Project Files tree incorrectly applies parent repository .gitignore

Look for the code that builds the Project Files tree, likely in a module handling file system navigation and .gitignore application. The issue is about precedence of .gitignore rules when a project is nested inside another repository. Start by finding where .gitignore files are read and applied, then trace how the current directory's repository is determined. Check for tests related to file tree filtering or .gitignore handling to understand the expected behavior.

Short summary

When a project is nested inside another Git repository, the Project Files tree can apply the parent repository's .gitignore rules instead of the child project's rules. This hides most files from the tree.

Affected version or release

v1.1.23

Installation context

GitHub Copilot desktop app on Windows 11, local repository project/session.

What happened?

All my projects live under C:/Code, and I use that for cross-repo AI work and it's added to sidebar - that folder is a repo, with an ignore-almost-all .gitignore to version control high level docs and notes (exclude anything but 3 folders). Under it I have C:/Code/ProjectA, which is also added to the sidebar, and is a normally setup git repo, but if I try and open the files pane in it, it seems to be filtered by the C:/Code .gitignore (I can only see one folder, which is from the allowed ones in the parent .gitignore).

C:/Code is also the repo storage location configured in the settings.

Steps to reproduce

1. Create a Git repository at C:\Code.

2. Add a parent .gitignore containing:

   *
   !docs/
   !docs/**
   

3. Place an independent Git repository at C:\Code\ProjectA.

4. Ensure the child repository contains normal source directories such as src.

5. Configure both C:\Code and C:\Code\ProjectA as local Copilot projects and configure C:/Code as the central storage location.

6. Open a Copilot session for ProjectA.

7. Open the Project Files tree.

8. Observe that only docs or other parent-repository-visible paths are shown; child repository source files are missing.

9. Close and reopen the session, then restart the app.

10. Observe that the incorrect tree remains.

Expected behavior

The local project .gitignore takes precedence over the root one.

Additional context

No response