Bug: SAM Conditional Globals Environment Variables maps fail to merge with Function environment variables

[prower-turnitin]

Description:

Defect where conditional Global environment variables fail to merge properly to Function.
This example demonstrates a defect in AWS SAM where conditional environment variables defined in the Globals.Function.Environment.Variables section using !If statements do not properly merge into individual AWS::Serverless::Function resources that have their own Environment.Variables section.

Steps to reproduce:

Deploy the linked https://github.com/prower-turnitin/sam-conditional-globals-example/tree/main# SAM App.
You'll see function2 does not merge Global Environment as described : https://docs.aws.amazon.com/serverless-application-model/latest/developerguide/sam-specification-template-anatomy-globals.html

Observed result:

When conditional statements (!If) are used in the Globals section, the conditional environment variables are NOT merged into functions that have their own Environment.Variables section.

Expected result:

According to AWS SAM documentation, global environment variables should merge with function-specific environment variables, with function-specific variables taking precedence when there are conflicts.

Function1 (No function-specific environment variables)

✅ WORKS CORRECTLY - Receives all conditional global variables:

{
  "LOG_LEVEL": "INFO",
  "log_level": "INFO", 
  "OTEL_INSTRUMENTATION_COMMON_DEFAULT_ENABLED": "false",
  "OTEL_SERVICE_NAME": "sam-conditional-example-dev"
}

Function2 (Has function-specific environment variables)

❌ DEFECT DEMONSTRATED - Missing conditional global variables:

{
  "LOG_LEVEL": "DEBUG",  // Function-specific override (correct)
  "FUNCTION_SPECIFIC_VAR": "function2-value",  // Function-specific (correct)
  "CUSTOM_CONFIG": "enabled"  // Function-specific (correct)
  // MISSING: OTEL_INSTRUMENTATION_COMMON_DEFAULT_ENABLED
  // MISSING: OTEL_SERVICE_NAME
  // MISSING: log_level
}

Additional environment details (Ex: Windows, Mac, Amazon Linux etc)

1. OS: Darwin NOA-M-JW3FNV5R6Y 24.5.0 Darwin Kernel Version 24.5.0: Tue Apr 22 19:53:27 PDT 2025; root:xnu-11417.121.6~2/RELEASE_ARM64_T6041 arm64

2. sam --version: SAM CLI, version 1.137.1

3. AWS region: us-east-2

# Paste the output of `sam --info` here
{
  "version": "1.137.1",
  "system": {
    "python": "3.11.10",
    "os": "macOS-15.5-arm64-arm-64bit"
  },
  "additional_dependencies": {
    "docker_engine": "Not available",
    "aws_cdk": "Not available",
    "terraform": "1.5.7"
  },
  "available_beta_feature_env_vars": [
    "SAM_CLI_BETA_FEATURES",
    "SAM_CLI_BETA_BUILD_PERFORMANCE",
    "SAM_CLI_BETA_TERRAFORM_SUPPORT",
    "SAM_CLI_BETA_PACKAGE_PERFORMANCE",
    "SAM_CLI_BETA_RUST_CARGO_LAMBDA"
  ]
}

Add --debug flag to command you are running