fix: parse boolean env vars in S3 backend correctly

.changes/v1.15/BUG FIXES-37601.yaml

@@ -0,0 +1,5 @@
+kind: BUG FIXES
+body: 'backend/s3: Fixed incorrect parsing of `AWS_USE_FIPS_ENDPOINT` and `AWS_USE_DUALSTACK_ENDPOINT` environment variables where any non-empty value incorrectly enabled the feature instead of properly parsing boolean values'
+time: 2025-11-25T13:30:00.000000Z
+custom:
+    Issue: "37601"

internal/backend/remote-state/s3/backend.go

@@ -1331,14 +1331,21 @@ func boolAttrOk(obj cty.Value, name string) (bool, bool) {
 	}
 }
 
-// boolAttrDefaultEnvVarOk checks for a configured bool argument or a non-empty
-// value in any of the provided environment variables. If any of the environment
-// variables are non-empty, to boolean is considered true.
+// boolAttrDefaultEnvVarOk checks for a configured bool argument or a boolean
+// value ("true" or "false", case-insensitive) in any of the provided environment
+// variables. Invalid values are treated as unset.
 func boolAttrDefaultEnvVarOk(obj cty.Value, name string, envvars ...string) (bool, bool) {
 	if val := obj.GetAttr(name); val.IsNull() {
 		for _, envvar := range envvars {
 			if v := os.Getenv(envvar); v != "" {
-				return true, true
+				if strings.EqualFold(v, "true") {
+					return true, true
+				}
+				if strings.EqualFold(v, "false") {
+					return false, true
+				}
+				// Invalid boolean value, treat as unset
+				return false, false
 			}
 		}
 		return false, false

internal/backend/remote-state/s3/backend_test.go

@@ -3963,3 +3963,125 @@ func objectLockPreCheck(t *testing.T) {
 		t.Skip("s3 backend tests using object lock enabled buckets require setting TF_S3_OBJECT_LOCK_TEST")
 	}
 }
+
+// TestBoolAttrDefaultEnvVarOk tests the boolAttrDefaultEnvVarOk helper function
+// which reads boolean values from environment variables. This is a regression
+// test for https://github.com/hashicorp/terraform/issues/37601 where setting
+// AWS_USE_FIPS_ENDPOINT=false incorrectly enabled FIPS endpoints.
+func TestBoolAttrDefaultEnvVarOk(t *testing.T) {
+	testCases := map[string]struct {
+		attrValue cty.Value
+		envValue  string
+		wantBool  bool
+		wantOk    bool
+	}{
+		"attr set true": {
+			attrValue: cty.BoolVal(true),
+			envValue:  "",
+			wantBool:  true,
+			wantOk:    true,
+		},
+		"attr set false": {
+			attrValue: cty.BoolVal(false),
+			envValue:  "",
+			wantBool:  false,
+			wantOk:    true,
+		},
+		"attr null, env true": {
+			attrValue: cty.NullVal(cty.Bool),
+			envValue:  "true",
+			wantBool:  true,
+			wantOk:    true,
+		},
+		"attr null, env TRUE": {
+			attrValue: cty.NullVal(cty.Bool),
+			envValue:  "TRUE",
+			wantBool:  true,
+			wantOk:    true,
+		},
+		"attr null, env True": {
+			attrValue: cty.NullVal(cty.Bool),
+			envValue:  "True",
+			wantBool:  true,
+			wantOk:    true,
+		},
+		"attr null, env false": {
+			attrValue: cty.NullVal(cty.Bool),
+			envValue:  "false",
+			wantBool:  false,
+			wantOk:    true,
+		},
+		"attr null, env FALSE": {
+			attrValue: cty.NullVal(cty.Bool),
+			envValue:  "FALSE",
+			wantBool:  false,
+			wantOk:    true,
+		},
+		"attr null, env False": {
+			attrValue: cty.NullVal(cty.Bool),
+			envValue:  "False",
+			wantBool:  false,
+			wantOk:    true,
+		},
+		"attr null, env empty": {
+			attrValue: cty.NullVal(cty.Bool),
+			envValue:  "",
+			wantBool:  false,
+			wantOk:    false,
+		},
+		"attr null, env invalid": {
+			attrValue: cty.NullVal(cty.Bool),
+			envValue:  "invalid",
+			wantBool:  false,
+			wantOk:    false,
+		},
+		"attr null, env yes": {
+			attrValue: cty.NullVal(cty.Bool),
+			envValue:  "yes",
+			wantBool:  false,
+			wantOk:    false,
+		},
+		"attr null, env 1": {
+			attrValue: cty.NullVal(cty.Bool),
+			envValue:  "1",
+			wantBool:  false,
+			wantOk:    false,
+		},
+		"attr null, env 0": {
+			attrValue: cty.NullVal(cty.Bool),
+			envValue:  "0",
+			wantBool:  false,
+			wantOk:    false,
+		},
+		"attr takes precedence over env": {
+			attrValue: cty.BoolVal(false),
+			envValue:  "true",
+			wantBool:  false,
+			wantOk:    true,
+		},
+	}
+
+	for name, tc := range testCases {
+		t.Run(name, func(t *testing.T) {
+			servicemocks.StashEnv(t)
+
+			const testEnvVar = "TF_TEST_BOOL_ENV_VAR"
+			if tc.envValue != "" {
+				os.Setenv(testEnvVar, tc.envValue)
+			}
+
+			obj := cty.ObjectVal(map[string]cty.Value{
+				"test_attr": tc.attrValue,
+			})
+
+			gotBool, gotOk := boolAttrDefaultEnvVarOk(obj, "test_attr", testEnvVar)
+
+			if gotBool != tc.wantBool {
+				t.Errorf("got bool %v, want %v", gotBool, tc.wantBool)
+			}
+			if gotOk != tc.wantOk {
+				t.Errorf("got ok %v, want %v", gotOk, tc.wantOk)
+			}
+		})
+	}
+}