In a 4-3 decision, the Virginia Supreme Court held that the subject-to-tax safe harbor to the royalty addback was ambiguous and applies only to the extent that the royalties are actually taxed by another state. In addition, the Court agreed with the Company’s alternative argument that a portion of the royalties qualify for the safe harbor when: (1) the royalties are taxed by states that require the royalty payor to add back the royalty payments; or (2) the royalties are taxed by states that require combined or consolidated reporting. Three justices dissented and agreed with the Company that the subject-to-tax safe harbor does not require that the royalties actually be taxed. Kohl’s Department Stores, Inc. v. Virginia Department of Taxation, Record No. 160681 (Va. Aug. 31, 2017).