I was at Valve a couple of years ago when they had a pretty sizable team working on L4D3. My best guess as to what happened to the game, based on what I know about it and about how Valve works, is that it was shelved.
A large part of the development centered around Source2 which then got rolled into the DOTA2 dev team. This was also around the same time Valve started getting heavily invested in VR, the Steam Controller, SteamOS / Steam Machines, and tons of other (software) things. At the time, CS:GO wasn't even really that popular and TF2 was still at the top of the play charts although of course DOTA2 was king. I could be completely wrong (and would love to be proven wrong) but the team that was working on it probably shuffled to other more interesting or profitable areas of the company (or other careers outside of Valve) which left the game mostly abandoned or at least had it's development severely crippled or cut back. I would be very surprised to learn that it hasn't released yet because of issues with direction or testing. Adding VR stuff would be great but again I would wager on the team being much smaller now (if it even exists at all) so Valve Time would be working against them in the most horrible way on that front.
Of course this is all speculation and they could announce the game tomorrow. As others have pointed out, Valve is simply making too much money with it's other endeavors (Steam, CS:GO, DOTA2) to worry about releasing a game that wasn't even service based or likely wouldn't provide Valve with a large amount of residual income beyond user's initial purchases.
