KPMG LLP said Monday that it would offer tax offsets to its lesbian, gay, bisexual and transgender partners and employees for the additional federal and state tax costs they incur when they pay for the medical benefits of same-sex domestic partners.

John Veihmeyer

The announcement comes a month after another Big Four accounting firm, Ernst & Young, said it would begin offering a similar benefit to its employees (see Ernst & Young Provides Tax Break for LGBT Staff).

“We are committed to a culture of inclusiveness and value the contributions of all of our people,” said KPMG LLP chairman and CEO John B. Veihmeyer in a statement. “Diversity is a business imperative. For our firm to continue to be a great place to work and build a career, we must be able to attract and retain the best people with the skills and determination to deliver above and beyond regardless of their sexual orientation.”

KPMG said its tax equalization benefit takes effect immediately and will cover the 2012 tax year. The firm’s U.S. employees who pay for medical and dental benefits for same-sex domestic partners who do not meet the Internal Revenue Code definition of dependent will be credited at the end of the year with additional tax withholding funded by KPMG. KPMG said that those individuals affected will be provided with information explaining how the gross-up will be administered.

“This decision is great news, both for our LGBT network and for KPMG as a whole,” said Tim Stiles, a tax partner and co-chair of the firm’s Pride@KPMG diversity network and Pride Advisory Board. “The firm’s leadership team has demonstrated their commitment to making sure KPMG is part of an elite group of progressive employers who recognize the importance of this benefit for lesbian, gay, bisexual, and/or transgender employees.”

The decision received support from LGBT advocacy groups. “The senior leadership at KPMG is to be commended for its decision,” said Eliza Byard, executive director of the Gay, Lesbian & Straight Education Network. “By adopting a tax-equalization benefit, KPMG has moved to the front ranks of LGBT-friendly employers. Recruitment and retention of talent, especially among the most recent college and high-school graduates, is critical to business success as the students of today become the workforce of tomorrow.”

The organization Parents, Families & Friends of Lesbians and Gays also praised the announcement. “PFLAG National knows from our work with KPMG over the years that it is a company committed to creating the best workplace possible for all of its employees,” said executive director Jody Huckaby. “This new benefit is yet another indication of that commitment. KPMG's comprehensive employee education program dedicated to creating more workplace allies, and now it's industry leading domestic partner benefits program have helped create culture change that strengthens talent acquisition and retention, improves morale, increases productivity, and ultimately, creates a healthier bottom line.”