In a post-audit challenge by a taxpayer, the Virginia Tax Commissioner addressed entity classification, nexus and royalty add-back issues. The Commissioner found that the taxpayer did not provide sufficient evidence that its single member LLC was a disregarded entity or that certain entities were financial institutions. Turning to nexus, the Commissioner determined that certain entities did not have positive apportionment factors or nexus in Virginia—and their exclusion did not distort income—so they could not be included in the Virginia consolidated group. Finally, the Commissioner determined the subject-to-tax exception to Virginia’s royalty add-back provision applied, but only to the extent that the income was subject to tax in other states. Va. P.D. No. 14-62 (May 6, 2014).