This question came in on an internal alias.

The answer from Naren Datha:

<ALLOWEDVALUES expanditems="true" filteritems="excludegroups">

          <LISTITEM value="Active" />

          <LISTITEM value="Closed" />

          <LISTITEM value="[project]\Contributors" />

          <LISTITEM value="MsftConn" />

          <LISTITEM value="[project]\Test Vendor Contributors" />

          <LISTITEM value="[project]\Test Vendor Readers" />

</ALLOWEDVALUES>