Reproduction of a bug with Observable + ForEach + Equatable + child views.

NestedBugTestView.swift

import SwiftUI
import Observation

@Observable
final class Folder: Equatable {
    var name: String
    var isExpanded: Bool

    init(name: String, isExpanded: Bool) {
        self.name = name
        self.isExpanded = isExpanded
    }

    func copy(name: String? = nil, isExpanded: Bool? = nil) -> Folder {
        Folder(
            name: name ?? self.name,
            isExpanded: isExpanded ?? self.isExpanded
        )
    }

    static func == (lhs: Folder, rhs: Folder) -> Bool {
        lhs.name == rhs.name && lhs.isExpanded == rhs.isExpanded
    }
}

@Observable
final class Category: Equatable {
    var name: String
    var folders: [Folder]

    init(name: String, folders: [Folder]) {
        self.name = name
        self.folders = folders
    }

    func copy(name: String? = nil, folders: [Folder]? = nil) -> Category {
        Category(
            name: name ?? self.name,
            folders: folders ?? self.folders
        )
    }

    static func == (lhs: Category, rhs: Category) -> Bool {
        // Uncommenting this line also fixes the issue
        // ObjectIdentifier(lhs) == ObjectIdentifier(rhs) &&
        lhs.name == rhs.name &&
        lhs.folders == rhs.folders
    }
}

@Observable
final class Library {
    var categories: [Category] = [
        Category(name: "Work", folders: [
            Folder(name: "Meetings", isExpanded: false)
        ])
    ]

    /*
      Given a structure: Library --♢ Categories --♢ Folder,
      the following three change the 'isExpanded' property in different ways:

      - folder.isExpanded.toggle()
      - folder.copy(isExpanded:)
      - category.copy(folders:)  <-- this one causes the other to stop working
     */

    func toggleFolderExpanded(categoryIndex: Int, folderIndex: Int) {
        categories[categoryIndex].folders[folderIndex].isExpanded.toggle()
        print("Direct: toggled isExpanded at [\(categoryIndex)][\(folderIndex)]: \(categories[categoryIndex].folders[folderIndex].isExpanded)")
    }

    func toggleFolderWithCopy(categoryIndex: Int, folderIndex: Int) {
        let oldFolder = categories[categoryIndex].folders[folderIndex]
        let newFolder = oldFolder.copy(isExpanded: !oldFolder.isExpanded)
        categories[categoryIndex].folders[folderIndex] = newFolder

        // Uncommenting this line fixes the issue:
        // categories[categoryIndex] = categories[categoryIndex]

        print("Copy Folder: toggled isExpanded at [\(categoryIndex)][\(folderIndex)]: \(categories[categoryIndex].folders[folderIndex].isExpanded)")
    }

    func toggleFolderWithCategoryReplacement(categoryIndex: Int, folderIndex: Int) {
        let foldersCopy = categories[categoryIndex].folders
        foldersCopy[folderIndex].isExpanded.toggle()
        let newCategory = categories[categoryIndex].copy(folders: foldersCopy)
        categories[categoryIndex] = newCategory
        print("Copy Category: toggled isExpanded at [\(categoryIndex)][\(folderIndex)]: \(categories[categoryIndex].folders[folderIndex].isExpanded)")
    }
}

struct CategoryView: View {
    let category: Category

    var body: some View {
        ForEach(category.folders, id: \.name) { folder in
            Circle()
                .frame(width: 44)
                .foregroundColor(folder.isExpanded ? .green : .yellow)
        }
    }
}

struct NestedBugTestView: View {
    @State private var library = Library()

    var body: some View {
        VStack(spacing: 20) {
            ForEach(library.categories, id: \.name) { category in
                CategoryView(category: category)
            }

            HStack {
                Button("Direct") {
                    library.toggleFolderExpanded(categoryIndex: 0, folderIndex: 0)
                }

                Button("Copy Folder") {
                    library.toggleFolderWithCopy(categoryIndex: 0, folderIndex: 0)
                }
                .tint(.green)

                Button("Copy Category") {
                    library.toggleFolderWithCategoryReplacement(categoryIndex: 0, folderIndex: 0)
                }
                .tint(.orange)
            }
            .buttonStyle(.borderedProminent)
        }
    }
}