co. board chairman whose tax problems were publicly debated at a recent State Board of Equalization hearing, said Monday that he paid the penalty last Friday in hopes that it would “put this matter fully to rest.”

Bren had initially asked the tax administration board to “forgive” the penalties, saying he did not know he had to pay California sales tax when paintings he purchased at a New York auction were brought into the state.

He said he became aware of the tax liability only when state auditors asked him for an accounting. After he disclosed art purchases of $20 million during the mid-1980s, they billed him for $1.2 million in back taxes, plus $671,872 in interest and a $120,830 penalty.

In a written statement, Bren said he paid the back taxes and interest but decided to challenge the penalties after he was told that the Board of Equalization had waived them in similar cases “as a routine matter on (the board’s) consent agenda.”

When the case came before the five-member elected board, however, it was not handled as a routine matter. Insisting on a full-blown public discussion, members argued heatedly over whether rich and poor should be treated alike when it came to tax penalties.

Two Republicans on the board urged their colleagues to forgive the penalties, noting that they had done the same in the past for taxpayers who weren’t billionaires. Two Democrats, however, contended that anyone who could afford $20 million in art purchases could easily afford a tax lawyer’s advice. The fifth member, Controller Gray Davis, abstained.

Until Bren’s statement, the board had intended to try to break the deadlock this week.

Bren said he had “sought no special favors or preferential treatment that departed from what I understood to be the board’s normal procedure and historic practice.”

The Newport Beach developer is a longtime personal friend of Gov. Pete Wilson, who has no direct authority over the Board of Equalization.

He noted that the board’s staff as well as its hearing examiner had recommended that the penalty be waived.

“I understand their recommendation reflected their conclusion that I had no knowledge of the state law which extended the California sales tax to art purchased out of state, nor had I sought to circumvent the law,” he said.

In the latest Forbes magazine listing, Bren’s wealth was calculated at $1.1 billion.

Bren grew up amid the new Southern California wealth created by the movies; his late father, Milton, was a Hollywood producer whose credits included “Borderline” and “Tars and Spars.” But the elder Bren made a small fortune investing in real estate, including extensive parcels along Sunset Boulevard.

The son, who attended the University of Washington on a ski scholarship and later served as an officer in the Marine Corps, built an empire of his own around his Donald Bren Co., a home-building firm, before joining a group of investors to purchase the Irvine Co. from the family foundation in 1977 for $337 million.