I think i would read that ruling with a focus on the statement that
The information provided to the Department does not clearly specify whether the income was excluded from FAGI under IRC § 911.
which was immediately preceded by the statement
IRC § 911 allows qualified individuals to exclude a portion of their income attributable to their presence in a foreign country. Generally, this exclusion does not apply to individuals who are paid by the United States, including members of the armed forces, embassies, and federal employees loaned to foreign governments, even if the foreign government reimburses the United States for his salary.
Reading between the lines i would guess that Virginia doesn't know whether the taxpayer was or was not claiming a foreign earned income exclusion under Section 911 but was then trying to claim that he wasn't subject to tax in Virginia because he was taxed in the foreign country. Virginia rejected that because there is no provision under the Virginia Code for a subtraction for foreign income.
He conceded that he was a resident and therefore subject to tax by Virginia. The conclusion to the ruling states that
Because the Taxpayer was a resident of Virginia for the 2013 taxable year, he was required to file a Virginia individual income tax return. The assessment, however, is based on information made available to the Department. The Taxpayer may have additional information that more accurately reflects his Virginia taxable income. As such, the Taxpayer should file a Virginia income tax return for the 2013 taxable year.
which, i assume, was inviting the taxpayer to submit a return that showed whether or not he was eligible to claim the foreign earned income exclusion.