N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 3-3.4
(Tax Law, section 208(9)(o))
In computing ENI, section 208(9)(o) provides that a corporation that is not included in a combined report with a related member (as that term is defined in subparagraph (1) of that paragraph) must add back royalty payments directly or indirectly paid, accrued or incurred in connection with one or more direct or indirect transactions with one or more related members during the taxable year to the extent deductible in calculating Federal taxable income. The addback will not apply if the corporation establishes by clear and convincing evidence of the form and type specified by the commissioner that one of three exceptions specified in section 208(9)(o)(2)(B)(i)-(iii) applies. For purposes of verifying that the corporation meets an exception to the addback, the corporation is required to retain and produce upon request an unredacted copy of the tax return filed with the applicable taxing authority of the related member for each transaction in question. The corporation is also required to supply an English translation of each non-English tax return required to be produced, including a translation of foreign currency to U.S. dollars. In addition, the addback will not apply if the corporation and the commissioner agree in writing to the application or use of alternative adjustments or computations.
N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 3-3.4