Barclays to Pay for Extra U.S. Tax on Same-Sex Partners

Barclays PLC, Britain's third-largest bank, said Friday it is joining Google Inc. and a small number of companies in reimbursing U.S. employees for federal tax they pay on health benefits provided to same-sex domestic partners.

The aim is to offset the tax on benefits for same-sex partners that does not apply to spouses in heterosexual marriages because same-sex partnerships are not recognized as marriages under U.S. law, the London-based bank said.

The change is to take effect Jan. 1, according to the bank, which bought the U.S. business of the bankrupt Wall Street firm Lehman Brothers Holdings Inc. in 2008.

Barclays may be leading the U.S. financial services industry in offering such tax-equalization payments.

Google in Mountain View, Calif.; Cisco Systems Inc. in San Jose, Calif., and San Francisco-based Kimpton Hotels and Restaurants are the only other for-profit companies to publicly disclose such reimbursement benefits, according to the Washington-based Human Rights Campaign.

"We are introducing this payment to proactively offset the additional tax," Mark Lane, a spokesman for Barclays Capital, said in an e-mailed statement.

"We believe that, by offering this, we will further our efforts to promote an inclusive environment."

Barclays will reimburse employees through a separate payment rather than an increase in base salary, Lane said.

Several financial companies, including Citigroup Inc., Morgan Stanley and HSBC North America, have joined the rights campaign's Business Coalition for Benefits Tax Equity, a group pushing for equal benefits.

Same-sex partners pay an average of $1,069 more in federal tax than people in heterosexual marriages with the same benefits, according to a 2007 study by the Center for American Progress and the Williams Institute.

Employers also pay added administrative costs to track the dependent status of covered same-sex partners and spouses and maintain separate payroll functions, the study said.

Reimbursements or "gross-up" benefits offered by Google and Barclays would increase costs for the employers but could improve employee retention, said Todd A. Solomon, a partner in the employee-benefits group at the McDermott Will & Emery law firm in Chicago.

"It's simply to provide equal pay for equal work," Solomon said in a phone interview. "In this civil rights issue, there's really no financial incentive."

"The bottom line is more than how much cash you spend today," he said, "it may help the bottom line to be seen as the employer of choice."

Barclays, which said in September that its U.S.-born president, Robert Diamond, 59, would succeed Chief Executive Officer John Varley at the end of March, does not disclose how many people it employs in the U.S.

In its annual report, it said it employed 88,500 people outside the U.K. at the end of last year.

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